CFDs or Contracts For Difference have been a ‘hot’ topic for a long while with articles and ads in newspapers and magazines promoting how easy it is to make money from this instrument. This promotion has certainly been successful over the years in attracting thousands of new customers seeking instant riches. However, in my experience many of the people electing to trade CFDs simply do have the knowledge or the skill to trade them. In fact I believe that around 80% of the clients opening accounts do not really have the knowledge to fill out the forms let alone trade the instrument, which is frightening in anyone’s book and it’s no wonder many loose.  

There is the view of let the buyer beware, but in my view CFD providers do not adequately disclose the risks associated with trading this highly leveraged instrument, or if they do it is in the fine print and written in jargon that most would not understand. Fancy marketing aside the questions is should they really be held accountable for individuals that simply want to gamble with their money in a market where only the educated survive?

So what can we expect in the market?

After more than a week moving sideways and looking like it was finding resistance, yesterday the All Ordinaries rose strongly to continue its strong run up since March. It is now well and truly into my price target area of between 4200 and 4600 points, however time is stretching past the point at where I believed the market would turn. The market cannot continue to rise without some sort of pull back in price, and the longer in time that it rises the higher the probability that the fall will occur. Given this we still need to expect the market will fall away very soon, and investors need to be patient rather than jump in now thinking they are missing out on making profits. As a trader and market commentator I have always found that it far better to be overly conservative than overly aggressive, as it is not how much you make on any one investment that counts but rather how much you do not loose.   

As I mentioned last week how far the market moves down when the fall starts will indicate whether we can expect further falls or whether the next bull-run will commence. For now make sure you set stop losses so as to protect capital.

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

Financial independence is a goal many strive to achieve, yet only a few accomplish. Why is this the case when we live in such a prosperous country? The most common reason is lack of knowledge in how to create financial independence, while others lack the desire or confidence in their ability to obtain the knowledge. Interestingly, many people are willing to spend years studying to gain a formal education with the expectation that they will obtain a job that will pay enough to enable them to sustain a desired lifestyle. Yet when it comes to educating…………read more