Time for a Punt!

It's Melbourne Cup time, and H.O.T's "Lock" for the cup this year is Zipping. Zipping has had a 9 day break after winning the Cathay Pacific Airways Cup at Moonee Valley. The win was a stunning come from behind, with Zipping demonstrating explosive speed on the final straight. Coupled with that, Zipping's solid performance in the cup last year is testament to the fact that the it can run the distance, and according to Zipping's trainer, he is much better prepared this year than last. All signs point to Zipping taking home the prize.
H.O.T's "dark horse" for the cup is Tungsten Strike. According to trainers, Tungsten is in the same form as when he romped home to a six-length win in the Listed March Stakes in England in August. At odds of Around $30 to $40, this seems to be one horse that has been overlooked by the betting public. Worth a punt.

Good Luck to All

China will end in tears part 2

PetroChina listed today in Shanghai. They have a quarter of the revenue of Exxon and a larger market cap and no particularly exciting prospects. This makes no sense. Lock in this value by going long Exxon and short PetroChina. If you can stay solvent longer than this bubble can remain irrational then you're in the money.

PetroChina's Value Tops $1 Trillion. This is crazy valuation. It is bigger than;

• The entire Russian stock market
• Exxon Mobil Corp and General Electric Co combined and
• The entire Chinese stock market in 2006!!!

The trade I suggest above is high risk, but you hedge out your oil price risk by being long short. You've just got to wait for the rug to be pulled out from under China.

The week ahead - Interest Rates, Child Care and Leverage, USD, Emerging Markets and other Hogwash

There are a few interesting items coming up on for the Aussie equity markets this week, including the reserve bank's decision on rates. At my latest mark, it was about 90%+ priced in. So it'll be interesting to see if this slows the market at all. My feeling is that it's got to start hurting some of the highly leveraged margin traders who are bidding the market higher, particularly in some of the index heavy weights.
Early Learning Services (ELS.AX) the soon-to-list child-care provider will follow in the footsteps of larger rival, ABC Learning . We've all seen the progression of ABS.AX and I'm sure there'll be plenty of investors looking to get in on this trade. The company, which owns seven child-care centres and has contracts to buy a further 44, will float on the Australian Stock Exchange next month.
Sixteen contracts for difference (CFDs) products, listed over Australia’s top companies, will debut on the Australian Securities Exchange (ASX.AX) today. Later in the month, the ASX will also launch two index CFDs, seven foreign exchange CFDs and one commodity CFD. These will include a product based on the Dow Jones Industrial Average. This will provide more unneeded leverage for the average punter. With so many of these products already available. (CFDs, Warrants, Minis, Options, Margin Lending etc etc.) The only people likely to be impacted by this are people like CMC Markets, with investors taking it easier option of purchasing ASX listed CFDs instead of the bespoke ones from third party providers.
Emerging market equities have out-performed major markets in recent months. It is as if emerging markets are the new safe haven from the US and other developed nations. This makes some sense , given the strong external accounts of many emerging countries. It is hard to imagine that emerging market growth could diverge from developed market growth for a long period of time.
Fiscal policies in China and other emerging Asian countries, have resulted in accelerating FX reserves growth. The result is a world that sees the glass half-full, and problems in the US as a local problem. However, as the diversion in market performance becomes clearer, the risk grows that something gives, and that may be a global equity market rout and global risk aversion trading. If the USD continues to fall out of bed, the risks that it falls dramatically in a single session continue to stack up. I would not be trading USD from the long side at any point, the risks are simply too great. A friend of mine recently predicted the USD to be buying 50 Euro cents within 18 months, and while he's mad, he might be right.

Emperor Update

Paradigm have just released a target price on Intrepid of C$0.50, which implies a share price of $0.13 vs $0.076 - a 75% premium!

Get to it. Se previous post for more info.

Opportunity Abounds Giralia and the AUD

With the market having a panic all because Citi bank had a bad day, it's a good opportunity to add to positions. People forget just how poor a measure of economic health the Dow Jones industrial average is. You have to remember this only has 30 stocks in it. When one of them (Citi) drops 7%, the Dow will tumble. Fundamentals remain unchanged and I for one am trying to pick up a few more GIR, although in the last 30 minutes they've really got a run on. On another note, the AUD got a fair hammering against the USD and I'm starting to think about getting long again. I'll let you know when I decide to pull the trigger.

Going for Gold - The Emperor's New Clothes

Gold continues to climb, closing in on US$800/oz, and it won't stop there. Here's another little tasty gold treat for all you punters out there:

Emperor Mines (EMP.AX) is a company that has undergone an amazing transformation in recent times. Not more than 6 months ago, the company was laden with debt and underperforming assets. Since then it has managed to sell it's Vatokoula mine, it's Porgera mine, and is soon to announce the sale of it's Tolukuma mine, leaving it debt free, with cash and investments of around $68m and a very valuable exploration program. Furthermore, it has now announced a friendly merger with Intrepid Mines, which has the Paulsens gold mine and the Casposo gold-silver development project.
The merger is the merchant banker's ideal "1+1=3" story. The combination of Emperor's cash and strong management team, plus Intrepid's quality assets in desperate need of cash and management, has the potential to really create value. Furthermore, being a laregley unhedged gold producer (at low cash costs), MergeCo will be very exposed to any upward movement in the gold price.
At a share price of around $0.07 to $0.09, the stock represents a real bargain. In addition to this the sale of Tolukuma will add another $0.015 to the share price, as this will be distibuted to shareholders before the merger.

Maurice's Rating (Take a swing)

Gold Gold Gold - ZAUWBA

We've been bullish on Gold for a long time and I think there's plenty more left in it yet. It might as well be $800USD an ounce after it's movement overnight, but this is something that we believe will be going north of $1000USD in the near future. We saw a good bounce overnight, particularly amongst American gold stocks, we'll see the same today in Oz. There's plenty of ways to play this including buying physical gold in Australia. ZAUWBA is a an exchange traded Australian Gold warrant, with the physical gold being housed in the Perth mint. You could of course just buy gold futures, which would give you a stack more leverage and a lot more potential upside or just buy Australian gold producers/prospectors.