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Archive through June 01, 2010

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through June 01, 2010

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ody
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Username: ody

Post Number: 5060
Registered: 10-2006

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Friday, May 28, 2010 - 11:39 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)



ETF GOLD

Thanks, Rudy, that is really helpful, as have been all your posts on this stock. Timing is truly important in the case of a stock like this, as in a way its function is to react to events, which means that its ups and downs can be usefully exploited. So I shall try to pick up on anything you say about it! For the purpose of half of it, anyway. I might well keep the other half for some very considerable time, as I think we are agreed markets will at some stage this year fall considerably. Indeed, I think that from here on I'd only be interested in selling the half I have kept if everything looked to be rosy for quite some time, so that the desire for gold would not soon re-emerge. But at times like the present (and during much of a bearish period) we are talking about volatility which at any time could go in either direction. I don't see a steady period of real stability and a solid sense of purpose and solidity re-emerging for quite some time!


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ody
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Friday, May 28, 2010 - 12:25 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)



Market improving in an all-round fashion

Ignoring fundamentals, and acknowledging that markets currently have shrugged off worries, I find nevertheless that the market is now looking a lot healthier - simply as a market - than when it was so obsessive about metals and mining. That sector is still up, but more modestly, by 0.9%. This seems to me reassuring, as whatever the values involved, at the speed the market was going up in this sector it certainly seemed to be "overdoing it". It is very good, too, to see the financials solidly on board, being 2.8% up so far today. As is only fitting in a more optimistic market, gold should be down, and is - by 0.7% (note: this refers to miners, not the metal per se, but it indicates that currently the gold mines are being re-rated along with the metal). GOLD IS THE ONLY SECTOR IN THE RED AT PRESENT.

If only I wasn't so conscious of the economic unsoundness of what is happening these days, I'd see this as, superficially, quite an attractive market to enter into. But compared with early 2003, which looked a much better economic moment (even if only because we knew much less about the gathering "rot" underneath), I am not eager to venture into a market in which I have no firm belief for even the medium term. At some point the very real worries about very real problems will return. At the moment, even people in Europe have decided that they could contemplate misery no longer! So off they went: time to invest and drown out one's sorrows. And it is an understandable psychological phenomenon.







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rdumas
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Post Number: 3483
Registered: 11-2006

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Friday, May 28, 2010 - 01:07 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 Ody,

You have every right to doubt the soundness of this rally. Regardless of how long it lasts, whether it be days/weeks or even months, this is purely a bear market rally and should be treated as a short to medium term opportunity. Once the rally is over, it will be the start some really ugly stuff that most EW guru's have been writing about.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Post Number: 3484
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Friday, May 28, 2010 - 01:22 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)



XJO Reaches First Resting Place


The XJO is behaving as expected so far. It has reached the first resting place at the 127.2% Fib level. Must be time for me to go and do some work in the garden rather than watching the kettle boil.






I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Post Number: 3485
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Friday, May 28, 2010 - 03:05 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)



Alternation guidelines could give us a sharp wave iv


Under the Elliott Wave guidelines on 61.8% of occasions if the 2nd wave (wave ii in this case) is a flattish corrective wave then the 4th wave (wave iv in this case) will be a sharp (Zigzag) type of retracement. Once complete we should then get a move up in the 5th wave (wave v).





I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Post Number: 5062
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Saturday, May 29, 2010 - 07:18 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)



Downturn

Wall Street has fallen quite a bit on Fitz's downgrade of Spain. Although some such news was vaguely expected, the actuality of it certainly and tangibly reminded markets in danger of forgetting - or denying - the severity of the problems in Europe. The S&P was markedly in negative territory. Earlier than its finish, European stock markets had been weakening slightly already. Commodities in general fell, with confidence clearly ebbing. Our dollar (correspondngly) also weakened somewhat - now no longer above the crucial "new" 85 cents we had seen. Gold went up a little.

One factor that also influenced the Americans was that they were going into a long weekend. That never helps markets. But, undeniably, Fitch was the major factor in sending American stocks down.

It is not easy to see how this will all spill into next week. Some further "roll on" can certainly be expected: deep down, fear of the European crisis is certain still to worry investors, who recently had only been too keen - once again - the "put this behind them". Not so fast! Show some realism, people! But that's hard to say to markets that want a rally. Still, that may now be affected to at least some extent. Nervousness is clearly palpable in the figures. Again, deep down most investors would know that they are speculating in what may well be a "last gasp" retracement upwards before the bear market re-asserts itself more clearly again.

But perhaps this incident will still not quite block the rally's path; the market may shrug it off after one or two days. That will be interesting to see. What COULD be the case, though, is that the rally may prove a bit more hesitant and last less long. Speculators are certainly playing with fire, and we have, after all, had some very strong days.


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rdumas
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Saturday, May 29, 2010 - 07:51 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)



Hi Ody,

I have no doubt that there would be some people who think my wave counting is a complete waste of time however one of the things that it allows you to see is the context within which the market pattern form. What appear to be surprise moves to the non technical become potentially expected moves to those who put in the effort to understand what is happening.

Yesterday afternoon in my post 3485 I discussed the 61.8% probability that we would get a sharp correction for wave iv of the current wave pattern. So as you can see there are some advantages to 'wave counting' and spending the time on pattern recognition.

I will go into this stuff in more detail in my market wrap today so won't go on with the subject in this post.

Becoming a bit of 'self confessed' short term trader I was left with the decision yesterday afternoon whether to maximise my gains by pulling out of my STW trade. I waited until 4pm to decide to pull out to take advantage of the expected decline thus locking away a good one day profit. I am more than happy to privately show you my trades which show that the sell trade was executed at 4:01pm


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Post Number: 5063
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Saturday, May 29, 2010 - 08:09 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)



Advertising blitz by federal government

Since I became aware of politics around 1955, and having lived in four countries, I don't think I have ever seen a government as bad as this one. Here we have it using taxpayers' money to fight the very industry that is the main producer of Australia's - and ultimately all its citizens' - prosperity. Non-Australians with whom I am in touch just cannot believe the extent of this absurdity, illogicality, unfairness, greed, destructiveness, etc. One does hope that, whatever else, this gross misconduct and oldfashioned out-of-touch form of class warfare will not be forgotten at the ballot box.

Even if we have the odd little rally, REAL recovery in our share market cannot occur until this reckless government changes its tune or is sent packing. Business life in this country, and not only that of the mining industry, is being violated far too much for any sensible person not to be careful about investing money in it.

A number of days ago it looked as though we might see a compromise. Currently that seems more remote than ever, with a government hell-bent on inflicting maximum damage, encouraged by that ignorant, arrogant and nasty Ken Henry from whom they have accepted this rubbish policy which flouts the common sense of the very Australians it is meant to protect against those rapacious miners who will now be attacked in a set of advertisements, as though it is this wasteful government that is doing something good for the country, not those who are largely responsible for producing its wealth.

For a good summation of the current situation see the following piece.
-------------------------------------------------
Mining tax sets nerves on edge

* Jennifer Hewett, National affairs correspondent
* From: The Australian
* May 29, 2010 12:00AM

A DISMISSIVE-SOUNDING Ken Henry says he can't understand why there should be any perceived increase in sovereign risk in Australia as a result of the government's new mining tax. Perhaps the Treasury secretary - and architect-in-chief of the tax - should listen a little harder to the concerns being expressed across the world.

