Now this is big

December 17th, 2008  by Lou Muddaris

Closing Data

	current	change	%
Dow Jones	8924.14	359.61	4.2%
NASDAQ	1589.89	81.55	5.4%
S P 500	913.18	44.61	5.1%
FTSE 100	4309.08	31.52	0.7%
Nikkei 225	8568.02	-96.64	-1.1%
SPI Futures	3574	19	0.5%
All Ords	3,574.00	19	0.5%
Oil	43.84	-0.77	-1.7%
Gold	842.7	6.2	0.7%
Silver	10.705	0.085	0.8%
Aluminium	1423	-19	-1.3%
Copper	3020.5	-55	-1.8%
Lead	980	-36	-3.5%
Nickel	9660	-445	-4.4%
Tin	11400	-350	-3.0%
Zinc	1054.5	-9	-0.8%

Now this is big!

Overnight the Fed delivered (and some), meeting even the most optimistic hopes by:

1. Not cutting the Fed Funds rate (the rate at which banks lend to each other overnight) by 50 or even 75 points they actually went one better by “targeting the rate between 0 and 0.25% for a long time to come’. Thus the banks will lend to each other, which further unfreezes credit markets. The last time this happened Uncle Sam was more concerned with fighting the Koreans.

2. They will buy long term maturities and mortgage backed bonds. This idea has been touted by governor Bernanke since 2002 and now it will happen. Result? The crucial long term interest rates will fall significantly and thus force down the all important mortgage rates and credit loans. “Joe the plumber” might start employing more staff as this along with falling inflation (US CPI data last night fell a record 1.7%) and falling oil prices shows Joe must be at least sleeping better at nights. The only worry is many of his fellow Americans have already lost their jobs with more to follow. However, from a monetary perspective the Fed have performed major surgery. Certainly the Dow Jones thinks so as it rocketed 400 points on the news.
The RBA will be following with Bank Bill futures pricing in a sub 3% interest rate by March.

Telstra eats humble pie

The share price collapsed to $3.36 (since recovered to $3.61) their lowest level since their listing in November 1997…and I thought TLS were the classic safe “Mum and Dad” stock, just shows there is nothing “safe” in these markets. The reason was the Government rejected Telstra’s tender for broadband (worth $4.7 billion) as it didn’t include any plans for small to medium sized businesses. It appears politics and a degree of arrogance has proved very expensive. Some analysts are downgrading TLS and some are saying it will have little effect on TLS’s business. 
One noted TLS analyst has downplayed the rejection and still has a $4.77 price target.  We saw record volumes traded which is often an indication of the future share price. The stock bounced strongly off the low of $3.36.

Options Expiry

On Thursday the December options expire. We note BHP will be particularly active as they have rallied from $20 to over $30 within a few weeks. Please call your advisor for further advice you may require.

Quote of the day

“I’m an excellent house keeper, every time I get a divorce I keep the house”.
Zsa Zsa Gabor

P.S. YOUR PORTFOLIO (From Neil Gynther Head of Stockbroking)

Over the next month the Advisers will be contacting you to discuss your portfolio.  Over the last 12 months this market has sold off “the good, the bad, and the ugly”.  There are many good stocks that we have identified that are much more likely to recover as conditions improve. 
History shows that “the bad, and the ugly” often take many years to recover (if at all) from such a significant market downturn.  We will be discussing with you the rebalancing of your portfolio so you may take advantage of “the good”. 

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

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