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Trade the Bollonger Band Squeeze

Archive through May 06, 2010

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through May 06, 2010

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deanrosario
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Username: deanrosario

Post Number: 1731
Registered: 11-2002

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Monday, May 03, 2010 - 05:25 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



@ Ody

No my point in bringing up Iraq was that Rudy mentioned a Rudd policy that caused the tragic deaths of 4 humans.

I simply identified a Howard policy that has killed thousands and left thousands more homeless.

Ivor quite correctly pointed out that we are a Commonwealth of States.

The higher population states pay far more income tax than the less populated states. It costs more per capita to build roads and other infrastructure through the less populated states but we don't whinge about it because we realise we are a Commonwealth of States.

Once the mud and rocks run out, I'm sure those States whose wealth is built on mud and rocks, will - as usual - come running to the rest of us for their handouts.


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

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ody
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Username: ody

Post Number: 4960
Registered: 10-2006

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Monday, May 03, 2010 - 05:50 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ivor, - Whatever the theory, in practice we all know that some states are wealthier than others, and that there is no question of the total wealth of the country getting equally distributed so as to make each state pro rata equal to the others. I have lived in South Australia since I came here in 1976, and it has consistently been the poorest state after Tasmania. Votes here, of course, count for less and less, federally, as the population proportionately does not increase enough.

In practice, Federal Governments try to make sure that they keep the majority of the voters happy, and no doubt one of Rudd's objectives in appropriating this massive amount of money in the form of tax - some 9-12 billion dollars per year - will be designed to win votes, notably in the less productive but populous states, where people may enjoy themselves more as a result, but in all probability not contribute one iota more to the productive part of the economy simply because they are given money.

Yes, a number of mining companies are not particularly productive. These will in the time to come be given
"exploration" money, which will no doubt encourage speculation in junior minor stocks. The 9-12 billion (PER YEAR) will come out of the earnings of major, proven companies, on which the country's wealth now to a very large extent depends. Today even major gold companies were "punished". Without a flourishing mining industry this nation's prosperity would plummet.

As for whether this bold tax grab will become policy ... well, I'd have to grant you that so much of what Rudd proclaims he intends to do never happens that it is just possible that this particular policy, too, may never see the light of day. However, the Greens - as one might expect of them (envious of "the rich", and opposed to "dirty" mines) - seem to like the policy, so it is not at all impossible that it will get through the Senate, even if the opposition were to oppose it.

During the day, I have in vain looked for any ECONOMIC argument that shows clinchingly that this enormous transfer of wealth is necessary or desirable. About the only strongly felt conviction on the part of those supporting it is, I believe, the mistaken notion that the mining companies are greatly enriching themselves at the expense of "ordinary Australians" or "working families", with no grasp being displayed of the fact that those ordinary Australians have become vastly wealthier (if stimulus money is included, as it should be for everyone) than they were before the mining boom occurred. Of that there is not the slightest doubt, and to give them yet more while that makes our mining industry (1) the most highly taxed in the world, (2) greatly uncompetitive; and (3) hugely at risk of losing investment money, seems to me to make no sense at all. And this exactly at a time when the dangers of the GFC are once again strongly in evidence, including huge overheating in China. If the companies made, suddenly, much less money, then, indeed, the 40% tax would amount to a smaller sum. But how does that help the companies - and the rest of Australia - if their earnings are also smaller anyway??







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ody
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Username: ody

Post Number: 4961
Registered: 10-2006

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Monday, May 03, 2010 - 06:17 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Market today

The XAO and XJO each went down only 0.5%, which shows that investors in the share market did not see the end of the world as nigh. Indeed, some of the more "defensive" sectors went up (financials 0.8%, property trusts 0.9%). However, the resources companies really "copped it". Although energy went down by only a modest 1.4%, gold lost as much as 2.3%, and metals and mining a whopping 3%. The results for some of the biggest companies indicate the nature of the losses, with BHP down 2.99% (say 3%?), FMG as much as 4.15% (of course this one tends to be more volatile as it is not as secure), NCM 3.11%, RIO a big 4.30%, and even WES, with its coal, which lost 2.25%.

These are revaluations, so to speak, which are quite logical as, if the Rudd government gets its way, all of these companies will make considerably less money, in real terms, for their shareholders than before. This will be so even if they do not lose ground for any other reason than tax at all: today's figures were clearly inspired by the tax factor more than anything else, which explains also why resources were targeted specifically.

In general, it is not as though the market has looked healthy of late anyway. Ken pointed out quite rightly recently that we now are getting a pattern of new highs and new lows in about equal measure. This is part of the formation of a "foghorn" pattern which is, as I seem to remember Ken indicating, often characteristic of changes in markets, whereby bulls/bullishness and bears/bearishness get further and further apart in their view of the market. Usually the situation results in losses rather than gains. Today there were 30 new highs, but 37 new lows.


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ody
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Username: ody

Post Number: 4962
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Monday, May 03, 2010 - 06:33 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Well, Dean, if you really believe that money gets spent in an evenhanded manner throughout the country and take e.g. roads as an example, you should travel by car from Melbourne to Adelaide and note at which point the road deteriorates. Visitors from abroad often point out to me, and I think correctly, that the situation resembles that found in Europe, where one can note that one moves into a poorer country because the road one is on deteriorates and indicates the lower level of wealth in that region!

Let's not kid ourselves. Of course the more populated states pay a higher amount of income tax: they are more populous, and at the same time wealthier anyway than SA. But as for some REAL nobility in distribution...? If you are at the end of the Murray you can't, I think, believe in it, and in other respects too it is obvious that any federal government will always be less concerned to look after South Australia, because there is less to be gained, politically, by doing so.

Rudd is nowhere near as crafty a politician as John Howard, but he IS a politician, and he is not going to reason that the economically sensible thing to do is to keep the (smaller) resources states strong and rich. And I am sure he will be only too happy to talk as though this is a commonwealth where all wealth gets evenly distributed!

