Preselection battle grows for Hughes as media war, split threatened

Craig Kelly may run as an independent if he loses. Sources are hopeful that Alan Jones will begin commenting on the preselection challenge next week. Photo: Jessica Hromas

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The threatened fallout from a potential preselection challenge in Sydney’s south-west is growing, with the first indications that sitting Liberal MP Craig Kelly may start a media war and run as an independent if he loses.

Fairfax Media revealed earlier this month that Mr Kelly would face a challenge from the party’s Left for the seat of Hughes.

Mr Kelly has publicly stated he will contest any challenge.

But a source close to the MP has foreshadowed a potentially radical response if he lost a preselection ballot.

“Craig’s an ex-front row forward; he may appear like a jovial bloke but he’s literally kicked heads in the past,” the source said. “The question [for challengers] is what will he do if [ousted].

“He’ll be out for revenge and there’s a lot of support for him in the electorate.”

Kent Johns, a powerbroker from the party’s left wing, is considered the most likely challenger and also recused himself from a recent state executive vote laying down preselection timetables, seemingly confirming his intentions.

The party is also alive with rumours that Mr Kelly and other conservatives are preparing to make an appeal to conservative heavyweights in the media to drum up support.

Sources on the right say are hopeful that talkback radio king Alan Jones will begin commenting on the preselection challenge next week.

Mr Kelly, who has been outspoken in his scepticism on issues such as climate change, has made at least eight appearances on Mr Jones’ top-rating program in the past two years.

Only adding to the sense of chaos is a looming court date for Mr Johns, who will be asked to testify as a witness in a court case next month while preselections are occurring.

The case relates to the long and tortured battle for control of the party’s Moorebank branch, which recently spilled over into an alleged threat of violence. (The branch could yet play a key role in determining the outcome of a preselection.)

A member of the branch was heard to say: “I’ll kill you” in a remark believed to be directed towards Mr Johns’ political ally Melanie Gibbons MP. Ms Gibbons has applied for an AVO, which the branch member is contesting.

ABC election analyst Antony Green said MPs who split from their parties tend to do “very poorly” in urban areas.

“You’re going back 20 years to Perth to find the last [successful examples of a disendorsed Liberal MP challenging],” he said. “Most federal MPs simply don’t have that big a profile.”

In 2004, sitting MP Peter King ran as an independent against Malcolm Turnbull after being deposed in a pre-selection challenge for the seat of Wentworth.

Mr King polled about 18 per cent of the vote and drove a slight swing against Mr Turnbull.

Other seats understood to be in the sights of challengers from the party’s left and centre-right wings include Berowra (Philip Ruddock), Hume (Angus Taylor), Bennelong (John Alexander) and Senate spots occupied currently by Bill Heffernan and Concetta Fierravanti-Wells.

The number of challenges eventually mounted hangs to a large degree on whether Prime Minister Turnbull exercises his authority to back sitting MPs.

The Prime Minister is currently overseas, but his representative on the NSW state executive, Paul Fletcher this week said MPs were not entitled to jobs for life and that preselections were a time-honoured part of the party’s democratic processes

“That’s how the system works, it’s how the system should work,” he said. “It’s the democratic process that every parliamentarian in the Liberal Party is exposed to.”

Mr Turnbull is understood to have not yet intervened  to lend Mr Kelly support or discourage challengers in the seat of Hughes.

Nominations have one month to run.

Market turmoil not enough to spur RBA rate cut, top economists say

Markets are pricing in another rate cut but economists think the RBA will hold off for most of the year. Photo: Nicholas RiderA rate cut is unlikely when the Reserve Bank of Australia meets next month and rates will possibly remain on hold for the rest of this year despite the global market turmoil, according to top market economists, who point instead to encouraging signs in the local economy

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A survey of the nation’s most prominent market economists by The Australian Financial Review found 13 out of 14 expect rates to remain on hold at the first board meeting of the year, despite the market turmoil which has wiped nearly $120 billion from the Australian sharemarket, battering consumer confidence.

Just AMP’s Shane Oliver believes the rout, spurred by concerns about global growth, particularly from China, and weakening commodity prices would prompt the central bank to cut in February to a new record low 1.75 per cent.

“But I doubt that it is convinced to move just yet,” he said.

“A much lower than anticipated December quarter inflation release next week could tip the balance though in favour of a February cut as it would make two quarters in a row of lower than expected inflation.”

Inflation will be watched closely next week and is tipped to have expanded 0.5 per cent in the fourth quarter of 2015, a total of 1.5 per cent for the year, according to a Bloomberg survey.

On Tuesday inflation figures in New Zealand revealed growth had fallen to 0.1 per cent, pushing it towards annual deflation for the first time since 1999, and adding pressure on its central bank to lower rates.

At home, economists including HSBC chief economist Paul Bloxham, have retreated on their expectations of a February cut. The bank pushed back an expected cut on the back of recent positive economic data.

