That seems to be the message coming out of ratings agencies Moody’s and Standard & Poor’s. According to the Australian Financial Review over the weekend, “Ratings agencies have indicated they may not apply the federal government’s AAA credit rating to government-guaranteed bank debt.”
We think the whole idea of the government guaranteeing the banks is a mad idea anyway. But it does seem bizarre that the ratings agencies may not rate government backed debt at AAA. Considering the government has control via the RBA of the printing press to churn out money when it needs it, it must be very unlikely for the Australian government to default on a debt obligation.
Even more odd is these are the same ratings agencies that were quite happy to rate billions of dollars worth of US subprime mortgage debt at AAA.
Perhaps they have decided to be more rigorous with their ratings, and more conservative with their awarding of AAA’s. That may be a good thing but it is at the risk of making them look foolish.
One Year Results: S&P/ASX 200 Down 50%, AUD Gold Up 50%
What’s happening with Gold? Research from mining consulting company Surbiton Associates shows that gold production continues to fall. This is despite – or because of – the record high Gold price.
According to the News Ltd article that quotes Surbiton director Dr. Sandra Close, “It looks as though Australia’s gold production for the full 2008 year will be the lowest since 1989. It will be somewhere between 25 to 30 per cent lower than the peak year of 1997.”
On a US dollar basis, Gold had its peak earlier this year when it briefly shot above USD$1,000 per ounce.
Since then, as global stock markets have fallen heavily Gold has fallen as well. Although by nowhere near as much. From its peak of USD$1,049 to Friday’s close of USD$800, it has only fallen by about 24%. That is compared to a 43% fall in the Dow Jones Industrial Average, and a 51% fall in the S&P/ASX 200.
Thanks to the falling Australian dollar, Australian Gold investors have done better. Those that have held physical gold anyway.
Since the Australian stock market peaked out last year, the price of gold in Aussie dollars has actually risen. Based on Friday’s price it is trading at AUD$1,258. That is a 50% gain in one year!
Despite that, the mainstream analysts and commentators continue to disregard physical gold as genuine investment.
Apparently the Perth Mint has been inundated with enquiries about how to buy gold coins and bullion.
Another way of betting on gold will be the new Exchange Traded Commodities to be released on the ASX by ETF Securities. Our first instinct is to say “better late than never.” They are probably about five years behind the times, but even so if you think precious metals such as gold, silver and platinum have further to run then it’s worth taking a look at.
Babcock & Brown One Step Closer to the Exit
We can’t go a day without taking a look at what’s going on at Babcock & Brown [ASX: BNB]. This morning it has got a little worse for B&B and its shareholders. This morning the ASX released a statement saying:
“The securities of Babcock & Brown Limited (the “Company”) will be suspended from quotation immediately, at the request of the Company, pursuant to listing rule 17.2.”
In reality there isn’t much difference between a trading halt and a suspension. The main difference that we can see is that a company’s shares can only be in a trading halt for two business days following the halt. After that the shares become suspended.
It’s the same process that ABC Learning [ASX: ABS] went through. And we know what is happening to that company.
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