Investors' nerves remain extremely fragile, courtesy of European debt problems and uncertainty about China's intentions. Global sharemarkets are teetering up and down on a daily basis, desperately trying to find renewed confidence, but the desire to avoid extra risk remains fundamental.

Suddenly, investment in Australia does look a much riskier proposition despite the robust health of Australia's economy relative to the rest of the developed world. Investment bankers and brokers trying to talk up Australian equities and companies to international investors say they are finding it much harder going. That's an issue for the mining industry, but it's also an issue for the broader economy given the country's need to attract foreign capital to fund its current account deficit.

Citigroup analyst Paul Brennan says that after a trip to Singapore and Britain it is clear that a "number of investors believed there was now greater political risk to investing in the Australian market".

Commonwealth Bank research says "increased sovereign risk is an issue not just for the resource sector but for the entire private sector in Australia".

"If Kevin Rudd wants a smaller Australia with less growth, fewer jobs and increased funding costs for all banks, he could not be doing a better job," says another senior investment banker dealing with a flood of queries from alarmed international clients.

That perception will not be easily changed no matter what changes the Rudd government is prepared to make to some of the elements of its 40 per cent super profits tax.

The public brawling and unprecedented and savage political attacks on the country's most important export industry and its executives have only reinforced a sense of disbelief in the broader investment community that Canberra doesn't understand what drives business or the markets.

Australia is too small to be a must-have in any international investment portfolio, for example. That means it is a matter of discretionary choice. Widespread uncertainty clearly equals risk. Why bother? The government's aggressive new ad campaign, suspending the normal advertising rules, won't calm that sentiment whether or not it helps it in domestic political terms.

Even if the concept of a profits tax is unarguable in economic modelling, the design of this particular tax and the way it has been introduced - deliberately without consultation - seems a remarkable own goal in terms of promoting Australia as a safe investment destination.

Despite the ferocious arguments in parliament over the level of tax paid, there also seems general agreement in the finance world that the new 40 per cent tax rate will make Australia the highest taxed minerals industry in the world at up to 56.8 per cent for the most profitable companies and projects.

But whatever changes the government may agree to make to elements such as the threshold at which the tax cuts in, Canberra seems adamant it will not change the 40 per cent rate or the application to existing investment.

It seems the government and Henry at Treasury apparently disbelieve or don't care about miners' warnings that such a tax will undermine further investment and expansion, quite apart from the prospect of unsettling the market generally.

Nor do they seem to place any store on the concerns of other groups not directly involved in mining. PricewaterhouseCoopers, for example, says there is a risk the new tax will see investment dollars flow to resource-rich locations such as Africa, South America and Canada. Yet under questioning from senators last week, Henry went out of his way to disparage any suggestion that the mining industry had saved Australia from recession, arguing that mining companies had sharply cut employees in the first six months of 2009.

This analysis ignored the ability of the mining industry to switch to quickly take advantage of a resurging China and high commodity prices to strongly bolster Australia's terms of trade during the past year and, even more importantly, into the future.

Frustrated opponents of the tax say the argument is not whether all resources projects will be frozen.

Clearly investment will not cease, particularly given there is so much already committed, such as the $43 billion Gorgon gas project in Western Australia. It is more that the level of future investment, according to an almost universal view, will be considerably less than it would have been. And, certainly in the short term, the level of confusion about the tax means that decisions about expansion are definitely on hold and will be at least delayed.

WA Premier Colin Barnett said yesterday that there were about $170bn worth of mining and petroleum projects in his state to come on stream in the next five to seven years and that he thought about one-quarter of those now would not proceed.

Fortescue Metals alone has announced it won't be able to get financing for $17bn of its planned iron ore developments.

Barnett insists that what happens in mining affects the living standards of all Australians, not just those in WA or Queensland. This may not sway too many voters in NSW or Victoria. But it underlines the view in the mining industry that the government is not seriously interested in talking or in acknowledging problems with the size and design of the tax, especially after deliberately freezing miners out of any consultations before the unveiling of the tax on May 2.

Tom Albanese of Rio Tinto claims the new tax in Australia is the No 1 sovereign risk facing the company anywhere in the world given the size of its investment in this country.

The derision about comparing Australia to countries with much less appealing regimes - in Africa, for example - also ignores the reality that miners usually get specific agreements from such governments that conditions such as tax rates and ownership shares will not vary for the life of the project. These agreements don't always work - which is why the companies demand a higher level of return - but, typically, the agreed conditions are followed given the desire by such countries to encourage Western investment.

So while no one outside Canberra can fathom how and why the Rudd government is happy for the situation to have deteriorated so badly, they are all painfully certain of the practical results.

These extend far beyond the government's preferred image of greedy, well-paid mining executives stopping the rights of all Australians to have their "fair share" .

Despite the attack on the mining industry led by the Industry Super Network and its chief executive David Whiteley, for example, most of his colleagues in the retail super industry were appalled at his tactics and at the suggestion they backed the government's proposed mining tax.

Apart from anything else, too much superannuation money is tied up in mining stocks for super funds to be happy with proposals that they believe undermine companies' value. So while the retail super industry is pleased with the government's intention to raise the super guarantee over time to 12 per cent, they aren't signing up to the government's attempt to link the two policies.

"We sure weren't invited to dinner at the Lodge," jokes one in reference to a dinner attended by Whiteley.

Rudd also has refused his official invitation to give the keynote speech at the annual dinner of the Minerals Council of Australia next week.

It's an atmosphere hardly conducive to productive negotiations any time soon.


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ody
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Saturday, May 29, 2010 - 08:30 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)



Rudy:

You have done very well in your analysis of the market - and not just in the post you refer to, but also prior to that. I am most impressed, and have no doubt that you have done well in trading! It IS a short period which you refer to, but that does not matter if you get it right. I just hope that I did the right thing in selling that 50% of my ETF GOLD. But I presume you feel that this will still be so, in the event?

In writing my post about market expectations etc I had in mind what it seems most people appear to have thought - certainly not that YOU would have been taken by surprise. You have been reading the market very well - better even than many others interested in EW, I understand - and have been remarkably accurate in what you said might/would happen. Which shows, incidentally, how wrong those people are who say this cannot be done at all.

It's uncanny, really, that your wave counting of late has been predicting, say, a market fall when everything seemed rosy, and that then we saw the arrival of the exact physical event (as this downgrade of Spain) which triggered off the development that your reading of the waves foresaw. Thus, if well practised, your method seems to forecast not only market events, but - to my mind very importantly - the real-world events that frequently trigger market reactions. (And I do not think it is superstitious to say so, for in the real world one can also often say that one event will automatically lead to another - even though timing this is difficult.)

If anything, all this shows to me not only that forecasting of market events is possible, but also that it makes no sense to suggest that they take place in a total void. That does happen at certain times, but by no means all. Quite a few moves in the market are - IF THE MARKET IS AT ALL RECEPTIVE - direct responses to physical events or the likelihood of their occurring. In other words, I don't see either wave counts or study of real events as irrelevant to market analysis.


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breaker_1
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Post Number: 179
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Saturday, May 29, 2010 - 09:20 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)



If things are so bad re mining tax .

Why are 11 coalminers including Rio,BHP, Xstrata bidding
4.85 billion for Queensland rail.

They are saying they want to ensure the capacity grows with their mining expansion plans.