“We shifted our view for a cut from Q1 to Q2 on the back of recent strength in the labour market,” he said.

Last week Australian Bureau of Statistics data showed the unemployment rate had steadied in December at 5.8 per cent, posting better-than-expected numbers following a quarter which boasted more than 126,000 new jobs.

A cut in the second quarter may not be necessary should a tangible fall in the Australian dollar precede it, Mr Bloxham said. The dollar has fallen 5 per cent this year alone to near 2009 levels, and 30 per cent in 18 months buying US69¢.

“The RBA would be reasonably happy with the decline of the Australian dollar of late as it has caught up with the decline in commodity prices,” BetaShares chief economist David Bassanese said.

Brent oil is trading at 12-year lows, buying under $US28 a barrel.

Overnight, the Bank of Canada opted to leave interest rates on hold, despite the impact of the oil price on the major exporter. Last year, a surprise January rate cut by the BoC – also in the wake of a tumbling oil price – triggered speculation the RBA may follow suit. Only one bank tips a cut in 2016

Of the big four banks, just one – ANZ Banking Group – is bracing for a cut this year.

“Some clouds are gathering over the economic outlook which we believe will result in lower rates in Australia over the second half of the year,” ANZ chief economist Warren Hogan said, anticipating cuts in May and August.

“Recent international financial market instability could be a harbinger of a more difficult world economy.”

The feeling is that if a rate cut is coming, it will be by June. Markets are pricing in an 88 per cent chance of a cut by mid-year.

RBC Capital Markets chief economist Su-Lin Ong suggested a more likely scenario was a rate cut in March, adding that while the Australian dollar had slid to seven-year lows at US68¢, the currency needed to fall further to support the economy.

“A lower currency is helping the economic transition [post-mining boom] but the reality is that Australia needs both lower rates and further currency depreciation,” she said.

Ms Ong expects the cash rate to sit at 1.5 per cent by year’s end.

But former Merrill Lynch chief economist Saul Eslake said a rate cut would only serve to prompt individuals and businesses to borrow more.

“It’s not at all clear that encouraging households to add to what is already a high level of household debt, merely in order to push up property prices even further, would do much good,” he said. “[It] could do some harm.”

Economists suggest the market turmoil, most intense in equity markets, has little correlation to the economy and therefore the RBA’s decision making.

But concerns around a hard landing in China have raised questions about the flow on effect from one of Australia’s key trading partners.

“We watch China like a hawk. Do we think it will fall over? No,” Alan Oster, National Australia Bank’s chief economist said.

Most economists expect Australia’s GDP to track around 2.5 per cent.

Nestle loses court battle to trademark KitKat shape

Have a break, have a KitKat… the chocolate bar’s four-fingered shape is as well known as its slogan. But not distinctive enough to warrant its own trademark, a court ruled. Photo: Jason AdlenNestle has lost a long-running court battle to trademark the four-finger shape of its KitKat chocolate bar in Britain.

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The Swiss food giant first tried to register the trademark in 2010, but the application was opposed by rival chocolate maker Cadbury, the biggest UK chocolate maker.

The case was previously dismissed by other courts including the European Court of Justice. Britain’s High Court on Wednesday upheld those decisions, ruling that the shape of a KitKat bar has not “acquired a distinctive character” enough to satisfy trademark requirements.

Nestle said it was disappointed by the ruling and planned to appeal the decision.

It argued that the shape of the four-finger snack has been used in Britain for more than 80 years and is well-known to consumers.

“We believe that the shape deserves to be protected as a trademark in the UK and are disappointed that the court did not agree on this occasion,” the company said.

It’s not the first time Cadbury and Nestle have tussled over confectionery in a British court. In 2013, Nestle won a court battle over Cadbury’s attempt to register the purple shade of its chocolate wrappers as a trademark.

The four-fingered KitKat bar has brought in 40 million pounds ($82.2 million) a year between 2008 and 2010 in the UK alone. It’s the world’s third-biggest chocolate brand.

The KitKat was first sold in Britain in 1935 by Rowntree & Co., with the shape changing very little since then. Nestle, the world’s biggest food company, bought Rowntree in 1998.

The UK Trade Marks Registry turned down the application to protect the shape of the chocolate bar in 2013 following the opposition from Cadbury.

aap/Bloomberg

The railway that made Canada

TALK of light rail is very topical today, but what about building triumphs in the 19th century heavy railways era?

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RAILWAY MAN: William Van Horne was Canadian Pacific’s man of ideas to make his railway profitable. He helped shape modern Canada.

PLUMB LOCO: The ingenious Spiral Tunnels were opened near Lake Louise, Canada, in 1909 to reduce a steep mountain rail incline and prevent train crashes.

Who, for example, remembers the navvies toiling away more than 160 years ago at Hexham, building a railway in a swamp to link Newcastle with Maitland?

But instead, let’s turn our attention to a major railway project in the age of British Empire, in another Commonwealth country on the other side of the globe.

