Share Market Wrap 12th September 2008

http://www.youtube.com/watch?v=omzg1wN3jjU

In July 2008 a number of experts were forecasting parity between the Australian and US dollar, however, since then the Australian dollar has fallen to below 80 cents US, which represents a discount of nearly 20% on the exchange rate. So what drove the disparity and what does it mean for the Australian consumer?

The Australian dollar is a commodity-based currency, which means the dollar will rise or fall inline with the price of commodities. Consequently, the fall in Gold (-21.5%) and Oil (-30%) over the past two months has caused the Australia dollar to fall. The good news, however, is that I believe these commodities will find support and rebound in the not too distant future, which means we should see the Australian dollar rise.

What does this mean for Australian consumers? Firstly any travel to the US in the near future has become 20% more expensive. But more importantly the cost of oil has not really decreased due to the fact that it now costs more to buy oil as a result of the disparity. That said the operational costs for Industrial stocks are likely to have decreased due to the reduced costs of some inputs, which can hopefully be passed on to consumers by way of lower prices.

What can we expect in the share market?

I have indicated previously that predicting the market on a weekly basis can be a risky job, as the market will do what it wants to do and not what I would like it to do. Apart from Monday, the market has traded down this week rather than up as I expected. That said as at close of trading last night (Thursday 11 Sep) the All Ordinaries was only down 1.5% for the week and it is quite possible that the market will trade up on Friday to close higher for the week.

Despite the continued volatility in the market over the past two weeks, I still believe it will rise up to challenge the 5200 point level over the next two weeks. I am confident that once the market closes above 5250 it should start to rise steadily and shake off the recent erratic behaviour. As always nothing is set in concrete. Even though probability suggests that the market will rise, we still need to be prepared in the event that it doesn’t. Given this I recommend that you wait until the All Ordinaries moves through, at least, the 5250 level before buying any stock.

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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