The last fortnight or so was a volatile affair, but the Dow managed to achieve a 2..6% gain for the month of February (can you believe it is March?) by marking time on Friday in what was a largely uneventful session.

Over the weekend plans solidified for a Greek rescue package, led by Germany, while a swathe of M&A activity involving Merck (targeting Millipore) and Prudential (chasing AIG's Asian assets) gives this morning a slightly upbeat tempo.

Source: Bloomberg

Buffett Back in the Black

Writing put options on the Dow, with no possibility of being called unless and until the Dow finds itself beneath 10,000 in about 15 years time, has been very lucrative for Berkshire Hathaway.

The process has raised a few billion, but the collapse of sharemarkets across the globe last year required Berkshire to recognise the higher probability of those puts being called, even if their expiry date is well beyond the anticipated remaining lifetime of Berkshire's leader, Warren Buffett.

The recovery has thus enabled Berkshire to improve its valuations of potential liabilities on these derivatives, so it was little surprise that the Omaha, Nebraska-based conglomerate delivered a $3b quarterly profit.

Warren opined that a housing recovery was on the cards for 2011 - that date keeps being pushed back, doesn't it...

Focus on Jobs

There's no real way for the market to escape employment (or lack thereof) numbers, as after a fall of 20,000 in January nonfarm payrolls, it seems most are anticipating a decline of another 50,000 in February.

Inclement weather will not have helped, and the unemployment rate is likely to have lifted back from the surprise 9.7% point announced for January.

A jobless recovery? Forgive me, but I have my doubts.

Europe

A rebound in the euro was driven mostly by some short positions being unwound into the end of the month, with those exiting feeling pleased with themselves after banking some healthy gains from a successful trade.

Trade was again thin, so we'll go easy on the conclusions drawn from the modest increases seen in most bourses.

Australia Digesting Sketchy Reporting Season

Yes, there have been some decent moments of outperformance, but the domestic reporting season has brought almost as many underwhelming, or disappointing results from corporate Australia.

As we begin another month, the market remains unconvinced that we belong far away from current levels, in either direction, and will look to the next RBA rates announcement and commentary for some guidance.

Rates on Hold?

I'm not sure what's changed from last month which would justify the RBA diverting from its decision to keep monetary policy unchanged.

Although I’m lacking conviction, I do sense that the almost unfathomably buoyant property markets (especially in Melbourne) and decent unemployment improvements will be sufficient to push rates higher another 25 beeps.

Much more of a delay in returning rates to “normal” levels might bring forth some unilateral increases, especially from NAB which is being crunched by the market as it seeks to buy market share at the expense of its short-term performance.

ANZ More Bearish than Most

Mike Smith’s outlook for bad debts wasn’t quite as rosy (or less upbeat) as his peers last Friday, when ANZ revealed an interim set of figures that supported its recent outperformance. Smith doesn’t quite see the horizon as being all beers and skittles, and reiterated his desire to push further into Asia.

Presumably that means he will fend off any suggestions from analysts or internally that AMP might be attractive, though he’d be a fool to telegraph his intentions towards a sector he has long dismissed as bordering on irrelevant.

ANZ’s Asian strategy provides a point of distinction from others, but I remain of the view that its intentions there are vastly beyond its capabilities and shareholders should prefer others sticking to their knitting for the coming year or 3.

Today

With there suddenly appearing to be a genuine contest on the cards in this year’s Federal election, some might be re-evaluating current holdings with respect to a potential change in Canberra.

That remains most unlikely, but at best I’d suggest 15 points ahead of where we finished Friday would be enough as we look to the US to work out which way it’s heading next.

Cheers,

Simon Wallace
Group Relationship Executive