With more Australians each year visiting Canada as tourists, especially to the stunning Rocky Mountains, let’s look at Canada’s then largest construction project, later involving people on maintenance duties being buried alive by snow.

Canada’s transcontinental railway scheme would finally link sea to sea, from the Atlantic to the Pacific oceans. This ribbon of steel almost 3000 miles long united the country physically at a time when the Canadian Government itself was only 18 years old.

Crossing vast prairies, bridging a thousand streams, snaking through canyons and conquering jagged, snow-capped mountain passes, well, it was a tall order.

When the Canadian Pacific Railway (CPR) Company began its main scheme from the eastern end in 1882, many thought it impossible. But it was achieved, against the odds, at huge cost and in only a few years –record time – turning a vast wilderness of isolated communities into the nation today. Make no mistake, this railway created modern Canada, even though freight, not passengers, is its lifeblood these days.

Of interest to me, having ridden on part of the same route late last year, was the recent British documentary, Extreme Railway Journeys on SBS TV, which paid tribute to this extraordinary rail-building feat.

Take the initial problems Canadian Pacific Rail faced in the wild west, out of Vancouver, British Columbia (B.C.) from May 1880. Up to 17,000 cheap Chinese workers were imported for the task. Here, theyhad to carve a railway line on a ledge in the steep gorges above the whitewater rapids of the raging Fraser River at the infamous Hell’s Gate.

Hanging on rope ladders lowered down into deep ravines, workers were expected to chisel a hole in which to place a stick of dynamite, light the fuse then scurry back up to safety – all for the sum of $1 a day.It’s now claimed hundreds of workers died, one for every mile of track built.

Meanwhile, the enterprising William Cornelius Van Horne, the CPR’s new general manager, started moving things along from the eastern end in 1882. He soon had 5000 workers with 1700 teams of horses laying 52,300 tonnes of steel rail that same year.

Despite loud public protests about CP Rail’s likely monopoly over freight and passengers and the company running out of money towards the end, the last spike of the momentous project was finally driven into the tracks at Craigellachie, near Revelstoke, B.C. on November 7, 1885.

The completed scheme probably cost more than a billion dollars today and was finished in 54 months, or almost six years ahead of its original schedule.But how could future revenues be generated to repay the huge debt and make profits? The wily Van Horne had a plan. Years earlier, hot springs had been discovered at what is now the popular ski resort of Banff.

“If we can’t export the scenery, we’ll have to import the tourists,” Van Horne said.

The original Banff Springs Hotel opened in 1888 as the main attraction in a future chain of luxury railway hotels from coast-to-coast along the CPR line. The present, huge Chateau-style hotel with its opulent interior has twice been re-built.

Back in 1885, with encouragement from the CPR, the Canadian government reserved 10 square miles of wilderness around the hot springs. While stimulating a tourism economy, the move also marked the beginning of Canada’s national park system.The surrounding Banff National Park is now part of a United Nations World Heritage site.

North east of Banff at Kicking Horse Pass today is probably the most vital section of the CPR line, a reminder again of how difficult rail construction was.

For here are the famous ‘Spiral Tunnels’ built between 1907 and 1909 through the Rocky Mountains. Before that, steam locomotives would grunt going up the notorious Big Hill here.No surveyor initially wanted to use Kicking Horse Pass as a major transport line, especially in winter, but it was 122-kilometres shorter than an alternative, gentler route way north at Yellowhead Pass, near Jasper township.

The steep Big Hill line was used for 24 years from 1885, being blasted out of solid rock by 1000 workers hired at $2.25 per 10-hour day while braving spring snow avalanches. Balancing on trestle timbers over a raging river, blasting cliffs with unpredictable nitroglycerine and dodging rocks rolled loose by workers above, deaths averaged one a week.

When the rail cutting was made, steam engines chugged up a treacherously steep track, but coming down was a nightmare. Wrecks of runaway trains soon littered the ‘temporary’ Big Hill route.

Finally in 1907, thundering explosions again echoed in the Kicking Horse Valley. Some 1000 men using 75 rail carloads of dynamite built two, so-called Spiral Tunnels. A new figure eight track spiraled into the mountains requiring narrow gauge steam engines to haul away more than 600,000 cubic metres of rock debris.

Based on a Swiss idea, the loop lines ingeniously reduced the steepness of the Big Hill by half, so that the front of a 3-kilometrefreight train can be seen today while its end disappears into a tunnel beneath itself (pictured).The Big Hill rail route was soon abandoned. Part of it has become part of the Trans-Canada Highway.

And all this is without the story of the tragedy of heavy snowslides further along the CPR line at Rogers Pass in early 1910.That’s when an avalanche suddenly smothered 182 metres of just-excavated track to a depth of nine metres. A locomotivewas buried and 58 workers died. Some 600 men using shovels dug frantically to help. Rescuers found many of the dead still standing up.The force of the avalanche even ripped off the train’s 62-tonne snow plough, hurling it 18 metres away up a slope.

