Archive through June 13, 2008

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eblode

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Post Number: 793
Registered: 11-2002

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Votes: 1


Thursday, June 12, 2008 - 09:23 am:

Ody & Rudy,

Your market observations in my opinion are far more accurate and honest than 95% of the financial "journalists" we read in our daily papers or subscribe to.
If you both ever decide to go commercial count me in.

Eugenio

rdumas

Member

Post Number: 1447
Registered: 11-2006

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 09:38 am:

Hi Ody,

I am interested to understand your comments above regarding OST and BSL. I had been looking at these stocks for some time and one of the things that I didn't like about them was their volatility.

OST for example when viewed over the last 12 months has had three cycles during which it lost 27% from its highs in August 2007, followed by 20% from its highs in October 2008 and then finally 15% from its highs in February. Whilst the 30 week EMA is still moving up and it is trading in a channel it is a stock that would continue to have its ups and downs.

BSL is also pretty volatile. I must admit that I find steel stocks in general fairly volatile. During the last year the 30 week EMA has shown a topping pattern and only recently has it started a Weinstein stage 2 phase. I suspect however that this stock will also continue to remain quite volatile.

cat_lady

Member

Post Number: 460
Registered: 10-2006

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 10:40 am:

ouch, what a day....

BNB is in big trouble - at least it's bounced up from $7.80
TPI came out yesterday to assure the market that it had no debt issues and it's now down 8%.
reckon people see the word "debt" in an announcement and run screaming for the door without reading the context.
sure is a terrified market at the moment.

cat lady
a tad nervous herself

Without my morning coffee I might as well be a dog

deanrosario

Member

Post Number: 1426
Registered: 11-2002

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 10:47 am:

The XJO has now broken through the final (i.e. 61.8%) major Fibonacci retracement level - based on the March 2008 LOW and the May 2008 HIGH.

Yesterday, when the XJO hit this level - approximately 5400 on the XJO - buyers quickly pushed the market back up 70 points.

No such bounce today at this price level suggests many of those "bouncers" have exited today and those who did not may exit each time the market nears 5400 - creating resistance at this level.

And, to add further intrigue to today's movement, Aussie Labour Force figures, which tend to have an effect on intraday movements of the XJO - will be released at 1130 a.m.

"Never commit yourself to anything you can't walk away from in 30 seconds." Neil McCauley (played by Robert de Niro) in 'Heat'.

"Hope is a dangerous thing. Hope can drive a man insane." Ellis Boyd "Red" Redding, played by Morgan Freeman, in 'The Shawshank Redemption'.

deanrosario

Member

Post Number: 1427
Registered: 11-2002

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 11:43 am:

Labour Force, Australia, May 2008 (Released 1130 a.m.)

Ref: abs.gov.au

SEASONALLY ADJUSTED ESTIMATES (MONTHLY CHANGE)

EMPLOYMENT
* decreased by 19,700 to 10,691,200.
- Full-time employment decreased by 10,400 to 7,645,200
- part-time employment decreased by 9,300 to 3,046,000.

UNEMPLOYMENT
* remained steady at 476,700.
The number of persons:
- looking for full-time work decreased by 17,900 to 317,700
- looking for part-time work increased by 18,000 to 159,000.

UNEMPLOYMENT RATE
* remained steady at 4.3%.
- male unemployment rate remained steady at 4.0%
- female unemployment rate increased by 0.1% to 4.6%.

PARTICIPATION RATE
* decreased to 65.2%

End of ABS data

kate

Member

Post Number: 900
Registered: 04-2005

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 11:53 am:

Dean, that should give the RBA a bit of a reprieve. Might even mean our share market could edge up from today's lows.

deanrosario

Member

Post Number: 1428
Registered: 11-2002

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 12:03 pm:

Kate you may be absolutely right, ...

however, to me, the figures are not all that convincing since it appears:

(a) there were fewer people employed during May - i.e. businesses could be putting a lid on their labour spend.

But is this due to to:
- higher cost of labour; or
- reduced demand for goods/services

Also, at the same time, we have

(b) fewer people looking for work
- so, does this mean "labour market" is still tight and, should businesses want to hire quickly in the future, the cost of labour will push inflation up further?

All very confusing and requires better financial models than my simple Excel spreadsheets!!

Dean

paddy

Member

Post Number: 148
Registered: 03-2008

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 12:17 pm:

Dean : A close below 5345 should set up a test of 5302 .

