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We are now at a very interesting juncture; the US mortgage market is primed to take yet another swan-dive. This will not be from subprime - that's mostly over, although there is still a lot of writing-off that will have to be hidden. The next set of problems comes from the resets of 'NegAm' mortgages - mortgages where borrowers were not required to make a payment which covered the accrued interest on the mortgage.
Yep, that's right. There were mortgages where people put no money down, and then didn't pay enough to cover the interest on the loan. So they were living in a house and going backwards as far as the debt on the house was concerned. And many of those mortgages - which were fixed-rate to begin with - reset over the next two years to significantly higher variable rates, but more importantly, they reset to being 'normal' loans where both the full amount of interest must be paid each month, and principle must be repaid.
And a goodly proportion of that type of loan - regardless of the credit quality of the initial applicant - will default, because the houses over which the mortgage is held has declined significantly in value. So folks who were paying $500 a month on a mortgage which ought to have cost them $1500, aren't going to suddenly want to pay $2k (as a result of paying a full mortgage payment based on higher rates) on a house that is worth 25% less than when they 'bought' it.
So do I think that the recent bounce in global equity markets reflects a decision that the worst is over and that we can all go back to mindlessly watching re-runs of Seinfeld or Friends? Not on your nellie. What we are watching is a suspension of disbelief, coupled with a misplaced idea that the politically-appointed incompetent knuckleheads who got us into this mess are somehow capable of getting us out.
Just to prove that I am not anti-property per se (although as an investment class it has many attached negatives - lack of portability, high upkeep, ongoing taxation), you ought to know that The Lovely and I pay very close attention to what is going on in regional French property markets: regions like Poitou Charentes and the Dordogne are now absolutely inundated with properties that are being sold for half of the initial asking price (if they are selling at all), despite values only having rising (roughly) 7% a year over the past decade. It is now pretty much given that nobody offers more than 70% of the ask; one can buy a completely renovated 4-bedroom house with outbuildings and an acre or more of land, for under 100k euro, pretty much anywhere in France - but the real pain is being felt in regions close to the Channel.
The sellers? English folks who leveraged to the eyeballs and are now increasingly underwater. They arrived en masse in the early 'noughties', set up little enclaves in the Vendee, the Dordogne, Poitou-Charente and even as far inland as Seine et Marne (not t any great extent though)... and spent fortunes on revamping barns and agreeable country houses that the French knew were money pits. And now they are all leaving because they can't bear the financial pain.
When we feel that the worst is over, The Lovely and I plan to buy a maison de maitre - at least 8 bedrooms, at least a hectare of land, with stables and what-have-you, near a river. I guarantee we will not have to pay more than 50k-65k euro. Right now you can get such a thing for offers in the region of 250k-300k - madness when they are situated in regions where average resident incomes are below 1500 euro a month.
So mote it be.
Major Market Indices
The broad market - the All Ordinaries (XAO) - advanced modestly, rising 11.9 points (0.24%), finishing at 5030 points. The index hit an intraday high of 5055 at 10:13 am, while the low for the day was 4991.5 - set at 1:58 pm Sydney time.
Total volume traded on the ASX was 1.21bn units, 0.6% below its 10-day average (let's not be too picky, an call that 'about equal to' the 10-day average).
The ASX's daily listing of all stocks included 1275 different 3-letter FPO's which traded (i.e., had non-zero trade volume). Of these, 472 issues rose, with volume in rising issues totalling 465.4m units; decliners numbered 496 counters, and between them they traded aggregate declining volume of 606.3m shares.
Of the 493 All Ordinaries components, 196 rose while 217 fell. DEspite a modest rise in the indices, overall volume was tilted in favour of the losers by a margin of 1.3:1, with 352.72m shares traded in gainers while 475.66m shares traded in the day's losers.
