Enter Warren Buffet, Stage Left

September 25th, 2008  by Lou Muddaris

Closing Data

Dow Jones down 29 @10825	NASDAQ up 2 @ 2,155	Gold down 3.1 @ 878.4
Oil down 1 @ 106.84	FTSE down 40 @ 5,095	Silver down .06 @ 13.14
Copper down 65 @ 6,926	Lead down 6 @ 1,981	Zinc up 20 @ 1,761
Aluminum down 7 @ 2450	Nickel down 9 @ 16.993	Tin down 107 @ 17,395

SPI down 34 @ 5.017

Enter Warren Buffet, Stage Left

Wall Street's most respected Guru caused our market to rally from a 70 point decline (futures based) to a 50 point gain on one simple share purchase; Goldman Sachs. The 78 year old investor (hope for us all yet) bought $5 billion worth of shares in Goldman's at $115 saying he is "making a bet that Congress will pass the $700 billion package", (would love to see this guy in action at the casino). The announcement immediately saw our banking shares rally enormously with like minded business models such as Babcock and Brown rising over 30%. The NAB also screamed higher with the announcement that they are considering applying to the U.S. Treasury for repayment of their $800 million July write down.

Who is this guy?

His track record in investing is second to none so when he moves others follow. A flamboyant and amusing character (makes Anthony Mundine look reserved) he has over the years made investors in his Berkshire Hathaway Fund multi-millionaires by going against the "herd instinct"; he buys when everybody is selling and vice versa and never tries to pick bottoms (so to speak!). Today he said, "Its nice to have a lot of money but you need to spend it and not keep it forever, it's a little like saving sex for your old age!”. Indeed, Warren, indeed
Later Warren said if Congress fails to pass the package on Friday then "Heaven help us all". Incidentally, a few hours later Goldman's shares rose above $128 netting him over $400 million (unrealized) profit!

So what is the latest on the $700 billion rescue package?

The Republicans are stalling, argueing it benefits Wall Street and not Main Street. Also, it's inflationary, unfair on the tax payer and doesn't address the cause as it could easily happen again as the Money Markets are not regulated and are essentially the cause of this capitulation. All this I will explain in tomorrow's Market Fox Report as it really is the crux of the entire problem and it will be in plain English!
Commenting on the rescue package, Ohio Republican, La Torretto said ‘What's the rush? There is a healthy dose of skepticism around”. It is exactly this kind of uncertainty that punishes the markets; we need this rescue package right here and right now!

Interestingly and certainly being an alarmist, CBA's Chief Economist, Craig James said yesterday, "there is a 30% chance of the package not being passed and if that happens then our market could fall to the 3,800-4,000 area." Hey Craig, how can you quantify it as 3-1 shot? I would love to know the model you are using! Call me and we'll have a friendly fiver on it!

Our Markets

Yesterday saw BHP badly underperform against the minor resource stocks as they lost their High Court appeal on their monopoly on the Pilbara railway line. Also, not helping were weaker base metals although OZ Minerals is suddenly looking interesting as it marches on from last week's low of $1.27 to $1.76; writing covered calls is suddenly back in Vogue.

Banks

Our banks start reporting next Tuesday. Never, ever has the market so eagerly awaited their results. Will there be more write downs? Will NAB deliver on their promised dividend payment? Does ANZ have any more skeletons? Or will it all be good? We are certainly seeing huge volumes going through in the options markets as we can guarantee there will be some huge price swings!

Just one point on NAB, last week it bounced off it's 1996, 1997, and 1998 low of $18.60 and that is no coincidence! Watch this space.

Have a great and relaxing day!

QUOTE OF THE DAY
“Be nice to your enenemies it will make them madder!”

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

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