Ignoring is bliss

November 4th, 2008  by Lou Muddaris

Closing Data

	current	change	%
Dow Jones	9319.83	-5.18	-0.1%
NASDAQ	1726.33	5.38	0.3%
S P 500	966.3	-2.45	-0.3%
FTSE 100	4443.28	65.94	1.5%
Nikkei 225	8576.98	0	0.0%
SPI Futures	4124	-52	-1.2%
All Ords	4173	190.3	4.8%
Oil	63.96	-4.14	-6.1%
Gold	726.8	8.6	1.2%
Silver	9.75	0.02	0.2%
Aluminium	1970.5	-65.5	-3.2%
Copper	3995	-502	-11.2%
Lead	1469	-51.5	-3.4%
Nickel	11305	-1320	-10.5%
Tin	13860	-840	-5.7%
Zinc	1091	-75	-6.4%

Yesterday the All Ord's enjoyed its 4th consecutive day up. The Dow Jones closed out an ugly October with four unprecedented daily gains. Yet despite (or is it because?) the market got bombarded by a plethora of terrible economic news and downbeat statements from every analyst, CEO, and economist. Here are the highlights:

1) General Motors sales fell 45%, the lowest since 1945;

2) European Commission said its 15 nations are in a recession and forecast economic growth for 2009 to be at a standstill. They also forecast the recession will be shallow and short lived.

3) The G20 are holding a "crisis" meeting in Brazil on November 15th.

4) The ISM (Institute for Supply Management) is a very reliable predictor of future economic activity and showed factory orders fell the most in 26 years.

5) The UK PM going to the Arab states "cap in hand" asking for more capital injections. Barclays received a $14 billion capital injection from the Sheiks of Dubai (much to the consternation of the British Parliament and the public) Also, Gordon Brown claimed the Sheiks will give $1 trillion to the IMF under his persuasion; now this question has to be asked "What are the Arabs asking for in return?".

6) The CEO of the world's largest iron ore producer, Senior Agnelli said "The world is in a very deep recession" and the company plans to reduce output.

I think you get the picture! It is more than interesting that the markets are rallying despite this doom and gloom. It is a fact that the stock markets price in a 9 to 12 month view and this is obviously the case now. However, nobody knows whether this global recession is deeper and longer than feared….and that is akin to predicting today's Melbourne Cup winner! (OK, it's Honolulu @25-1)

Bottom Line

Average P/Es are at 8.55 and dividend yields are at 28 year highs suggesting the market is anticipating earnings and profits will be lower over the next twelve months.

Fibonacci

This 12th Century mathematician/farmer published his "Golden Ratio's" over 1,000 years ago. Not only can his numbers be applied to every day life but are frequently used in technical market analysis. His work inspired and was developed by the likes of Gann and Ralph Elliot. Such is his influence and importance on market movements I will cover and explain his works in Thursday's Market Fox Report.

Tip of the day:

Based purely on the fact that the Courier Mail's front page has pictured the winner in 6 out of the past 7 Melbourne Cups... it's Profound Beauty!

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

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