The Index that forms the cash basis for the SFE's Share Price Index Futures - the S&P/ASX 200 (XJO) - posted a modest rise of 14.2 points (0.29%), closing out the session at 4983.3 points.
| Name | Close | +/-(%) |
|---|---|---|
| All Ordinaries | 5030.00 | 11.90 (0.2%) |
| ASX 20 | 2832.10 | 10.20 (0.4%) |
| ASX 50 | 4899.30 | 19.40 (0.4%) |
| ASX 100 | 4041.60 | 13.80 (0.3%) |
| ASX 200 | 4983.30 | 14.20 (0.3%) |
| ASX 300 | 4974.90 | 12.80 (0.3%) |
| ASX Mid-Cap 50 | 4842.90 | 0.10 (0.0%) |
| ASX Small Ordinaries | 2811.90 | -13.90 (0.5%) |
The "heavy hitters" of the Australian market - the ASX 20 Leaders (XTL) - advanced by under a percent, adding 10.2 points (0.36%), closing out the session at 2832.1 points.
Among the 20 big guns, 11 index components finished to the upside, and of the rest, 8 closed lower for the session. Volume in gainers was 41.3m shares, while the 8 decliners had volume traded totalling 85.79m units. The major percentage gainers within the index were
- Woolworths Limited (WOW), +$0.59 (2.25%) to $26.85 on volume of 2.5 million shares;
- AMP Limited (AMP), +$0.10 (1.53%) to $6.64 on volume of 3.4 million shares;
- Westfield Group (WDC), +$0.24 (1.44%) to $16.94 on volume of 7.9 million shares;
- St George Bank Limited (SGB), +$0.35 (1.21%) to $29.20 on volume of 2 million shares; and
- Brambles Limited (BXB), +$0.10 (1.15%) to $8.77 on volume of 2.1 million shares.
On the less salubrious side of the big-cap fence, the following stocks were the worst-performed within the index:
- CSL Limited (CSL), -$0.44 (1.23%) to $35.26 on volume of 2.1 million shares;
- Macquarie Group Limited (MQG), -$0.38 (0.74%) to $51.17 on volume of 1.2 million shares;
- National Australia Bank Limited (NAB), -$0.19 (0.73%) to $25.81 on volume of 7.2 million shares;
- BHP Billiton Limited (BHP), -$0.24 (0.64%) to $36.98 on volume of 10 million shares; and
- Suncorp-Metway Limited. (SUN), -$0.06 (0.51%) to $11.80 on volume of 2.8 million shares.
At the other end of the market-cap spectrum lie the denizens of the ASX Small Ordinaries (XSO) - the place where non-mania excess returns lie. The small-fry swam in the opposite direction to the big fish today. The Small Ords slid reasonably significantly, falling 13.9 points (0.49%), closing out the session at 2811.9 points.
The 195 stocks which make up the index traded a total of 268.61m units: volume in the 71 gainers totalling 105.21m shares, with trade totalling 130.49m units in the index's 103 declining components. The major percentage gainers within the index were- Australian Pharmaceutical Industries Limited (API), +$0.12 (17.14%) to $0.82 on volume of 1.3 million shares;
- Reverse Corp Limited (REF), +$0.21 (11.67%) to $2.01 on volume of 260.8 thousand shares;
- St Barbara Limited (SBM), +$0.02 (10.53%) to $0.21 on volume of 22.2 million shares;
- Perilya Limited (PEM), +$0.04 (9.88%) to $0.45 on volume of 2.8 million shares; and
- Coeur d'Alene Mines Corporation (CXC), +$0.21 (8.14%) to $2.79 on volume of 160.1 thousand shares.
In the red-zone of the little-stock index, the following list represents the biggest downers (in terms of percentage decline):
- OceanaGold Corporation (OGC), -$0.12 (16.44%) to $0.61 on volume of 349.5 thousand shares;
- Great Southern Limited (GTP), -$0.08 (9.76%) to $0.74 on volume of 552.5 thousand shares;
- Nido Petroleum Limited (NDO), -$0.03 (9.52%) to $0.28 on volume of 5.5 million shares;
- Sms Management & Technology Limited. (SMX), -$0.36 (8.76%) to $3.75 on volume of 58.7 thousand shares; and
- Mineral Deposits Limited (MDL), -$0.06 (8.45%) to $0.65 on volume of 225.5 thousand shares.
