Institutions Reduce Cash Reserves
Australian’s have been in a negative savings pattern for almost a decade as they continue to borrow more than they earn. This has been fueled by the easy lending polices and heavy promotion from institutions offering credit. While in the current environment the impact has not been as severe as what has unfolded in the US with the sub-prime crisis, the potential is there if this scenario continues.
What is compounding this issue is the fact we have reduced the cash reserves available in Australia because the institutions continue to invest large sums of money offshore based on the so called need to diversify. This means the banks have to borrow from overseas institutions at higher rates, which has the impact of reducing their margins.
In my opinion, the more people take advantage of self managed superannuation the better it will be for the country. This is because more cash would potentially remain in Australia, but more importantly it means there would be more competition, which obviously has the flow on effect of adding more value to the individuals who operate the funds.
So what can we expect in the market?
In my last report I indicated the market was likely to rise over the next couple of weeks from its current level through to 4200 points and beyond before we experienced a small pull back between 18 June and early July. As it turns out the pull back started a few days earlier than I anticipated given that the market has fallen away this week. This current move down is nothing to be concerned about, as I believe it will only last a few more days into early next week before the market turns to rise once again to my target of between 4200 and 4600 by late July.
As I have indicated before, now is not the time to take on any debt to invest in the market, unless you are highly experienced, as I believe the market will turn bearish again into September.
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 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
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