Stock Trader Man

LOU’S VIEW Tuesday 13th January

Closing Prices

Dow Jones down 125 @ 8,474 (biggest 2 day slide in a month)

CRB Index down 9.36 @ 220.55 (The Mother of all index’s measuring 19 of the relevant commodities)

Oil down $2.58 to $38.25

Gold 4.3% to $819

Copper down 9.9% to $146.05 lb

The Hindsight Stuff

Australian stocks fell on very light volume,$538 mln shares(average $800 mln) as resources dragged caused by RIO’s shelving its $2.15 bln Iron ore expansion in Brazil. These guys are doing everything possible to reduce their $10bln debt, even trying to sell its Borate and nitrates for $750 mln(yep, I thought that was a film also) . Also not helping were  the ANZ job ad’s falling 9.7% to “recessionary” levels pointing to Thursday’s monthly employment data being worse than the expected 20,000 drop.

Overnight the Dow fell on analyst’s further downgrading profit forecasts particularly the banking sector, seeing Citibank falling a massive 11%.(and I thought a $10bln cash injection from the sale of its broking arm might just have been heaven sent). As I highlighted yesterday we need to get to February’s company reporting season asap as no investing by the institutions will occur until we see concrete figures,especially on the dividend front. If dividends can be maintained, or even slightly reduced then boy are shares looking cheap! This is underlined by the fact that for the first time in 50 years 10 yr bond yields are under dividend yields…me thinks one of them is very wrong; especially with unprecedented massive amounts of debt hitting investors.

Treasury Secretary Henry Paulson said overnight that the U.S economy is “mired in a very difficult period.”Hey, Hank don’t tell me next the Pope is a Catholic. What is it with this guy, the second he appears on T.V the market goes always goes immediately down.Ho hum.

Saudi Arabia said they will cut oil production by a further 300,000 bls per day, this on top of Iran saying OPEC will cut production further at its March meeting.Just like RIO and other commodity producers this in the long term can only a good thing as supply will soon will soon fall below demand; then we start rallying. Incidentally, Goldman’s predicted oil will hit $30 bl by March.Certainly the price action is indicating this as with the severe northern hemisphere winter, the OPEC cuts and the constant Middle East tension just not having any impact. Another example of the “funny mentals” not working as oil only a week ago was trading at $50 and was being explained away by all the above; so “talking heads” what’s changed?!….apart from your increased salary.

GEORGE BUSH (this will be a one-off!)

He gave his final speech and still insisted the number one threat facing Obama is a terrorist attack on America! George, the “Axle of Evil” isn’t North Korea,Iraq and Iran but the mortgage broker,the bank and the Investment bank. There are no weapons of mass destruction in Iraq(he admitted he erred on this) they aren’t in “Allah Ackba Street” but in Wall street. He was asked if he had any regrets(at this point half the reporters starting bunking down for the night) and replied “Regrets, I’ve had a few….”(please don’t start singing George) and blamed his “intelligence” (er, whose exactly,George) for not believing there were no WMD’s in Iraq….small mistake, just millions of lives lost and a daily bill of $450 a day to still finance. Anyway, good to see the cowboy finally ride into the sunset.

FORESIGHT

Expect our market to open about 60 lower with resources getting hammered on copper/CRB falling. As I said yesterday I’m looking to buy BHP around $30.00, the market should open through that so getting an even better bargain! Indeed, I am now long BHP (the day’s low being $29.92, closed at $30.43) Our market will continue to weaken over the coming weeks until February when 80% of firms report 4th Q earnings(or lack of). No institution is going to jump in now but will do so if things aren’t as bad as expected in February.Its called storm before the calm.So meanwhile get used to more volatility with a downward bias.

QUOTE OF THE DAY: ” The single biggest threat facing Obama is another terrorist attack on America.” George W Bush. (I’m just amazed he didn’t say Osama)

P.S!    Storm Financial going bankrupt just underlines how such highly leveraged business models are doomed to failure. Be aware of others!