For when we think of rail building in Canada, and elsewhere, we never seem to recall thegreat human cost of doing it, do we?

[email protected]杭州夜网

The Motley Fool: Up 700% in 5 years – where to next?

Integrated Research’s client list reads like a ‘who’s who’ of international commerce: a quarter of Fortune 500 companies, 4 of the world’s 10 largest companies and 6 of the 10 biggest stock exchanges. Photo: iStockAustralian tech-wreck survivor, Integrated Research (ASX: IRI), has taken on the world in IP telephony services and returned investors more than 700% over the last five years.

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The company’s enterprise software has infiltrated over 1,000 businesses globally, and its resume of customers reads like a ‘who’s who’ of international commerce: a quarter of Fortune 500 companies, 4 of the world’s 10 largest companies, 9 of the top 10 US banks, 7 of the 10 biggest telcos, 4 out of 10 biggest oil and gas companies, and 6 of the 10 biggest stock exchanges.

With a market cap sitting a touch under $350 million, Integrated Research lives outside the ASX300, and under the radar of many investors. But what, exactly, does this little-known Aussie do?

Integrated Research is the leading global provider of performance monitoring and diagnostics software for business-critical computing and VoIP (voice over internet protocol) networks. Its flagship product PROGNOSIS is an integrated suite of applications that monitors and manages distributed IT infrastructure, payments systems, unified communications, and Web applications. Put more simplistically, a health monitor for business technology systems.

Communication and payments are two cornerstones of everyday life that keep rapidly evolving. Integrated Research remains brilliantly positioned to profit handsomely from both the migration to Internet Protocol Telephony networks — IPT or VoIP as it is commonly called — and the massive long-term growth in real-time payment processing.

Integrated has had a seat at the IP telephony table since the technology’s infancy in 2000. It began by monitoring Cisco’s IP systems but now supports other key VoIP providers such as Avaya, Nortel and Microsoft’s Lync and Skype.

Sales are supported by a large installed base of major customers, a strong partnership network, and a three-fold revenue model: customers pay upfront license fees to use the software (just over half of revenue), plus they pay annual maintenance fees, (typically around 20% of the license fee), for the lifetime of the customer relationship (one-third of revenue), and consulting services make up the balance. Boring, boring software

Enterprise software slips into the ‘too boring’ basket for many investors, but Integrated’s thick 40% gross margins and 20% net profit margins are attention-grabbing. And the appeal doesn’t stop there.

Maintenance retention rates into the mid-90% range means the average life of those customers is nudging 20-plus years, so it’s easy to know where the next meal is coming from. During difficult economic times, this recurring revenue provides a safety cushion: businesses may delay a new purchase, but they’re less likely to cut maintenance expenditures.

There’s more that’ll really get your CPU racing.

The 39% return on equity is high enough to give you a nose bleed, and zero-debt balance sheet strong enough to keep you there. In fact, the company was sitting on over $15 million cash when it last reported.

And with a global A-list of customers, it should come as little surprise that 95% of revenue is earned offshore, providing easy international diversification for Australian-dominated portfolios.

The company has been on a growth tear in recent years. Last year revenue increased 32%, while profit soared 68% — thanks in part to a falling Australian dollar — but driven by the underlying strength of the business. But there may be some trouble afoot. A recent stumble

The company’s recent half year guidance pointed to a slowing of growth, with revenue set to gain a modest 17% and net profit to disappointingly slide by a similar proportion.

Full details won’t be revealed until the company reports, but determining whether the first half of 2016 is a permanent change, or just a bump in the road, could be very rewarding.

It’s unlikely the growth will stop here. The company is sensibly reinvesting around a fifth of revenue into research and development — the pipeline for future growth. Add to that the July 2015 acquisition of US-based IQ Services, which provides a platform for next generation testing capabilities and extends the existing product line.

Shares have nosedived 25% since reaching a high of $2.80 at the three-quarter mark last year, to less than $2.00 in early 2016. Things could get particularly choppy when the company reveals the full details on 18 February. Foolish takeaway

Combining a strong reputation and loyal customers, several of whom are among the world’s largest, with forward-thinking new solutions, is a proven model for increasing profits and margins.

Integrated Research stands to continue profiting from the VoIP tidal wave and surging real time transactions. Its high customer retention delivers solid recurring revenue, with strong and improving margins.

The company’s 3.6% partly-franked dividend yield is well supported by a rock solid balance sheet, though the mid-20s price to earnings multiple may look high to some market participants in light of recent disappointing growth guidance.

If things get rough, that may provide added opportunity for level-headed long-term investors.

New report: Forget BHP and Woolworths. These 3 “new breed” top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

Donny Buchanan is a Motley Fool investment analyst. You can follow The Motley Fool on Twitter @TheMotleyFoolAu. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson

Rumour has it, but News Corp is not investing in Twitter

News Corp’s Rupert Murdoch (left) and chief executive Robert Thomson (right) at a press conference in August. Photo: Simon O’Dwyer Twitter shares spiked last night.