Regards,

Paddy

ody

Member

Post Number: 2525
Registered: 10-2006

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 12:41 pm:

Labour force figures: I think these will be a double-edged sword. They may stay the RB's hand, as Kate suggests, but I don't think that at the moment people are strongly expecting a rise in interest rates anyway, and that the negative of these figures is that they show a recessionary trend: so, less activity in the economy - bad for retail, housing, etc. Bad for the share market too, as interest rates would actually have to come DOWN to stimulate that, and the fear, for the moment, will be that we have inflation on the one hand (mainly through oil, but not just that), and a weakening economy on the other. In other words, we are likely to follow the US down on high oil, and bad employment figures (the two drivers that produced the exceptionally big fall a few days ago). And on ongoing fears about the credit situation.

Mark: I am actually quite often wrong, though thank God not often on the really major things. But I was wrong, for sure, in not sticking with the three major miners when I bought them In February and chickening out the next day. That, I think, was my most significant recent mistake. I could have made some tens of thousands that way, quite easily, and distrusted them too much because of fear of the market as a whole, so didn't properly distinguish between the winning sector and the rest. And I think the mistake was avoidable, so blame myself for it. No point in doing anything else.

On the other hand, I think you'll grant me that I was right in turning bearish (even if on the late side) on 14 December, and in predicting - not difficult to do, I feel, but many disagreed - that the Bear Stearns move would NOT lead to an ongoing reversal of the market, only a temporary bear market rally. I feel that that is what we have seen, and that the market is fully bearish again. This is completely in tune with history, and its opposite would have been far more exceptional. But mind you - I wasn't the only one to point this out. I do think too many posters here went bullish too soon, but some firmly stuck to the bearish tune, so the merit of this being a "democratic" thread has once again revealed itself.

Rudy: thanks for so many useful posts! As for those steel stocks: I don't find them attractive at all - as you may imagine, I share your dislike of their volatility. I just wonder, mathematically, why the deuce they nevertheless produce those in-the-black results? SHG appeals the most, the others not at all.

Very happy with my deposits, less so with my shares - not that they are bad stocks, but they are now "copping" it.

Still some other work to do, so will leave here. But I have read many good posts here, and not just Rudy's either. Thanks everyone.

Not happy about the market at all today, but not surprised. I think we are facing strong headwinds at the moment, and don't expect any impressive turnaround - most likely further misery. I should not have thought, though, that we'll end up at 4700+, though I can see your point, Rudy. I feel (intuitively) that at the least 5000 will prove a significant psychological obstacle, and would even expect 5200 to provide some barrier. But it sure ain't good. I find myself MUCH further down than yesterday. I felt relatively "good" than - just miserable today.

ody

Member

Post Number: 2526
Registered: 10-2006

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 12:52 pm:

RUD -I (OF FNARENA) ON THURSDAY

This is free material from the editor of FnArena, and he more often than not talks sense, which does not mean - as he'd be the first to admit - that he is always right.

But I must admit that I find the following piece, though depressing, VERY convincing:
---------------------------------------------------
Rudi On Thursday
FN Arena News - June 11 2008

The market is in doubt. Not sure which way to go next. At least that's what market commentators elsewhere are telling you.

I don't believe this is the case. I think part of the investment community knows exactly where to go, while the other part hasn't seen the light yet. The end result is the same: a fairly stagnant share market. The explanation isn't.

I am genuinely surprised by the fact that many an investor -small, smaller, larger and large- has not yet made the connection between high oil prices and slower economic growth. I remain convinced that those who refuse to pay attention will get caught out at some stage.

With oil prices remaining in the vicinity of US$130 per barrel, and a large army of cheerleaders continuing to point in the direction of US$150 and higher, I think the most logical conclusion to draw is that economic growth is going to disappoint in the months ahead. Mind you, this is after we've already seen growth forecasts coming down significantly over the past months.

Are equity markets reflecting such a scenario? Of course not. One of the most favourite sentences I come across in intelligent research reports these days is "equity investors are/seem in denial".

Today an enthusiastic professional investor asked me whether I thought crude oil might go to US$150 per barrel. I responded with: it might, but don't be surprised if you'll find the ASX200 at 4900 then.

Silence.

I could tell he hadn't made that connection yet. I know for certain that an increasing part of the global investment community is making the connection. I can tell by the amount of research reports that land in my inbox, or are cited elsewhere, containing key terms such as "slower growth projections", "higher costs", "less spending", "diminishing confidence", "higher inflation" and "rising interest rates".

As I have been trying to get across over the past few weeks, and I am more than happy to say it again:

HIGHER OIL PRICES ARE NOT GOOD NEWS.

Apart from cutting into spending budgets (consumer budgets but equally so in corporate budgets), high oil prices push up headline inflation numbers, force governments and central bankers into action (the "negative for economic growth"-type of action), but above all, expensively priced oil competes with high interest rates as the most dominant factor when it comes to exerting a negative impact on consumer confidence. No surprise thus today's release of the Westpac-Melbourne Institute June consumer confidence index has revealed confidence for the average Aussie battler has now sunk as low as it was back in 1992 - recession level deep.

