That is quite some feat. We write of course, on the subject of the BHP Billiton/Rio Tinto story.

Aside from all the benefits that a takeover would have brought to BHP, the big point to take from it is that even mega companies are reluctant to add debt to their books at the moment. And it also gives an indication that if it is troublesome for the likes of BHP and Rio to raise money in this market, think about the smaller companies and how they must be faring.

An example of this is one of the companies in our Australian Small Cap Investigator (ASI) portfolio. Last week it released details of a new joint venture deal it had entered into. Three days later the window closed for shareholders to pick up more stock in a capital raising.

The result was that the company raised less than 40% of the capital is was hoping for. If it was twelve months ago we are sure they would have raised the full amount. Fortunately, the company in question does have a Plan B. But many small companies out there don't. If they can't borrow from banks and can't raise additional capital from shareholders, it makes it very hard for smaller companies to invest in growing their business.

On the other hand, that is one of the reasons why rather than stepping back from looking at new investments for ASI, we are actually ramping up the coverage in the New Year.

The credit markets will eventually recover, but it may be slow. However, even before this becomes obvious to the market many small cap companies will have already taken advantage and should surge ahead in price.

In our view, we believe the next six months will be the best time in years to pick up undervalued small cap companies.

Kris Sayce
for The Daily Reckoning Australia

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Please explain both the differences and the areas of commonality between the "Aussie Small Cap Investigator," and the "Diggers and Drillers" newsletters.

Thank you.
AW

Both focus on shares we think will go up. One (Diggers and Drillers) concentrates on tipping shares in the mining, oil, and energy sectors. The other (Australian Small Cap Investigator) tips shares we think can go up five to ten times based on a big business breakthrough (alternative energy, for example).

[Editor's Note: Take our newsletters out for a spin. Sign up for a 3 month trial subscription to Diggers and Drillers or Australian Small Cap Investigator.]

And another letter.

Greetings,

Brendan, Melbourne

The top half of the Daily Reckoning comes from the Old Hat Factory here in Melbourne. Our team is global (an American, a Frenchman, and an Australian). We monitor global markets because…well everything is connected to everything these days. In our subscriber services, Diggers and Drillers and Australian Small Cap Investigator we tip Australian shares for Australian investors.

The Daily Reckoning itself is a global franchise, with offices in London, Paris, California, Baltimore, and South Africa. It was started in 1999 by Bill Bonner, whose notes you generally read in the second half of each issue. Bill, like your Melbourne-based editor, is an American expatriate who follows the markets from abroad.

It would be tough to summarise Bill's analysis. But he's written a few books to tell you where he thinks we're headed. Here's the short version: America is headed towards a Japanese-style slow-motion depression as it slowly sinks under a vast Empire of Debt and is propelled from one financial disaster to the next by the irrational behavior of investment crowds and political parties bent on getting something for nothing.

Dan Denning
The Daily Reckoning Australia

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