As to deaths in war and peace: I would not, if I were in your shoes, want to defend Rudd's careless attitude in the area of insulation by comparing it with Howard's belligerence. Surely you don't want to suggest that somehow the existence of the latter (which I agree with you was undesirable) in any sense makes Rudd's reckless conduct defensible?


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eagle
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Username: eagle

Post Number: 28
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Monday, May 03, 2010 - 06:35 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody - I'm not sure if it means that our mining industry is the most taxed in the world but if this "super-profit" tax isn't happening elsewhere then it surely won't be long before other countries seize upon it as well. Then mining companies will find the world has become a new level playing field.

This happens/ed in the oil/gas industry. They don't like it but they still invest and produce as the numbers add up for them. Different versions of "super-profit" taxes exist around the world. It is never as simple as the dollar amount - legal systems, corruption levels, national stability, proximity to markets etc all weigh into investment decisions.

Didn't the Brits even do something similar recently for their main industry - finance - taxing the super-bonuses that the execs make. I'm sure there was a lot of huffing and puffing but the London Financial Markets will continue. Maybe something for Greece to think about... super-tax on ...olives?

It would be interesting to know if all commentators (and I mean wider than these IC postings) who are argue that this will ruin the mining industry have sold their shares today (or maybe when legislations passes). Similarly we should perhaps watch the actions of mining directors who have to declare their dealings whether they see it as the end of their world/wealth.....


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deanrosario
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Post Number: 1732
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Monday, May 03, 2010 - 07:16 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



A wonderful post eagle, which clearly demonstrates you have an understanding of economics and how big business operates that is more sophisticated than most.

As long as any project's return is greater than an investor's WACC, the sophisticated investor will continue to put his/her hands in his/her pocket.


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

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market_mad
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Post Number: 311
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Monday, May 03, 2010 - 09:06 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi all,

EW explained in May 2000 when the Justice Department ruled against Microsoft;

"When the bull market reaches exhaustion, the old supportive mood begins to crumble, and the punitive mood bursts forth. One result of this metamorphosis in social character is governmental attacks against highly successful enterprises. In fact, they typically start with a major attack against the most successful enterprise of the time"

Now, they were talking here about Microsoft and comparing that to the current case against Goldman Sachs, but given what has happened with the super profit tax, I thought this was appropriate to post the socionomic nature of what is going on.

Everyone is entitled to their views, but clearly a couple of recent posters on here are firing up and trying to goad others.

Lets get back to the markets and get over this political clap trap. Taxes will always be with us in some form or another - you cannot spend money like this government has done without getting it back in some other way, shape or form. Unfortunately for the big miners - its their turn to get slugged

Cheers
MM


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ody
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Username: ody

Post Number: 4963
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Monday, May 03, 2010 - 09:19 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eagle

It will be hard to predict whether other countries will adopt a tax as severe, and at the moment Australia's is certainly the biggest, which gives it a handicap. No, it will not mean "the end of the world" or that the companies will not continue - but there is no doubt that 40% is a lot. Certainly share markets have not taken kindly to it.

On the reasoning that "people will go on regardless" quite a few enterprises in history actually have suffered considerably when taxed harshly - it is not, I think, a good way of defending a tax simply to say that companies may/will survive. For that to be argued successfully, on economic grounds, one would need to show that the tax will not actually be particularly disadvantageous. Just to assert as much does not constitute anything particularly compelling. Yes, business often does adapt; but that does not mean that it may not find the going difficult, or indeed too hard - depending also on the circumstances. I think it is certainly a risky experiment on the part of the government, particularly also because of the fact that quite a few facts emerging about China these days are actually quite worrying.

As you will have noticed if you looked at the prices of the major resources companies today there was indeed a good deal of selling. Personally I would not be a buyer at this stage: I would want to see a lot of analyses, from various angles, by experts on the issue, just to see how grave they find the situation. It is not just the mining industry that considers the step very drastic indeed. Those selling today probably in many cases took the simple view that the prices we had seen were NOT based on a 40% profit cut, whereas that is the amount of profit that will be taken. And that, logically, MUST affect the valuation, no matter how adaptable a company proves to be.

In general, nations that tax their main industries heavily do not do well. That is something very observable in human history. There is, of course, always some room for argument as to what is too much, but 40% is certainly hefty.


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ody
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Username: ody

Post Number: 4964
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Monday, May 03, 2010 - 10:06 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM:

"When the bull market reaches exhaustion, the old supportive mood begins to crumble, and the punitive mood bursts forth. One result of this metamorphosis in social character is governmental attacks against highly successful enterprises. In fact, they typically start with a major attack against the most successful enterprise of the time"

What a remarkable quote - entirely apposite to the present situation.

Let us hope that Dean and others will take note. The problem that we are seeing, I think, is that of a government which does not understand economics, and thinks that the resources industry is invulnerable and its success certain be long-lived. These are very dangerous assumptions, and not generally supported by history. And it IS a case of the politics of envy: "Here is a section of the community which is earning a lot of money, and we must proceed to hit them for our own purposes". Very tempting for a government that has rapidly been losing credibility; needs a distraction; needs money to pay its debts; and for which it is useful to find a scapegoat.

Bull markets, or for that matter bullish rallies in bear markets, frequently get brought to an end because they have gone on for too long and the economically naive feel that there is wealth being built up in perpetual, invulnerable fashion. One way to ruin the party is by imposing heavy taxes on successful companies.


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ody
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Username: ody

Post Number: 4965
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Monday, May 03, 2010 - 10:30 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Here is some real information for the optimists who think that this resources tax won't make a difference, or is even a desirable thing to have:

Alan Kohler in the Eureka Report

[I cannot reproduce the graphs which Kohler produces, but the article will still be easily intelligible and factual enough to make clear just how dangerous and damaging this tax will be. I post this for those who are still receptive enough to listen to news and analysis that may well be unwelcome to them.]
--------------------------------------------------

The share prices of BHP Billiton and Rio Tinto were crunched as soon as the market opened this morning [3 May], so obviously despite all the leaks and all the well-informed pre-announcement debate, the market didn’t quite believe it would happen as rumoured. But now we know it will (unless it goes the way of the ETS, of course).

