All Ords Report 25 May 2015
When our politicians tell us something is good for us, should we listen?
This week the RBA made a further cut to the cash rate, which means cheaper money, and you may have heard our Federal Treasurer Joe Hockey say that now is a great time to invest in Australia. However, a survey revealed that around 75% of respondents disagreed, which left only 25% siding with Joe. So who is right?
Studies of human behaviour show that often we do the opposite of what is good for us. How many times has your wife told you not to have that extra helping, or your husband has told you to relax and you don’t? It is so easy to do what we are in the habit of doing, or what is easier, than what we really ought to.
This is also true when it comes to investing. I have spoken with people who have been procrastinating about learning to trade for years, and some of them are still procrastinating. Just imagine what they could’ve achieved in that time if they were clear on why they needed to do it today, and if they were in the habit of taking action rather than procrastinating. Although we cannot get back time, we can change our habits and make a difference in the future.
Have you ever heard about The Common Denominator of Success, it was written by Albert E.N Gray? I remember reading this years ago and it still rings true to me today. If you haven’t read it yet, I recommend you do. The main message he shared was that “the secret of success of every person who has ever been successful lies in the fact that THEY FORMED THE HABIT OF DOING THINGS THAT FAILURES DON’T LIKE TO DO”.
He continues by saying “If they don’t like to do these things, then why do they do them?
Because by doing the things they don’t like to do, they can accomplish the things they want to accomplish….Successful people are influenced by the desire for pleasing results. Failures are influenced by the desire for pleasing methods and are inclined to be satisfied with such results as can be obtained by doing things they like to do.
Why are successful people able to do things they don’t like to do while failures are not? Because successful people have a purpose – strong enough to make them form the habit of doing things they don’t like to do in order to accomplish the purpose...”
This is why you will often hear me say “know your WHY”. Once you know this you are likely to do the things you need to do to get it, and for many, one of the big ones is educating yourself. Learn How
Did you know that less than ten per cent of people own an investment property and invest in direct shares? So what does that tell you about the level of knowledge of the masses, and what does this lack of knowledge create?
Think about this for a minute, when the masses are fearful about investing, people without knowledge are following each other. A bit like cattle stampeding in a field. Of course, it’s instinctual to want to follow the herd if you don’t know how to think differently.
Given this, what faith can you really have in the opinion of the masses, or the opinion of the survey? Not that I am suggesting you should believe everything that Joe Hockey, or other politicians say. We should view what they say with some skepticism, however I wouldn’t trust the view of people with little or no knowledge either. Would you?
Successful people make their own decisions, and often do the opposite to what the herd does, which is why they don’t have what the herd has, and so these are people I mentioned earlier, in the ten per cent. They choose to educate themselves, so that they can make good and informed decisions, understand their risk, build wealth, and sleep well at night.
If you would like to be in this group, rather than the herd, find out about doing one of my courses, from as little as $500, by calling 1300 742 738.
The only way for you to know what’s right, and make good investment decisions yourself, is to be willing to step away from the herd, and get the right knowledge. If you would like to hear from some of the ten per cent, you are welcome to click here
If you would like to hear more on my thoughts about Joe Hockey’s comments and the survey click here
So what do we expect in the market?
Last week, we saw the All Ordinaries Index (XAO) finally pull back into my target zone between 5600 and 5700 points, a move that appeared to be largely driven by bank and property related stocks. The talk around financial stocks, particularly banks has been about the new capital requirements. However, this is nothing new, and we saw how talk of this slowed the rise last year, when the banks largely traded sideways in late 2013 and 2014.
People are concerned about the profitability of banks moving ahead as a result of the change, however, I believe that what some people are forgetting is that bank earnings have historically been in the single digits, rather than low double digits seen in more recent times. Given this, one would have to expect that eventually they will come back to historical trends. I believe that the slowdown in 2013/14 prevented the market from getting too far ahead of itself, too soon.
The first positive I see about the recent fall is that the market is behaving as the analysis indicated it would in terms of price, in coming back into my target zone, even though the timing of the decline is not in sync. My regular readers know that I had wanted to see the market come back into this zone in April. However, as the 6000 point level is still up for grabs, and my other targets between 6200 and 6400 points for this year haven’t been reached, I’m not concerned about the current fall.
That doesn’t mean I have a fixed view on the market, as I believe it is very important to be flexible and always have a view for the best and worst case scenarios, and be prepared for either. However, my preferred view is based on analysis that indicates that currently the probability is still pointing to a further rise this year.
Given the strength of the decline this week, the market may fall just below my support zone, to around 5500 points, before it finds support and meets the angle of the longer term trend. Remember, the trend is your friend, and markets often work their way back to trend after strong rises, and before continuing higher.
If you are an investor with a portfolio of shares that you are managing, then it is important to have a goal for the portfolio, and sound rules to manage your risk. If you currently don’t have either then now is a good time to work this out, or consider having Wealth Within do it for you. Click here
to find out how.
Dale Gillham is Chief Analyst at Wealth Within