Upfront Investor Share Market Report 5/10/09

http://www.youtube.com/watch?v=7H-ZUN3I1uA

The Productivity Commission’s draft report on executive pay and the potential influence that minority shareholders will have raises some interesting questions. The main one is whether so few shareholders should be able to effectively sack the board of a company. I am all for more accountability from companies and their boards as I believe many executives are paid too much especially when you consider that quite a few have received significant pay rises in the past few years whilst shareholder value has decreased.

It is well known that voting on issues at Annual General Meetings (AGM) are generally considered a forgone conclusion, given that deals are often struck before an AGM with the majority shareholders who are usually the institutions. This makes AGM’s merely a token gesture to at least look like the board is interested in what ordinary shareholders want. It’s no wonder that average Australian shareholders are calling for more transparency and accountability. The challenge for the commission now is how to balance the needs of the minority along with the need for boards to act effectively.

So what can we expect in the market?

The market has continued to defy logic over the past week by refusing to fall away in price, instead it has really only traded sideways as the bulls have been unable to push the market higher. Since 17 September the All Ordinaries Index has closed lower on 7 occasions and has also made a lower low and a higher high, all of which are signs of indecision and in this case bearish indecision.

With the Dow falling 2 per cent overnight, the Australian market will travel down today, and should break below the low of 4646.30 that occurred on 25 September. If this happens it will signal that the market is finally moving into the short term low that I have been expecting. If I am correct we could see a short sharp move down of one or possibly two weeks, with the market likely to fall by at least 5 to 10 per cent with a price target for the fall of between 4300 and 4500 points. I expect it will more likely be the latter and then following this the market will move up again for a few weeks in late October before experiencing a larger fall in late November or even December.

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