Morning all,

Many years ago it was imperative for Gold producers to hedge their price risk. Seems strange that companies that take so long to find the stuff, spend so much digging it up and then leave it to a bunch of useless speculators to decide how much their can sell that stuff for. It seems like a crazy industry mining, where you do not know the value of the stuff you are selling and cannot set the price yourself. Companies spend a fortune on working out the feasibility of digging the stuff up and then let the market decide how much they make. Come on guys is that the best model in the world?..talk about “Greed is Good”!!. Of course that’s why the commodity market were invented guys so you can hedge your risk. But how many Gold miners actually raised money to buy back their hedge books!!!Now other commodity producers have got it more sussed. In oil for instance OPEC controls the price to some extent and are already talking production cuts to boost the price back up. Oil, of course is actually a useful commodity, and a cut in the price is actually a good thing for economies..not a good thing for those that produce it but overall beneficial. The big problem with resource stocks is they are so badly run. They have not hedged their prices ,they have overpaid for assets in an ego fuelled blitz and have grown massively complacent as high prices have induced a complacent mentality. Probably the best thing an industry can experience is a serious downturn. This will focus the mind, laser like on cost. Wages for Aussie miners have risen  by 25% since 2008..No wonder there is a raft of projects being cancelled..we have priced ourselves out of the market..the lucky country thought the luck would last forever right..nope ..wrong.

RIO copped it from its UK shareholders last night at the AGM..these guys are absolutely hopeless…they justify their massive salaries by saying they did better than all the other useless managers. Brilliant Strategy! If everyone is crap how easy is it to be just a little bit less crap!!You are still crap!!

In the last week resources have been thumped and high profile commentators like Charlie Aitken have thrown in the towel on BHP and RIO…now I am not as clever as Charlie and haven’t got his track record!But cant help feeling that despite the New Normal of the market ,there is a place for BHP etc in a balanced portfolio. I have been cautioning against the buy the resource sector sell the banks for some time as I did not think it was time to do that..I still do not but I do believe that nibbling away at some resource stocks is prudent..

Expect our market to recover some poise today especially in resource stocks but it will be skittish in front of the G20 Weekend meeting. Still think we will see 4850 on the index and that Easter was a highish point and the next six months will be tough as economic results point to a patchy and anaemic global recovery..and we have an election here.

Idea of the Day

Risks continue to build IMO….hate to say it but defensives and blue chip industrials are the place to be and would nibble away at BHP and possibly WPL as it appears to have gone Ex Growth and maybe more income driven!

Things that make me go dead Soros!

1.In this ‘Twitterverse’ it was interesting to see how quickly the news of George Soros’ death spread..problem was he wasn’t dead…at least not until he saw his obituary..saw mine once..same name, same age, same suburb..everyone saw it at work too..bit shocked when I walked in!!

2.Yesterday’s fall was pretty serious and devastating for resource stocks as the market plunged on fears that the big explosion in Waco was a terrorist bomb…well, it looks like it was just a tragic accident and very sad but maybe we are getting a little too paranoid of the terrorist!!

3. International Business Machines Corp. (IBM), the largest technology-services provider, missed analyst profit estimates for the first time since 2005 after hardware sales slowed. The shares declined as much as 5.9 percent.

4.Sign of the times…WBC has a bigger Market Cap than BHP..how the worm has turned..the big four banks are now worth more than Apple!! Anyone remember when WBC did a rights issue at 2.50 because they were nearly bust!!!I do!!Must be old!

5.Coles is not showing any sign of improvement fatigue, posting its fastest sales growth in two years on the fifth anniversary of its purchase by Wesfarmers. And management is looking to squeeze even more earnings from the once-ailing supermarket chain through better supply arrangements and store refurbishments.

6.G20 meeting this weekend where all the ministers get to rack up a huge mini bar bill and try to avoid making any real decisions. They will all affirm that they do not want to devalue their currencies yet at the same time trying desperately ,behind the scenes, to devalue their currency!! Would you really trust these guys to get us out of the mess that they got us into!!No!!

 

7. Fairfax Media: billionaire Alex Waislitz has been building a small stake in Fairfax Media through his private Thorney Holdings investment company. Mr Waislitz, who is in the process of turning small listed cashbox Wentworth Holdings into an investment vehicle and becoming an activist investor, starting buying Fairfax shares late last year

8.Christine Lagarde has been asked on Bloomber TV whether she was optimistic…

“I’m deliberately, decisively, desperately optimistic, yes…I think there’s some good news. The fact that the average debt around the world has stabilized, too much there is of it. It has now stabilized and the deficits on average has been halved since the beginning of the crisis. So there are some good news. It’s a question of keeping at it and pursuing the major reforms that have been initiated.”

Of course they have just downgraded World growth!! She didn’t sound too convinced of her words to me!!..remember when it gets really bad you have to lie!!!

9. Nine Entertainment: could return to the listed market before the end of 2013, the company and its US hedge fund owners weighing up pitches from investment banks for a float that would value the group at close to $3 billion….if this goes ahead and let’s face it the banks would love it as there are no other deals out there ,it will throw the spotlight on the others in the stable like TEN and SWM…Good and bad!

10. Still like this one….Telstra has won a $1.1 billion contract with the Department of Defence that will lead to 350 new jobs being created at Australia’s largest telco.

11.Government finances seem to be getting worse and worse… A sharp slump in revenue has left the federal budget looking at a potential shortfall of $17.5 billion, raising fears in business circles that the Gillard government will shut down a range of business tax breaks in the May budget to help fill the hole….according to the SMH today!!The question is how much will our local economy slip in the next few months as we await the messiah, Tony Abbott to take his rightful place. Or is he just a very naughty boy!

 

And finally….saw this on a coffee shop wall today…Marriage is like a deck of cards..you start off with two hearts and a diamond and end up wanting a club and a spade!!

Have a great weekend …back on Sky TV this afternoon at 5.30..Breakfast and Evening shows today!!Too much!

 

Clarence

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