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Here’s another great example of just how skittish markets are these days.

Media giant News Corp was overnight forced to deny vague market rumours that it was going to buy, or had already bought, a stake in Twitter.

The rumour, which was – among other news outlets – reported by News Corp’s very own Marketwatch site, lifted shares in Twitter, the beleaguered social network, by as much as 14 per cent.

The stock retreated following the denial, but still finished the regular trading session on the New York Stock Exchange about 4 per cent higher.

That News Corp would at least consider buying a stake in Twitter – whose shares are trading near their lowest levels since listing in 2013 – is not entirely implausible. After all, the company dropped $US580 million on MySpace – a kind of forerunner to Facebook, back in 2005 (although it sold the business for just $US35 million in 2011, and later described the investment as a “huge mistake”).

Also, don’t forget News Corp’s billionaire boss, Rupert Murdoch is clearly a fan of the service. He’s a prodigious tweeter, having posted his most recent tweet just five hours before publication of this story.   Obama says Australia second biggest anti-iSIS fighter. So where the heck are NATO partners?— Rupert Murdoch (@rupertmurdoch) January 20, 2016

Yet alas, any Twitter investment is clearly not happening. ” The rumour is untrue,” a New York-based representative for News Corp told Fairfax categorically.

These types of shady rumours tend to emerge when companies are struggling, and for Twitter that is certainly true. Its stock has tumbled more than 50 per cent over the past year – amid investor concerns over its the lack of growth in its user base. Twitter has 320 million monthly active users, compared to 1.5 billion for the social media behemoth Facebook.

To add to its woes, Twitter suffered a widespread outages on Tuesday, rendering millions of users across the globe unable to access the service.

December temperature spike capped record hot year in 2015, US agencies say

Record heat was reported from the oceans to the land in 2015. Photo: Leigh Henneingham2C or not 2C? It’s a regional questionRecord hot end of 2015 for Australia

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A remarkably warm December helped drive global surface temperatures in 2015 to the hottest year in records going back to 1880, the US National Atmospheric and Oceanic Administration said.

Temperature records were broken for 10 of the 12 months of last year but it was December’s spike that marked the sharpest leap for any month, surging 1.11 degrees above the 20th-century average.

It was the first time a monthly temperature anomaly had exceeded 1 degree, NOAA said.

Land temperatures last month were 1.89 degrees above average, smashing the previous record departure from the norm, set in December 2006, by almost half a degree (0.48 degrees).

Sea temperatures were 0.83 degrees warmer than the 20th-century average, beating the previous record anomaly for December 2009 by 0.36 degrees.

The December surge came during a month when leaders from almost 200 nations gathered in Paris to set a new agreement to keep temperature increases to less than 2 degrees and reduce the risk of dangerous climate change.

The NOAA report on Thursday coincided with a paper in Nature by Swiss and Australian researchers that outlined how a 2-degree target would still see some parts of the world – notably the Arctic – rise by as much as 6 degrees because of regional differences.

‘Emphatically broken’

As a whole, 2015 was a standout year, with surface temperatures 0.9 degrees above the 20th-century average.

The tally was 0.16 degrees above the previous record year – set only in 2014 – making it the largest margin by which an annual temperature record had been broken, NOAA said.

David Jones, head of climate monitoring at the Bureau of Meteorology, said previous stand-out years, such as 1998, had also come at a time of a big El Nino event in the Pacific.

“Now we’ve emphatically broken [all the previous records],” Dr Jones said. “Decade after decade, the planet is accumulating more heat because of greenhouse gas emissions.”

Temperatures are rising about 0.17 degrees per decade since 1970, NOAA said.

During El Nino years, the Pacific Ocean’s normally westward-blowing winds stall or reverse, leading to a warming of the central and eastern Pacific. Global temperatures get a kick of about 0.1-0.2 degree during such events.

The current El Nino – among the three strongest on record – probably peaked at the end of last year. The temperature impacts on the globe, though, typically lag about six months so it is likely that the start of 2016 will also be exceptionally warm, Dr Jones said.

The gap between last year and all previous record hot years was wide and widening by the end of 2015, as the following NOAA chart shows:

All of the 16 warmest years on record have happened since 1998, NOAA said.

Regional heat

The unusual warmth was widespread, with the Indian Ocean among those regions posting record heat.

Asia and South America had their hottest year on record, while Africa and Europe posted their second hottest years.

The US and Australia had their fifth hottest years on record, NOAA said.

Australia was about 0.8 degrees above average in 2015, or not far short of the global anomaly.

Land temperatures worldwide, though, were 1.33 degrees above average, beating the previous record departure from the norm by a quarter of a degree.

Australia’s famously variable climate can cause annual temperatures to gyrate about 1 degree compared with the long-term average, while global shifts are in the order of 0.2-0.3 degrees, Dr Jones said.

