The market is up 56 — we were down 23 at one stage. The SFE Futures were up 3 this morning.

The Dow Jones closed down 173 on Friday. The Dow closed down 173 points to end lower for a fourth straight week. The S&P 500 closed down 1.5% and down 4.7% in the week. It is now down 13.1% in August — its worst month since October 2008. Fed Chairman Ben Bernanke will speak on Friday at the Fed’s annual meeting in Jackson Hole, Wyoming. Last year he used the speech to announce the Fed’s bond buying program. The oil price fell 12c to $82.26, Gold put on $30.20 to $1852.20 and the Aussie dollar fell to 103.72c from 103.78c.

In the news today…

  • BlueScope Steel’s (BSL) result has come in much lower than expected. They announced a net loss of $118m, some analysts were expecting $93m. EBIT came in at a $101m loss compared to the $24m loss expected. They also announced the closure of their export business with 1,000 jobs lost. BSL down 2.5c to 76.5c.
  • Primary Health Care (PRY) reported a FY profit of $78.29m, down 40%, as government funding reductions lowered patient demands. They declared a final dividend of 5c, down from 10c a year earlier. PRY down 1.8% to 269c.
  • Amcor (AMC) has announced a FY net profit of $571m, above market consensus of $550m, thanks to higher than expected synergies from their Alcan acquisition. AMC up 4.4% to 682c.
  • Challenger Ltd (CGF) announced a 7.5% drop in FY profit to $261.4m. They declared an unfranked final dividend of 9.5c, 1c higher than a year earlier. They expect a 7% lift in full year 2012 cash earnings. CGF up 5% target price 472c.
  • Treasury Wine Estates (TWE) reported full year profit of $64.1m compared with a loss of $900.6m a year earlier which included non-wine related activities and borrowings that were retained by Foster’s Group. They say they are aiming to grow earnings through cost efficiencies.  TWE up 1.4% to 321.5c.
  • Caltex Australia (CTX) first half net profit was up 91% to $270m as they benefited from higher oil prices. Revenue was up 22%. They declared an interim dividend or 17c, fully franked. CTX up 2.8% to 1012c.
  • James Hardie (JHX) has emerged from a trading halt after winning its tax case in the Federal Court. The ATO is obliged to refund $242.4m to JHX. JHX up 3% to 540c.
  • Western Areas (WSA) has announced a rise in FY net profit to $135m, up $14.5m, after beating nickel production targets at two of their mines. WSA up 4.92%.
  • Qantas Airways (QAN) has received the go ahead for their proposed joint business agreement with American Airlines. QAN up 1% to 146.5c.

Over the next few months and years there will be new themes and opportunities, maybe an overshoot on the downside to exploit, or, one popular hope, maybe global fund managers identify the Australian economy and the A$ as safe havens in a stormy sea and plough money into our small market lifting us (deservedly?) above the GFC and growth impaired alternatives. Lets hope so, there have certainly been some weird days in Australia recently (like today … we are up against Wall St down) but it is probably a bit early to invest for that. We are still in the adjustment phase with the odds against us.

Any rallies are likely to be short lived as with the recent one … because long term investors will not develop confidence in the long term price appreciation for a while yet and wholesale funds (fund managers) will continue to filter money into safer, and by definition higher income producing, asset classes. Within equities that means safer income stocks are going to move to a premium (already are — TLS). But for now that doesn’t include the big banks. There is still a lot of risk in those even though they do look cheap on current consensus forecasts.

The story will develop every day but the current call still has to respect the risk of an all out GFC developing (if banks end up taking the hit for governments we are in GFC 2) in which case Financials are an Avoid (not just banks … anything to do with financial markets), and the adjustment to a prolonged lower global growth outlook means you have to rethink your resources sector assumption, with a muted global economic recovery resources are not the ‘dead cert’ insulated growth sector that they are being painted as but are vulnerable to a fall in commodity prices … they are already adjusting — maybe the BHP record profit this week will be looked back on for many years.

The next step for Marcus Today will be to identify stocks you can at least hold. First up we will identify quality (lower risk), cheap (value) and for the retirees still desperate to earn more in equities than the bank … income stocks.

We will also look to make some trades with our new Trading Section which will be in the Newsletter soon. At the moment we have no trades with all trades having been stopped out. Visit Marcus Today to read more – www.marcustoday.com.au.

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