Morning all,

A very positive day yesterday led by the much maligned resource stocks. A combination of good surprises and a lower dollar helped focus punters minds on the “Value” that there is in some of the bombed out dogs.I expect this to be a bit of a theme going forward. Positive surprises on production and costs from RIO,ILU,PDN,WPL,OZL and even NCM showed there is life in the old dog yet. Banks funnily enough did not really take part in the big rally. They have already done the heavy lifting.Of course even with the big rises of the last few days we are still only back to where we were last Friday…

The other big news yesterday was the unemployment numbers where the Astrologists got it completely wrong as usual. Not sure why anyone would pay these guys. Their Crystal balls seem to be all steamed up at the moment with a huge miss on their forecasts of +10,000 jobs to -22,000 and significantly the full time ones were down 30,000!Now we will see lots of calls from business and the Astrologists for lower interest rates. The problem with this is it isn’t working! The biggest issue we have is our wage structure and the costs associated with it. Now if we lower rates, everyone will be borrowing money to buy a negatively geared property or their super fund will and thus we will have to pay ourselves more to afford these houses so we become even more uncompetitive…doesn’t really add up..consumers can only have so much stuff from Hardly Normal on easy 5 year to pay credit. We can only drive so many cars on 2.9% finance and no one under 35 can afford a house unless their parents give them the money! So cut interest rates by all means ..get the Aussie dollar down..miners will be happy..tourists will still think we are really expensive and a long way from home and have deadly snakes under every bed coupled with sharks ready to pounce but the real problem is our competitiveness. We are a wealthy nation and have become use to it! The rest of the world has had a recession and has adjusted their cost base accordingly…..

Anyway last night the US slipped back on weaker earnings numbers from the banks.Best Buy got whacked 28% for a 0.8% sales miss..harsh maybe? Anyway for the US to push even higher earnings have to come through..as yet we don’t seem to be seeing that really..Zombieland was steady at the top of a six year bull market …Spanish 3 year bonds went for under 1.6% last night! Inflation in Zombieland is dead..long live the Zombies!

Idea of the Day Resource Stocks PDN and Vietnamese Casino Operator DNA

I spoke yesterday about the doggy resource stocks and despite Iron Ore falling 1% last night I think I am on the right track.Would expect to see some weakness in eth Iron Ore price as we head into Chinese New Year celebrations so I am sticking with my bullish stance on iron ore stocks and other bombed out resource stocks…PDN is one maybe for the punters as it was announced yesterday that Tepco in Japan is going to restart two nuclear power plants. Good numbers out of Langer Heinrich a few days ago will help sentiment turn around.

Late last year I also talked about a stock called Donaco which has a casino in Vietnam and looked interesting..I think they were sub 80 at the time..anyway here they are knocking on the door of 1.00 DNA is the code..high risk but see another 20% upside as the casino opening ,in March,draws near.. The management team are experienced, well connected and have skin in the game (51.5% ownership). The company is ok financially (minimal debt and generating free cash flow) and is close to the Chinese border..this should be a licence to print money..look for more upside to come in this one…

 

Things to make me go mmmmmm!!!

The Corporate battlefields of Asia and the US are littered with Aussie casualties. So it was somewhat worrying that at the G’Day USA convention in the US yesterday David Thodey from Telstra was starting to rabbit on about growth opportunities around the world especially in our region…Warning! ..Warning!….Will Robinson.

SG Fleet: will front fund managers in Sydney on Friday, on the last leg of its investor education tour ahead of a slated IPO. SG Fleet’s management has been out explaining the business to potential investors in Melbourne and Hong Kong already this week, but held back from releasing financials or forecasts for the coming years.

Looks like the Mounties have got their man…don’t they always!…Saputo looks to have got Warrnambool Cheese & Butter in the bag after major shareholder and one-time bidder Bega Cheese begrudgingly accepted its $9-a-share offer. Saputo, one of the world’s top 10 dairy players, now has more than 45 per cent of the Victorian-based dairy processor. Game over Murray Darling…and stop calling me Darling!

This one has some more time to run…Germany’s top financial regulator, Bafin, which apparently is not as corrupt, complicit and clueless as its US equivalent, and who said that in addition to currency rates, manipulation of precious metals “is worse than the Libor-rigging scandal.” You go Girl!

Was watching Michael Palin’s show on Brazil last night..now they have some problems but they do seem to have the leadership to solve some of the big issues…where is ours..where are our big ideas and transformational visions…wearing Lyrca I suspect! Of course its not all Girl from Ipanema with interest rates now at 10.5% and inflation around 5.9%…but was impressed with the vision of how to get 30m people into the middle class…

Bernanke (Remember him?) Says QE Works While Posing No Immediate Bubble Risk..right..

RIP Trigger…as someone who grew up watching Only Fools and Horses it was sad to hear Triggs passing…

“He died a couple of years before I was born”. TRIGGER on his dad

And finally…..a lovely quote from Only Fools and Horses..maybe one for the English that read this email!!

“Did you know, 500 years ago this was a green and peaceful area? The old Earl of Peckham had a castle where the Kwik-Fit exhaust centre now stands.

Flaxen-haired maidens used to dance round the village maypole of an evening. And then one fateful medieval day, the Trotter clan arrived in a stolen Zephyr.

Before you knew it, the flaxen-haired maiden was up the spout, the old Earl had been sold some hooky armour and someone nicked the maypole.” Only Fools and Horses!Great comedy…

And for the ones that never saw the show….

Did you hear about the thoughtful Scottish Husband?

He was putting his coat and hat on to make his way down to the local pub.

He turned to his wee wife before leaving and said, “Maggie, put your hat and coat on, lassie”.

She replied, “Awe Jock that’s nice – are you taking me tae the pub with you?”

“Nay,” Jock replied, “I’m switching the heating off while I’m out”.

Have a great weekend

 

Clarence

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