While temperature changes were worth highlighting, people may also experience climate change through altered rainfall patterns and rising extremes, such as fire weather, he said.

Australia’s fire season is already a particularly active one, with widespread fires in Victoria, South Australia, Western Australia and Tasmania – with at least another month of high fire risk to come.



‘Don’t panic’: Experts reveal their investment tips for volatile times

Around $120 billion has been wiped off local shares in 2016. Photo: Jessica Hromas “It’s about buying good, quality companies that have strong businesses through cycles,” Ross Barker, managing director of AFIC, said. Photo: Adrianne Harrowfield

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Blue-chip stocks such as BHP and Rio have been two of the biggest market casualites, shedding 40 per cent and 24 per cent respectively since last year. Photo: Michele Mossop

China fears! Billions of dollars lost! Unprecedented volatility!

With investment markets in full blown panic mode, two listed investment company stalwarts are advising investors to keep cool heads as they wade through some of the most volatile times on record.

Tom Millner, chief executive of the $900 million BKI Investment Company, urges investors not to see red despite nearly $120 billion wiped off the Australian share market since the start of this year.

Ross Barker, managing director of the $6.2 billion Australian Foundation Investment Company (AFIC), believes now is a great time for investors to cherry pick where to put their funds.

These are their investment tips for navigating through the volatility in 2016: 1. Don’t jump

As the markets yo-yo with gains and losses throughout the trading day, Mr Barker has this to say to investors: “Don’t panic.”

Herd or mob mentality often permeates the market when investors dump stock in a state of panic, resulting in the overselling of companies.

Australian shares tumbled to a 2 1/2-year low on Wednesday as investors worry about China’s growth prospects and slowing global commodity markets.

“People get caught up in the mentality of the moment and they can often sell good things when they shouldn’t be selling,” Mr Barker said.

“There’s concerns about China but we’re still confident about the growth prospects of the economy.” 2. Take your time

“Be patient.”

That is Mr Millner’s response to the panicked selling since the start of this year that has spared few companies on the ASX.

Casualties such as BHP Billiton and Rio Tinto, two of the largest resources stock on the sharemarket, have shed 40 per cent and 24 per cent respectively since last year.

But Mr Millner remains confident major Australian resources companies exposed to commodities such as oil, coal and copper in particular will bounce back as the imbalance between supply and demand is adjusted and the Australian dollar continues its descent.

He believes large resources companies may rebound over the next 12 to 18 months.

“It’s just short term noise – so be patient,” he said.  3. Buy quality

If a company is temptingly cheap but there’s little basis for future growth, don’t buy it.

“Stick with quality is my advice,” Mr Barker said about picking stocks amid the market downturn.

Healthcare and diversified financial stocks are AFIC’s picks thanks to an ageing population, while companies that source their revenue from overseas markets are also attractive.

The LIC has bought stakes in companies such as annuities giant Challenger and Macquarie Group.

“It’s about buying good, quality companies that have strong businesses through cycles,” he said.  4. Stay for the long haul

“We tend to try and hold a stock for at least 10 years,” Mr Millner said.

While the thought of clinging to a company for a decade might not be every retail investor’s cup of tea, holding a stock for a few years rather than dumping them at the first sign of trouble could yield strong growth potential.

Investors who bide their time and reap the dividends from blue chip companies or businesses with strong fundamentals will benefit through the volatility.

“We’re in this for this for the long haul, and we do like the thematics of healthcare in particular with an ageing population.”

BKI has been buying stock in Ramsay Healthcare and Sonic Healthcare as part of their long term investment strategy.

The company returned 10.9 per cent for the year to December, beating the S&P/ASX300 Index’s 2.8 per cent over the same period.

need2know: Positive start in store after crazy night on Wall Street

The Dow’s 500-point swoon would mark the third time since mid-August the 30-stock gauge has tumbled that much on a closing basis. Photo: Richard DrewLocal shares are poised for a positive start after a roller-coaster night on Wall Street.

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What you need2know

SPI futures up 38pts or 0.6pc to 4840

AUD at US69.00¢, 80.85 Japanese yen, 63.52 Euro cents and 48.80 British pence.

On Wall St, in late trade, S&P 500 -0.5%, Dow -1%, Nasdaq +0.5%

In Europe, Stoxx 50 -3.3%, FTSE -3.5%, CAC -3.5%, DAX -2.8%

In London, BHP -7.4%, Rio -4.8%

Spot gold +1.4% to $US1103.11 at 2.53pm New York time

Brent crude -3% to $US27.90 at 2.28pm New York time

US oil -6.5% to $US26.61 at 2.28pm New York time

Iron ore last traded down 2.73% at $US41.61 a tonne.

What’s on today

Australia consumer inflation expectations January, HIA new home sales November. Euro inflation for December, Euro consumer confidence January. France manufacturing confidence January. US Philadelphia Fed manufacturing January. Earnings: Verizon, Amex, Starbucks, United Continental, Schlumberger.

