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Lateline Business -

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(generated from captions) will be with you tomorrow

night. I'll be back next week, for now 'Lateline Business'

with Andrew Robertson.

Bottoming out, a top US market

analysts claims the worst is

behind us and it's time for

investors to return. I would

start to buy and add to your

portfolios you have in selected

market sensitive areas. Why

mid range hotels in the suburbs

are producing better returns

than their upmarket

competitors, and Kerry Stokes

stages a $40 million share raid on Western Australian

newspapers. Obviously shares

are picked, picking up some on

market at good prices. He's

saying he sees better value in

it. And is prepared to pay a

premium. First to the markets

and Australian shares rose for

a second day as hopes for a

bailout of the two top US

mortgage lenders boosted

financial stocks. Despite

falls in resources stocks the

All Ords recovered earlier

losses closing half a percent

higher. The ASX added 0.75%.

The Nikki jumped One man who

has been busy in the share

market today is billionaire businessman Kerry Stokes, who

made a raid on the Western Australian newspaper group.

The media mogul was

unsuccessful in his bid for a

seat on the board in April but

vowed to keep fighting for greater control. Eliza Blue

reports. Channel 7 boss Kerry

Stokes failed in his bid to

gain a seat on the board of WA

newspapers in April. It

appears then he lost the

battle, not the war. We

continue to own 20%, we'll

continue to take an active

interest in WAN. That was on

show, Mr Stokes snapping up 4

million shares for more than

$40 million, the share rate

increased his stake to under

23%. The shares are cheap, he

picked up some on market at

good prices. Obviously he's

saying he sees better value and

is prepared to pay a premium.

Western Australian news

chairman Peter Mansell says the

share rate is no surprise and

the two parties can agree on a

new board member. Mr Stokes is

able to increase his stake by

3% in six months, which could

see him in a position to launch

an aggressive takeover bid. We

see him increasing slowly,

until he has a significant

stake, maybe around the 25%,

then he may make an aggressive

move. Analysts say today's

raid put the Western Australian

newspaper's board on notice,

emphasising the continuing

interest in the company by Mr

Stokes. For its part the Seven

Network wasn't saying what its

long-term plans are. Kerry

Stokes has been active on

another front with his mining

company signing a landmark

agreement with Rio Tinto

shaking up the way junior

miners do business in WA.

Under the deal iron ore

holdings will sell its awe to

Rio, which can export it as its

own product. Diane Bain has more. The agreement means

little to the bottom line of

the mining giant but will have

a huge impact on the mining

APPLAUSE junior.

Iron Ore Holdings whose

majority shareholder is West track boss Kerry Stokes

negotiated to sell 1.5 billion

from its project at fils creek

to Rio Tinto. This is a win,

win agreement. Win, win,

certainly for Rio Tinto and

Iron Ore Holdings, importantly

it's a win, win for Australia.

Under the binding memorandum

of understanding the junior

miner will truck its ore to

Rio's mine, 5km away, they

won't say what the deal is

worth or what Rio will pay for

the ore. With 8 million

tonnes, the life of the project

is less than 6 years. Rio

wants to avoid sharing its rail

lines, the deal is a helpful

tactic. It hasn't com promised

Rio's infrom structure

logistics, it's a good

fit. Iron Ore Holdings holding

director Richard Court, a

former premier said the

agreement could change the way

the 94 iron explorers

operate. As a junior you have

an option of a stranded

resource or negotiating

commercial arrangements under

realistic terms to sell that

ore. That is the basis of this

agreement. Analysts say it's a

wise move. It means that

they've got a guarantee of

selling the - what's in the

ground. They value it around

$70 million net present value

in the ground for them. Today's agreement strengthens

Rio's case that it's prepared

to help other smaller miners

getting its ore to port without

the need of giving up control.

As you heard at the top of the

program the Australian stock

market continued a mini

recovery, I spoke with Lake at Macquarie Private Wealth for

his thoughts. Good to talk to

you again. Thank you. Another

good day on the market, in

fact, we are in danger of

ending the week in the

black. Yes, indeed. Looks like

we are up about over 300 points

on a week on week basis,

providing the market holds for

tomorrow's trade, that's up

about 6% on the week, it can be

labelled a bit of a relief

rally, from last week when we

had two very bad days at

market. It may well be viewed

the market as oversold, we are

start togee a rebound there.

The make-up of the rally has

been did not. The resource

sector is weak, financials

putting on a strong performance

stocks interesting. with a couple of the other

Commonwealth Bank up 4% , $1.74

to 46.39, comments reported by

the CEO Ralph Noriss that

despite the slowing economy the

credit growth is holding up,

inspiring the markets that

maybe the banks will hold up OK

through the reporting season. Commonwealth is the first to

report. AMP up 5%, 33 cent to

7.10, it's compatriot QBE pup

$1.44 well over 25%. To,News

Corp with a strong day on the

back of a weakening Aussie

dollar, around 95.8 0. Weak

thing off from the 98 level.