High oil cuts even deeper into budgets in developing economies, especially with governments starting to abandon official subsidies. Next thing you know central bankers start raising interest rates. We all know what comes next. Slower economic growth.

This immediately explains why some strategists are pulling the old valuation argument out of their bottom drawer when it comes to banks. Banks are cheap. Sure, they are facing tough times, and earnings growth will remain far, far remote from what they were used to until last year, but they're cheap. And they pay good dividends.

Compare that with growth oriented companies who do not have a direct (positive) leverage to expensive oil. Many of them have outperformed over the past months. All of them are now vulnerable because valuations are higher than the market average and economic growth is poised to disappoint. Not just in Australia, or the US, or Europe, but also in developed countries.

Take a good look at the charts we recently introduced on the FNArena website. Under the section "Commodities" there's only one chart that shows a steadily increasing path, the one that depicts crude oil futures since January this year. All the others, from copper to nickel to uranium to zinc, show a steadily fall in prices since April (ok, tin is the exception, but it is falling now).

These charts are in line with experts pointing out it would seem fund managers are scaling back their exposure to base metals. This brings me back to the second paragraph: part of the investment community knows what lies ahead, and they are repositioning themselves accordingly. (Consensus has it that aluminium and copper should be ok, the rest is in for some more bad news flow).

There are more reasons to assume share markets are likely to find the going tougher in the near term: phase next in that dreadful credit and debt problem amongst global banking institutions is likely to bring some more negative news out of corporate closets. Next thing you know housing markets sink a little deeper and the whole carrousel of write-downs, provisions and new capital raisings is back on the agenda.

Some economists believe the second quarter might well turn out the weakest for the US economy this year. Those second quarter data are the next ones to hit the public arena.

No wonder thus that global strategists at Credit Suisse this week suggested they could see equity markets fall another 5-10% from current levels, before bouncing back and ending the year higher. Credit Suisse sums it up as follows: "[global] GDP growth has to be slow enough to stop commodity prices rising yet fast enough to justify earnings estimates. These two objectives are now increasingly looking incompatible".

Central in Credit Suisse's thesis is the fact that the combined burden of interest rates, food prices and expensive oil is now comparable to where it was prior to the hard landing of 1990. And for those who remain yet unconvinced that investors more so than market fundamentals are responsible for today's price levels for crude oil, here's something to think about from Credit Suisse:

"We are surprised to see oil rise so sharply when US miles driven are declining for the first time since 1980 (North America accounts for 29% of [global] oil demand)".

What is the common key factor behind each and every investor mania? Precisely: factors that should temper enthusiasm are simply ignored, while all other factors are seen as another reason to buy.

Just make sure you don't end up on the sorry side of the market in a while from now.

rdumas

Member

Post Number: 1448
Registered: 11-2006

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 01:10 pm:

MGX

Today I added MGX to my portfolio. As with my other stocks my purchase is bought on the basis of purchasing half of my desire quantity now and the other half when the market goes down further.

As we can see by the chart for the Materials Index, we have today reached a fairly critical support level. Whether it holds or not remains to be seen.

MGX recently bounced off the 30 week EMA. I had in fact hoped that it would fall through it before purchasing it. If it does then I will be buying my second helping of the stock.

MGX is a Star Stock and following are some of the important parameters relating to the stock.

Average Investor Returns for the last 5 years, 3 years and 1 year period were 88.56%, 64.73% and 113.45% respectively.

The current PEG value is 0.25 and the calculated PEG values for the forecast 2008 and 2009 periods are 0.21 and 0.04 respectively.

ROA has improved from 4.44% to 12.78% in the last 12 months. ROE has improved from 6.06% to 18.73% in the last 12 months.

The outlook for the company is positive with MGX expected to continue to benefit from production growth as well as higher iron ore prices.

MGX by market capitalisation is the 90th largest company in the Australian stock market thus meeting the requirement to be in the ASX100.

ody

Member

Post Number: 2527
Registered: 10-2006

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 01:10 pm:

MSPARKS: STOCKS

Sorry Mark: I did mean to respond.

AEP: Associated with high risk in borrowing, financial engineering. Fear perhaps a bit overdone, but a dangerous stock all the same. Don't touch, certainly not until they have "proven" themselves safe (at some other time).

BNB: See above.

SOL: An ultra-conservative stock that has been around for a very long time. One for the very, very patient investor, but the fact is that management has made itself and others wealthy over time. Tends to get unpopular when there are winners around, and vice versa.

kate

Member

Post Number: 901
Registered: 04-2005

Rating: N/A
Votes: 0


Thursday, June 12, 2008 - 01:11 pm:

Ody
The problem is lower employ