The RSPT will start on July 1, 2012, at a rate of 40% on profits from non-renewable resources.

It will replace the crude oil excise and operate “in parallel” with existing state royalties, which means they will still be collected but will be deductible from assessable income for RSPT purposes, but only up to a point. The deductibility of state royalties will be capped so the states don’t go on a royalty binge to get extra money out of the Commonwealth coffers.

The RSPT applies to projects whereas income tax applies to companies. Income tax will still be levied, but RSPT paid will be tax-deductible.

The first thing to say is that it will be a nightmare for smaller mining companies. They will have to do everything they do now with their tax returns and compliance, plus a whole lot more. Calculating tax payable and working out whether a project is viable will be much more complicated; the transition for existing mines, which the government says will not be grandfathered and will all have to pay RSPT, will be horrendous.

BHP Billiton and Rio Tinto are our two global resource houses with development projects and ore deposits dotted around the globe. For them Australia’s new 40% tax on the profits of resource projects will clearly tip the balance in favour of projects elsewhere (see Golden geese may fly elsewhere).

That’s not to say BHP and Rio will never do another new project in Australia again; it’s just that if Australia is competing for a new iron ore mine with, say, Africa or Mongolia, we now have a handicap.

As for existing cash flow streams, Merrill Lynch last week did some useful work on what a 40% tax means for BHP Billiton and Rio Tinto’s profits.

Here are their charts [not shown here on IC], with their comments:

BHP’s earnings could be trimmed by as much as 19% if an RSPT of 40% was applied instead of the current state-based royalties. Iron ore would take the biggest hit – at $US2187 million or about 70% of the tax impost – very much a reflection of the high-margin nature of the iron ore business and therefore the bigger RSPT take. The next most sensitive would be metallurgical coal, accounting for about 14% of the tax hike, and North-West Shelf gas, about 8%.

[Another chart not shown]

Drilling down to a business unit level highlights an interesting pattern … the higher-margin business units such as North-West Shelf gas, iron ore are set to be “penalised” the most. The lower-margin energy coal and metallurgical coal business units would likely report less impact. Interestingly, Rio’s energy coal unit is estimated to take a bigger tax hit courtesy of it having better margins than BHP – who would have figured?

[Another chart]

Rio Tinto fares no better than BHP. In fact the overall impact of a 40% resources rent tax would be as much as a cut to earnings of about 30%. And like BHP, iron ore is the business that takes the biggest hit – iron ore accounts for about 84% of the projected tax hit. The irony is that Rio has a better iron ore unit than BHP yet gets taxed more! All other business units except Australian coal have essentially nil impact (in $USm terms).

Once again the higher-margin business units – in this case iron ore, copper (North Parkes) and ERA – are projected to carry the burden of the tax impost as a proportion of divisional earnings. NB: Rio’s Australian coal unit – a mix of metallurgical coal, semi-soft coal and thermal coal – is in fact similarly disadvantaged to BHP’s premium metallurgical coal unit.


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ody
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Monday, May 03, 2010 - 10:38 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Another informative piece
----------------------------------------

Robert Gottliebsen [in Business Spectator]

HENRY TAX REVIEW: Are we pushing BHP and Rio offshore?


Whether it's the resources rent tax or the small business tax concessions, the government is headed down paths that look attractive but which will have hidden long-term repercussions.

It looks like BHP Billiton and Rio Tinto will provide in the vicinity of two thirds of the expected $9 billion resource tax revenue in 2013-14.

According to Merrill Lynch, on the basis of Rio Tinto’s base net profit of $9.9 billion, a full year’s impact of the new tax would be about $3 billion or a reduction in net profit of 30 per cent. That would take place in 2013-14 and the actual amount would depend on its profits at the time. On the government calculations, the transitional concessions will cut the 2012-13 resource rent tax by two thirds. The Merrill sums show that the full $3 billion Rio Tinto liability comprises $2.5 billion from iron ore and $346 billion from coal.

BHP’s full contribution, according Merrill Lynch, is $3 billion – the same as Rio Tinto – but because BHP’s overall profit is much greater than Rio at $15.7 billion, the slug represents only 19 per cent of profits. Iron ore is $2.2 billion, coal $500,000 and North West Shelf gas $246 million. As with Rio, the big impact will be in 2013-14, with the 2012-13 impact being much less because of the transitional provisions.

These are big sums and will change corporate attitudes to Australian resource investment. To some extent the market has priced these changes in, but they are so vast that they will change the attitudes of shareholders and directors towards investing in Australia.

Ken Henry did the sums and reckoned the industry would pay and not change its investment plans. On paper he is right.

But over in Guinea they are going to be given the chance of a life time to woo a big chunk of iron-ore investment capital that would have otherwise gone to Australia.

Rio Tinto, BHP and Brazil’s Vale all have huge iron ore deposits in Guinea. Similarly Indonesia has a chance to increase the coal market share it has taken from Australia because of our failure to build infrastructure. Similar considerations will apply to gas. That does not mean Australia will lose out, because Africa, Asia and the Middle East are regions that make people and bankers nervous. But Australia now also looks scary, for different reasons.

Australians must remember that it’s not just the resources tax that the government is using to batter miners. Canberra has changed the industrial relations law which will lift labour costs and create much greater uncertainty and almost certainly lower productivity.

Although the emissions trading scheme has been set aside it showed that Canberra public servants have no idea how the commercial sector works. It is clearly possible that in their ignorance they will come up with another crazy scheme.

It adds to the risk of doing business in Australia.
--------------------------------------------------
[Extract]


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ken
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Monday, May 03, 2010 - 10:43 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,

The resource super profits tax will be applied on a per project basis.

Seems to me that there's a lot of scaremongering and smokescreening going on. I have read in Eureka Report suggestions that companies will flee and move their stock exchange listing if they have overseas projects. LGL was mentioned. Surely this tax will apply to projects on Australian soil (or water) and it won't depend where the company is listed or where you pay company tax.