News Corp up 88 cent. Inset ek

pivot down to 149.63.

Following a speculative report

that they may be out looking to

raise capital. A mixed bag,

market up 38 points on solid

volume, 6.8 billion, that's

good news for the market to

rally on good volume. You

referred to the switching out

of resources into financials in

the current climate. Do you

see that being sustained. It

was interesting because we have

certainly looked at a survey in

particular of international

investors. The they had

positioned their portfolios to

Australian resource stocks, be that way, to be very long

really taking advantage of the

strength of the brick,

economies, China Asia, Brazil

and Russia and underweight the

Australian financials. So when

you have a large proportion of

international investors making

the same bets, at some stage

that will be reversed and it

would appear we are seeing the

start of that, yes. A lot of

change in sentiment on the

stock market of course is due

to the sustained fall in the

price of oil. And whilst that

is great for the broader market

it's not good for energy stocks. Absolutely, and, in

fact, the oil price peaked pat

$147 in mid July. A number of

the oil stocks peaked earlier,

late June, and to give you an

idea, at $147 oil has fallen at

$123.70, fallen 16 per cent,

23, Woodside Petroleum, the

leading oil and gas producer

has fallen from its highs in

late June, about 23% compared

to the oil price of 16. Also,

a major gas producer in the

same time period has gown 25%,

oil search, under performing.

I guess really we need the oil

price to steady. The market

doesn't enjoy volatility World

Cup way or the other. It will

be good to see it find a level

and be consistent. That's a

comment we'd say the same for

the broad market. It had a

relief valley, let's see it

hold a level where it's 5,100

or 5,200 doing work, giving

investors a high degree of

comfort. Sounds like more

interesting times ahead.

Martin Lakos, thank you for

your time. My pleasure. To the

other major movers on the

market. Despite denying

rumours a private equity player

was going to make a bid

Healthscope jumping. Lion

Nathan jumping after renewing

its forecast. Santos fell,

reporting a drop in half year

production and disappointing

output numbers saw Newcrest

shed 5%. On currency Australian dollar steadied

after yesterday's sell off.

Gold bounce back from a

two-week low. Crude oil

recovering some. Yesterday's

losses.

Ahead of the Australia's

biggest banks says the pain

from the wholesale credit

crisis has 18 months to run.

Ralph Noriss's views won't be

welcome by non-bank lenders who have been priced out of the

home loan market. The

shrinking pool of institutions

able to write competitive

mortgages is raising

competition concerns, Desley

Coleman reports. Official

interest rates are at 12 year

highs and the fallout from the

US-led credit crisis increased

the cost of wholesale funding

for Australian banks. That's

no secret, but the Chief

Executive of Australia's

biggest bank, the Commonwealth

says the light at the end of

the tunnel is some way off

yet. Wholesail markets remain

fragile and unfortunately I

don't think that this is something that's going be cured

in a matter of weeks or month I

think it will be much more

likely that this particular

situation has got at least

another 18-24 months to run.

With that in mind and even

with the Commonwealth Bank's

new advertising campaign determined to be

different... We are the

determined. The bank has

joined rivals and passed on

costs to customers. I think at

this point it comes down to

what our average costs of funds

are. At the moment we see the

average cost increasing on a

day by day basis and that's why

we've had to increase interest

rates out of sequence with the

official cash rate. Some

analysts say that the decision

to continue to lift interest

rates has been easier due to

the current lack of

competition. The non-banks have

pretty much disappeared so most

people are now, 90% of people are getting their loans from

four players, or maybe five.

If you look at the product sets

out there, and the choices and

offers, rates, fees and things,

they have reduced significantly

because the non-bank sector were offering different

products to consumers at

different rates. It means that

consumers have less choice in

terms of the type of products

there. It's a risky situation

at the moment. On the one hand

we have a merger between the -

proposed merger between the

third and fifth largest bank.

On the other hand we have this

hope that competition will pull

us out of spiralling interest

rate increases, we can't have

both, we need as many

competitors as possible. The head of the Commonwealth Bank

is measuring the competitive

tension in Australia's banking

sector differently. We don't

see some of those players in

the market in the non-bank sector operating. At the

moment I'd have to say I have

seen nothing to indicate that

the market has got any less

competitive . The Government is currently analysing the

state of the banking and

non-banking sectors,

submissions to the House of

Representatives Economics

Committee were published today.