Index Changes
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| XAO | All Ordinaries | 5030 | 11.9 | 0.24 | 894.8m |
| XFL | ASX 50 | 4899.3 | 19.4 | 0.4 | 315.6m |
| XJO | ASX 200 | 4983.3 | 14.2 | 0.29 | 741.2m |
| XKO | ASX 300 | 4974.9 | 12.8 | 0.26 | 837.7m |
| XMD | ASX Mid-Cap 50 | 4842.9 | 0.1 | 0 | 253.5m |
| XSO | ASX Small Ordinaries | 2811.9 | -13.9 | -0.49 | 268.6m |
| XTL | ASX 20 | 2832.1 | 10.2 | 0.36 | 138.9m |
| XTO | ASX 100 | 4041.6 | 13.8 | 0.34 | 569.1m |
Market Breadth
| ASX20 | XTO | XJO | XAO | XSO | Market | |
|---|---|---|---|---|---|---|
| Advances | 11 | 47 | 86 | 196 | 71 | 472 |
| Declines | 8 | 51 | 106 | 217 | 103 | 496 |
| Advancing Volume | 41.3m | 235m | 311.1m | 352.7m | 105.2m | 465.4m |
| Declining Volume | 85.8m | 313.1m | 398.9m | 475.7m | 130.5m | 606.3m |
GICS Industry Indices
Among the 11 industry indices, 9 registered an advance for the session, the remaining 2 lost ground.
The best performing index was Information Technology (XIJ), which added 15.4 points (2.98%) to 532.7 points. There are only two stocks in this index - IRE and CPU - and CPU dwarfs its much smaller index compatriot in terms both of market capitalisation and daily volume. Today the 2 stocks which make up the index traded a total of 2.31m units; CPU - whih rose - had volume amounting to 2.05m shares, while IRE - which didn't rise - traded 0.27m units.
- Computershare Limited (CPU), +$0.27 (2.97%) to $9.37 on volume of 2 million shares.
Second in the index leadership stakes was Property Trusts (XPJ), which gained 16.6 points (1.18%) to 1418.7 points. The 21 stocks which make up the index traded a total of 119.13m units; 10 index components rose, with rising volume amounting to 51.4m shares, while the 9 decliners had volume traded totalling 61.71m units. The major percentage gainers within the index were
- GPT Group (GPT), +$0.12 (6.99%) to $1.76 on volume of 7.3 million shares;
- Macquarie Countrywide Trust (MCW), +$0.04 (4.17%) to $1.00 on volume of 3.4 million shares;
- Goodman Group (GMG), +$0.06 (2.29%) to $2.68 on volume of 6.2 million shares;
- Westfield Group (WDC), +$0.24 (1.44%) to $16.94 on volume of 7.9 million shares; and
- Stockland (SGP), +$0.05 (1.03%) to $4.89 on volume of 5.8 million shares.
The bronze medal for today goes to Consumer Staples (XSJ), which climbed 78.7 points (1.08%) to 7332.4 points. The 11 stocks which make up the index traded a total of 41.08m units; 5 index components rose, with rising volume amounting to 19.3m shares, while the 6 decliners had volume traded totalling 21.78m units. The major percentage gainers within the index were
- Timbercorp Limited (TIM), +$0.05 (5.36%) to $0.89 on volume of 1 million shares;
- Goodman Fielder Limited (GFF), +$0.05 (3.17%) to $1.47 on volume of 14.2 million shares;
- Woolworths Limited (WOW), +$0.59 (2.25%) to $26.85 on volume of 2.5 million shares;
- ABB Grain Limited (ABB), +$0.07 (0.93%) to $7.57 on volume of 348.4 thousand shares; and
- Wesfarmers Limited (WES), +$0.07 (0.2%) to $34.46 on volume of 1.1 million shares.
The worst-performed index for the session was Healthcare (XHJ), which dipped 81.3 points (0.94%) to 8525.5 points. The 8 stocks which make up the index traded a total of 10.1m units; The 6 decliners had volume traded totalling 4.98m units, and 2 index components rose, with rising volume amounting to 5.11m shares, The major percentage decliners within the index were
- Ramsay Health Care Limited (RHC), -$0.53 (5.26%) to $9.55 on volume of 311.4 thousand shares;
- Cochlear Limited (COH), -$1.23 (2.65%) to $45.27 on volume of 201.7 thousand shares;
- CSL Limited (CSL), -$0.44 (1.23%) to $35.26 on volume of 2.1 million shares;
- Healthscope Limited (HSP), -$0.03 (0.68%) to $4.36 on volume of 230.3 thousand shares; and
- Sonic Healthcare Limited (SHL), -$0.08 (0.57%) to $13.84 on volume of 1.5 million shares.