The resources stocks that went up today in my watchlist were AMX and GRY (West African gold projects), and NKP (Africa platinum).

LGL went down. Why? Its main project is in PNG. Perhaps because of the NCM bid and NCM fell.
PDN went down. Why? Its main project is in Africa.

There's some silly stuff being written and misunderstood. Eureka Report makes a good point that other countries with resources will also increase taxes, as they have done this before. Maybe it will finish up neutral after a while regarding project selection but with mining companies worth less.


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bridog
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Tuesday, May 04, 2010 - 12:54 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



From the Australian
SO now it's the big bad miners rather than the big bad banks under fire from Canberra. Just like the banks, the mining companies were, until recently, being celebrated as heroes for helping Australia survive the global financial crisis so well.
Now they too join the ranks of greedy villains who need to be brought under control by the government. The abrupt switch of target and rhetoric means Kevin Rudd and Wayne Swan are effectively suggesting miners are stealing Australian resources without paying the Australian community a decent return.
But while the "fair share" argument may resonate favourably with voters, it has provoked an extremely antagonistic reaction from the mining industry, which has just had its worst fears realised. The strength of that reaction may eventually be loud enough to register with the public: that the government's equation is nowhere near as simple as it sounds.
Canberra's claim is that miners are making far too much profit and that more of that money should instead be directed to paying for better services, super and lower taxes for all Australians.
Calling it the Resource Super Profits Tax is all part of the political sell. This ignores the reality any return to shareholders above the long-term bond rate of 6 per cent hardly rates as a super profit.
But even if it is unarguable that these are good times for the mining industry, the idea of slugging companies with a 40 per cent tax on profits creates a whole range of unintended consequences.
The analysts' briefing papers were full of them yesterday, underlining the reasons for the general sell-off of mining stocks. Putting it politely, no one believes the government's argument that this new tax is somehow going to encourage investment and growth in the mining industry. And there's the added complexity of a system that will see companies getting rebates for the roughly $6 billion worth of state royalties they currently pay.
The Minerals Council of Australia argues the new impost will make the Australian mining industry the highest taxed in the world. There are always plenty of competing figures on this, but Citi's Paul McTaggart, for example, says the effective tax base for the industry is now 58 per cent versus the old tax base of 43 per cent.
"The next most heavily taxed regions are the US at 40 per cent and Brazil at 38 per cent. This tax makes Australian mining uncompetitive," he wrote yesterday.
"The new Resources Super Profits Tax proposed by the government is messy, complex and in our view increases the difficulty in understanding the tax structure in the Australian mining space. We see it as a tax structure that will ultimately hurt mining investment in Australia (especially by offshore companies) and increase uncertainty and volatility surrounding companies' profitability."
BHP Billiton and Rio Tinto, which had previously been models of restraint in their public utterances, realised belatedly that quiet co-operation hadn't done them any good. Rio Tinto warned the new tax could erode Australia's competitiveness, severely curtail investment and limit jobs growth.
"Just as importantly, altering the rules for existing multi-billion-dollar projects in mid-stream -- after large amounts of capital have already been put at risk over many years -- would be the worst possible message Australia could send to investors," said David Peever, Rio's managing director Australia.
BHP Billiton's Marius Kloppers said it would lead to the group's effective tax rate jumping from 43 per cent to 57 per cent on its Australian operations.
"If implemented, these proposals seriously threaten Australia's competitiveness, jeopardise future investments and will adversely affect the future wealth and standard of living of all Australians," Mr Kloppers said.
Kevin Rudd immediately responded to the criticisms with a convenient version of xenophobia more usually directed against the Chinese. In various radio interviews yesterday, he took care to point out that BHP was 40 per cent foreign owned and Rio Tinto more than 70 per cent foreign owned.
He argued this meant that massively increased profits built on Australian resources were mostly going overseas.
This is extraordinary logic for a Prime Minister of a country so heavily dependent on foreign investment. Just as with the government's selective use of figures on royalties, it ignores the increasing amounts of corporate taxes and other taxes paid by companies as well as the spin-off benefits on economic activity. BHP, for example, pointed out that it paid taxes of $6.3bn in 2009 on its Australian operations, including company tax of $3bn.
But the government will try to stick with its more simplistic line that resource profits were $80bn higher in 2008-09 than 1999-2000 but that governments only collected an additional $9bn through state royalty payments.
The government insists resources must be treated differently and effectively should pay more than other industries because they are exploiting non-renewable resources belonging to all Australians. And companies did expect a version of this from a government short of cash and wanting a more consistent way of taxing a growth industry.
The trouble for the miners was it was at the worst end of their expectations in terms of the percentage and implementation. It affects their existing operations as well as new ones. The figure of 40 per cent matches that of the existing petroleum resource rent tax on offshore operations -- chosen in 1987 when the company tax rate was 49 per cent.
It does not replace the state royalties, which are now supposed to be rebated in complicated ways. It does not allow immediate write-offs of capital expenditure, but requires them to be amortised. It is set to take effect at a much lower rate than the petroleum resource rent tax, which is the bond rate plus 5 per cent. The supposed trade-offs, such as the ability to transfer expenditure and refund unused expenditure, are regarded as minor by comparison.
The government has announced a new resource tax consultation panel to consult the industry.It will have plenty to talk about.


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furpo
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Monday, May 03, 2010 - 07:06 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Great stuff; quite right. The greedy miners standing in the red dust fines (in hair and undies) sweating in oppresive heat, brushing off flies, sandwiches turning to cardboard in lunchbox should fund super of easterner publ servers in air con offices shuffling paper tween water cooler and coffee machine = krudd justice


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cat_lady
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Tuesday, May 04, 2010 - 10:10 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



can someone clarify something for me.

eagle says that this type of tax already exists in the oil/gas industry so does this mean they wont be impacted by the new tax??

cheers
cat lady


Without my morning coffee I might as well be a dog

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eagle
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Cat Lady - the oil industry has been operating under this style of tax regime for years - called PRRT (Petroleum Resource Rent Tax). Run by Fed Gov't on it's jurisdiction. It is one version of (super) taxes that apply around the world. I believe the Tax Review advocated that a similar approach should be taken to Minerals. I therefore don't believe that it will be 're-applied' to the oil/gas industry. I think in the Treasury review papers there were a list of minerals it recommended that this new tax be applied to - there were also exemptions. I didn't get into the detail as there is much water to go under this bridge.