The submission by consumer

group Choice questioned the

high break fee charged by banks

if mortgage holders want to

take their loan to another

bank. At the moment the

structure isn't designed to

facilitate free and fair

movement of consumers between

products, it's likely if you

did have a bank that did make

the bold move of cutting

interest rates, there'll be a

significant proportion of

couldn't assumers not in a position to take that up

because of early exit fees,

penalties that apply in moving

between home loans. Until we

look at that issue, we won't

have a competitive home loan

market in Australia.

The Government will report on

competition inquiries in

December. In the meantime

Ralph Noriss has his own

inquiry under way with a look

at the books ABM am-Ross

Australian operation. Mark

Cook is a legend in the United

States investing community

after obtaining an audited

return of 546% in the 1992 US

investing championships, called

the top of the market in 1998

before the LCTM hedge fund

triggered a clops, and

predicted the end of the dot

com bubble before it burst and

now believes the worst may be

over. Mark Cook visits

Australia, I spoke to him from

Melbourne earlier this evening.

Mark Cook, welcome to

'Lateline Business'. Thank you

very much for having me. You

recently called the bottom of

US financial stocks and since

then they've risen by 30%.

What made you think we were at

the bottom? I have a particular

indicator that you use that I

actually discovered back in

1986. It was - gives me

telltale signals of market

bottoms and market tops, and

last Wednesday morning I

actually, one week ago, a

signal was given that the

market was in a capitulation

mode which, in regard to that

was showing that we were in a

bottoming phase. I do an

advisory service I send out

twice a day, and I alerted

subscribers to go along in the

US market at that time, and so

far it's paid off. Your

indicator monitors trading activities, as you explained,

is that a better indicator than

fundamental analysis of, say,

the future prospects of a

company, a sector of the

economy and so on. What my

indicator is is a market

sentiment indicator, it's an

overbought, oversold indicator

that I utilise. Anything that

is market sensitive to

movements up or down that

coincides with the market

movements will receive the sensitivity, they'll move.

It's not a fundamental

indicator at all, it's purely

what I call an internal sendment indicator. When you

look at the fundamentals, we

have the global economy

slowing, we are seeing that

company profits are starting to

fall. Wouldn't it then be

reasonable to expect stock

markets have further to

fall. Well, you would think so,

but what my indicator is

telling me is that perhaps the

worst is behind us, you may see

additional bad information

coming out, or worse nipping

news, or things like --

worsening news, but the time

test to see if it deteriorates

the market. I do not think it

L the crisis of the impact of

what I saw in volume tells me

that we are getting what I call

the fundamental stages hoor of

a market bottom. -- here of a

market bottom. It's not an

instantaneous movement that's

sustainable. We have had a

significant move, the S&P 500

index moved in the US 90 points

since I gave the alert. Which

is a considerable amount of

movement. We could see pull

back in the short term. I

doubt highly if we see those

lows made last week be

penetrated by any significant

amount. Today in Sydney we had the Chief Executive of

Australia's biggest bank say he

sees credit conditions staying

tight for the next 18-24

months, last Monday night we

had global international

economist Mark Faber tipping a

global recession, if they are

right it's hard to see stock

markets going north any time

soon. Well, the situation that

I look at over all, yes, we

have the intermingling in the

global markets and the sympathy

you see between the markets, I

think the sectors that you are

seeing that are going to be

influential right now you are

starting to see an easing in

oil prices also, so fundamental

view would say that over the

past eight to 10 days we have

seen oil prices come off

considerably. That's going to

ease the pressure on inflation

on a demroble market basis,

that is a -- global market

basis, that is a positive.

Conversely the housing market

especially in the States probably worsening, that

probably will be somewhat of a

disease event that's going to

occur and be constant and

perpetual for maybe a couple to

three more years overall. But

I think that the inflation

pressures are probably going to

ease because the economies are

slowing, and whenever we are in

that, that could be a good time

to make the fundamental bottom you asked about before. What

I'm seeing here now is the

prices are probably already

dictating that the worst is

behind us. So when you look

into your crystal ball, what do

you see in the next, say, 6,

12, 18 months. Well, basically

what I look at is the shorter

term, that mine CCT, my Cook Cumulative Tick indicator has

given me, that we are doing a

bottoming basis. What I see is

perhaps we bottomed out a week

ago, and as time will tell

we'll see how credible it is .

But we should rally into the

next 2-3 months, we could

correct back down, re test the

area, and then from that point

forward we'll make a better

bottom ing process and in 6

months from now and above we'll be higher than what we are

seeing at the current time. If

you were an investor at the

moment, presumably you have a

fair bit of your portfolio in

cash, is now a time to revisit

your asset allocation, and if

so, by how much. I would say do

the old-fashioned adage I use,

nibbling, start to buy and add

to your portfolio in selected

market sensitive areas, for

example, you could go with the

bigger blue chips if you are in

the US market, because, and

also the technical situation

that we see, you'll see areas

probably are going to be not as

strong. The financials, for

example, they get a little more blood-letting before they are

out of the woods, so to speak,

their rallies may be

short-lived, you see some,

like, Nasdaq-related stocks or whatever, anything with

electronics that is a little

bit more inflation adverse. So

things are going to be affected

by inflation are probably going to have difficult times, they

are not going to rebound as

quickly, other sectors that

aren't as sensitive to

inflation will rebound quicker.

