ASIC, in its submission to a parliamentary enquiry into financial products and services, has been critical of the trail fees or commissions paid to financial advisors, and rightly so. Many investors have indicated that they do not use a financial planner because they feel a lack of independence in the advice they receive, and that planners do not necessarily add value to what they could, otherwise, do themselves. It’s no wonder people think this way when many planners rely on the product provider to supply both their remuneration and their education, which can lead to the planner being biased towards certain product.
Allowing fees to be rebated back to the client ensures that advisors will concentrate on what is in the best interest of the client rather than which product provides the best trail. While removing commissions or trials from advisors remuneration is a good start, more needs to be done, particularly given that most advisors are involved with dealer groups owned or controlled by product providers. Until advisors are totally independent of product providers, Australian’s are unlikely to receive truly independent advice.
So what can we expect in the market?
This week the market has unfolded in stark contrast to last week, given that it has traded down in price and over the past three days has shown strong signs of indecision. This is particularly evident over the past two days as the range between the low and high for each day was in excess of 50 points yet both opened and closed near the bottom of the day’s range. Generally, when markets are indecisive it signals a reversal of the prevailing trend, although we need to see the market fall further before we can confirm it is starting its move down into the low in September that I have been expecting.
If the market is moving down into its low, then price will fall below 4000 points and most likely trade to around 3800 points, with a possibility that it could fall as far as 3600 points. Given this, I recommend investors set a stop loss on the stocks they currently hold; firstly to protect any profits made over the past few months, and secondly to protect capital. Right now it is wise to be conservative and to sit back and watch until we can confirm which direction the market will travel in the short term.
Economic forecasts have predicted that unemployment will rise over the next year and with revenues down on previous years for many businesses, this is quite a possibility. That said many businesses are preferring to move their employees from full time to part time employment to avoid the high costs of recruitment and retraining when revenues do pick up. Interestingly, many people are in fear of losing their job and are waiting for something to happen rather than being pro-active. But there is old saying that rings true here, ‘if you fail to plan you plan to fail’.
As many would know, jobs are no longer guaranteed and job loyalty is pretty much a thing of the past. Given this, people should be learning how to build up multiple streams of income so that if they do become unemployed for a period of time, they will be able to adequately manage their finances and potentially minimise any impact on their savings for retirement.
Over the past 12 months I have received increased enquiries from people in their 40’s and 50’s wanting to learn how to invest or trade the share market. I strongly believe, however, that we need to start teaching our children to invest so they can build financial security much earlier and therefore become less reliant on a job. The earlier people realise that superannuation is not the retirement savior we have been sold, and instead start creating multiple streams of income by investing directly in shares and property, the better. Remember superannuation has proven time and again not to be able to deliver a comfortable retirement for many Australians.
So what can we expect in the market?
Over the past week, the market has continued to be bullish with no real signs that the momentum is slowing. As a market forecaster, the ability to predict market highs has a lower probability than predicting market lows. Whilst I don’t believe the bullish run will last for much longer, I need to accept that it may move further into August than anticipated.
That said I still believe the market will move into a low in mid September, bounce up in October and then make another low in November. How the market unfolds will indicate what will occur in the next bull-run that will move up into early next year. Yesterday the All Ordinaries Index hit the lower end of my price target of 4200 points, therefore if the market continues to rise it may hit my next target of 4600 points, which is a real possibility.
[youtube]ttp://www.youtube.com/watch?v=7WZED4We_Qo[/youtube]A number of economic reports are predicting rising unemployment, lower demand and pricing for commodities, stable interest rates and a general slowing of most economic activities such as travel and transport services during the 09/10 financial year. This will obviously affect not only the share market but other investment vehicles. That said money is still being poured into superannuation as a result of the 9 per cent contribution guarantee, which cannot continue to be held in cash therefore it is likely it will find its way into the share market at some point in time. Right now I am seeing more and more investors becoming confused about what to do with their money. Over the past two years investors have been switching money around various investment vehicles in the hope that one will deliver on their expectations with some moving in and out of investments within a few months on unrealistic expectations. This has been fueled by the fear of loosing and a lack of education about how investments work, both of which are counter productive in the longer term. Investors would be better off taking the time to understand the three golden rules to wealth creation, which includes spending less than you earn, investing wisely and then leaving your money alone so it can grow. So what can we expect in the market? There is an old saying that when you least expect it, expect it. Over the past two weeks the market has risen quite strongly in what I believe is a last ditch effort to reach new highs since the low in March 2009. The last time the market rose for more than 10 days straight was following the March 2009 low. While this run up started the bullish run we have experienced over the past 4 months, I believe the current run up over the past two weeks will result in the market achieving its high for the year. Given this, I do not expect the market will continue to rise for much longer before falling into its normal correction that occurs every year. I believe the market will peak within the next one or two weeks and then fall into a low in either September or November. Right now I would recommend investors wait until we can confirm the next low before buying rather than jump in now thinking they are missing out as better prices are likely to be gained in a few months time. Dale