iPredict Column

This week’s iPredict column is done:

Buy of the Week
The Sun newspaper, after thee consecutive endorsements for Labour, has today endorsed the Conservatives for the May 2010 general election. And PM Gordon Brown has been fending off questions over prescription drug use.

Add to that the first poll since 1982 that shows Labour in third place, behind the Lib Dems, and you conclude the stock to buy is UK2010.CON.ABS which pays out if the Conservatives get an absolute majority. Current price is 70c.

Sell of the Week
OCR.INCR.APR10 has increased from 25c to 55c in the last fortnight. This has obviously been driven by the early exit from recession, as the stock pays out if Allan Bollard puts up the OCR before April 2010.

However I think the stock is overpriced. The reason is Dr Bollard has previously said he does not see any tightening before June 2010, and he has yet to indicate a change of tune. I’m holding onto my sell.

Spike of the Week
The Mayor.Brown stock has been at 32c for some time. Then Len Brown came out and said that he would welcome Sue Bradford as a colleague on the Auckland Council. The market saw this as a bad move, with his stock dropping to under 26c. It has since rebounded somewhat to 30c.

GST
There are two GST stocks. GST.UP.JULY10 is at 14c and as previously noted is highly unlikely. Still a good stock to sell in my opinion.

We also have GST.UP.JAN11 which is at 30c. For this to occur, the Government has to both decide to increase GST and implement it before the end of 2010. Now it is possible they could do so in the May 2010 budget and have it occur on 1 October 2010. 1 April 2011 would be easier, but GST up in election year could be politically unwise – even if matched by reductions in other taxes, All things considered 30c is about right.

Top Trading Stocks
The petrol price stocks have been the most active in the last week, with over $20,000 of trading. The new UK election stocks have gone down well with over $5,000 traded. In third place is the Roy Morgan poll stock.

Cheers,

David

Disclosure

David’s current positions are:

BROWN.RESIGN Short, DL.KING.09 Short, FASA04.REPEAL Short, GST.UP.JULY10 Short, LEAD.GOFF.09 Short, MAYOR.BROWN Long, MIN.DEPART2.09 Short, MP.ANDERTON Short, MP.PETERS.2011 Short, NAT.MAORI.09 Short, OBAMA.DISAP.4NOV Short, OCR.INCR.APR10 Short, OCR.INCR.JAN10 Short, PETERS.LEADER Long, PM.2011.NATIONAL Long, VSM.1STREAD Long, ZIM.MUGABE Short

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