Well, last night was the third Doomer’s Ball. Based on our count, there were over 100 people that attended. All of them were subscribers to Money Morning, Daily Reckoning, Australian Small Cap Investigator and Diggers & Drillers.
So what did we get out of last night? Plenty of feedback for a start. So we’ll filter some of that feedback into how we present Money Morning. The main request was for us to go into a bit more depth on Australian news stories.
We think we can manage that.
Aussie Market to Rise 40% in Next 12 Months?
The other point to come out of last night’s Doomer’s Ball was about the direction of the markets.
Opinion seemed to range across the spectrum. From those who thought the market had another 50% to fall, to those who thought it would do nothing, to those who thought it could double within the next 12-18 months.
What do we think? No idea. But it certainly wouldn’t surprise us to see markets put in an extended bear market rally through 2009.
There is a valid argument that the ‘bull’ market from 2003 until 2007 was in fact a bear market rally. So it would make sense that if the S&P/ASX200 can rally from below 3000 points to just under 7000 points in four years, why can’t it rally from 3604 to 5000 by the end of next year?
That would be a 40% gain.
Doesn’t that sound nice? But is it reality?
Just to repeat, we really don’t know. But even though the macroeconomic outlook looks pretty dodgy, there seem to be plenty of market professionals and participants that do believe current central bank and government policies are positive for the markets.
So even though we may think the policies are madness, well, it doesn’t really matter what we think if most investors are taking the opposite view.
It’s at times like these when cautiously following the crowd could pay dividends.
Of course, just as one of our subscribers said last night, “the markets are gonna fall by another 50%.”
Look out!
Westpac Offers ‘Mates Rates’ to Institutions
Oh, the life of the retail share investor. If you’re not being shafted by the general market downturn, or having overpaid CEOs taking a chunk out of your profits, then you’re getting a belt around the chops from a combination of your company and investment bankers striking up a deal that benefits everyone apart from you.
So it is with the Westpac placement of $2.5 billion worth of stock to institutional investors.
Placement, of course, is just market terminology for what you and I would call “mates rates.”
As a retail investor in Westpac shares you may have started to feel a little – but only a little – bit happier seeing the share price rise off the low of $14.59 that it sank to in November.
Over the next three weeks it has done quite nicely. In fact on Monday it closed at $17.88. That’s better than a 20% rise. Naturally, the boys on Martin Place couldn’t let that happen.
We can only assume that having missed out on this rally the institutions said “sure, we’ll buy your stock, but we’re not paying more than $16 for it. Take it or leave it.” Seeing as Westpac appear to be keen to bolster their capital position, it was probably an offer they couldn’t refuse.
Letting institutions pick up stock at a 10% discount to the market price when the issue only adds about 5% to the company’s listed capital seems like daylight robbery – if you’re one of the current shareholders excluded from the “mates rate” that is.