The market is down 117. The SFE Futures were down 103 this morning.

The Dow Jones closed down 419 overnight. It was down 529 at worst. The German market fell 5.82%, France down 5.48% and the FTSE dropped 4.49%, as concern grew over the health of European banks. Weak economic data renewed fears of another recession in the US – Philadelphia Fed index disappointed, existing home sales and jobless claims both under expectations. The oil price was down $5.20 to $82.38. Gold up $28.20 to a new high of $1822. The A$ is buying 103.36c down from 105.10c.

In the news today…

  • ANZ Banking (ANZ) — 3Q underlying profit was $1.4bn, up 1.3% from the 2nd Q and up 7.7% from the same period last year. Underlying profit for the nine months to June is up 16% at $4.2bn. ANZ says it has good reason for optimism in Australia, New Zealand and Asia despite the market turmoil. The result was described by one broker as “mildly disappointing”. ANZ down 4.1% to 1959c.
  • Billabong (BBG) — Annual profit fell 18% with cash flow was down 87%. Billabong said it had been hurt by the strong Australian dollar and a weak retail environment. They withdrew earlier EPS guidance for the current year due to significant deterioration in trading conditions. Declared a final dividend of 13c, compared to 18c last year. BBG down 20.5%.
  • QBE Insurance Group (QBE) — First half profit up 53% to $US673m. Revenue from ordinary activities was up 34%. Investment income more than made up for the surge in natural disaster related claims. They said in the 2nd half “premium income will benefit from the full year development of the US crop insurance portfolios, the acquisitions of Balboa and Renaissance Re in the US and CUNA Mutual in Australia”. QBE down 6%.
  • Santos (STO) announced a first half profit of $504m, up from $198m and was ~13% better than consensus estimates. They benefited from the sale of a stake in the Gladstone LNG project. Sales revenue of $1.1bn was in line with the corresponding period, helped by high commodity prices, but offset by the strong dollar and lower sales volumes. Declared an interim dividend of 15c, fully franked. STO down 3.4%.
  • Sedgman (SDM) Annual profit up 4.2% to $26m exceeded consensus estimates and came in at the top of the company’s guidance range. SDM down 2.7%.
  • Super Retail Group (SUL) profit is up 46.1% to $55.6m. Revenue up 16.5% to $1.09bn, on the prior year. Declared a final dividend of 17.5c, fully franked. SUL down 2%.
  • Spotless Group (SPT) full year net profits were down 0.5% to $42.8m, and underlying profit up 1.4%, but they say their 2half results show a significantly improved performance.  Revenue was up 10.9%. The company declared a final dividend of 6c, 60% franked.

I have had a series of emails about Hybrids. Most emails ask…”Are they safe,” and whether they are a sell.

Hybrids are only a sell if you think financial system confidence (GFC) issues are going to go re-emerge – they were not immune in the last GFC. But GFC aside, they are OK.

So if you are worried about a GFC style event (a loss of confidence in the financials) be prepared to get out. As usual, the best indicator will be the prices, not research or valuations, it is sentiment you will be dealing with first and the experience from the last sentiment crash was that sentiment can destroy hybrids as well. So be prepared to get out … there is nothing sacred about anything in a GFC.

Without a GFC they are simply income investments and you won’t need to sweat. But because they are NOT immune from risk and there’s no guarantee and you have to stay awake not forget. Bottom line … it will take an extreme situation to smash their prices but it can happen.

If they do fall over the other experience from the GFC was that almost all of these instruments came rushing back, they did not disappear, they did not default, and they did not miss payments. They came back. They proved to be your typical long term “value” style investment.

So if a GFC style drop does occur again…buy when others are fearful, as they come back quickly when the dust settles. But as always … keep awake and use stop losses.

We have a Fixed Interest section in the Marcus Today Portfolio Section. In there we list almost all the hybrids with explanations of their main terms as well as a description of what hybrids are and a glossary of hybrid jargon. It includes Preferred Recommendations.  You can view this section by joining up for a free trial or subscribing HERE.

For a free 5 day obligation FREE TRIAL of the MARCUS TODAY newsletter Click Here. You will receive our renowned and popular Daily email about the stockmarket with all the stuff you need to know ahead of the trading day including:

  • Overnight developments, news, comments, rumours, broker recommendations and ideas from Marcus and his Team.
  • Our Recommended Portfolio which is actively managed on behalf of subscribers …no “set & forget”. Everything you need to effortlessly managed your own long term investment portfolio. It includes Income Portfolio recommendations.
  • Daily Technical Trading ideas and data, including daily scans of the ASX 300 for stocks changing trend.
  • Stock Database – all the numbers with comments on the top 300 stocks and more.
  • Educational section – Marcus’s Educational and Entertaining articles.

We also offer a FREE END OF DAY EMAIL — Click here — A free summary of the day in the market.

Subscribe to MARCUS TODAY — Click Here. We are sure you will enjoy and profit from what we offer…we have one of the highest re-subscription rates in the financial newsletter industry

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.


Peter Fray
Editor-in-chief of Crikey