This would seem to indicate expansions are likely even if the resource tax proceeds.


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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bridog
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Saturday, May 29, 2010 - 12:05 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)



Hey Breaker,

Heart pounding game Wednesday night mate, with the right result except the margin should have been more.

The problem for me as an investor with the Resources Super Profit Tax is that, all things being equal, the reported profit for, say, BHP will fall 25% (as dividends are fully franked the profit for Australian investors must come from Aussie projects) therefor dividends will fall by 25% and franking credits likewise.

To me that means that if the BHP share price is worth $40 pre RSPT its value reduces to $30 subsequently, based on an ongoing P/E ratio of 15%. Of course, mining is a dynamic business with prices fluctuating and production ebbing and flowing, that BHP may well go on to be worth $60 per share or more, however the share price and dividends would always have been worth 33% more (relative to Australian projects)
had the RSPT not been introduced.

There are very few working Aussies who are not exposed to BHP shares in their super funds. At $40 per share, BHP has a market cap of $134 billion, 60% of which is in Australian hands, or $80 billion. When this takes a hit of 25% reducing it to $60 billion it wipes $20 billion off Australians' assets values, taking 7 years for the government to reap this amount.

Will BHP and other Aussie miners continue to invest in Australia? Well yes but in a more limited way, because they will have to add 33% on to a projects operational cost projections to see if it will generate a reasonable return on funds.

Will the Chinese and Koreans continue to buy Aussie mining projects. You bet they will, with their ears pinned back, as they can negotiate sales contracts back home at prices of their choosing, called transfer pricing, to negate any RSPT.

Go the Mighty Maroons . .


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breaker_1
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Saturday, May 29, 2010 - 12:46 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 Bridog,

Yeah great game result expected.

Of course RSPT has to be legislated and Labor would have to get in ,I guess its all uncertain pre election.


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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breaker_1
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Saturday, May 29, 2010 - 12:51 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)



PS Hope no one bought a house in Bowen

BHP Billiton's coal development in the Bowen Basin is in fresh doubt as Australia's biggest miner signs a deal to advance its Indonesian coal project.


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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bridog
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Saturday, May 29, 2010 - 01:09 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)



Folks, I got that wrong, P3t3 (Pete?) alerted me to this earlier:

Lets say Breaker Mining has $1 million to invest in a mine to make a net profit before tax of 15%. Not really a super profit, hey.

Before RSPT:
His profit is $150,000 on which he pays tax 30% or $45,000, doesn't really leave him a lot for his trouble.

After RSPT:
He wants to make the same profit, but the project must make $240,000, 60% more. How come?

Of his $240,000 he gets to keep 6% or, $14,400 being the bond rate. Deduct this from $240,000 and you have $225,600 remaining. The Gov't takes 40% of this leaving him $135,360 plus the free $14,400 giving him a total of $149,760 on which he then pays 28% tax. Net profit after tax $107,827.

Breaker Mining decides the project may not make that return and chooses a project that looks like making a 30% return in Africa.


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bridog
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Saturday, May 29, 2010 - 02:53 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)



Maybe thats not right either . . i guess Breaker Mining gets to keep 6% of the cost of the mining project which was $1 million.

Therefore project profit required = ~$204,000, 36% more than pre RSPT.

Of the $204,000 he gets to keep $60,000 (6% * $1m). That leaves $144,000 of which RSPT takes 40% or $57,600, leaving Breaker Mining $86,400 plus the $60,000 = $146,400 less 28% company tax = NPAT $105,408.

As royalties have not been taken into consideration the required additional return for Australian projects is likely around 30%.


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ody
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Saturday, May 29, 2010 - 04:00 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)



Breaker 1:

In your post 179, you say:
-----------------------------------------------
If things are so bad re mining tax .

Why are 11 coalminers including Rio,BHP, Xstrata bidding
4.85 billion for Queensland rail.

They are saying they want to ensure the capacity grows with their mining expansion plans.

This would seem to indicate expansions are likely even if the resource tax proceeds.
----------------------------------------------

This is one of several statements seen recently to the same effect, i.e. "If the tax were really bad, the miners would stop their projects altogether", with the added implication: "If they still try to make a buck, things must be allright." In essence, this is like saying that if a horse has three legs instead of four and still continues to use those three, there is nothing wrong. I just cannot understand how you fail to see that a severely impaired performance for either the mining company or the horse DOES matter. It means reduced performance, and thus less benefit not only for the company or the horse, but all who are dependent on better results. Moreover, if there are other companies or other horses than the defective, impaired ones, they will in any competitive situation take advantage of the weakness of their competitors, which means in the end that not only will the weaker competitors end up with less good results, but ultimately they will lose altogether.

Even if mining companies in Australia will perform vastly less well in Australia because they will pay more tax than e.g. a Canadian equivalent in its country, that means shrinkage of the pie for the Australian company, per se. But the situation is made greatly worse by the fact that, if both companies are doing much the same thing, the company which operates in Australia will not be competitive against the Canadian one IN ANY GLOBAL CONTEST unless it takes its activities abroad. Either its performance in Australia will dwindle, or it will decide to take its business abroad, and not mine in Australia. These things are already happening, right now.

Unfortunately, in business, anything less than an optimal performance is always damaging. Rudd and Swann are fully counting on production and selling continuing as before, but it won't, if you cripple the industry you depend on. Simply put, if you tax a company more, it will produce less for those who might benefit from it, as there is less incentive for investors to support it, and its capacity for making profits is reduced by the tax that is taken out of those profits. Moreover, the company cannot, internationally, compete against those who are selling similar goods, and thus will lose ground as well. Even Labor (or least part of the party) admits that its tax will mean lesser earnings from Australian resources, but then argues that that is a GOOD thing ("we preserve the resources for those who come after us").

All this Labor nonsense does NOT mean, of course, that companies will not continue to try. It is the RATE of their success which will diminish, not necessarily - immediately - their desire to succeed, or at least make SOME money.

I am reminded here of Labor's indignation about one of the Liberal Party's members investing a small amount in BHP. Obviously, thus it was reasoned, this person must be a hypocrite, or else he would not invest in the company. Apparently, thus Labor implies, he ought not to do so. Well, if that happened, BHP would lose financial support completely, and thus collapse. This is not what the argument is about. To invest in BHP, you would expect that the company will still make a profit. The problem is, however, that the profit will be much diminished, as will investment in the company as far as its investments in Australia are concerned. If it does do well, that would be because it takes its activities abroad, which is not to the advantage of the Australian economy. I am not imagining matters here: they are already visibly in train.

OBVIOUSLY those 11 miners will still try to make money. What else would you like them to do? NOT bid, and simply start up business outside Australia? As it is, they will try to make money here as well, of course, but with a government taking so much of the profit they will do less well than before, and ultimately this will diminish their profit, investment in them, and their output. You cannot expect a company's profit to remain the same if it is heavily taxed, and, particularly, investment will diminish: if you give an Australian investor an opportunity to make, say, 15% on a stock operating in Australia but 25% on one operating abroad, they will not be so chauvinistic as to support the stock that operates here.

This is one of the major issues: people like Swan, Rudd, and Henry just do not imagine that the industry WILL, inevitably, be impaired, so that their calculations of the profits the companies will make are flawed as the basis for their reasoning is wrong. Henry amazingly asserted just a few days ago that the RSPT would not make an impact on the performance of the mining companies' performance in Australia at all. Even several of his Labor colleagues don't agree. He is living in a dreamworld, with blinkers on. What he says runs counter to all historical experience in similar situations, and even against everything we see happening already.

