Enough of the negativity - WHAT SHOULD WE DO?
September 17th, 2008 by Zeyar Htut
Overnight Markets
| Dow Jones + 141.51 @ 10,917 | NASDAQ +27.99 @ 2,207.9 | Gold -6.5 @ 780.5 |
| Oil -4.03 @ 91.49 | FTSE -178.6 @ 5,025.6 | Silver -0.618 @ 10.517 |
| Copper -53 @ 6930 | Lead -43 @ 1,802 | Zinc -16.25 @ 1,727.25 |
| Aluminum -38.5 @ 2,482 | Nickel -725 @ 17,275 | Tin -805 @ 18,195 |
Enough of the negativity – WHAT SHOULD WE DO?
We believe the Energy sector is worth considering in particular coal seam gas. Prices are forecast to double in the next eight years as gas resources face a supply strain and are considered a cheaper substitute to oil. Our preferred pick is Queensland Gas (QGC) for its size and quality of reserves. There is also the potential for a full buyout by its alliance partner BG Group.
Also in this period of market turmoil selectively increase your exposure to companies with strong franchises, cashflow and balance sheets. And avoid business models driven by leverage, as the clean out of the financial system will have some duration.
Even though we do like QBE Insurance (QBE) - The balance sheet remains conservative and there are no skeletons haunting other financial services firms - given the fallout from AIG and Hurricane Ike it may be time to sell and re-enter at a later date.
Where now?
The biggest concern faced is the lack of credit and a potential fire sale across most asset classes - placing pressure on asset prices. The flood of cash by Central Banks appears to be a band aid solution, so until the credit markets loosen up and fresh capital is available we will see further writedowns and continued market volatility - providing buying opportunities.
Wall Street Up 1.3%
US Stocks bounced back 1.3% from their biggest fall since September 11 on a Bloomberg report of possible Fed involvement in bailing out failing insurer AIG.
Be cautious. Remember the market fell 4.5% the previous day. This market is going back and forth based on rumor and headlines and it has temporarily divorced itself from fundamental analysis.
Our market is set to open positive with futures pointing up 47 points. Australians listed on the NYSE, BHP Billiton up 3.5% and Rio Tinto up 2.8% so watch the big miners.
Quote of the Day: “It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Warren Buffett
Contact your Freeman Fox Stockbroker on 07 3031 9960 or 1800 003 369 Ext 7.
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