rio tinto

Before we get on to today’s non-property related edition of Money Morning a very brief follow-up to yesterday’s edition.

First of all, we’ve re-read it, and do you know what, it seems a little disjointed. After two weeks of a property famine, on reflection we think we tried to cram in too much – must do better next time.

But aside from that, we did receive a couple of lovely emails into the Money Morning inbox. First, this one from Steve:

“I just ran those house locations past my brother who lives in… Michigan and you managed to pick 3 houses in what’s known as ‘No cop, no stop’ zones. Still, I suppose for $499 USD, it makes a good investment.”

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Kris is busy meeting and greeting at the Wealth Symposium in Vancouver. And Swarm Trader Gabriel Andre is out with the fever that’s been making the rounds here at the Old Hat Factory. So I’ll man the good ship Money Morning for the day. And what a day it could be. A brand new day, even!

What do I mean? Why a new bull market of course! “The bear market that has pounded stocks for more than a year has ended, a broker said, as Australian shares head for their sixth day of gains,” reports Chris Zappone in today’s Age. “I believe we saw the bottom of the market on the ninth of March,” says Alex Moffat, a director at Joseph Palmer & Sons.

The S&P ASX/200 is up almost 29% since that March 9th low at 3,154. ”Whilst it won’t be a stunning straight back to 6850-points-type rally, I think we’re on a nice sustainable upward trend…Anyone who expects the sort of returns we saw between 2003 and 2008 really needs to be spending more time in a casino and less time in investing.”

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“AT least 50 of Australia’s largest companies face a combined $25 billion shortfall on company superannuation funds, brought on by plunging bond and equity markets.”

So The Australian newspaper reported on Tuesday. These include AMP with a deficit of $120 million, and Westpac with a deficit of $473 million.

Trumping those is Rio Tinto with a whopping $3.6 billion shortfall.

According to the article, it quotes David McNeice from consulting firm Watson Wyatt as saying, “At June 30, 2008, the companies in our study were holding $58 billion in defined benefit superannuation liability and backing that with $56 billion in assets.”

Of course, at June 30th 2008 the Australian stock market had only declined by about 25% from the peak. Since then it’s down by about 40%.

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This is probably the most popular stock in Australia. Between 2003 and May last year, it has also been a top performing stick, rising by almost 500% in 5 years.

From a low of $8.4 in May 2003, it bounced to $50 in May 2008.

BHP has a similar technical configuration as Rio Tinto. Where Rio is capped at $54 by a gap created in last November and which is now a strong resistance level, BHP is capped at $34 by an identical gap.

This gap was generated in the very last days of September (blue ellipse on the chart). It was also a previous low posted on September 10 (point A) that became a new high (point B) last month. This is therefore the immediate and main resistance level to the current price action.
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