The kind of reasoning employed by people like him was typical in Europe in the 50s, and I remember it very well. Socialists there slammed enormous taxes on private enterprise in order to create the welfare state. One result was that many companies and personnel went elsewhere. Switzerland, for example, attracted many of the best business people who simply left in order to escape from punitive taxes. The childish reasoning of socialists was that "morally" we don't "need these people here", and others will emerge who are just as capable: simply not true. The performance of socialist nations greatly deteriorated, and they now have a huge problem in that the welfare state cannot be continued as it vastly expensive to maintain, and the money is simply not available. People like Ken Henry reason just like socialists in Europe in the 50s, and his outcomes would, over time, be just as bad. Greece shows this pattern of socialist malaise to the nth degree, which is why it cannot pay off its bills, and won't.

Its taxi drivers to not pay ANY more tax than 1200 euros, no matter what they earn, and Greek workers can retire in their early fifties while preserving an indexed salary pay-out of 80% for life. My mother, from 1963, received 80% of my father's salary - indexed! - for 32 years, after he died, without having to do any work. One of my older brothers, who argued he was unfit for work after a so-called "nervous breakdown" was nevertheless told to apply for jobs. He invariably mentioned the breakdown, so that he did not get offered employment, and he too was given 80% of his last salary, from age 40 on! He complained bitterly when eventually a government reduced the rate to 70%. He died at age 70, having been financially unproductive, yet paid by the taxpayer, for 30 years, living quite comfortably at the expense of others.

Gradually the tax structure had to be revised, of course, and the very high taxes were removed again, though they are still stiff. And, in the more sensible countries, gradually people are less spoiled now. In the 70s it was fashionable to argue that the unemployed should be able "to replace their furniture every 5 years" ("just like the rest of us", socialists claimed, although many people did NOT replace their furniture every 5 years, of course).

Those countries which do well in the modern world are those which are the most adaptable. They do not need rigid socialist minds like those of Ken Henry, which would anchor us in the past, and make us a far less successful nation than during the last 15 years or so we have been. It's almost always the same. Liberals run economies well, even if they are boors in areas like culture and education. If socialists succeed them, they ruin the economy, or at least make it less effective. This danger is particularly strong if the economy has done well, for then it is argued that all wealth can be distributed evenly to all citizens. That recipe always leads to poor performance. The Soviet Union is of course the best example of what, in an extreme form, this reasoning leads to. America, on the other hand, is too wild and irresponsible a capitalist nation.

The balance we have had in Australia has on the whole been very good, which is why for the most part it is a well-adjusted and harmonious nation. But it is now in serious danger of sliding too far towards ineffective and harmful left-wing behaviour, initiated by this economically ignorant government seeking its advice from the doctrinaire bureaucrat Ken Henry. Rudd is a "classic" this way: not generating money, but as quickly as possible spending what he had inherited from his predecessors, and spending it badly, too. What he is engaged in is not "nation building", but squandering wealth on such vote-buying exercises as defective insulation and school-building programmes, and now government propaganda. The NBN, if it ever comes off the ground, will be another white elephant. There are only very few good things this government has done, and usually they are not financial, but moral, like saying "I am sorry" to the indigenous population. And, of course, Labor would probably not have embarked on the war in Iraq. It is in such areas that Labor tends to be preferable - but we sustain the government at huge economic cost because they do not understand economics (never mind the formal qualifications they may have - Keynes did not understand economics either, or the Nobel prize winners who argued that volatility would come to an end).

(Message edited by Ody on May 29, 2010)


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breaker_1
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Thank you Ody, for a very informative post

I guess they have to look after what they all ready have .Living here in CQ , there is a massive amount spent on infrastructure all ready.

Would not a Liberal Govt keep the tax as no of them like to give taxes back?


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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ken
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Ody,

I wonder if the miners are wanting to buy the railways at least partly to increase the capital side of their projects, so that the return on the project is not as high in percentage terms and hence less RSPT is paid?

Ken


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peterloh
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Ken Henry can't understand that investors not happy. If I already have investments in RIO or BHP, it means the government is taking part of the profit that rightly belongs to me. I would not have invested in the shares if I know before hand that the government will introduce the RSPT.A tax which is retrospective is nota fair tax.


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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ody
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Part of a piece by Alan Kohler (The Eureka Report)
--------------------
May has been a washing machine month, and I’m talking the type of machine that walks across the laundry. The average all ordinaries daily move has been 70 points, more than 1.5 per cent a day; 70 per cent of the moves in the Dow Jones have been 100 points plus; there have 16 straight days of 200 point plus intra day movements in the Dow.

So let’s be clear about this: the world is still in the grip of a credit collapse and the volatility we are seeing does not signify a bottom. The last time the market was this volatile was September/October 2008 after the collapse of Lehman Brothers and before the All Ordinaries fell 40 per cent. Volatility like this usually signals a top.

It’s now clear that the weekend of May 8/9 was the world’s second “Lehman Weekend”. You’ll remember that US Treasury Secretary Hank Paulson and Fed chairman Ben Bernanke met over the weekend of September 13/14, 2008, to decide whether to bailout Lehman Brothers. Paulson kyboshed it because he wanted to draw the line somewhere and on Wednesday the biggest money market fund, Primary Reserve, broke the buck. As a result the global financial system went into meltdown.

The big difference between the US banking crisis of 2008 and the European sovereign debt crisis of 2010 is what happened over those two weekends. After 11 hours of talks three weeks ago, the European Union authorities actually did come up with a bailout, announcing that a 750 billion euro ($A1 trillion) package had been agreed between EU finance ministers, central bankers and the IMF.

That prevented what would have been a far worse financial meltdown than that which occurred in the weeks following that of September in 2008. The reason the markets have been volatile and trending lower since then is because there is now a pitched debate about whether the bailout will actually save Europe.

That is: will it get through the German courts, will it be enough and will Europe go into long-term deflation and depression anyway. Answers: yes, yes and probably.

Adding to the Euro-misery are the following cake-icings:

· the United States is struggling with deflation as its recovery falters;


· the world’s biggest ever oil spill in the Gulf of Mexico is rattling the oil industry, the southern US states and Americans’ faith in President Obama;


· China is intent on slowing its economy;


· Australia has embarked on a damaging, unwinnable battle with the global mining industry over taxation.


So, bottom line - while the long term outlook for Australia remains good because of the industrialisation of China and India, the short to medium term looks decidedly messy, and for Europe and America, it could be the long term that’s messy, as it was for Japan after the crash of 1989.

Commodity prices could fall a lot further this year and sharemarkets almost certainly have more correcting to do in my view, although I'm not as bearish as some.

Richard Russell, author of the Dow Theory Letters newsletter [WHO HAS A VERY STRONG RECORD, - ODY], which has been going for 52 years, believes we are in a bear market of “historic, earth-shaking proportions” and is urgently begging his subscribers to get OUT of the market.

Russell says: “The generations since World War II have been enjoying decades of good times with the help of fiat money and massive borrowing -- a process that has created an international house of cards. The stock market has forecast our great and "borrowed" period of the good life in its own way -- by giving us the greatest bull market in history.

