Wealth Within - All Ords Report 5 June 2007
Australian Capital Reserve (ACR) is yet another property group to collapse within the last year. ACR targeted small investors promising above average returns to raise money via unsecured deposit notes to fund property developments. While on the surface it appears as though this is a good investment, there are at least two issues of concern; firstly, the fact that the investment was unsecured and secondly, the investment is only as good as the company backing it. If funds had been invested in well established and well run companies like Westfield or Lend Lease, then the investment could have been considered low risk, given their long track record in property.
While the lure of higher than average returns is attractive, investors should have been warned that ACR was a high risk investment given the money was unsecured. That said higher than average returns doesn’t always mean high risk; it just means the investor needs to understand the investment vehicle and who they are dealing with, what is securing the investment and how liquid it is in case they need to exit.
So what’s happening on the market this week?
Indecision has dominated the market over the last two weeks resulting in the All Ordinaries trading roughly within a 2% range throughout May. Given that the market has continued to trade sideways following the rise of around 10% from early March to mid April indicates that the current bull market is definitely slowing. That said as I mentioned in my last report for the market to prove it is still bullish, price needed to move strongly through the previous high of 6376.90 from 9 May which occurred yesterday when it traded to a new high of 6435.70.
I also stated in my last report that if the market did rise, I expected it to find resistance between 6514 and 6533 points, and therefore peak around the first week of June. However, because the market only achieved the high in the last few days, it is unlikely that it will peak this week.
As you know I have been expecting the market to move down into its yearly low, and right now this should be happening. However, something abnormal is driving the market which I believe may be people placing money into their super funds before 30 June to take advantage of the tax concessions.
Given that the probability of the market continuing to rise is low, I think investors should take a wait and see attitude until the market settles. If it does continue to rise, I believe we will see some erratic behavior around mid June, which will last through to mid July.
Until next time
Good luck and profitable trading.
Dale Gillham
Chief Analyst
