the dow bath

As mentioned in my last post pre-announcement, DOW had to take a bath when they released this update. They however took it to the extent where it wouldnt breach its debt covenents. Clever. I suspect also that the $250m provision is on the conservative side and deliberately so.

They meet a couple of deadlines, their costs run short or on the provisions and shock horror they start to become the 'market darling' again.

The announcement was detailed, very detailed regarding the Waratah project. DOW management was just unloading everything off its chest. Management are away that we think their history stinks and the newer blood is trying to pass the peace pipe.

The price is likely to trend lower than Thursday's low over the coming few weeks. Maybe not by much you always start to see these type of scenarios settle their price below post-announcement lows and then it gets to the point of 'capitulation' for many. (someone alert me when it hits the low because I have no idea where it will be - I cant predict people's idiocy)

The market hates uncertainty and as I mentioned in the other post, DOW will be the ugly duckling for a few more weeks to come (the media bombardment makes it a perfect situation for people to throw out the business fundamentals out of the window - any easy thing to do).

One thing on DOW's side at the moment is the fact that NSW Labor Gov is on its way out and Barry O'Farrel has already made a point of mentioning in the media that he wants the delivery of these trains 'a top priority'. It always helps if you've got your major business partner on your side.

With this volatility and seemingly glum share price lets not forget the story of Mr Market, which I think is very relevant at the moment:

"Mr. Market, an obliging fellow who turns up every day at the share holder's door offering to buy or sell his shares at a different price. Often, the price quoted by Mr. Market seems plausible, but sometimes it is ridiculous. The investor is free to either agree with his quoted price and trade with him, or ignore him completely. Mr. Market doesn't mind this, and will be back the following day to quote another price.

The point of this anecdote is that the investor should not regard the whims of Mr. Market as a determining factor in the value of the shares the investor owns. He should profit from market folly rather than participate in it. The investor is advised to concentrate on the real life performance of his companies and receiving dividends, rather than be too concerned with Mr. Market's often irrational behaviour."

For those that are longer term investors - I suggest you dont watch DOW over the coming weeks because it may infect your prudent view of the overall business fundamentals and sway you to follow the market sentiment.