“Now the bull market is over, and the great correction (bear market) is upon us, but it's still in its early stages. The bear market will be hair-raising in its intensity and persistence. The bear market will produce losses that will be a wonder to behold.”

Now I don’t know if Richard Russell is right or wrong. I don’t have his experience or faith in the so-called “Dow Theory” (a series of principles invented by Charles Dow that revolve around identifying market trends).

But the graph accompanying today's email [NOT SHOWN HERE, - ODY] has two messages: while the long-term (since 1880) average PE of the US market is 16.4, there have been long periods when it has been well below 10, especially after big bull markets; and secondly, looking at the graph it can be seen that this bear market began in 2000 and is now 10 years old.

The PE is not the price index, it's true. The S&P 500 tells a slightly different story, which is that it has been flat for 12 years. But I would argue that the price earnings ratio graph is a purer indication of the market’s mood, eliminating the “noise” of economic and business cycles.

What it shows is that while the growing economy and profits have kept share prices in the US flat for a decade, the value placed on those profits has collapsed by half (from 40 times to 20 times), but that it’s still above average, and a long way above other post-bull market levels. Note that after the bull markets of the late 1880s, 1920s and 1960s, the Shiller PE fell to 5-6.

That is what Richard Russell is predicting will happen again.
------------------------


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bridog
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Breaker 1 on Saturday you said:

"BHP Billiton's coal development in the Bowen Basin is in fresh doubt as Australia's biggest miner signs a deal to advance its Indonesian coal project."

You must have a good pair of antennae there lad, congratulations.

The following is in Minebox News today:

"BHP Billiton has restarted studies on a 6 million tonne-a-year Indonesian coking coal hub.

Chief Executive Marius Kloppers said it meant the company could leapfrog multi-billion-dollar Queensland coking coal expansions if Kevin Rudd's 40 per cent tax on mining profits is implemented.

The Australian reports the moves come as Itochu, one of BHP's Japanese partners in its iron ore ventures, said signs of the tax slowing BHP's coking coal expansions were starting to emerge.

BHP said the $US350 million ($409m) sale of a 25 per cent stake in the Murawai coal project to Indonesian coal company Adaro Energy had been approved by the Indonesian government.

"We're now progressing study work to identify development options," BHP metallurgical coal president Hubie Van Dalsen said."


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bridog
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I wonder how long it will be before Rudd and Swan brand BHP and others as "un-Australian" for taking business offshore to dodge the RSPT as far as possible.

As far as being Australian is concerned, Rudd is very hard to recognise as one let alone a Queenslander, and Swan surely got mixed up as a child and got swapped for a Whinging Pom.


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breaker_1
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Thanks for the kudos Bridog, maybe I missed my calling.

P.S. Wish I could pre empt the share market


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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ody
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Et tu, Wen?
-------------------------

Wen warns of second global downturn

Reuters

TOKYO - Chinese Premier Wen Jiabao has warned that global economic growth remained vulnerable to sovereign debt risks and the possibility of a second downturn, while saying his own country's growth remain on track.

"The world economy is stable and beginning to revive, but this revival is slow and there are many uncertainties and destabilising factors," Premier Wen told a meeting with Japanese business leaders in Tokyo.

Referring to the risk of a second dip in global economic growth rates, Premier Wen said "I believe that we can't say with absolute certainty, so we must undertake close observation and act to prevent it."

He said it was too early for economies to consider exiting from their stimulus spending.

"All countries must coordinate together and strengthen support to the economy. There cannot be the least relaxation," he told a meeting with Japanese business leaders in Tokyo.

"The world economy is stable and beginning to revive, but this revival is slow and there are many uncertainties and destabilising factors."

Wen mentioned problems of countries including Greece and added: "Is this phenomenon over? Now it seems that it is not so simple."

He said Europe's sovereign debt problems may drag down its rates of growth.

"In these circumstances we propose that what is needed is an appreciation of the threats, calm observation and a steady-handed response."

He remained confident that China could achieve its growth goal for this year, but said China would also have to "maintain a certain level of intensity in its economic stimulus."

He also stressed several times the risks that inflationary pressures posed to the Chinese economy.

Referring to China's goal of keeping annual CPI in 2010 within 3 percent, he said: "Achieving this is an important goal for this year."


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ody
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Can anyone remember an Australian government so harmful to business, and hence the share market??

This was one of the good industries left! Where will Labor's destructiveness end??

---------------
Overseas student numbers plummet

* Andrew Trounson
* From: The Australian
* May 28, 2010 12:00AM

INTERNATIONAL student enrolments could drop by as much as 20 per cent next year, costing the economy up to $2 billion, as a consequence of the Rudd government's "abrupt" tightening of immigration requirements and rising competition from North America and Britain for the lucrative student trade.

Australia's largest international student recruiter, IDP chief executive Tony Pollock, warned that changes to visa rules and priority skills were being made without giving the industry time to adjust. As a result, student demand had plummeted and the sector's market standing was at risk.

Mr Pollock said international placements into Australia across IDP's network were down 37 per cent in April compared with a year ago, with current Indian demand almost wiped out. He said the Australian High Commissioner in India had told his staff there that the number of student visa applications it had on hand had crashed to just 200, compared with 8600 a year ago.

The Australian was unable to verify these numbers with the commission. According to the Department of Immigration, its latest application figures for the nine months to the end of March 31 show that applications from Indian nationals are down 47 per cent at 23,601.

Mr Pollock said further negative fallout was expected as more students were stranded by private college collapses caused by the downturn, and frustration grew among the thousands of students already enrolled in courses that have been culled from the Skilled Occupations List that provides a pathway for permanent residency. "My concern is that the numbers for the next 12 months are going to be severely impacted," he said.

Immigration Minister Chris Evans has tightened visa requirements and refocused on a narrower range of skills to clamp down on rorts and student exploitation.

These included "visa factories" or dodgy courses in areas like hairdressing, cookery and community welfare that were focused solely on permanent residency.

International education is Australia's third-largest export earner behind coal and iron ore at about $17 billion a year. International student fees have become a key revenue source for universities following declines in government funding, accounting for more than 15 per cent of revenue.

"The government's desire to clean up the industry is entirely admirable, but they have made the changes so abrupt that there is little time for the kind of structural adjustment that is necessary in any big change of this nature, both for the students and the institutions," Mr Pollock said.

A spokesman for the Department of Immigration said the changes to a more "demand-driven" immigration program had been signalled as far back as early 2008.

"The recently announced changes to skilled migration remove incentives for students to seek permanent residence through low-quality education courses, a practice that damaged the integrity of both the migration program and the education industry," the spokesman said.

A spokeswoman for Education Minister Julia Gillard said the sector was well placed to weather the changes.

"The introduction of the new Skilled Occupations List will require a refocusing for some education and training providers, but we believe the market is well placed to continue as a world leader in international education services," she said.

International students are set to protest against changes to the skills list at a demonstration in Sydney on June 3. So far this year, 15 private colleges have already closed, affecting 3713 students, of which only 57 per cent have been placed at other providers or given refunds.

The latest government figures show international student commencements rose by just 0.3 per cent in the nine months to March, compared with average growth rate over the past eight years of 8.6 per cent. While commencements at universities were up 11.8 per cent, they were down in the vocational and English language sectors that are key feeders for universities.


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ody
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Answer: if you have a bunch of socialists governing you AND they are incompetent there is NO limit to the harm they will do to a country's prosperity.


