Dark months ahead?

John Durie

DAVID Jones boss Mark McInnes has set the low bar for the tales of gloom.

He forecasts the worst sales conditions for 20 years with no hope for recovery until the second half of next year.

Comings on the same day BHP Billiton, as expected, shut its Ravensthorpe nickel production in Western Australia and will cut some 6000 jobs world-wide, while Rio Tinto snaked in news of cutbacks in its aluminium production and 1100 jobs gone.

The good news from Rio is at least its Australian alumina operations have been spared the knife.

None of this came as any great surprise and in fact the bourse stood up remarkable well, shedding 62 points in morning trade to be still 62 points above the November lows.

These lows will be breached and it should be noted financial stocks have already taken out their November lows to be trading at their lowest levels for eight years.

Prime Minister Kevin Rudd did what prime ministers are meant to do and reassured the punters he was ready to help support the financial system, as said previously, he should move with caution to avoid simply subsidising the banking cartel even further than he already has.

But there is no harm in soothing words, even if they were planted directly by the folk from NAB.

The Wesfarmers board meets in Perth today prior to its scheduled golf game to consider the financing options.

As you would expect, the company has canvassed lenders to see what it would cost to refinance early should the banks be willing to do so and this cost will be compared to the equity raising options.

Wesfarmers boss Richard Goyder is keen to settle matters early to let him get on with his job free of balance sheet concerns.

There is work to do as shown by David Jones’ McInnes, who said same sore sales are down a massive 9.5 per cent and the retailer is budgeting for sales falls in the first half of 2010 with no improvement until the second half.

Market bulls were pinning hopes on a flood of bad news this half and recovery in the second.

The first part is right, the second isn’t looking so good.


Source

I can't understand the article.