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Morning all,

I remember when I was a kid watching all those black and white cowboy films where at the final knocker the Seventh Cavalry came riding down the valley and saved the settlers behind the wagons from the marauding Red Indians. And so it was last night when good US economic numbers came riding over the horizon and focussed the market on what is happening in the US economy. It may not be enough though and the Cavalry sometimes had a bad day and Custer got scalped but it was enough for some temporary respite anyway. Yesterday our market was quite resilient at least in the defensives and banks with gold and other resource stocks on the nose. The wild swings in China were somewhat ignored although we did swing from positive to negative as Shanghai continued its white knuckle roller coaster ride .At one stage it was down over 5% again before the PBOC came riding to its rescue with some soothing comments.

The big uncertainty out there at the moment for us is the Political landscape. I find it hard to believe that the happenings in Canberra are real…really who are these guys? Not just Labour, but the Coalition aren’t much better and the independents!!Maybe today we will have a new PM…we shall see but it certainly does not help sentiment for business. And of course every day we seem to be having downgrade after downgrade from blue chips and mid-caps alike…the economy is suffering big time and in that environment it is hard to see the rallies in the market anything more than a dead cat bounce before we continue to trend sideways to down.

On commodities last night we saw Gold fall, Iron Ore down too and Oil flat…suspect we may see the rally today led by the resource stocks though as they took the hit yesterday…personally I still think the Banks and other yield stocks look more attractive especially if we get more rate cuts from the RBA..of course it is going to be hard for the banks to pass on those cuts when their cost of funding is rising overseas. Would be a shame if the RBA was seen to be a toothless tiger again!!!

Aussie banks credit risks costs have risen 50% recently on the back of Chinese turmoil and tapering talk.

Aussie banks cds

Today we will see a little confidence return but China and the rest of Asia will be key….if we see a rally there we could pick up some momentum but all the good work of the first quarter is now undone and we are nowhere for the year….expect a 20 up day with resources possibly leading the way.

I remain convinced we will see 4600 on our index and that we will not be out of the woods until after the election and the turmoil on credit and currency markets abates…Until then as they used tos ay on Hill Street Blues…”let’s be careful out there”

Idea of the Day

As we approach the end of the year maybe worth a look at your tax position …

We had our emerging companies conference yesterday and happy to send you a round up of the comments if interested in some mid cap performers…

Things to make me go mmmm…

1. Well someone at BHP is smiling!!!The head of BHP Billiton gets paid about 200 times as much as the average Australian. Back at the start of the 1980s it was six or seven times as much.The stark finding is in research that uses BHP records dating to 1887 to plug gaps in what is known about long-run trends in Australian executive remuneration.

2.Billabong International: has looked to quell investors’ fears that its refinancing plans are in trouble after one of its lenders sold its exposure to a Hong Kong-based hedge fund. The company’s banks are getting nervous about its troubled position, with little news from the company since early June when it said it was no longer in takeover talks with its two suitors and instead is working towards a recapitalisation plan.

3.Noni B plunged to a 16-month low after the company warned it would report a full-year loss after writing off $5 million in goodwill from its balance sheet. Noni B said it had written down the $5m carrying value of goodwill on its books, although its brands, valued at $10m, were not affected by the decision. The impairment charge will be a one-off, non-cash item in the company’s annual accounts.

4.Perseus shares tumbled 15c or 23 per cent yesterday to 51.5c in response to the production downgrade at its Edikan mine in Ghana. The scale of the share price hit was despite the downgrade being relatively minor, indicating the market was more concerned that all-in production costs at the mine for the June half year are now “likely to exceed the forecast of $US1100 an ounce”.

5.Telstra  is betting it can quickly generate revenues after forking out $US18.3 million ($19.8m) for a minority stake in the US-based software and applications developer Kony Solutions. The investment in Kony, a software developer that makes mobile phone applications for businesses of all sizes, marks the eighth time that Telstra has invested in a small start-up company in the past two years.

6.Confidence among U.S. consumers climbed in June to the highest level in more than five years. The Conference Board’s index rose to 81.4. Home prices rose more than forecast in the 12 months through April, with the S&P/Case-Shiller index of property values increased 12.1 % from April 2012. New-home sales increased 2.1 % in May, government data showed.

7.A mere 39 days after the once-largest-market-cap company in the world, Apple, came to the market with its bond issues, those that saw ‘value’ in the 3.85% coupon are not having a great run. The 30Y issue is now down 14% from the break price (and down over 18% from high price to low price since issuance)

8.Unless Italy can count on low borrowing costs and a broad recovery, it will “inevitably end up in an EU bailout.” The current situation is as bad as when the country was blown out of the ERM in 1992 as “the Italian macro situation has not improved…rather the contrary; with 160 large corporates in Italy now in special crisis administration”, according to one analyst with Mediobanco. He said Italy’s industrial output has slumped 25pc from its peak in the past decade, while disposable income has dropped 9pc and house sales have dropped to 1985 levels.

9. President Barack Obama declared that limiting carbon emissions is in the national interest, setting a standard that will affect almost every sector of the economy, from power plants to the proposed Keystone XL pipeline.The package of initiatives announced in an address in Washington today mark the president’s first detailed plan for confronting what he’s called a central global challenge of the 21st century.

Saying that science had put to rest the question about whether the planet was warming, Obama vowed to use his executive powers to act, arguing that limiting emissions would spur technological advancement and new jobs.

10.Good to see that Edward Snowden is now living the dream at Moscow airport. Looks like they are making a remake of the “Terminal”….bet he wishes he was at Changi..much better airport to live in!

11.Dublin is opening an inquiry into the bailout of Anglo Irish Bank, following release of taped phone conversations between former executives.The recordings revealed by the Irish Independent newspaper, suggest directors may have underplayed the colossal sum needed to fix the bank.The two executives can be heard laughing at the term “bridging”, suggesting they knew it would not be repaid given the bank’s parlous financial state.

12.Scary thought for the day.. China’s shadow banking system equal to over $18 trillion (more than 200% of China’s GDP), so this could be nasty if it bursts!!!.

And finally…thanks to one of my readers Roger for this gem…

There I was sitting at the bar staring at my drink when a large, trouble-making biker steps up next to me, grabs my drink and gulps it down in one swig.

“Well, whatcha’ gonna do about it?” he says, menacingly, as I burst into tears.

“Come on, man,” the biker says, “I didn’t think you’d CRY. I can’t stand to see a man crying.”

“This is the worst day of my life,” I say. “I’m a complete failure. I was late to a meeting and my boss fired me. When I went to the parking lot, I found my bike had been stolen and I don’t have any insurance. I left my wallet in the cab I took home. I found my wife with another man… and then my dog bit me.”

“So I came to this bar to work up the courage to put an end to it all, I buy a drink, I drop a capsule in and sit here watching the poison dissolve; and then you show up and drink the whole damn thing!

“But, Hell, enough about me, how are you doing?”

Have a good day

Clarence

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Any financial product advice contained in this email is general financial product advice only and does not take into account any one person’s objectives, financial situation or needs. Therefore, before acting on any financial product advice in this email, you should consider, with or without the assistance of an independent adviser, the appropriateness of the advice, having regard to your objectives, financial situation and needs 

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