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rdumas
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ASX Indices

Interesting to see the ASX indices that performed the worst/best today. The bigger they were the harder they fell.




I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Hi Rudy,

Yes, last day of the trading month and hence some window dressing will have been done by the instos...

What are your thoughts? Do you think that Wave 4 down was completed today and we should see Wave 5 up to a high above Friday's high. Or do you think that Wave 4 may have some more downside first before the Wave 5 starts.

Cheers
MM


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rdumas
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Hi MM,

Never been able to work out why the window dressing wouldn't be done 3 days ago since I would have thought that you could really only draw a line under a 'settled' trade rather than an 'executed' trade. Maybe it comes under the category of 'near as dammit'.

As for whether there may be further down side it's a difficult thing to say. I would have thought that our index would have 'marked time' until it got a clear indication from the US futures tomorrow afternoon.

I also note that the 4th wave wasn't sharp as expected under the Alternation guidelines for 61.8% of wave 2/4 patterns (at this stage anyway). Looks like the 38.2% probability may have held sway this time.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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p3t3
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rdumas wrote on Monday, May 31, 2010 - 04:53 pm:

Never been able to work out why the window dressing wouldn't be done 3 days ago since I would have thought that you could really only draw a line under a 'settled' trade rather than an 'executed' trade.


Contract Law says the the transaction is completed upon offer, acceptance and "consideration". Undertaking to pay within a specific timeframe is legally sufficient "consideration".


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ken
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Ody,

The overseas student businesses were not good. A whole lot of overseas business people set up colleges to train overseas students in cooking and other trivial courses that as a leftover from the Howard Government, allowed the students permanent residence. There were layers of middlemen and the colleges went belly up when there was even a suggestion of regulating the mess. This has wrecked the Melbourne rental market, put pressure on all kinds of infrastructure and led to social unrest. Rudd's government has reduced the job categories required to those actually required like doctors nurses and engineers, and the colleges are just coming down from the bubble of their own making. I don't have a lot of sympathy.


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ody
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Hi Ken,

I would have thought that there was more of a mixture than that. I must confess that I perhaps judged this matter too quickly. You are right to insist that a number of overseas colleges have been appalling. If THOSE are the institutions the government is targeting I must agree with you. But is that the kind of distinction they are making? Overseas students are very big money earners for the country, so any action would have to be well directed. There do, after all, seem to be quite a few satisfied overseas students as well. I have no pity if they are rip-off businesses only. I also do not like the link of "if you study here we shall give you a job/permanent residence", I must admit.


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ody
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Share markets are for the most part fairly weak again, right now. There seems renewed concern about debt/sovereign risk on the basis of "contagion" spreading from Greece to Spain. In Australia the Rudd government is making sure that investors are concerned about parting with their money, and this situation may well continue. Of course sentiment will probably continue to bob up and down, as the matters of concern are not such as to pester people every day - but they will continue to return and weigh on markets even if we see somewhat sunnier periods in between.


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ken
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Ody,

There are legitimate students and courses in the mix, and there are many Indian students in High Schools and universities. A friend of mine is an IT professor and his Masters course has been affected.

Last year there was a spate of violent incidents against Indian residents which the police and state government tried to play down, and I think this has affected the perceptions of Victoria as a safe place for some overseas students.


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p3t3
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ody wrote on Monday, May 31, 2010 - 11:13 pm:

Share markets are for the most part fairly weak again, right now.


Also consider today's 2.4% drop in the Shanghai composite, which has been a reasonable "tell" for likely outcomes in the All Ords, understandably. This article from the FT
http://www.ft.com/cms/s/0/d4ac8942-6c65-11df-86c5-00144feab49a.html?ftcamp=rss
talks about the Chinese property tax reform plans affecting equity prices.

Chinese construction has been a significant source of demand for products made from materials supplied by Australian miners. And wealthier Chinese have been meaningful participants in the higher end of the Oz property market. Slowing of Chinese residential construction, and especially the speculation therein could well have global implications - and not of the pleasant kind.


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ody
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Couldn't agree more, pl3t3: all these things are connected in the way you say. And developments of this kind are indeed occurring, and unpleasant. It is hard to see how they will not get worse for some time to come.


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ody
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Tuesday, June 01, 2010 - 12:32 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)



That idiotic one-star grading is back again.

Recently Peter Loh wrote the following:

"Ken Henry can't understand that investors not happy. If I already have investments in RIO or BHP, it means the government is taking part of the profit that rightly belongs to me. I would not have invested in the shares if I know before hand that the government will introduce the RSPT.A tax which is retrospective is nota fair tax."

Peter's argument here is to the effect that he bought the shares with an expectation in mind. He had no reason whatever to expect a government would be so crazy as suddenly, without any consultation, and retrospectively, to introduce a 40% tax applying to any profit earned above an "allowed" band of about 6%: anything more is suddenly regarded as a "super profit". We are taken into Alice in Wonderland with this. The miners are told: You ARE allowed to make 6%, and we'll not tax you on that, but anything more is a "super profit". What garbage. Furthermore, retrospectivity is on the whole abhorred in Australia, exactly for such reasons as Peter mentions: you act on the basis of what exists at a particular time, and usually new rules are NOT applied retrospectively, the way this government intends.

In other words, what Peter wrote made good sense. Yet what does this cowardly one-star marker do? Without producing ANY reasons against Peter's post, s/he just marks the post as "utter rubbish" (that is what one star is meant to represent). It is, of course, this star which is rubbish. But one must also once again question the good sense of a system that enables people to do this: it's like tolerating graffiti, in my view. And I hold such an action in absolute contempt. No doubt this will provoke another one star rating.


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ody
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Username: ody

Post Number: 5074
Registered: 10-2006

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Tuesday, June 01, 2010 - 12:36 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)



Ken: Indian students

Yes, I think the attacks were despicable, yet clearly targeted against this particular group, and the Victorian authorities were in a despicable state of denial about the whole thing. Cannot have helped.


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p3t3
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Username: p3t3

Post Number: 7
Registered: 04-2010

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Tuesday, June 01, 2010 - 01:02 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)




p3t3 wrote on Monday, May 31, 2010 - 11:59 pm:

This article from the FT
http://www.ft.com/cms/s/0/d4ac8942-6c65-11df-86c5-00144feab49a.html?ftcamp=rss


The link is blocked, so a screen capture of the relevant text is attached.FT Article re Shanghai Composite


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bridog
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Username: bridog

Post Number: 124
Registered: 06-2009

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Tuesday, June 01, 2010 - 01:48 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)



Wearing my Bandanna tonight . . why?

It should be time for BND to get a rerating in the market after the following announcement extract today:

“Bandanna Energy Limited (ASX : BND) and its farmin and co-venturer, AMCI (Alpha) Pty Ltd, are pleased to advise that their South Galilee Project, located near Alpha in the Galilee Basin, has been declared a Significant Project by the Queensland Government.

Operated by AMCI, the Joint Venture recently completed a Concept Study which indicated that the South Galilee Project had the potential to support annual production of up to 20 million tonnes (Mtpa), of high volatile, thermal coal for export to international markets over at least a 40 year mine life.

Premier Anna Bligh in referring to the declaration said the South Galilee Project could generate 2000 construction jobs, a permanent workforce of 750 people to operate the mine and numerous support jobs for suppliers and contractors.

