Bargain Hunting
January 15th, 2009 by Neil Gynther
Closing Data
| current | change | % | |
|---|---|---|---|
| Dow Jones | 8200.14 | -248.42 | -2.9% |
| NASDAQ | 1489.64 | -56.82 | -3.7% |
| S P 500 | 842.62 | -29.17 | -3.3% |
| FTSE 100 | 4180.64 | -218.51 | -5.0% |
| Nikkei 225 | 8438.45 | 24.54 | 0.3% |
| SPI Futures | 3649 | 28 | 0.8% |
| All Ords | 3,624.00 | 30.4 | 0.8% |
| Oil | 37.43 | -0.34 | -0.9% |
| Gold | 808.8 | -11.9 | -1.5% |
| Silver | 10.475 | -0.205 | -1.9% |
| Aluminium | 1440.5 | -35 | -2.4% |
| Copper | 3139 | -32.5 | -1.0% |
| Lead | 1080 | -70 | -6.1% |
| Nickel | 10355 | 205 | 2.0% |
| Tin | 11305 | -295 | -2.5% |
| Zinc | 1181.5 | -31.5 | -2.6% |
The US market fell 248 points last night after weaker than expected retail sales led to large falls in General Electric, Macey’s and American Express. The S&P 500 (-29.17) and the NASDAQ (- 39.23) were also down. Retail sales were lower than “economists” had predicted. It amazes me that the markets and investors react when the so called economists get it wrong. They have got it wrong for the last 18 months so why listen to them know.
The world is in recession, we know that! There will continue to be negative headlines, the media love to sensationalize things, and companies are going to be reporting lower sales and profits. There will also be more job losses. However, there will also be more interest rate cuts (Australia predicted to fall as low as 3%) and very large stimulus packages by governments which will be directly aimed at the consumer. Unprecedented amounts of dollars will flow into the world’s economies. Now is the time to look into stock valuations and determine which companies will ride out the recession best and which will be in a position to benefit the most when the world finally changes direction. Your adviser will have suggestions for your portfolio that have been thoroughly researched and thought through.
In other news, oil was down, that’s good for the economy, gold was off $10.40 so expect the gold stocks to be weaker, and base metals were all weaker.
Wesfarmers (WES) yesterday had a trading update. This is perhaps a good example of what we need to look for in good stocks to buy for future upside. Most of WES trading divisions reported higher earnings. The WES board has signaled write offs as they reassess the carrying values of all their assets. They have suggested that the current dividend may not be able to be maintained. If the dividend of $1.98 was maintained WES shows a dividend yield of 11.68%.
If they cut the dividend to $1.00 the yield would be 6% fully franked. This is a much greater return than you can get from money in the bank. As interest rates drop investors and institutions will begin to look for greater returns and funds will begin to flow from the bank accounts into bank stocks (and others like WES).
The Australian market will be down again today but for no good reason other than the US was down. Great bargains are appearing as the index again approaches 3500.
Have a good day.
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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