I only caught part of it but the ABC Radio National had a brief segment this morning on how is the mining industry taxed elsewhere in the world. The bits I picked up indicated that this may be new at the global level for the mining industry but that a countries whole tax system needed to be looked at before any comparison could be made.


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cat_lady
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Tuesday, May 04, 2010 - 01:58 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



thanks for that Eagle.
doesn't seem that many one time holders of oil/gas stocks are aware of any exemptions.
cheers
cat lady


Without my morning coffee I might as well be a dog

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bridog
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Tuesday, May 04, 2010 - 04:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Cat Lady,

The PRRT appears to relate only to Australian offshore projects.

The following brief summary is from ATO web site (googled resources rent tax), don't know how much it helps in relation to Woodside, for example:

"The petroleum resource rent tax applies to all petroleum projects in offshore areas (or Commonwealth Adjacent Areas) under the Offshore Petroleum and Greenhouse Gas Storage Act 2006, other than production licences derived from the North West Shelf exploration permits WA-P-1 and WA-P-28. These are subject to the excise and royalty regime."

I'm sure one can dig down and find more detail, maybe those NWS operations come under the super tax. Think I'll be lazy and leave it to someone else to figure.


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bridog
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Tuesday, May 04, 2010 - 04:30 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



It seems that Australian investors are more pessimistic than our US counterparts, across the board.


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market_mad
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Hi bridog,

Maybe it's the overseas investors who are selling Aussie stocks?


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bridog
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Tuesday, May 04, 2010 - 05:29 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM, yes, could be . . if thats the case one might suspect they are selling our currency also?

This might be confirmed as AUD now below 92c US, source the bullion desk.

Cheers


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furpo
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Tuesday, May 04, 2010 - 05:41 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



More blood yet imo on ASX as materials I follow show no clear sign of bottom even with RSI pushing down through 30, stochast down, candles stuck to bottom Bollinger.
Increased cost/tax on coal=increased electricity cost; same oil/petrol; metals/general goods. Kevvie has given the inflation carousel a push.
Inflation=interest rate rises.


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deanrosario
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Tuesday, May 04, 2010 - 07:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Daily charts for 2 of the world's largest mining companies, whose major mining assets are located outside Australia.

I wonder ... are we also going to blame PM Rudd and the ALP's "mining super tax" for the ~10% fall during the past 3 days of Xstrata plc and CVRD?

If, as some have suggested, BHP & RIO are going to become so unprofitable and impoverished - with all new projects & ventures put on hold since this new super tax will make them uncompetitive - then, surely, we would expect the value of their competitors with operations OUTSIDE Australia to jump in value?



(Message edited by deanrosario on May 04, 2010)


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

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ken
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Dean,

Thanks for bringing that to our attention. Excellent work.
(Tried to put an exclamation mark but the censor didn't like it).

Ken


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deanrosario
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No problems, Ken. Glad to help. I don't follow the miners closely, but here are the daily charts for 2 other large miners:

a) Teck Resources, from Canada
b) Anglo American plc, from South Africa but with diverse geographic operations

It would be pretty arrogant (or, perhaps, that should read "ignorant"?!) for anyone to think a proposed Aussie tax policy has caused the drop in share price of the world's largest mining operators!




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

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market_mad
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Tuesday, May 04, 2010 - 11:06 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi bridog,

When an overseas investor sells aussie stocks, he/she then has to repatriate money back into his/her own currency, therefore selling of the AUD is a necessary part of the transaction.

Cheers
MM


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market_mad
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Tuesday, May 04, 2010 - 11:12 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Might watch the US market open tonight - gotta feeling there's gonna be some fireworks....

Bulls have been a bit quiet of late....


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market_mad
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Tuesday, May 04, 2010 - 11:33 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



furpo,

I think we will see deflation first before high inflation.

The credit contraction of 2007-08 is re-igniting itself again with the Greek problem spilling over into other Euro nations, eventually into the UK and finally into the US.

Cheers
MM


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market_mad
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Wednesday, May 05, 2010 - 12:38 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



BHP off 7.2% in London! ASX futures off 105.. Big day tomorrow if this keps up


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bridog
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Dean and Ken,

Here is Vale's chart on US market (hopefully):

image/bmp
rio_us05nov08_to_15may09a.bmp (129.7 k)


Doesn't look much like your charts, Dean.


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bridog
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Damn, didn't look at the dates . .

Colin, don't I have access to current US data?


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bridog
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Wednesday, May 05, 2010 - 01:24 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Dean and Ken.

Name change apparently, hopefully got it right this time:

image/bmp
vale_us30oct09_to_11may10.bmp (129.7 k)


More in synch now, Dean, apologies . .


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deanrosario
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Apology accepted, bridog, no harm done.

Here is the updated chart of Vale's ADR, after the US completed its trading for 4-May 09.



Whilst I agree Government policies/"political risk" is a significant issue to be considered when valuing a share, the fact that the share price of all the big resource companies is falling by comparable amounts (%), suggests that the fall is being driven by factors, which are general to the financial markets and specific to the mining industry; and has little to do with a proposed tax policy that might become law in 2-3 years!

Of course, the mining lobby and the LIB/NATs will use the fall in the share price of locally-listed mining stocks to scare people about the proposed mining super-tax and, unfortunately, the majority of the public are fairly ignorant and very unsophisticated about the operation of global financial markets.

I had assumed active investors/traders on this forum would have been more diligent in their research and not just accept the rhetoric of the mining lobby and the LIB/NAT sympathisers.

