Government handouts a boon for pokie barons

Wall Street posts positive gains, ASX likely to show strong start

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published July 18, 2012 9:01 am AEST

Wall Street markets have posted solid gains overnight after US Federal Reserve chairman, Ben Bernanke suggested the Central bank was prepared to take action as appropriate to promote a stronger economic recovery. Forecasts for US GDP growth of between 1.9% and 2.4% were lower than forecasts made in January, while Bernanke said that US economic data was 'disappointing' and future reductions in unemployment would likely be 'frustratingly slow'.

The Dow Jones Industrial Average closed up 0.6%, the S&P 500 Index adding 0.7% and the Nasdaq Composite Index was up 0.5%.

European markets ended mixed, with the UK's FTSE 100 losing 0.6%, Germany's DAX rose 0.2% while Paris' CAC 40 was relatively unchanged.

The Australian dollar has jumped to a six-week high against the US dollar, buying 103.1 US cents, after the RBA board minutes suggested a fairly stable outlook for the Australian economy and it appears there's less chance of an official rate cut in August.

Commodities markets were fairly flat overnight, with gold currently trading around US$1,583.70.

Futures indicate likely positive start

The ASX SPI futures have closed up 8 points, suggesting the S&P / ASX 200 (Index: ^AXJO) (ASX: XJO) is likely to show early gains this morning.

According to a report in today's Australian Financial Review, handouts to low-income earners have been blown on pokies. Queensland poker machine revenues jumped more than 7% in May, when the first payments went out, and climbed an even bigger 12% in June. Coles, owned by Wesfarmers Limited (ASX: WES), Woolworths Limited (ASX: WOW) and Echo Entertainment Group Limited (ASX: EGP) have all seen their pokies and entertainment revenues rise over the same period. Perhaps the government's $15 billion in handouts could have been better spent.

BHP Billiton Limited (ASX: BHP) has today released its fourth quarter production report. Investors will likely be comparing the results to Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group's (ASX: FMG) results released yesterday. BHP has delivered its twelfth consecutive annual production record for iron ore, while shale liquids and gas assets contributed to a 40% increase in petroleum production over the previous year.

Foolish Takeaway

As my Foolish colleague, Scott Phillips mentioned in a reply to a Motley Fool Share Advisor subscriber's question today, 'remember the tortoise and the hare'. Investing is a long-term race, not a short-term sprint.

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Motley Fool writer/analyst Mike King owns shares in Woolworths and BHP. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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