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Tuesday, September 29, 2015

My response to the stock market turmoil

 

Right now, global stock markets are a disaster zone and the local market is in crash mode. It’s an all-round shocker.

The (former) commodities giant Glencore saw its share price plunge around 30% in London trade last night. BHP and RIO went along for the ride, falling around 5% each. They say Glencore could be the resource sector's Lehman Brothers.

BHP dropped below $22, offering an amazing yield for a resources company of 7.7 per cent. With 100 per cent franking, it's more like an absolutely astounding 11 per cent. At that rate, compounding semi-annually, the dividend doubles your money in less than seven years and never mind what happens to the share price.

Question is: can it afford to maintain its progressive dividend profit in the face of falling commodity prices? BHP's CEO said, "Over my dead body sounds a little strong but it's almost right," in reference to the circumstances in which he would be willing to cut the dividend.

Anyway, it's too late to panic now. I just sit on my newly-acquired Husqvarna, drive up and down my acreage, and let the carnage play itself out.