All Ords Report 31/05/2011

There is nothing new in how political parties receive donations from marginalised industry groups. So why is there such a fuss about the Liberal party getting money from a tobacco company?

Now before you get all fired up, I do agree that any large donation to a political party may in some way influence how that party thinks and votes. I would also say that those who do donate large amounts would expect to get the ears of the politicians to push their story with the hope of influencing the decisions. So perhaps the question is not whether an individual or company ought to be able to donate to a political party, but whether the donation should give them the right to influence policy? In my experience, I know that when I have contacted politicians about an issue I receive a polite brush-off, and I hear from others that I am not alone. So how can ordinary Australians get a voice and not be shuffled into the back stalls whilst large corporations receive a royal address?

In my opinion, any legitimate political party should be excluded from receiving funds or other incentives directly from any individual or company, and that a political party’s revenue should only be funded out of taxes. This way all legitimate political parties are on an even playing field and more accountable to the people. More importantly this will enable policy to be set by the number of votes to that party and not the highest bidders.

The last election was battled in the media, in a war where those who could afford to advertise more were more likely to win, and they did. Given that we live in a country that believes everyone deserves a fair go, I think it is about time we actually allowed that to happen. I don’t know about you, but I am sick and tired of the big end of town deciding what is good for this country, and the politicians agreeing with them because they donate lots of money.

So what do we expect in the market?

In my last report I indicated that there was a battle between the bulls and bears, with the bears slightly in front, and nothing has really changed over the past two weeks. Whilst I do not necessarily subscribe to the myth of ‘sell in May and go away’ Theory, May 2011 has justified this thought as the market has fallen slightly over 3 per cent. What is interesting, however, is that more than 50 per cent of the fall occurred in the first week when the All Ordinaries Index fell 1.63 per cent.

If you have been unsure as to the direction of the market during May then I am sure you were not alone, given that we have seen a mixture of volatile swings, which at one point saw the All Ordinaries Index down 4.86 per cent. I hate to say it but the only real positive in May was that Telstra rose nearly 4 per cent although I wouldn’t get too excited about this as it has not yet proven the rise is sustainable. The bears are still in control albeit only slightly, so over the next month it will be interesting to see if the bulls can wrestle back control.

Recent surveys have suggested that market sentiment is low, which means it is unlikely that the market will be strongly bullish or bearish. As consumers and industry are being conservative in their approach to the market, it is highly unlikely for it to fall to any great degree. Indeed, it would seem that no one is panicking as they have already done what they need to. Therefore these times can present opportunities for those who are astute to purchase good shares that are undervalued, however, in saying that, do not expect the market or any share to be strongly bullish, at least in the short term.

Until next time
Good luck and profitable trading

Dale Gillham
Chief Analyst