Minister for Infrastructure and Planning Stirling Hinchliffe said the South Galilee Coal Project would utilise common user rail and port infrastructure required for the Alpha, Kevin's Corner and Waratah projects, located to the north of the South Galilee Project, to export coal through Abbot Point.”

Kevin’s Corner? Damn, bet they are proud of that name these days, not.

Anyone interested can read my previous posts on BND, however the bottom line is their coal in the ground assets are valued by market cap at less than 20c per tonne compared to MCC at $1.60 and NHC at around $2 if you strip out cash, Arrow shares and other assets. Yes I know they are operating coalmines and BND is just coal in the ground, but there is room for price improvement of 2 times or better. All IMHO of course.

Sorry folks, I don’t really have a bandanna, but do hold some shares.


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rdumas
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Username: rdumas

Post Number: 3489
Registered: 11-2006

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Tuesday, June 01, 2010 - 09:51 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)



Hi p3t3,

Thanks for that explanation. I know that when I do my tax for my SMSF, if I haven't settled my trade within the current financial year then it is still considered to an unrealised gain/loss in that financial year which is why I would have thought that window dressing on the last trading day of the year should have been 'settled' window dressing rather than 'half finishsed' window dressing.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Username: market_mad

Post Number: 357
Registered: 09-2009

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Tuesday, June 01, 2010 - 10:14 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)



Interesting;

(Reuters) - The European Central Bank warned on Monday that euro zone banks face up to 195 billion euros in a "second wave" of potential loan losses over the next 18 months due to the financial crisis, and disclosed it had increased purchases of euro zone government bonds.
As the euro recouped losses but remained on the back foot after a cut in Spain's credit rating and China warned that the global economy remained vulnerable to sovereign debt risks, Spain assured investors it would reform its rigid labor market even if employers and trade unions cannot agree.
The ECB said euro zone banks would need to make provisions for further losses this year of 90 billion euros, and 105 billion in 2011, on top of some 238 billion euros in bad debts written off by the end of 2009. That was the first time it has given an estimate for next year.
Although total write-downs from bad loans and securities between 2007 and the end of 2010 were likely to be lower than previously expected, the ECB said in its latest Financial Stability Report, write-downs this year and next year would be still larger if heightened sovereign debt risk and the impact of government belt-tightening dragged down economic growth.
The ECB began buying up mostly Greek, Portuguese and Spanish bonds on May 3 in a contentious move to calm debt markets and support an $1 trillion stabilization package for the euro agreed by the European Union and the International Monetary Fund.
The central bank said in a statement it had settled 35 billion euros in bond purchases by May 28, up from 26.5 billion a week earlier. It did not detail the nationality of the debt but ECB officials have said it is mostly from south European countries hardest hit by financial market turmoil.
The ECB acknowledged in its report that euro zone debt tensions may force it to delay a phasing-out of cheap lending operations designed to help banks through the financial crisis.
After Lehman Brothers collapsed in September 2008, the ECB began offering euro zone banks unlimited, flat-rate loans in a bid to revive inter-bank lending and keep credit flowing to the real economy.
ECB governing council member Axel Weber, president of Germany's powerful Bundesbank, urged a tight cap on the bond buying program and said the extraordinary steps taken to ease the euro zone debt crisis posed a risk to price stability.
"The purchases of government bonds in the secondary market should not overshoot a tightly-capped limit," Weber said in a speech prepared for delivery in Mainz, Germany. He did not suggest a figure.
Spain, the fourth-largest euro zone economy, saw its credit rating downgraded a notch by Fitch Ratings agency from the maximum AAA to AA+ late on Friday after a 15 billion euro austerity program squeaked through parliament by a single vote.
Market reaction to the downgrade was limited, partly because U.S. and British markets were closed for holidays on Monday.
The euro recouped losses incurred after the Spanish debt downgrade to trade at around $1.23 but remained on the back foot as the downgrade highlighted ongoing structural weaknesses in the euro zone. The 10-year Spanish-German bond spread widened only slightly but Spanish stocks fell 0.7 percent while the index of leading European shares gained 0.4 percent.
Labor Reform
Spanish Economy Minister Elena Salgado told a conference in Madrid that the government aimed to pass a much anticipated labor market reform by the end of June with or without consensus with the unions and business representatives.
The minority Socialist administration extended the deadline for an agreement by one week from Monday but officials have said the social partners are still far apart.
The left-leaning daily El Pais said the government planned to allow companies to make greater use of cheap work contracts for a broader range of employees, reducing redundancy payments and making it easier to fire workers.
Trade unions have threatened to strike if the government imposes the reform by royal decree, a move that would set the ruling Socialists on a collision course with their traditional allies in organized labor.
In a sign of continued international concern about the impact of Europe's problems, China warned that Europe's struggle to contain ballooning debt posed a risk to global economic growth, raising the specter of a double-dip recession.
Premier Wen Jiabao, addressing business leaders during an official visit to Japan, issued his warnings a day after France admitted it would struggle to keep its top credit rating.
"Some countries have experienced sovereign debt crises, for example Greece. Is this kind of phenomenon over? Now it seems that it's not so simple," Wen said. "The sovereign debt crisis in some European countries may drag down Europe's economic recovery.
He added it was too early to wind down stimulus deployed during the 2007-2009 financial crisis.
Governments around the world ran up record debts during the $5 trillion effort to pull the economy out of its deepest slump since the Great Depression and now face a tough balancing act: how to reduce debt without choking off growth.
ECB Governing Council Member Mario Draghi warned that austerity programs by European governments could snuff out a fragile recovery unless they were coordinated internationally.
Economic sentiment in the euro zone fell in May, defying analysts expectations of a slight improvement, in part due to the wave of austerity announcements.
However, ECB President Jean-Claude Trichet said the economy may expand more than expected in the second quarter.
The fact that not just fiscally weak southern European countries, but also nations such as France and Germany at the euro zone's core are under pressure to cut debt and deficits amassed during the financial crisis, is adding to concerns.


Cheers
MM


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breaker_1
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Username: breaker_1

Post Number: 185
Registered: 10-2009

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Tuesday, June 01, 2010 - 10:32 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)



bridog

As one who lives in the area they are a long way from the first shovel full of coal.

Mines they were discussing 25 years ago have just come on line here.

Why arn't they whinging about the RSPT.

They have a lot off hurdles yet not to mention distance IMO


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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rdumas
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Username: rdumas

Post Number: 3490
Registered: 11-2006

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Tuesday, June 01, 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)



Hi MM,

Wow, you sure are a bearer of bad news.

All jokes aside though, there is no doubt in my mind that the global share markets are going to see some really ugly stuff in the medium term future (months ~ years) and there will be a correlation between what we see in the share markets and what happens in the world in terms of wars/civil unrest/etc. All we can do is attempt to make 'our part of our world' as nice as possible.

In the short term based on the sum of all of the methodologies that I use, whilst there is always a possibility that our market could drop from here, I still believe that the market will in its wild and volatile way trend up towards the 4620 ~ 4650 level for the next few weeks. I have suggested a time frame for a medium term top of around the 19th to 21st of June (see chart/diagram below).





I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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colin_twiggs
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Username: colin_twiggs

Post Number: 613
Registered: 06-2009

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Tuesday, June 01, 2010 - 11:22 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)



Ody,

We had a vote on the star rating system a few months ago and it is too early to re-visit the issue at present. We will change the wording of the voting system, however, to reflect agreement/disagreement rather than the good/bad distinction made at present. That should remove any inference of disrespect where the voter wishes to record their disagreement with the views stated.