Gillham Chief Analyst Wealth Within[/youtube]A number of economic reports are predicting rising unemployment, lower demand and pricing for commodities, stable interest rates and a general slowing of most economic activities such as travel and transport services during the 09/10 financial year. This will obviously affect not only the share market but other investment vehicles. That said money is still being poured into superannuation as a result of the 9 per cent contribution guarantee, which cannot continue to be held in cash therefore it is likely it will find its way into the share market at some point in time. Right now I am seeing more and more investors becoming confused about what to do with their money. Over the past two years investors have been switching money around various investment vehicles in the hope that one will deliver on their expectations with some moving in and out of investments within a few months on unrealistic expectations. This has been fueled by the fear of loosing and a lack of education about how investments work, both of which are counter productive in the longer term. Investors would be better off taking the time to understand the three golden rules to wealth creation, which includes spending less than you earn, investing wisely and then leaving your money alone so it can grow. So what can we expect in the market? There is an old saying that when you least expect it, expect it. Over the past two weeks the market has risen quite strongly in what I believe is a last ditch effort to reach new highs since the low in March 2009. The last time the market rose for more than 10 days straight was following the March 2009 low. While this run up started the bullish run we have experienced over the past 4 months, I believe the current run up over the past two weeks will result in the market achieving its high for the year. Given this, I do not expect the market will continue to rise for much longer before falling into its normal correction that occurs every year. I believe the market will peak within the next one or two weeks and then fall into a low in either September or November. Right now I would recommend investors wait until we can confirm the next low before buying rather than jump in now thinking they are missing out as better prices are likely to be gained in a few months time. Dale Gillham Chief Analyst Wealth Within[/youtube]
A number of economic reports are predicting rising unemployment, lower demand and pricing for commodities, stable interest rates and a general slowing of most economic activities such as travel and transport services during the 09/10 financial year. This will obviously affect not only the share market but other investment vehicles. That said money is still being poured into superannuation as a result of the 9 per cent contribution guarantee, which cannot continue to be held in cash therefore it is likely it will find its way into the share market at some point in time.
Right now I am seeing more and more investors becoming confused about what to do with their money. Over the past two years investors have been switching money around various investment vehicles in the hope that one will deliver on their expectations with some moving in and out of investments within a few months on unrealistic expectations. This has been fueled by the fear of loosing and a lack of education about how investments work, both of which are counter productive in the longer term. Investors would be better off taking the time to understand the three golden rules to wealth creation, which includes spending less than you earn, investing wisely and then leaving your money alone so it can grow.
So what can we expect in the market?
There is an old saying that when you least expect it, expect it. Over the past two weeks the market has risen quite strongly in what I believe is a last ditch effort to reach new highs since the low in March 2009. The last time the market rose for more than 10 days straight was following the March 2009 low. While this run up started the bullish run we have experienced over the past 4 months, I believe the current run up over the past two weeks will result in the market achieving its high for the year.
Given this, I do not expect the market will continue to rise for much longer before falling into its normal correction that occurs every year. I believe the market will peak within the next one or two weeks and thenfall into a low in either September or November. Right now I would recommend investors wait until we can confirm the next low before buying rather than jump in now thinking they are missing out as better prices are likely to be gained in a few months time.
The ASX has announced a proposal that would allow retail investors direct access to the bond market in the same way investors buy and sell shares on the exchange. Access to debt funding through the issue of bonds has traditionally been sourced through wholesale markets, but due to a lack of liquidity in this market it is now being proposed that both state and federal governments have the opportunity to source cash from ordinary Australians by way of trading bonds on the stock exchange. For retirees looking for risk free income, bonds are a great investment vehicle provided they can lock in a higher long term interest rate than the cash rate which is debateable right now given the effect on the economy resulting from the sub-prime meltdown. In my opinion, investors looking to generate wealth or increase their retirement savings whilst interest rates remain low would be better off in other investment vehicles. From an economic perspective, it would be prudent to consider the effect on the shares and property market if large sums of money are ploughed into the bond market. While it is early days, I hope that that the government and ASIC don’t make a rash decision simply to solve a short term problem.So what can we expect in the market? This week the market has been quite volatile and erratic although it has closed higher in 5 of the last 7 trading days. This is in contrast to the Dow which has only closed higher on 3 of the last 7 trading days, which indicates that sentiment in our market is proving to be more bullish and resilient than the
US market. In previous reports I indicated that the down move in the All Ordinaries Index could occur between 18 June and early July, therefore the volatility we have experienced this week could just be a last burst of selling pressure before the next run up occurs. I still believe prices will rise for the next 3 to 5 weeks to reach the yearly high I have been expecting. Therefore we should see the market settle over the next week and move up strongly once again to my target ofbetween 4200 and 4600 by late July. As always we need to be prepared in case the market decides it is now moving down into the yearly low that I expect will occur sometime between September and November. Therefore I encourage all investors to use stop losses and avoid any leveraging unless you are a really experienced trader. Dale Gillham Chief Analyst Wealth Within
