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The GFC has taught investors a valuable lesson about the risks of maintaining the strategy to ‘buy and hold’ equity investments, yet despite large losses the majority would rather continue to practice their ‘hope and pray’ strategy as they wait for a recovery rather than learn how to protect their investments. 

Last year the decline in the share price of some of the big names continued, with investors starting to see how even stocks that are classed as being ‘Blue Chip’ by the financial industry are not awarding any special protection from further declines. This week QBE Insurance Group is one such example.

Australian investors saw red this week when once share market darling, QBE, stunned the market with a massive profit downgrade. Management of QBE indicated the damage to the company bottom line is in the order of 40 to 50 per cent, citing the spate of natural disasters as the cause.

In response, QBE’s share price dropped like a lead sinker after it was released from a trading halt pending the announcement. Although QBE’s share price has recovered somewhat, the initial fall on Thursday represented a decline of around 20 per cent from Wednesday’s closing price of $13.00.

QBE is still a great share to own, just not right now, and there is talk about further acquisitions which seems positive. That said I don’t see how all of this is going to give investors any greater sense of security about QBE, or other blue chips shares for that matter.

What do we expect in the market?

The Australian share market has made some solid gains to start the new year, with the all Ordinaries Index rising well clear of the December low of 4091.6 points, and above the upper band of our previously identified support zone between 4100 and 4200 points. Although this is a positive sign, it’s still too soon to confirm whether the market as a whole will be able to build sufficient momentum to buck the current sideways trend.

From here I am watching to see whether the market will continue to hold above the support zone well into February and unfold in a sustained upward move, as then the probability of a further rise to around 4500 points and above becomes a realistic scenario.

So what does this mean for investors? At this point don’t expect miracles, and it is important to continue to keep an open mind about what the market might do over the coming months as it could just as well be bullish as bearish. One of the biggest mistakes I continually see investors and traders make is to behave like sheep and follow the herd.


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Dale Gillham

Chief Analyst, Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.For more information please visit www.wealthwithin.com.au

Thought you might like to know that tonight is Dale Gillham’s first scheduled appearance for 2012 on Your Money Your Call on the Sky Business Channel . The show starts at 8 pm (EDST).

This is your chance to join in on the conversation or sit back, relax and watch Dale on tonight’s panel. You have the opportunity to gain a valuable insight into the current state of the market and about particular ASX listed stocks that may be in your portfolio. During the show you may also pick up on valuable share trading techniques and share market tips which you can use to better manage risk in the market.

I have just read this article on how the US Investment banks are running a cartel and have been for decades. Not surprising news to me. What was surprising was that the US government sued the investments banks in 1947 and lost. Now the investment banks are bigger and stronger than ever before and the investment banking industry is now even smaller thanks to the GFC, sound familiar?

In Australia the banking industry is very concentrated despite Bill Shortens attempts to support the second tier banks, and the investment banking industry is even more concentrated along with stock broking industry.

Given this companies and individuals are being disadvantaged for all manner of services that these cartels privide. In the end we are all paying higher prices and being bullied by the few. We need our government to be strong and regulate these industries so that things don’t get worse and we end up like what is now going on in the US.

What does Australia’s steel industry and some of the big Aussie retailers have in common?

Since the GFC investors have watched the once ‘market darlings’ like Bluescope Steel and OneSteel plummet to new at all-time lows, and now some of the big names in retail are following suit.

Billabong International and Myer Holdings have this month broken to new lows as ongoing pressures from a boom in online shopping due to a high Australian dollar, and lackluster consumer sentiment, continue to weigh heavily on the share price of these companies. Looking forward the picture is not looking brighter as retail shares are likely to experience further declines over the coming months.

High profile industry players, like Harvey Norman boss Gerry Harvey, lost the debate with the Australian government to cut the GST in an attempt create a level playing field for Australian retailers grappling with competition from overseas imports.

Given the government’s pledge to provide assistance to the steel industry you can’t blame the retail industry for putting a hand out for assistance. But as this failed, retailers need to get on with business and do whatever is necessary to survive. Like Harvey Norman, this may mean going offshore to set up online shopping.

What do we expect in the market?

Last week the Australian share market held its ground to close at 4192 points, or at around the halfway point of the week’s range. The current lack of direction is not unusual for this time of year, when trading volumes are typically low.

What is of interest though is a scenario that has occurred almost every year over the last 20 years; in January the market has moved beyond the highest level achieved during the last week of December.

Given this, as we move into the New Year, the probability is very high for the All Ordinaries index to trade above this week’s high of 4193.7 points to challenge resistance at around 4300 points. How the market unfolds shortly after this rise will set the scene for the first half of 2012.

On behalf of the Team at Wealth Within I would like to wish you all a safe and happy new year.

Visit our Facebook page for links to more detailed discussions on world markets.

Dale Gillham

Chief Analyst, Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.For more information please visit www.wealthwithin.com.au

The Australian government’s decision this year to ban live exports to Indonesia may have backfired as the Indonesian government have this week announced plans to cut Australian cattle imports as part of a plan to become self-sufficient.

In my opinion, this situation is a lesson for the Australian government, and yet again, is another case where Australian farmers will come off second best. Whilst I supported the need to pressure the Indonesian government to lift the standards in controlling the humane treatment of animals, I felt that our government’s response was too heavy handed. So in the end, what have we really achieved? 

Frankly, I am not surprised by the announcement from the Indonesians to sure up their own industry. What the government has done is put at risk an export market we clearly cannot afford to lose, and this, in an environment where we are constantly reminded about the fragile nature of our two speed economy.

Further, the Australian public have not heard much in the media about whether the standards that we forced the Indonesians to comply with are actually still being adhered to. So in the end, taking the moral high ground about the practices occurring in another country has left mud on our faces, and taken the public’s attention away from the fact that there are still unresolved issues in our own meat industry.

What do we expect in the market?

Last week the Australian share market lost the battle to remain above 4300 points and continued the decline this week into a low on Thursday of 4175 points. Looking back at what has unfolded post the prior week’s high of 4391 points , the All Ordinaries index has fallen over a total of eight days, with buyers moving back into the market cautiously on Friday to lift the index away from the low.

Although the recent decline has been longer in time and price than I was hoping would unfold, there is still no indication on the charts to confirm that market sentiment has changed and therefore, technically this means that the market is still trading sideways. However, as is always the case when a battle for control is unfolding between the bears and the bulls, until agreement is reached the direction of the market will remain unchanged, but remember that only one side can win.

Given this, there is nothing further investors need do with their portfolios until we see a break out of the current consolidation and as the status quo is unlikely to change until the first quarter of 2012, investors can take time out from the market to enjoy the festive season.

On behalf of the Team at Wealth Within I wish you all a very merry Christmas and a safe and happy new year.

Visit our Facebook page for links to more detailed discussions on world markets.

Dale Gillham

Chief Analyst, Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.For more information please visit www.wealthwithin.com.au