The Market Wrap 13-1-10

By Jason Fittler

USA reporting season.

After a strong market through December we start to move into the US reporting season once again.

As you can see for the downturn over the last two days of the chart it has not started well. We are looking for strong retail sales over Christmas and strong underlying cash flows.

I expect 2010 will be the year of the US market and I expect to see the large US companies re-capitalise themselves, US interest rates move up and their dollar improve. This should push their market higher.

Short term we can expect to see a little pain as I think retail sales will disappoint.

As you can see our market struggled to stay above 4900 and has started to move back towards the trading range of 4800-4500.

In my books this is a buying opportunity, there are plenty of good long term, high yielding stocks to buy in this market.

The top line of my chart is 5200, this is where I expect to see our market move in the medium term.

If you are a long term investor this market is providing you with plenty of opportunity.

2009 The Year in Review

By Jason Fittler

2009 will go down in history as one of the best years in our market.

There are two important figures here. The market rose 1125 points or 30% from January to December, but from the lows of March 2009, the market rose 1800 points or 59%. Reinforcing our view, not to panic and sell out at the bottom. For those who invested heavily over the 2009 year you have done well.

If we go back a couple of years, you can see from the below chart that the market is 26% off the highs and back to the level of September 2007.



The gains were made in the blue chip sector with the resources and finance sectors doing very well.

We have also started to see a recovery in the infrastructure sector and the property sector, which is currently restructuring and should have a good 2010. I expect to see a lot of takeover’s in the property sector as the strong take advantage of the weak. I am also bullish on the smaller resource companies. Investors in the resources sectors have looked for safety in BHP and RIO and I expect that investors will start looking for more growth and value in 2010.

Cash is still overweight in the market place; many investors are still sitting on the sideline waiting for confirmation that all is well. This cash will push the market higher at some point in the future. As such I am taking a long term view on investments. I do expect to see the volatility continue, any dips should be taken as an opportunity to enter stocks.

Dollar

The Australian dollar started the year at 0.72c and closed at 0.92c with a low of 0.62c. One of the major affect on our dollar is interest rates. As Australian companies have re-capitalised and the Reserve bank has taken the steps to increase interest rates to curb inflation giving  Australia the highest interest rate in the western world. This is a negative if you have a home loan but a positive in attracting overseas investors to our country, giving our market and economy a boost.

Gold

The gold price started the year at $860 an ounce and closed at $1100 an ounce, however, the sale of physical gold has not increased in line. As such it appears that the gold price is being pushed in the futures market as investors look to hedge against the concerns in the US. Going forward we still expect to see the gold price move higher, however, short term I am looking for a pull back.

Oil

Oil started the year at $48 a barrel and closed at $81 a barrel. We have a fair value price of $75 a barrel as such it was looking undervalued at the start of the year. I would expect to see the oil price hold around these levels for now.

2010

Even with 2009 being a good year I do expect to see further upside in the 2010 year.

At present the market is trading in a range from 4500 to 4800. The start of the year saw the market break out of this range once again moving above 4900, my next target for the market is 5200 which is another 8% above the current level. This is a short-term target, other commentators are looking at the market getting to around 5400 being 10% above the current level, and they are expecting this in the current quarter.

I also expect to see some sectors out perform; property and small caps being two that I am taking a close look at.

Also if you are sitting on cash, look to get this invested now, before the masses. You can easily obtain a yield way above the bank term deposit rates in conjunction with good growth. In my view cash in no longer king, as such I will be fully invested as soon as possible.

Make sure you keep an eye on our web site www.growyourwealth.com.au for all the up dates and latest ideas.

Happy New Year.

The Last Market Wrap for 2009

Downside risk!

By Jason Fittler

The last week has seen the market unable to push up towards 4800 again, however, we have stayed in the trading range. Given that we are moving into the Christmas break I would expect to see trading slow over the coming weeks.

The news out of the US is still mixed while at home it is more upbeat. Last week we had NAB looking to take over AXA and Telstra’s negotiations with the Government looking to have a more positive outcome than first thought.

