Wayne Swan's Temporary Deficit!

It was only six months ago that the dumbest treasurer in the world, our Wayne Swan, was talking about a $40 billion hole in the budget.

The spin here was that it was 'temporary.'

Today our dumb treasurer comes clean and hits us with $50 billion deficit and more likely to be much greater. In one year this treasurer has presided over a $70 billion reversal!

From a $20 billion surplus to a $50 billion deficit and that is just going by what he is telling us so far!

Here's what he had to say about this drastic reversal at a press conference today:

Since admitting late last year that the Budget would fall into deficit, the Government has continued to describe the fall into red as a "temporary" measure. Speaking after the Reserve Bank's decision to leave interest rates on hold, Mr Swan said continuing weak international and domestic demand will force a deficit for a "longer period of time".

But he would not reveal a specific timeframe.

"There's no doubt that the deficit will last longer, the temporary deficit will be longer as a consequence of revenue downgrades imposed on this country by the rest of the world," he said.

So the 'temporary' deficit will last longer.........?

Here's a simple question for the knuckle head treasurer Wayne Swan.

How much longer before you stop calling it 'temporary?'

Volatility Index Continues Downward!

The last time I posted about the Volatility Index back in late March, we were seeing the downward trend continuing to hold with a test of a major support line at 40.

An updated chart shows a solid break through 4o and a test of the next major support line at 35. At the beginning of the week we saw a major bounce off that support line but as the market jitters eased over the bank stress tests in the US, we are now starting to see another attempt at breaking through the support line at 35.

The US continues to show encouraging signs of gradual recovery and the VIX is confirming this with the main downward trend continuing to hold its path downward.

India Resources (IRL) Jumps On JV News

India Resources (IRL) managed a 95% gain today on the back of news of a JV with a subsidiary of Indian conglomerate Binani Group, with the right to earn a 51% interest by spending US$1.1m.

Here's the interesting part from the announcement:

In the application area IRL has previously announced an exploration target3 of between 95-135 million tonnes at between 2.2 to 4.5% Zn, 0.7 – 1.8% Pb in several discrete areas, including the Sindesar Kalan East deposit. This is based on historic resource estimates by Geological Survey of India (GSI), over 400 historic diamond holes that IRL has compiled into a 3D model and on IRL’s own diamond drilling. Higher grade lenses occur in the area and will be especially targeted. IRL intersected a best result of 7m at 7.6% Zn and 1.0% Pb from 424m depth in its own drilling at North Sindesar Ridge, showing the potential.

RBG will assist the grant process of the PL and ML applications, and will fund further exploration drilling targeting mineral resources. IRL welcomes the interest and commitment from one of India’s premier metals companies, and particularly the backing from State owned mining enterprises, and looks forward to a positive relationship in developing a new mine in this area.

That shows the potential size of the project and the market responded accordingly sending the stock up to a new six month high of 3.9c.

India Resources is already a copper producer that has been heavily oversold so a recovery was overdue regardless of today's announcement. With base metals staging a solid recovery expect higher prices in the short term.

Kevin's Recession 09

With Chinese retail sales jumping 15.9% for the first quarter of 2009, clear signs of a recovery from the US, and markets across the world rallying strongly off their March lows........

This is what Kevin Rudd is telling us............

AUSTRALIA will inevitably slip into recession, Prime Minister Kevin Rudd says.

"The worst global economic recession in 75 years means it's inevitable that Australia will be dragged into recession," Mr Rudd told an economic forum in Adelaide today.

"The challenge for government is to cushion the impact of recession on business and jobs, through the actions we take, through economic stimulus strategy."

Mr Rudd said seven of Australia's 10 largest trading partners were in recession.

"The severity of the global recession has made it impossible for Australia to avoid a further period of negative economic growth," he said.

A recession is technically defined as two consecutive quarters of negative economic growth. Total gross domestic product declined 0.5 per cent in the December quarter, compared with growth of 0.1 per cent in the September quarter.

It was the first time the economy had contracted in a quarter in eight years.

It makes you wonder if this Federal Labor Government has something to hide.........?

Their rank incompetence perhaps?

Neuren Pharmaceuticals (NEU) Breakout!

One of the stocks that I tweetered about today was Neuren Pharmaceuticals (NEU) and as you can see from the above chart we witnessed a solid breakout today, with the stock managing 107% gain for the day, closing just above previous resistance at 2.7c.

The forum actually picked up on the run in the stocks yesterday but a forced trading halt from the ASX to allow the company to reply to a price query prevented us from catching it earlier.

This morning the company issued their reply and we saw a strong open at 2c before a bout of jitters caused a collapse down to 1.5c. The price stabilised and for those brave enough to continue holding a very nice gain was made from the ensuing rally!

Going back to the chart we can see a solid spike in volume and as mentioned earlier, a close at 2.7c, which is just above the previous day's 2.6c high. There is also a substantial gap at 5c in the chart that is yet to be filled and we may see that target get hit in the short term.