(Message edited by deanrosario on May 05, 2010)


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

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market_mad
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Hi Dean,

Good post there - I agree that the tide turned on resource stocks worldwide and not just because of krudd!

Wait and see, Krudd will be taking the credit for crude falling 4% last night and telling us it's ok coz we'll be paying less at the pump! Wonder how his fuel watch scheme is going...

Westpac reported this morning and by all accounts its line ball with expectations.. still they got smashed on the ADR's last night so it will be an interesting reaction on our market today - WBC down 4.92%, in London BHP finished down 7.92% with Rio down 6.41%

I note also that the US futures are down again on the re-open - S&P 500 down a further 0.33% from the close and the Dow off 24 points.

Cheers and good luck
MM


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deanrosario
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Wednesday, May 05, 2010 - 08:51 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks, MM.

Yes, it should be carnage at the opening bell in Australia.

Futures suggest an opening of 4640ish on the ASX200.

The following article provides one person's opinion and further reason for the decline in mining shares.

Of course, this is just one bloke's opinion - it is NOT FACT.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aMbfBKW.uKn4&pos=4

Bloomberg (3 May 2010)

* Investor Marc Faber said China's economy will slow and possibly "crash" within a year as declines in stock and commodity prices signal the nation’s property bubble is set to burst.

* "The market is telling you that something is not quite right", the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong today.

* "The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months."


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

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market_mad
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Wednesday, May 05, 2010 - 10:46 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



What the Wall Street Journal had to say about Krudd's decision re super profits..

Australia is the only developed country that didn't have a technical recession after the global financial crisis, mostly because its mining sector kept feeding China's economic boom. Now, the Labor Party government has decided all that wealth creation was a bad thing, and it's time to levy a 40% "super-profits" tax on these companies and redistribute the money.

The news was delivered Sunday in Canberra by Prime Minister Kevin Rudd and Treasurer Wayne Swan as the centerpiece of a proposed tax-reform package two years in the making. They argued that mining companies did so well that they sucked labor and capital out of other parts of the country, creating a "two-tier" economy. Mr. Swan says he wants companies to be "growing together," and would use the tax take to build infrastructure, help low-income workers with their pensions and "fund" a tiny, across-the-board corporate tax cut.

This economic thinking runs counter to everything that made Australia rich over the last three decades: namely, the embrace of competition and capitalism, which rewards high risk with high returns. Setting up a mining company is not akin to opening a restaurant. Companies invest billions of dollars in exploration, build infrastructure to bring their products to a port, and then have to compete in a global marketplace and deal with volatile prices for their goods. As Rio Tinto recently discovered, the political risks of selling to countries like China are high, too.

Now the Rudd government wants to impose an arbitrary diktat on one of the country's most globally competitive industries in the name of "fairness." The government claims it settled on the 40% rate by following the lead of other trend-setters, like the U.S. state of Nevada. But why not 50%? or 60%?

The truth is that all windfall taxes, however they are dressed up and sold by politicians, are arbitrary and economically damaging. BHP Billiton estimates the "super-profits" tax would raise its total effective tax rate to about 57% from 43%, making Australia one of the most burdensome places to mine in the world. The increased tax burden would reduce profitability, discourage future investment and restrict companies' ability to return cash to shareholders through dividends.

That money, instead, will be redirected to the Rudd government, which estimates it will reap 3 billion Australian dollars ($2.8 billion) alone in 2012, the first year the tax would go into effect. The Minerals Council of Australia estimates mining companies already contributed about 16% of all corporate income tax revenue last year. BHP alone paid A$6.3 billion in Australian company, state and other taxes over the same period.

What Messrs. Rudd and Swan didn't say Sunday is that this bonanza helped fund the Labor government's unprecedented spending spree, which sent the country from a A$19.7 billion surplus into an A$32.1 billion deficit in a single year. Lately Australians have been treated to a raft of revelations about how the Rudd government and the bureaucracy mismanaged billions of dollars of this spending.

Given that record, it's hard to have faith that Sunday's announcement is about "fairness" as much as it's about plugging fiscal holes that the government itself created. It doesn't hurt to whip up populist sentiment against big corporations in an election year, either.

If Mr. Rudd really wanted to reform the corporate tax system, he would simplify it and cut Australia's sky-high rates much more than the proposed trim to 28% from 30%. That would spur investment, create jobs and ultimately, a bigger tax base. What politician wouldn't like that?

Cheers
MM


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jaded
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Wednesday, May 05, 2010 - 03:20 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



My watchlist of Iron Ore 'Juniors' approx 20 of them showing all OFF today's lows,back up 'significantly'[10%+ even 20%ish] with a half dozen showing Up on yesterday.

Indicates that for Iron Ore speccies the Buyers are back?The rot has dissipated?

The 'low' end of the Materials Market could 'rally'?Why not the Big End,too?

non Aust Material Big Boys/Blue Chips also 'retracing',deanrosario,was very useful info.
Thanks for sharing it with us.

Happy Trading.

ps-sorry can't cut'n'paste my list of junior IrnOrers.See Long Term thread on such shares.The list is there if one is interested.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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eblode
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Wednesday, May 05, 2010 - 03:50 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Many thanks Jaded,
Just came back from a bit of shopping and saw your post on iron ore. Jumped in and bought a swag of AGO. Up $100. so far. Thanks again.

Eugenio


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gdd3
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Wednesday, May 05, 2010 - 04:59 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



D'jaded...

"Cut and Paste" of most of the stocks you are referring to(located in the 'Last Years "Cinderellas"...Iron Ore' thread under the ASX Stocks...Long-Term & F/A Topic); only a few missing...IRD, BTV etc.

Yep, me thinks you might be right too about a swing low(my words) and 120C/D out from Jan highs(eg BRM fall 120 points in 120CD's)...but that is only of interest to some T/A's (Gannsters).



A few "key reversal" day's on higher volumes amongst this lot also...FMG, AGO, MGX, SPH and MMX(almost) tother with RIO!

