o Friday week ago, NAB provided for big write-downs due to the sub-prime crisis. Shares in NAB had their biggest one-day fall in 20 years. This was followed up on Monday with more bad news for the banks with ANZ. ANZ shares had their biggest one-day fall in 20 years And that was followed up with more bad news on Friday from Suncorp-Metway. So Suncorp-Metway shares topped NAB and ANZ with their biggest one-day fall on record. o Stock markets in America and Australia were advancing on lower energy prices. That bit of positive sentiment was knocked on the head with a big jump in energy prices on Wednesday in the U.S. o Starbucks announced it is closing the majority of its stores in Australia. Cutback announcements by Australian companies are now a daily feature of the news media. o The Australian Dollar fell against the US$, the Japanese Yen, and the Euro with more news of a slowing economy in Australia. Some people even dared to mention the R word. The Big Goose down in Canberra said that wasn’t very helpful – as if not speaking about it would make the possibility go away. And then, oh no, Krudd the Krool mentioned the word. o Meanwhile, the trade balance turned positive but that wasn’t enough to stop the slide in the Little Ozzie Battler. o Various commentators borrowed Krool’s blowtorch and applied it to Glenn Stevens, the Silver Back Gorilla in the Reserve Bank, demanding a rate cut. The Silver Back, of course, didn’t blink – as is the way with Silver Backs. o Exxon-Mobil announced the biggest profit of any company in history. The share price fell. Why? You well might ask. The story from the company that accompanied the biggest profit in history wasn’t as good as analysts expected so the stock sold off. o GM followed with its third biggest loss in history. Yes – and its shares fell. o Eight banks in America have now failed. o Property prices in England are dropping and Britain appears headed for a … oh dear – what word should I use???? … let’s say “an economic slump” just to keep the Big Goose happy.
Wanna see some real scarey figures (as if the above aren’t bad enough)? Well – how about these. The long-run average P/E on the U.S. market is about 15. Currently the S&P500 P/E is 21 (well above the long-run average). But … Drum Roll … the Dow Jones Industrial Average has a P/E of 78!!! Phew!!! How long is that going to take to come back to a reasonable level. Either profits are going to increase sharply, or the Dow is going to fall a lot more.
How is Australia? Well, the XAO P/E is 11.01. Well below the long-run average in America. Bargain buying? There could be some great bargains if America continues to fall and we follow. We shall see.
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(Is that piece of Rain Forest up in Springbrook now looking very desirable? Organic vegies every day? Home brewed beer in the evening? No newspapers? And nobody mentions the R Word?) ...
Both the XAO and the OBV bottomed out in mid July. Since then, the XAO has gone on to retest the low at 4900, while the OBV hasn’t. The OBV is now above the 30-Day Moving Average, in fact, the 10-Day Moving Average of the OBV is now above the 30-Day Moving Average, while the XAO is well below its 30-Day Moving Average. This suggests that big investors are becoming more positive about the market than previously.
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