Just finally the Dow Jones

industrial average closed at

11, 632, where do you see it by

the end of the year. Well, my

crystal ball out that far gets

a little cloudy. I don't know

if we'll see it higher or not.

The US elections are coming, of

course, this fall. That will

be a period of uncertainty

since we don't have an

incumbent. We'll have a new

President January, as we go

into election time the

uncertainty will probably stall

the market somewhat until we

see what direction it's going

to head from that particular

time. Between the time of our

election in November, and the

end of the year, it will tell

the tale of where we'll be.

Wubs we have the new President

in place -- once we have the

new President in place we'll

see a clearer direction of

things. Mark Cook thanks for

your time. Thanks for having

me, I appreciate it. Well,

while the stock markets woes

have been well documented the

global credit crunch and

soaring oil prices weigh

heavily on the hotel industry.

Developers say the local market

is also suffering from a lack of investment because room

rates are too cheap. That

hasn't stopped one Kuwaiti

Sheikh taking the plunge in an

Australian setting. Reporter

Neal Woolrich was there with

him. A touch of royalty in

Melbourne's outer suburbs

Kuwaiti Sheikh Mubarak Abdulla

al-Mubarak al-Sabah was in town

to unveil his latest

investment, the Hotel Ibis in

Glen Waverley, 20km south-east

of Melbourne. While some

wonder why build a three-star

hotel on the outskirts of town,

Kuwaiti Sheikh says it makes

good business sense. We focus

proliferation of limited on the mid scale market the

service airlines in our region,

the increase of business

travellers in our reason led me

to focussing on limited service

hotels in the Middle East,

cascading to other investments

across the world, Australia one

of them. Kuwaiti Sheikh

partner is the Accor Group

group opening a hotel in Glen

Waverley in the 1990s, and

faced doubters at the time. In

the 1990s and before then major companies established offices

and manufacturing plants on the

eastern corridor. Traffic in

Melbourne moves freely, busy

travellers want to be close to

where they work. Kuwaiti

Sheikh says mid-scale hotels in

the suburbs offer better

returns than 6-7 star hotels in

the Middle East. The main

reason you invest in those is

for yields, you are unlikely to

get capital appreciation, you

expect a good sol it yield.

For that you sacrifice the

capital gain you may ordinaries

have. John Hudson says hotel

investor sentiment in Australia

remains strong, but not as

solid as a year ago, arguing

while occupancy levels are

high, room rates that customers

pay are low by world

standards. Wherever you are

likely to want a hotel the

highest and best use in a CBD

is office or residential. We

won't see new hotels other than

if they are built for an ROE,

return on ego rather than

return on equity. Brisbane and

Perth are among the most

constrained because of the

local mining boom. Sydney is

tight because there's no new

CBD hotel since 1999. With the

supply of city hotels unlikely

to increase soon, that means

prices must go up. That is what

is driving the investors that

have money and are not driven

by six monthly and monthly and

annual returns, those investors

able to take a 3-5 year view

says the future prospects for

the hotel industry in Australia

are strong because there's no

new supply. Right now the

global economic slowdown is

making life difficult for hotel

operators, not to mention the

impact of high oil prices on

leisure travel We believe the

mid scale hotel segment will

farewell ironing out the difficulties evident in the five-star segment of the

market. So Kuwaiti Sheikh is

confident his strategy can

withstand the difficult

conditions and hit the right

note. Now a look at tomorrow's

business diary, where all the

action is overseas. The latest

Japanese inflation figures are

out along with the British GDP

report. US existing home sales

numbers will be released in

half an hour, followed by the

University of Michigan consumer

confidence index. A look at news in the business sections

of tomorrow's papers. The Age:

fledgeling signs of a rebound

in second assumer sales. The

Australian examining Kerry

Stokes 40 million raid on Western Australian share

registry. The 'Australian

Financial Review' says State and territory governments

facing a public sector wages

blow-out. 'Sydney Morning

Herald' talks to former poip

boss about his new job. That's

all for tonight. Wall Street

opens, the Dow Jones down 29

points or a quarter of a per

cent. FTSE in London

continuing down half a percent

or 28 points. If you want to

review the program tonight

visit the web site at abc.net.au/latelinebusiness,

where you can watch the entire

program on line or download it

as a podcast. We'd love to get

your feedback, email address:

I'm Andrew Robertson,

goodnight. Closed Captions by CSI