Stocks in focus

Investec recommends investors sell shares of Glencore, Anglo, Antofagasta and Ferrexpo. The analysts have buy ratings on Rio Tinto and Centamin. “Market conditions represent the perfect storm for commodities given that demand is falling, supply is rising, inventory levels remain stubbornly high and the US dollar stubbornly strong,” Investec wrote.

A measure of volatility over 10 days on BHP’s London stock jumped to the highest since September 10 on Wednesday. The stock tumbled 7.4 per cent in London trading to its lowest in 11 years, extending its decline this year to 24 per cent amid mounting speculation it will cut its dividend next month. BHP’s drop this year has outpaced declines by Glencore and Rio Tinto Group in London.

Currencies

The yen strengthened 0.9 per cent to 116.58 per dollar, and touched 115.98, the strongest level since Jan. 16, 2015. Japan’s currency appreciated 0.9 percent to 127.19 per euro. The euro was little changed at $1.0897.

Russia’s currency weakened as much as 3.1 per cent to a record 81.0490 against the US dollar. The Mexican peso fell to a record 18.4775 per US dollar and is down 6.4 per cent this year, making it Latin America’s worst performing major currency.

Saudi Arabian banks are under orders to stop selling currency products that allow investors to make cheap bets on a devaluation of the riyal, according to five people with knowledge of the matter.

Commodities

The Bloomberg World Mining Index dropped as much as 3.3 per cent to its lowest since September 2003, with the world’s biggest miner, BHP Billiton, losing 7.4 per cent in London.

Citigroup cut copper and other base-metals forecasts. Benchmark three-month copper on the London Metal Exchange closed down 1.1 per cent at $US4360 a tonne, having hit its highest since January 8 on Tuesday. However, prices remain near their weakest since May 2009 at $US4318, marked on Friday. Nickel fell, so did zinc, lead and aluminium.

The world’s biggest miners have little to offer to shareholders, Investec said. They are selling assets and ending dividend payments to generate cash, analysts wrote in a report on Wednesday. Earnings are now a “scarce commodity” for the industry, they wrote.

United States

US stocks fell, with the Standard & Poor’s 500 Index reaching at 21-month low, following a renewed selloff across stocks worldwide as scepticism about the strength of the global economy intensified.

Equities staged a late-day rally paced by health-care and small-cap shares that briefly erased a drop of 3.7 per cent in the Nasdaq Composite Index. The Dow Jones Industrial Average and S&P 500 cut their worst losses by more than half. Energy companies sank further into five-year lows, on pace for their worst monthly slump since 2008 as oil plunged. Chevron slid 3.1 per cent. International Business Machines fell 4.9 per cent after its earnings forecast missed projections.

The Standard & Poor’s 500 Index fell 1.2 per cent to 1859.43 at 4pm in New York, closing at its lowest level since April 2014. The gauge trimmed a slide of more than 3.6 per cent.

“We were oversold and we didn’t keep falling off the table,” said Walter “Bucky” Hellwig, who helps manage $US17 billion as a senior vice president at BB&T Wealth Management in Birmingham, Alabama.. “The last-hour strength is positive and I think it’s due to the fact that investors are saying, ‘This thing is oversold, I’m going to put some money to work,’ and it’s worked out better than buying it on the up days and then watching it disappear.”

Europe

European stocks slid to a 15-month low as falling oil prices and results from companies including Zurich Insurance Group and Royal Dutch Shell exacerbated investor concern about global growth. The Stoxx 600 erased Tuesday’s rebound, tumbling 3.2 per cent to 322.29 at the close of trading. The VStoxx Index measuring volatility expectations for euro-area shares jumped 14 per cent.

“I’m sitting on my cash, not buying right now, because we think it can get worse..” said Michael Woischneck, an equities fund manager who oversees the equivalent of $US156 million at Lampe Asset Management in Dusseldorf, Germany. “We see a worst case of another 10 per cent down.”

Deutsche Bank, Germany’s largest bank, said it expects to post a loss for the fourth quarter after taking additional litigation charges of about €1.2 billion. Full-year revenue will be about €33.5 billion, with the net loss estimated at €6.7 billion for the year, Deutsche Bank said in a statement late Wednesday. The results include previously disclosed impairments taken in the third quarter, full-year litigation provisions of about €5.2 billion and restructuring and severance charges of €1 billion, the lender said.

Barclays chief Jes Staley has started a fresh round of cuts at the investment bank, affecting staff in New York, London and most deeply in Asia, according to a person with knowledge of the matter.

What happened yesterday

Australian shares closed at fresh 2½-year lows on Wednesday after worries about Chinese growth and global commodity markets continued to weigh on investor sentiment, while investors dumped ANZ and BHP.  The S&P/ASX 200 index fell 62 points, or  1.2 per cent, to 4841.5, while the All Ordinaries 58 dropped points to 4896.9.

