Coming Soon! Australian Wealth Gameplan

Today your editor is hunkered down trying to complete the first edition of Australian Wealth Gameplan before we head off on a few days break to Hobart.

The official launch is scheduled for the week after next. I’ve already picked six Australian income stocks that you can either add to your portfolio or start from scratch.

So, stay tuned and look out for more details on Australian Wealth Gameplan in the coming weeks.

ANZ Takes Lambs to the Slaughter

We nearly fell off the chair when we read this headline:

The fact that ANZ had previously sold $2.5 billion worth of stock to institutional investors is not surprising. Those institutions after all are spending ‘other people’s money’ (OPM).

But that “small investors” – 178,000 people apparently – should voluntarily hand over $14.40 per share of their own money is, frankly, worrying, but more on that in a moment…

In a nutshell, that’s the power of the mainstream press. If all you’ve read over the last year is parroted editorial on the strength of the Australian banking system then you’re bound to feel confident to invest your money.

And if you also read that the government shouldn’t and never will allow an Australian bank to go under, then you’ll feel even more confident.

A perfect example of the nonsense most people are subjected to from the mainstream press can be found in Michael Pascoe’s article for Yahoo! Finance – “Plenty of pay packets for spending.”

He writes:

“In reality, despite all the headlines about job losses and unemployment rising, the employment side of the equation is doing incredibly well considering that the world is suffering a very serious recession and we’re having (a so-far mild) one ourselves.”

He goes on to say:

“There are pluses and minuses about the changes in employment over the year – there are more part-time and fewer full-time jobs, for example, and the number of jobs in the private sector has fallen by roughly 100,000 while public-sector jobs have increased by 150,000.”

Got that? Private sector employment – you know, the part of the economy where things are made or services provided – has dropped by 100,000, which public sector jobs – you know, the part of the economy that leaches taxpayer money without providing anything of any productive value – has increased by 150,000.

Just when the economy is already faltering, the public sector decides to up the bill. In other words there are 100,000 fewer taxpayers to pay the wages of 150,000 new public sector zombies.

According to Pascoe that’s great news.

So it’s hardly surprising that so many ANZ Bank investors chose to buy more shares at a “discount” to the current price if that’s the kind of message the majority of the population are reading.

But perhaps the biggest clue about the weakness of the ANZ Bank and other Australian banks is that they were more than happy to suck in every last dollar from investors.

ANZ Bank was only looking to raise $350 million from small investors, yet when applications for $2.2 billion of stock came in how could they possibly refuse to accept it?

They couldn’t.

Like a drunken bum, ANZ Bank couldn’t bring itself to refuse another drink.

Pity the sensible ANZ Bank investor who decided not to hand over more cash. With all these extra shares being issued chances are their dividend will be cut even further.

Actually we won’t pity them too much, we see very little reason why anyone would want to own bank shares in the first place.

But for the bank it’s nothing less than a windfall. That’s $2.2 billion of hard cash going straight to the balance sheet, and it’s money the bank can immediately use to prop up the housing market a bit longer.

We continue to say, sell the banks, and buy… (almost) anything else!

Other Stuff on the Markets

The S&P/ASX200 fell 0.12% yesterday, while there was marginally better news overnight on Wall Street with the Dow Jones Industrial Average adding 4.76 points. In Europe the FTSE100 gained 0.45% and the CAC40 added 0.54%.

The price of gold in Australian dollars is trading at $1,164.97, while in US Dollars it trading at $914.06.

The Aussie dollar strengthened slightly versus the US dollar and Japanese Yen, trading at USD$0.7846, and JPY72.79.

Further strength for Crude oil overnight, closing at USD$60.74.

For the biggest movers on the market yesterday click here…

Cheers.
Kris.