Just missing out on the wooden spoon was Materials (XMJ), which slid 7.7 points (0.06%) to 13019.3 points. The 42 stocks which make up the index traded a total of 151.04m units; The 26 decliners had volume traded totalling 53.91m units, and 15 index components rose, with rising volume amounting to 93.06m shares, The major percentage decliners within the index were
- Great Southern Limited (GTP), -$0.08 (9.76%) to $0.74 on volume of 552.5 thousand shares;
- Aquarius Platinum Limited (AQP), -$0.56 (5.46%) to $9.70 on volume of 790.5 thousand shares;
- Macarthur Coal Limited (MCC), -$0.66 (4.75%) to $13.24 on volume of 1 million shares;
- Lynas Corporation Limited (LYC), -$0.06 (4.45%) to $1.18 on volume of 573 thousand shares; and
- Fortescue Metals Group Ltd (FMG), -$0.36 (4.44%) to $7.75 on volume of 7.3 million shares.
Sector Indices
| Code | GICS Sector | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| XIJ | Information Technology | 532.7 | 15.4 | 2.98 | 2m |
| XPJ | Property Trusts | 1418.7 | 16.6 | 1.18 | 119m |
| XSJ | Consumer Staples | 7332.4 | 78.7 | 1.08 | 41m |
| XUJ | Utilities | 5384.7 | 51.2 | 0.96 | 26m |
| XDJ | Consumer Discretionary | 1624.2 | 10.3 | 0.64 | 57m |
| XNJ | Industrials | 4913.2 | 22.9 | 0.47 | 146m |
| XXJ | Financials ex Property Trusts | 5086.7 | 10.1 | 0.2 | 81m |
| XTJ | Telecommunications | 1548.8 | 1.9 | 0.12 | 56m |
| XEJ | Energy | 16210.3 | 12.8 | 0.08 | 52m |
| XMJ | Materials | 13019.3 | -7.7 | -0.06 | 151m |
| XHJ | Healthcare | 8525.5 | -81.3 | -0.94 | 10m |
All Ordinaries Major Movers
All Ords Volume Leaders
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| TLS | Telstra Corporation Limited. | 4.47 | -0.02 | -0.45 | 47.2m |
| CEU | Connecteast Group | 0.86 | -0.14 | -14.07 | 44.4m |
| OZL | OZ Minerals Limited | 1.75 | 0.01 | 0.57 | 26.7m |
| QAN | Qantas Airways Limited | 3.31 | -0.08 | -2.36 | 23m |
| SBM | St Barbara Limited | 0.21 | 0.02 | 10.53 | 22.2m |
All Ords Percentage Gainers
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| KBC | KeyBridge Capital Limited | 0.95 | 0.18 | 22.73 | 1.2m |
| NPX | Nuplex Industries Limited | 4.75 | 0.70 | 17.28 | 4.5k |
| API | Australian Pharmaceutical Industries Limited | 0.82 | 0.12 | 17.14 | 1.3m |
| ARR | Arasor International Limited | 0.15 | 0.02 | 15.38 | 310.5k |
| MAFCA | Multiplex Prime Property Fund | 0.34 | 0.04 | 13.33 | 70k |
All Ords Percentage Losers
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| OGC | OceanaGold Corporation | 0.61 | -0.12 | -16.44 | 349.5k |
| CEU | Connecteast Group | 0.86 | -0.14 | -14.07 | 44.4m |
| AXM | Apex Minerals NL | 0.40 | -0.05 | -11.11 | 1.5m |
| SPH | Sphere Investments Limited | 1.97 | -0.24 | -10.68 | 2.6m |
| TMR | Tamaya Resources Limited | 0.04 | -0.01 | -10.64 | 11.9m |