Short story: I Just Need Margaret

Worth 1000 words: Summer Herald will each day publish a short story competition entry. The winner will be announced on January 30. Picture Simone De Peak

杭州桑拿

SHE had been the belle of the ball – Margaret Gorton.

Her flowing blonde locks had been coveted across town. Even when winter arrived, she carried the ethereal glow of an eternal summer.

Margaret was a regular at the Friday night dance. Her floral dresses and lipstick shades were the town’s Monday morning gossip. I had done my best to impress her but I wasn’t much of a dancer myself. Hell, she could have had any man in town. Perhaps that is what she had found so attractive. I was a man who knew his place in the world.

It had seemed so unlikely. A Paterson of all people! My family weren’t exactly known for their status. I was from the wrong end of town. The offspring of a dodgy mechanic and an easy hairdresser. I could feel the town scoffing at Margaret and I’s budding audacity. Our rainy sidewalk strolls had attracted the attention of every man and his dog.

“A Paterson and a Gorton?” they scorned from behind their shop window.“Who does he think he is?”

With a cough, I startled myself from my daydream. The fabric of the recliner had dewed sweat upon my shoulders and brow. How long had I been sitting in this damned thing? Marg would be angry. That was something I tried to avoid at all costs. It wasn’t worth having to witness the pulsing vein in her forehead.

I glanced at her seat next to the fireplace and was startled to find her absent. Tuesday was crossword day, her favourite day of the week, and something she never missed. Standing slowly, I lumbered down the hallway and poked my head into our crammed bedroom.

The bed was cold.

“Marg, love?” I called, turning back towards the kitchen. Maybe she had had the good sense to put the kettle on.

I came to a halt in the hallway as I examined the photo frame on the wall. That was peculiar. I definitely hadn’t taken these pictures and I didn’t recognise the people either. An old person was peering back at me. Heck, a really old fella and he was standing with an adult. They were smiling sedately. A woman, dressed rather strangely, arm in arm with the ancient man.

“Marg, who the hell are these folk?” I shouted, pulling the frame from the wall and marching towards the kitchen. “I’ve never seen these people in my life! Why do we have ‘em hanging from our walls?”

There was no answer. The kitchen was empty and the kettle certainly wasn’t boiling. This made no sense. Was this my house? It had to be. The linoleum floors were where I had laid them. The kitchen hadn’t moved. The garage? I quickly hobbled down the few stairs to the shed and shoved the door from my view. My Torana! Where the hell had it gone? I hadn’t driven it anywhere lately and Marg didn’t have her licence. It was the blasted neighbourhood hooligans! They had nicked it. I needed to phone the police but for the life of me I couldn’t find the damned telephone.

Fine!I’d go to the station myself. Johnson would be on duty. He would be able to make time for a midday cigarette. Now in a hurry, I stepped onto the street and began the short journey.

“How can I help you?” asked a young policeman as I trudged through the doors of the Watt Street station.

“I’m here to see Johnson,” I ordered, tapping my foot impatiently.

“Mister Paterson?” the policeman asked.

“How do you know my name?” I barked, squinting my eyes at the young blighter. “I want to see Johnson! He’s always on duty on a Tuesday.”

“Sir, no Mister Johnson works here.”

“Suit yourself,” I muttered, throwing the boy a glare. I would report the theft another day when Johnson was around. Instead, I would visit Marg at work. That’s where she was. She must have had an early shift.

A grin crossed my face as the train station came into view as I marched down Watt Street. Margaret had always been good at her job. She sold train tickets to the commuters and passengers that visited the harbour.

“I’m the first thing they see when entering the city,” she’d laughed once, running her hand through her tresses. “I feel sorry for them.”

“Love, anyone who has the privilege of laying eyes on you is having a lucky day,” I had cooed, pressing a soft kiss to her neck.

The station was silent as I approached. It was far cry from the usual bustling chaos. There were no trains waiting at the platforms. In fact, there where thick bars blocking my entry. Dark maroon iron bars reminiscent of a prison. What was happening? I threw my fists against the metal. I needed to see Marg. I needed to hear her voice. I needed to …

“Dad?” came a wary voice from behind me.

“You’ve got the wrong person. I ain’t no Dad,” I answered, without looking away from Marg’s office behind the bars.

“Dad? Are you OK? The police rang. Said you were asking for Johnson again?”

I turned to look at the mistaken woman. My mouth dropped open as I recognised her as the one from the photograph. The one with the old man. Her blonde hair was the mirror image of Marg’s …

“Where’s Marg?” I demanded.

“Mum died a few years ago, Dad.”

“I don’t know who you’re talking about,” I shouted, a sudden wave of fury sweeping over me.

“Dad, Margaret died in 2012. We’ve been over this.”

I shook my head. The stranger was wrong. This was 1968. Marg was fine. She would finish work in a few hours. I’d be smiling as she swayed into our home to make dinner. Maybe it would be my favourite – a chicken roast.

“Dad?”

“Everything will be all right,” I whispered, turning back towards the abandoned station.

“I just need Margaret.”