The market is down 37 points with Tabcorp and Tattersalls accounting for 13 points off the ASX 200 after the loss of their Victorian monopolies yesterday. BHP also dragging the ASX200 down 9 points in a reversal of the China stake take hopes after a 6% rise this week.

The Dow was up 55. Up 122 at its best and 30 down at its worst. The semiconductor sector (up 1.6%) was upgraded by Bank of America. Wal-Mart upped earnings guidance – retailers up 1.8% as a result. Financials down 0.4% with more negative comments from Treasury secretary Paulson saying the “economy had turned sharply” and acknowledged that the US is probably in a recession. The investment bank results season is next week and the uncertainty of results and writedowns and rhetoric is enough to keep people on the sidelines. Citigroup on the 19th – the stock is down 55% in the last year. Initial jobless claims fell 53k to 357k, or 1.3% more than expectations (good for economy) but the four week average remains the highest since 2005. Trade Deficit up 5.7% to $63.2bn (bad for the US$). March same store sales down 0.5% – less than expected 1% but the biggest drop since 1995.

  • Both BHP and RIO slightly down in ADR form overnight, 0.43% and 1.06% respectively. BHP down 50c to 4150c. RIO also down 126c to 13648c.
  • Metals all down – Copper, Nickel and Zinc down 1.2% and Aluminium down 0.6%. Zinifex down 12c to 968c.
  • Oil price took a breather after closing in record territory yesterday – down 82c to $110.07 – OAO Lukoil, Russia’s second-largest oil producer, announced a 27% increase in profit on the back of record oil prices and an increase in refinery output. Woodside down 79c to 5576c.
  • Gold down $5.70 to $931.80. Newcrest down 1c to 3350c.
  • Bonds down with the 10 year yield up 3.53% from 3.48%.

Both Tabcorp Holdings (TAH) and Tattersall’s (TTS) are getting slammed this morning as a result of yesterday’s decision by the Victorian government to change the structure of the gaming sector. Both companies receive no compensation despite saying they have an entitlement to it…one for the courts no doubt. Tabcorp Holdings (TAH) announced Standard & Poor’s Rating Services has maintained its BBB+ rating for the company despite losing its gaming duopoly. Lots of broker downgrades and valuation cuts. Login to Marcus Today to read brokers comments on both stocks and Woolworths who are a beneficiary of the changes thanks to their JV with ALH which currently leases pokies from both TTS and TAH. TTS down 30% or 110c to 256c and TAH down 20% or 294c to 1144c. WOW up 26c to 3050c.

A bit of a slow day to finish the week…other stuff making the news.

  • Allco Finance Group (AFG) announced the banks have agreed to extend the review period for its senior debt facility to May 2nd. It was supposed to have expired today. AFG up 1.5c to 48c.
  • Rio Tinto (RIO) expects its 2008 copper output to be “down a bit” from last year due to lower ore grades with production predicted to recover in 2009. RIO down 112c to 13662c.
  • Devine (DVN) has sold its 153.12 hectare Gold Coast Development site to FKP Property Group (FKP) for $75m, payable in installments over the next 5 years. DVN unchanged at 113c.
  • OPES – The courts will decide on the nature of the hotly contested beneficial ownership issue surrounding the ANZ, Merrill and Dresdner sell down of stock after the broker collapsed on March 27. Mick Gatto and mates are in The Australian with of photo of them literally standing over some guys from OPES – smiling. Rather them than me.
  • Most brokers have maintained a negative view on the Bank of Queensland (BOQ) after its profit result yesterday – BOQ up 9c to 1584c despite Merrill Lynch maintaining their SELL recommendation and Credit Suisse cutting their target price to 1650c from 1700c.
  • Qantas (QAN) up 7c to 376c despite ABN AMRO cutting its recommendation to HOLD from BUY and its target price by 33% to 350c from 525c due to slowing demand and record high oil prices. India has released a new mining policy designed to open the resource-rich country to entice private investment in mineral exploration and production.
  • Investment legend George Soros says high-risk credit swaps are a ticking time-bomb and could easily worsen the current market situation.

The Berkshire Hathaway Annual Report arrived in the office today. Impressed as usual by the style of writing and the complete lack of unnecessary expense. We’ve all heard the AGM statements but I can’t help but repeat a marvelous line on the succession issue: I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death – abandoning my hope to give new meaning to the term “thinking outside the box”. Got to hand it to the bloke. Never a word wasted.

You might also be interested in some of the performance statistics. The S&P 500 since 1965 has returned a compound 10.3% including dividends. A thousand dollars invested in the S&P 500 in 1964 is now worth $68,400. The same thousand dollars invested in Berkshire Hathaway is worth $4,008,630, a compound return of 21.1%. The power of patience, consistency, research process and independence of mind. He didn’t invent compounding but that also helped.


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Peter Fray
Peter Fray
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