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Some suits must raise their game

AUSTRALIA is well placed geographically, economically and financially to withstand the shocks now rocking the world. Yet the reputation of our stock market as a safe haven is being sullied. One reason is the sad and chaotic collapse of Ansett, which is affecting the already groggy lending books of the banks. Even if overseas visitors are brave enough to come here, they would find it tough to get around the country when they arrive. Tourism receipts were worth $15.5 billion during the past year and account for nearly 5 per cent of our GDP.

The Ansett demise, closely followed by the administrator called into Pasminco, caps a period during which the National Australia Bank has lost $3 billion in the US HomeSide debacle, and serves as an encore to the dispatch of the HIH insurance group, Harris Scarfe and One.Tel to the knackers’ yard.

It is difficult to escape the message that we are a nation of corporate nincompoops. Certainly some lavishly paid suits must soon raise their game, or make way for people who can.

Shell-shocked investors are now focused on the preservation of capital. There has been some heavy, indiscriminate selling of shares. That is understandable. But it makes no sense to throw the baby out with the bath water, and then hurl the bath after them.

The Australian market does have some things going for it, not least high yields for the income conscious. Analysts at Merrill Lynch have run a stocks screen over companies that they cover around the region to identify current year high-dividend plays. Of the 31 they came up with, no less than 11 were Australian. As you would expect, five of these were property trusts, with General, Stockland, Mirvac and the two Westfield’s returning from 6 per cent to more than 9 per cent.

The other half dozen are Qantas, Tabcorp, NAB, CBA, Santos and Woodside. The big banks already have taken a belting and the energy stocks are surprisingly weak. The lower the price the higher the yield – assuming dividends are maintained.

Buying Australian equities now carries a stricter-than-usual health warning. It is hard to expect a rapid and sustained recovery in world markets.

Perhaps the bolder spirits can pick up the odd bargain at their leisure.

The postponement of the $2.3 billion Enex coal float will soon return more than half a billion dollars to Australian retail investors. It will be interesting to see what they do with it.



Gold puts in a leaden performance

REGULAR readers may wish to bury their faces in their hands. I want to return to the subject of gold. Confronted by a global recession, currency chaos and the likelihood of a war, the gold price has crawled up to $290 an ounce. The head bangers and conspiracy theorists have flooded cyberspace with predictions of $1000 an ounce for the metal.

Kerr Neilson is very far from a head banger. He is in charge of global strategy at the highly successful Platinum Capital funds group. Neilson says treating gold principally as a commodity, demand is about 1,000 tonnes greater than new supply, which is running at 2,600 tonnes a year. He opines that, combined with unsettled currencies and markets, he could see a 10 per cent to 20 per cent spike in the price, which would add 50 per cent to the cash flow of gold producers – he made that call well before the recent cataclysmic events.

Quick, buy a few shares in an Australian gold mine before the last one is carried off by the South Africans.

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