Good tradin'...if anyone dares!(Eugenio + some)
Dolphin

(Message edited by gdd3 on May 05, 2010)


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market_mad
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Wednesday, May 05, 2010 - 11:23 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Looks like the Greek 'salad' affair is causing a few market jitters again Eugenio..

Market looks terminal at this point of the evening - futures solidly down, Greeks rioting and burning banks... this WILL spread to other countries, it won't be contained just to Greece - we have gorged on too much debt for too long and it is coming home to roost.

Part 2 of the GFC has just started, as I have said here before, the debt wasn't repaid - it only shifted from the private to public sector.. now governments are laiden with debt.. it's all ending in tears...

Cheers
MM


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bridog
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Thanks MM for WSJ article. Its instructive to know what is being said about us in other countries, and embarrassing to know our government is held in some contempt even if we share the same view.

I don't always agree with Dan Denning and the Daily Reckoning, but these extracts (separated by . . .)pretty well sum up my thoughts:

Finally, Wayne Swan has said, by way of defending the new resource rent tax that, "Our resources belong to all Australians and Australians do deserve a fair share." Thus is revealed the face of the entitlement mentality at the highest levels of government and bureaucracy. And it was done unselfconsciously and proudly. . . .

--And if you're a policy maker counting on the sheer abundance of resource wealth (coal, iron ore, mineral sands) to guarantee that someone is going to produce them so you can tax them, you may want to consider two other handy ideas from the real world markets and economics: comparative advantage and substitution.

--Aussie resource customers like China can find substitute suppliers, which they are already doing in Africa. Aussie-listed enterprises can substitute Aussie projects with political uncertainty for foreign projects with political uncertainty, but a more transparent and lower tax burden. International investors can substitute Australia as a destination for capital and replace it with Indonesia, Brazil, or Guinea.

--That is not to say Australia has suddenly become third-world soviet republic (if you can still use those terms these days). But it is to say that when you raise prices on a project - and introducing a resource rent tax [presumably means super profit tax] changes the plans and economics and profitability of many mines - you cause people to seek substitutes and alternatives. When, for the purposes of looting big profits, you change the rules midstream, you also change the conditions that created those profits. If it had tried, the government could not have come up with a better way to sabotage its own prosperity.

--There IS a good argument about whether Australia's main comparative advantage in the global economy - low-value added resource extraction - can produce diversified national wealth. But that's not the issue the government has tackled with its strategy (and it IS a huge issue that deserves a real public argument).

--Instead, the government has revealed that it believes it's entitled to change the rules on mining taxes because it knows better how to spend wealth even if it has no idea how to create it. Also implied is the moral superiority of government to the market. Also implied is that the people making policy think they are smarter and thus entitled to chose for the rest of us how to redistribute wealth created by the private sector.

--But now we are drifting to a bigger debate. We'll close with the simple idea that a normal return in the bond market - 5.7% according to the Henry Review. . .

--But is 5.7% a "normal" return for someone who undertakes to go into the bush and find an economic concentration of metals or minerals, raise the money to build a mine, build the mine, dig up the resource with expensive capital equipment and scarce human capital, and sell it before more producers come in and bring down the price?

--For that kind of uncertainty with so many variables, wouldn't you demand a higher rate of return in order to make it worth your while at all to take the risk? And if the reward for your risk taking was the theft of your profits, would you even bother to take the risk at all? We're about to find out.


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bridog
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Thursday, May 06, 2010 - 02:41 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Jaded and all,

Yes, it seems some money moved in towards the end of the day to mop up bear selling in the resource sector.

The following stocks that I'm interested in (but don't necessarily own atm) finished higher with increased volume:

BHP, COK, GXY, GRR, MCR, NHC, WHC

HMMMM.


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market_mad
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Thursday, May 06, 2010 - 09:56 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi bridog,

It's a good article and in my view, it is vitally important to understand the views of the world on Australia.

Dennis Gartman who is a highly influential commentator had this, pretty scathing attack to say;

Never Ever, Ever Discount Governmental Stupidity!

We have always been strong supporters of almost everything that the recent administrations in Australia have done, but we are shocked, dismayed and stunned by the decision on the part of the Australian government to impose a huge 40% tax on profits on that nation's mining industry! What in the world is this government thinking? What purpose shall this serve other than to get an increase in tax receipts this year and perhaps for another year or two, but at the same time chase a highly productive, highly important and highly labour intensive industry out of the country and send it elsewhere? This decision is true and utter nonsense, and we shall state for the record that our previously strongly held wish to own the Aussie dollar has weakened materially as a result of the decision. We will be adjusting positions accordingly as a result of this idiocy. Again, what's this government thinking... and why?

Prime Minister Rudd has taken a decidedly populist perspective, noting that in the past decade the profits of the Aussie mining companies have risen by A$80 billion while... as he notes "only" A$9 has been taken by Canberra in the form of taxes. He went on to take a decidedly anti-foreign company perspective, noting that BHP is 40% foreign owned; that Rio Tinto is more than 70% foreign owned and that means these massively increased profits, built on Australian resources, are mostly in fact going overseas.

We expect such nonsense out of Hugo Chavez in Venezuela. We expect it out of Rafael Delgado Ecuador's President. We expect this sort of nonsense out of Juan Evo Mora'es in Bolivia, but never did we expect such nonsense from Australia. We knew that Mr Rudd was centre-left, but we saw him as a centre-leftist in the same vein as "Lula" in Brazil... a wise, market firendly, centre-leftist. Now we know he is otherwise, and now we know he Is willing to put Australia at risk. Our propensity, suddenly, to own and support Australia in the same manner that we have in the past has fallen sharply. Shame on Mr. Rudd, he really should know better!

Cheers
MM

Vote the Donkey!


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deanrosario
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Thursday, May 06, 2010 - 10:40 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I don't want to make this a political thread, but, if others are providing reports to back up negative views on the mining tax, I see no issue with providing reports that agree with the concept of the mining tax.

