Bye Bye Miss American Pie

December 5th, 2008  by Lou Muddaris

Closing Data

	current	change	%
Dow Jones	8591.69	172.6	2.1%
NASDAQ	1492.38	42.58	2.9%
S P 500	870.74	21.93	2.6%
FTSE 100	4169.96	47.1	1.1%
Nikkei 225	8004.1	140.41	1.8%
SPI Futures	3560	4	0.1%
All Ords	3,476.50	3.1	0.1%
Oil	46.79	-0.26	-0.6%
Gold	770.5	-12.8	-1.6%
Silver	9.59	-0.025	-0.3%
Aluminium	1587	-55.5	-3.4%
Copper	3423	-107.5	-3.0%
Lead	1003	-57	-5.4%
Nickel	9260	-320	-3.3%
Tin	11900	-205	-1.7%
Zinc	1141	-23	-2.0%

"BYE BYE MISS AMERICAN PIE“ - Don Maclean

The only story in Town is the ongoing debate in Congress about bailing out the big 3 car makers with the GM CEO pleading for an immediate payment of $4 billion and an eventual $30 bln. Citing failure would result in 1 in 10 job losses, he is even willing to work for $1 a year (I would if I was worth $100mln) and drive to Washington rather than use his private jet (what's wrong with the Greyhound?). Anyway, there seems to be a growing dissent against a bail out with Fed officials having an aversion to extending the "too big to fail“ to non financials. Also many republicans are grilling the CEO's asking "how can you assure us you won't be back next year“; they can't! Maybe, just maybe, they are selling expensive in a falling demand environment. Also, where does it all end? Next will it be the Aviation industry? I know Milton Friedman; the world's greatest economist will be turning in his grave.

Commodities

The most watched index is the CRB (Commodity Research Bureau) which measures 19 of the most important raw materials. This index last night hit a 6 year low. Oil fell under $45 as Merrill Lynch told clients their target is $25!(In a way I hope they are right)
BHP's U.S sister company Freeport Mac Moran hit a 1 year low and, as we highlighted in yesterday's report, if copper prices fall below $150, (it closed at $146 then they will resort to the " drastic plan B“. This short term pain of reducing supply will eventually lead to higher prices. The only concern is many of these mining companies have prices fixed until February and thereafter they will have to reduce prices with many saying by as much as 30%.

Economic Data

Last night saw the Bank of England slash rates by 1% to 2%. The last time they were that low was when Churchill was in power. The ECB were surprisingly more aggressive by cutting 75bp however they did say they don't want to be "trapped“; read we aren't going the same way as the U.S and Japan.

U.S weekly jobs data just go from bad to worse and all eyes on tonight's monthly data with non farm payrolls falling 330,000 and the headline number rising to 6.7%.
Anyway, this number released at 12.30 am is probably just too late to stay up for but it will have a big impact.

Strategy and Companies

This morning we saw the first signs of Corporate activity with Felix Resources (FLX) confirming they are in discussions regarding a transaction that could result in a change of control. All the other local companies, MacArthur Coal (MCC), Gloucester Coal (GCL) and Centennial Coal (CEY) are all up on the news.

As the market always under values on the downside (as it overshoots on the upside) there is now a lot of value in companies. Next week we will try to identify companies and industries that may benefit from corporate activity.

Crown Casino (CWN)

Crown Casino has successfully raised $1.6 Bln to fully repay its syndicated facility. Their next major refinancing will now not occur until 2012. We think CWN is excellent value under $5.

Babcock & Brown (BNB)

Also recommenced trading after it came to an agreement with its Bankers on very favorable terms. The banks must believe in BNB because they have converted interest payments on all their facilities to a "Pay if you can“ basis.

On a lighter note…we certainly need it!

KNUT

This polar bear celebrates his 2nd birthday today in Berlin and has captured the world's attention. Apart from everybody saying "ahhh“ he is facing eviction as the Zoo doesn't have the space to build a bigger enclosure. This guy is a multi-dollar business having already raised $8.6 bln through merchandise sales. Furthermore other zoo's are trying to relocate him at a huge price…you can even get odds on which zoo will own him.
Have a great week end.

QUOTE OF THE DAY: The trouble with the rat race is if you win then you are still a rat."

Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.

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