Something worthy of noting was the actual ASX price query reply from the company today:

1. As recently noted in the Company’s 2008 Annual Report, Neuren has for some time been in negotiations relating to two of the Company’s programmes:

a. with regard to the development of NNZ-2566 through Phase 2 trials and beyond, new investment sourced from the US market is being sought to compliment the previously announced US Army funding; and

b. with regard to the preclinical cancer programme a partner is being sought to enable development to a value point which will allow further partnering or collaboration.

These negotiations are incomplete and the Company is unable to announce further details. Once negotiations are complete, expected to be in the next two to three weeks, a detailed announcement will be made.

While the Company does not believe that these negotiations are an explanation for recent trading in the Company’s shares, if either or both of these negotiations are successful they could be expected to have a positive effect on the Company’s share price, particularly having regard to recent price levels.

Good luck to all holders!

Labor's Weak Stance On Boat People

Since the Labor Government got elected and changed the laws on illegal immigrants we have seen a steady increase in people smuggling into Australia.

This is the end result...........

THREE asylum seekers have been killed in an explosion on board the latest boat to be intercepted by the Australian Navy.

WA police have confirmed 3 people have been killed in the mid-ocean blast, with many others injured...

Two other passengers are missing, possibly drowned, while the remaining 44 boatpeople who were on board are suffering a range of injuries, including serious burns, sources told The Australian.

The explosion is understood to have occurred 2-3 hours ago as the boat, carrying 49 people, made its way to Christmas Island, after it was intercepted at around 12pm AEST yesterday two nautical miles off Ashmore Reef, 610km north of Broome.

The above story does not say how or why the explosion occurred but my understanding is that it was the result of petrol being poured onto the boat by the illegal immigrants.

Prima Biomed (PRR) - Breakout!

I have mentioned before of my knack at being able to spot the buyers before they actually start to really hit a stock and today's 43% share spike in Prima Biomed (PRR) was something that was actually picked up on the last trading day of last week, which was Thursday and at the very close of trading.

There was only one trade that day and it was at the closing auction but the after more than two weeks of selling it was actually a buyer and he was keen to buy. I alerted the forum that this stock would most likely trade higher today and as it turns out, Prima Biomed closed at 2.3c and was just off the 52 weekly high.

The forum has been watching this stock since news of their ovarian cancer treatment was nearing commercialisation and the recent European patent win sent the stock to a new 52 week high of 2.4c back in late March. The sellers drove the stock down to 1.5c thereafter but that all changed today.

Wells Fargo Wows The Market

The other day I posted a snippet about China being bullish. In that blog post however, I acknowledged the point but I stipulated a strong preference for oversold financial stocks and listed property trusts (AREITs).

Last night the Dow Jones futures index jumped sharply before the US markets had opened. For a few moments I was sitting and waiting to find out what had caused the sudden spike........

And then the news came through with Wells Fargo (NYSE:WFC) announcing an expected record $3b net income for the first quarter;

Wells Fargo & Co. Issues Q1 2009 Earnings Guidance Above Analysts' Estimates
8:00am EDT

Wells Fargo & Co. announced that for first quarter of 2009, it expects to report record net income of approximately $3 billion or approximately $0.55 per common share after preferred dividends, including $372 million in dividends paid to U.S. taxpayers on the U.S. Treasury's Capital Purchase Program investment. According to Reuters Estimates, analysts were expecting the Company to report net profit of $1.2 billion and EPS of $0.25 in first quarter of 2009. s

The US financial sector in particular has been heavily oversold and when the news came through of the record profit, the large US financial institutions rallied strongly! The Dow Jones broke through 8,000 closing at 8,083, up 246 points for the day.

Wells Fargo gained 31%, Bank Of America gained 36%, Citigroup gained 12%, JP Morgan gained 25%, and Morgan Stanley gained 11%. These strong percentage gains are almost unheard of for blue chip stocks so to actually see almost the entire sector rallying with such strength says with resounding certainty that the recovery is on the way!

And most of the gains in the immediate future will be made from the heavily oversold financial and property sectors.

The Bull In The China Shop

Right now I am not focusing on mining stocks or Chinese related investments but here's an interesting quote from an RBA board member and I think it is on the money.

Reserve Bank board member and economist Warwick McKibbin said China’s desire to buy resource assets around the world showed that already it was preparing for the next upswing in the global economy.

Mr McKibbin also pointed to “fish hooks” on charts of commodity prices and other markets as evidence that some emergence from the global financial crisis could be getting under way.

“We’ve got commodity prices rising while the Chinese appear to be confident because they are out buying resource assets all over the world in preparation for the next big cycle," Mr McKibbin said in a speech to the Lowy Institute.

For now I think it is best to just monitor the situation as I still think there is much better opportunity in oversold financial stocks and listed property trusts.