A wonderful article by Michael Stutchbury in today's Australian newspaper

Main introductory points:

1. The new resource super-profits tax is not a simple matter of taxing 40 per cent of what a mine earns above some designated normal rate of return

2. It is much more radical than this. It makes the government and taxpayers the "silent partners" in every resource development in Australia.

3. The government becomes virtually a 40 per cent joint venture partner - a compulsory shareholder - in every new and existing mining, oil and gas project.

4. The new tax asks for 40 per cent of the economic "rents" generated from from digging up and selling the nation's mining resources.

5. Taxpayers also will compensate, in cash, mining shareholders for 40 per cent of any losses, such as from BHP Billiton's failed $1.5 billion Ravensthorpe nickel mine in Western Australia.

[Have we ever heard BHP & its shareholders saying "thank you" to us for this?]

6. That is, the government is sharing the mining company's risk of exploiting the rocks and gases on behalf the Australian people who own them. Because it shares the risk, it claims a share of the profit and not just the excess "rents".

Keep reading here ...

http://www.theaustralian.com.au/business/super-tax-makes-us-all-resource-partner s/story-e6frg8zx-1225862756173


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

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market_mad
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Thursday, May 06, 2010 - 11:10 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Dean,

I'd rather not keep reading something I am opposed to...

Sorry, but the government are saying that more money go into compulsory super yet the resource sector are hit with a super profits tax. So on one hand you are forcing Australian's to invest more for their retirement, but on the other hand you are devaluing Australian assets in a global context and discouraging foreign investment in Australia.. Brilliant idea!!

As Charlie Aitken quite rightly said; " the most ridiculous aspect of all this is the Australian resources super profits tax is basically a "success tax" and a "tax on productivity". How on earth does that equate to advancing Australia's future? How does making investment in Australia less attractive advance the nation's future?"

I think the markets are factoring in that the next cab off the ranks to be hit with a super profit tax will be the banks - they are getting smashed in anticipation.

Cheers
MM


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deanrosario
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Thursday, May 06, 2010 - 11:26 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM

There are many things that I often oppose.

However, rather than remain insular and blinkered I will educate myself and read and listen to all points of view.

Eventually, I form an educated opinion - the opinion may be the same opinion that I originally held - but, at least, it won't be based on my inherent bias and misconceptions.

But, that's just my approach to handling new concepts and issues and it may not be suitable for all.


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

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ken
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Thursday, May 06, 2010 - 11:52 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



From The Age this morning - Seems the miners are changing their position from last year

Big miners cry foul but this is what they asked for
PETER MARTIN
May 6, 2010

WHAT the mining industry now says is ''an unprecedented double tax'' that will hit workers, share owners and small businesses, it once championed - in its submission to the Henry review.

The submission from the Minerals Council of Australia, dated November 2008, explicitly argued for a shift away from the existing complex system of more than 40 different state-based royalty charges to a national ''profits-based'' tax.

Quoting its own submission to a ministerial council on mining in 2005, it said the new regime should be seen as ''a return to a joint venture where the state brings the resources to the joint venture and the minerals company the expertise to convert it to a saleable product''.

It argued for a ''sharing of the profits that arise from a saleable product'', saying the government should ''try to extract a share of the joint-venture rents''.

By contrast, at present, no state had the same rate for the 42 minerals mined, with ''the method of levying royalties for the same mineral differing across states, rates differing for the same mineral across states and in some cases rates differing for different mines extracting the same mineral in the same state''.

It suggested the government use the proceeds of tax reform to cut the 30 per cent headline company tax rate and assist with the tax treatment of capital expenditure, also measures ticked off by the Henry review and adopted by the government.

So sensible did the government find the Minerals Council's suggestions that at a conference last year the head of Treasury's revenue group, David Parker, thanked it for ''quite properly'' pointing out that the best way to look at a resource tax was as a ''partnership or joint venture between private capital and community-owned resources''.

So what went wrong? Why is the Minerals Council now opposing a change it sought?

One view is that the market changed. It became apparent that there would be many more good years than bad years in the decade ahead, making the switch to the tax less attractive than it seemed in 2008.

Another is that what the government now proposes is different to what the Minerals Council thought it would propose.

The rate is the same, but it will apply to existing projects rather than ''prospectively'' to new ones only, as the council wanted.

Its submission spoke of the danger of ''sovereign risk'' if that happened, a contention Parker derided at its conference.

Or it might be that what the Minerals Council and the government are really arguing about now is price, specifically the hurdle rate at which the tax will apply.


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market_mad
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Thursday, May 06, 2010 - 12:30 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Dean,

You've got your opinion and I've got mine - let's just leave it at that...

MM


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deanrosario
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Thursday, May 06, 2010 - 05:09 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I reckon most investors/traders will look for global reasons to explain the fall in the Aussie Finance sector, unlike "the tabloid reaction", which is to simply blame the Rudd Government!

The fact is the world is heading back toward a major crisis in global credit markets.

The likelihood of Greece defaulting on its sovereign debt has caused the EURO to fall by 5% against the USD in the last 5 sessions.

This tightening of credit markets will make it more difficult for Aussie banks to raise capital. WBC, in particular, has been hit hard as it is Australia's 2nd largest lender and, apparently, already operates on very tight margins, and these margins should get even tighter.

Of course, I'm certain some will continue to hold the view that Kevin Rudd is to blame for all of this!







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

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baysider
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Thursday, May 06, 2010 - 08:20 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Dean

Good on you for having principles that you're prepared to stick up for but seriously you're deluding yourself if you don't believe that Kev has made Australia a whole lot less attractive for foreign investment. This does effect all Australians in ways I don't believe Kev and Swanny have even considered in their ivory tower of socialist theory.
Why stick around and wait to see what might happen, Johnny foreigner's only taken his toys home with him - and with good reason.

To borrow from the Uk press from the 1970's, will the last one out of the Pilbara please turn off the lights!

PS If Kev says 'working families' one more time....

 
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