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ody
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Username: ody

Post Number: 5075
Registered: 10-2006

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Tuesday, June 01, 2010 - 12:04 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)



Colin: voting system

For those people who liberally provide one-star ratings, I think that "disagreement" in fact often automatically means "this post is rubbish", but at least Incredible Charts, as the supervising entity, will, if you implement what you describe, give an explanation of what the stars are meant to express. I don't believe, though, that the difference will in practice amount to much, either for the person who gives one star to a poster, or to that poster.

My dissatisfaction with the system results chiefly from two things: (1) the "voter" can give a negative rating (often of course in cowardly fashion) under the cloak of anonymity, and (2) the voter does not have to provide any reasons for the rating given. These circumstances, I put it to you, do not encourage reasoned, substantiated debate. In effect, when someone gives a one-star rating without providing any reasons, that person I is likely to be engaging in a form of abuse. And I add to that that the system in my view does not do much more than provide "hollow" praise if someone else gives five stars: we do not know who it is, and we do not know what, precisely, the reasons are for the rating chosen.

I taught university students from 1966 to the end of 2001. One reason why my students respected me a good deal more than many of my colleagues was that when I graded their essays I always - and in detail - explained to them why I gave them the grades that they got (whether bad or good); what their weaknesses and strengths were; and how they might, as far as I could see, improve their work. This in general greatly helped the morale of the students, even that of the weaker ones, and often led to an improvement in performance. In fact the other day I met a student I had taught a long time ago who explained that this approach had not only improved his performance in his work for me, but across the board in his university work, and in ALL subjects that involved essay-writing. His level went from a B to an A within a very short time, and he is now an academic himself.

On the whole people on a thread like this expect their fellow posters to provide rational statements, with reasons and evidence used, which will be of potential use, whether one agrees or not with what is proposed. The level of posting here is generally very high, and I would think that that is a reason why ODB has lasted for so long. But I think that the star system is quite out of keeping with the general approach adopted in our posts: it does NOT require the need to provide reasons and evidence, nor does it reveal who the grade comes from. That fact to my mind stands in marked contrast to what in general we are trying to achieve.

I deliberately used Peter Loh's post as an example to illustrate my points because that post was not mine, and what Peter argued was both factually and logically sensible and accurate. For a person to give one star to such a statement is unreasonable and offensive in the extreme. And, above all, it is not of any help to either Peter or anyone else: the intent and the result can only be detrimental. For those of us who can see the difference between sense and nonsense Peter's post is not ultimately affected by the star, but it is a vexation for all who have to put up with such childish pranks, and it is an absolute, unmitigated insult to someone who, like Peter, was making serious points on an issue of importance to investors.


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colin_twiggs
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Username: colin_twiggs

Post Number: 614
Registered: 06-2009

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Tuesday, June 01, 2010 - 12:12 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)



Ody,

Click on the voting link alongside any post to see the changes. Our aim is to remove the negative/positive connotation so that the system merely reflects agreement/disagreement.


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ody
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Username: ody

Post Number: 5076
Registered: 10-2006

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Tuesday, June 01, 2010 - 01:08 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)



Colin: voting system (2)

I have just checked the new wording. I don't think, to be frank, that it will change what is happening in any sense. "Disagreement" or "agreement" will mean much the same as "this is rubbish" or "I like this". There is no need for a person who gives another person one star even to check his or her OWN motives or reasons for that choice; it can be done anonymously, i.e. in secret; and s/he is not required to provide a public reason. There is a manifest injustice in this: the person who POSTS does have to make a case for views given, but those who give a one-star rating do not need to expose themselves at all.

In other words, I think that what you are proposing will in essence leave the situation just where it is. Those who "disagree" will usually do so because they feel, about a post, that "this is rubbish", and that feeling will continue to come across to the recipients and others on the thread. Indeed, one could argue that one element which is possibly WORSE about the new situation is that recipients and others will actually not be at all informed WHY the person disagrees, while it actually might be interesting or important to have those reasons.

Thus a potential educational opportunity is wasted. Merely to know that someone disagrees with one tells one little of value. Similarly if someone agrees. So what??? Is the statement one has made any the more valuable, or less so, because people who don't even mention their names, and no reasons or evidence for their views, agree or disagree with it? What we'd have is a peculiar "voting system", actually, which will still not in any way improve the work we are doing.

Arguably, a poll in a newspaper is perhaps, for all its shortcomings, superior to the star system on IC. A newspaper poll often does tell us reasonably how big a percentage of people are for or against a proposition, and from much of the material published in the newspaper one will gather some sense of what the reasons are likely to be. In the case of our star system, often only one or two people will give a grade. Question: how representative are they? If one gives one star, and another gives five, does this mean that people reading and writing posts on ODB consider "three" a fair "mark"? Does "three" mean that 50% of the members of ODB feel the mark should be one star, and another that it should be five? Or do most people think that three is right because they think the truth lies in the middle?

I put it to you that nothing of any real value is revealed by a grading system of this kind. If we were REALLY interested in A SYSTEM telling us what people on this forum think, and why, we would need something much better. As it stands, the system encourages people NOT to put forward views, NOT to argue and produce evidence, but merely, and in pure anonymity, to express a feeling, pro or contra, concerning what they have read. Others can do nothing useful with those ratings, as they don't know from whom they come, what the reasons for them were, how representative the ratings are, etc.


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peterloh
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Username: peterloh

Post Number: 3692
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Tuesday, June 01, 2010 - 01:21 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)



Ody and Colin,

I did not notice the rating till Ody brought it up. I do not feel offended at all because I did not anticipate everyone will agree with me. I speak as an investor and how the current RSPT issues hurt the pockets of the wealthy and the not so well off as it is a fact that our money is in equity either through superannuation or any other vehicle of investments.Until this RSPT issue is resolved I am afraid our share prices will be discounted one way or another. Prior to this Australia is being seen as a preferred financial centre with a stable financial system and a country that is most likely to perform to expectation.With the proposed introduction of RSPT, dividends are likely to be reduced as miners have to accomodate another layer of "outgoing or expenses". There is another way out, that is to increase the prices of our resources. As we are not the sole producer of resources, this will drive our customers to other producing nations.This is from the demand side of things.

From the investors or supply side , we look for the lowest cost so that we can maximise the profit. Unfortunately with the proposed super tax,the preference for Australia on the supply side will be affected because of a higher cost and lower profit.

By targeting a particular sector,all other sectors including the financial should not feel safe as at any time they will be the next fair target.There is already no certainty of outcome in the profitability of companies, this is another risk that comes into play "sovereign risk"
which is one of the most feared risk for investors.
I have given Ody a 5 star for defending a principle.







-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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rdumas
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Username: rdumas

Post Number: 3491
Registered: 11-2006

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Tuesday, June 01, 2010 - 01:39 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 Ody,

I totally agree with you about the star system. If it must stay at least we know that the majority of sensible posters (and readers) of this thread will understand that the voting system says more about the person dishing out the stars than it does about the person who has gone to the trouble of posting.

Regardless of what Colin may provide the star ratings for when it comes to this thread it is blatantly obvious that anyone dishing out a 1 star is attempting to do. Let the small minded 1 star raters have their thrills. They obviously aren't capable of achieving much else in their lives.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

 
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