Share Market Wrap 5th December 2008

http://www.youtube.com/watch?v=vyQ470rGeZQ

Given the current market conditions, listed companies are being closely scrutinised by the industry with respect to their debt levels which are expected to be in the order of 30-50%.But this poses an interesting question. Why does the same industry allow individuals to take on significantly greater risk by borrowing up to 70% of the value of their shares or 100% of a property?

Over the past two years we have seen record levels of debt accumulate in Australia which has resulted in record levels of margin calls. This has occurred because of the overuse of leverage and the lack of knowledge on its proper use. In my opinion, retail investors would be better off following the practices of the corporate world. My view has always been that for every dollar you invest in the share market, only leverage to a maximum of 50% of the value of your shares, just like the industry expects any listed Australian company to do.

So what can we expect from the market?

The activity in the market this week has taken some of the shine off of my earlier optimism following last week’s strong rise, given that the market has already given up most of last week’s gains. Markets always test previous highs and lows, and the current down move could be just that, but it is still possible that the market will fall below the low of 3201.5 that occurred on 21 November.

It is for this reason why I continue to say that it is better to wait for confirmation that a market or share is rising before buying. While I believe the low of 3201.5 may actually be the bottom on our market, it is still too early to tell. That said once the bottom is confirmed, which may occur in the next few weeks, my expectation is that the market will rally for at least two months and possibly up to eight months.

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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