Tuesday 24/02 is last day to be eligible for 29c Ffr interim...

Tuesday 24/02 is last day to be eligible for 29c Ffr interim div. No doubt on wednesday we will see some selling as holders exit knowing div will be received. Hence, is it worth buying any shares in bear mkt and in particular UGL shares? some thoughts/opinions:

Big picture: i expect world mkts to continue falling for ages. i expect bear mkt/world recession to last minimum 5 years and maybe 30 years. Nobody knows but I cannot conceive a return to 2001-2007 conditions in my lifetime. I reckon Aussie mkt will stay bearish for several years but will not fall to anything like the extent of overseas, even though it has fallen further than many western mkts this past 16 months. Simply, we are in far better shape than most. But property prices (esp. commercial) are very vulnerable. Folk and funds with income/savings have to put their cash somewhere. Trick is to find the best option.

Interest v Divs: Interest on deposits is about 4% and fully taxable. 4% return componded equates to deposit dobling in 18 yrs. And that's assuming interest rates do not fall further. Earning divs at 8.5% means yr capital doubles in 8.5yrs and that assumes (extremely unlikely) UGL will not increase div at any time during next 8 years. The franking benefit effectively adds for medioum wage earners another 42%. So 8.5%+42%=12%.

Capital Gain: i can't forecast with a great degree of accuracy what UGL SP will be in 18-24 months. But do know that rev/earnings/divs growing at 18% doubles in size every 4 years. Capital gains tax rate is half that of tax on wages or bank interest.

Risk v Reward: This is the key criteria. My preferences when seeking a share: High safety in earnings/low debt/minimal overseas exposure/minimal exposure to coal and base metals/some exposure to POG/max exposure to essential services/ low Capex requirements/minimal exposure to collapse in property prices/ ability to grow organically and avoid borrowing/company policy and history of paying high dividends/ history of meeting or exceeding their earnings forecast and (lastly/importantly) exposure to government stimulus. Remember the worst the economy gets..... the more stimulus Rudd/Swan will throw (waste?) with job creating projects in the name of 'the public good.'

A long list but remember the prime aim is 'safety'. Clearly UGL has no current exposure to POG but may well be targeting gold mines with tenders. The big unknown is currencies. If USD collapses UGL is exposed and will suffer and i do worry about that. UGL is also vulnerable in 2 other factors on the list but not entirely so. I would love a company that fits all these criteria but cannot find one. UGL comes closest.

So if i am right and overseas mkts tank and ASX200 falls another 15% how will my investment in UGL compare with puting cash in the bank? Do the rewards justify the risk? i cannot influence/determine future SP but i can examine and determine company structure/strategy'fundamentals along with likelihood of winning further work and use these to deduce probability of company earnings. I can also make forecasts re world economic situation and especially governments' reactions to sustained downturn. We already have evidence of Rudds/Swans response to threat of deep recession. We also know teasury/RBA instinct is to lower interest rates if economy worsens. Of all the indicators they watch.... unemployment and property prices are the closest.

If you decide to buy UGL... when is yr best time? IMO no use forsaking 29c (41c equiv)so try and jag lowish point on Monday 24/02. Tuesday is cutting things fine unless you feel DOW et al will tank on Monday night. Good luck and do some research yourself B4 making a decision. Get as many opinions as possible.