My money is still on buying good quality stocks paying exceptional yields, the price of a company may jump around on news, but if the company has sustainable dividends it will eventually bring the price back up.

Wishing you all a Merry Christmas and Happy New Year.

The Market Wrap 17-12-09

By Jason Fittler

Still in the trading range.

"The best play in the market right now is an income one."

Again we see the market in a holding pattern, with the market making higher lows over the past 2 months. This would indicate that at present the risk is to the upside.

The market right now is looking for good news, something to push it to new highs.

I am looking for the market in the short term to get up around the 5000 level before it finds resistance, this could take a couple of months and certainly there are a number of economic issue to over come. But short term I am bullish.

Longer term is a different story. The best play in the market right now is an income one. Many investors have moved to cash over the past 3 years, now is a good time to look to buy blue chip assets paying high yields from cash flow.  Investors will do well to adopt this approach.

Traders keep an eye on the materials sector, gold and coal being the hot spots. I do expect some volatility in these sectors which will give you some opportunity.

The Market Wrap 9-12-09

By Jason Fittler

Let’s take look back!

The below chart shows the movements in the market over the past four and a half years. As you can see from this chart every large drop is followed by similar paced recoveries. This is clear in August 2007, March 2008 and finally in March 2009.

It is during these recoveries that you can make good returns; or for those of us riding the ups and downs of the market, it is when your shares recover.

What is clear now is that this initial recovery is completed.

The question now is, where to from here?

It is true that not all of the ducks are in a row, however, Australian companies have certainly taken the necessary steps to re-capitalise themselves, improve cash flows and structure sustainable dividends. Even if the market does pull back these companies will be able to maintain dividends and income - Once again looking for good medium term investments paying solid dividends which will become core portfolio stocks.

It is true that the gains on these will be slower than what we have seen in the past six months but long term you will still be able to achieve around 20% pa.

My focus is now on the USA, I want to see companies recapitalize and retail sales start to pick up.

The Market Wrap 2-12-09

By Jason Fittler

Look for opportunity!

The market has remained inside the trading range of 4800 to 4500, however, opportunities will present themselves.

Last Friday Dubai World looked in trouble. Don’t get me wrong, they are. The point is that the market is still very nervous, this sign of trouble saw the market dip 3% on Friday and then recover the same amount the following Monday.

The issue here is one of news flow; investors have a “shoot first ask questions later” policy. If they see trouble they will sell and reduce their exposure first and then analyse the problem.

It is this mentality which provides opportunity.

The large players in the market at present are more about Monkey see, Monkey Do. They copy each other and follow each other. This allows small investors like ourselves to take advantage of their herd like mentality and take their money.

My view is that the market is getting back to normal, opportunities are out there and investors once again need to be working their portfolios to maxmise their returns.  

The Market Wrap Friday 13th November 2009

Sideways is the new trend.

By Jason Fittler

Over the past couple of weeks we have seen the market pull back to 4500 at level which I have been expecting to see for some time. We also saw a quick rebound from this level, again totally expected.

Many investors who did not get set at the March lows are using any weakness to get into the market.

Note how the market was unable to move back through the 4800 level and is once again trending down. I expect to see the market move sideways from now until Christmas as investors look for opportunities, of which there are plenty.

Any change to this pattern will be caused by one of two things:

1.    The US retail sales improvements along with US companies re-capitalising themselves.
2.    China reducing their spending - I do not expect to see this happen.

At present I am looking at the following sectors,

• property trusts,
• infrastructure,
• media
• and investments in the US.

Keep in mind that as the US retail sales start to improve this will see US companies increase in value, at the same time they will look to increase interest rates improving their dollar giving any investments in the US a fantastic return.

I think now is the time to take a look at the US.

The Market Wrap Friday 23rd October 2009

By Jason Fittler

Have we topped for now?

Earning seasons in the US will finish this week.  To date it has been a mixed bag.

What we are looking for is a return to stable earnings and solid forecasts, analysts are now starting again to believe company reports and pricing those companies on sensible earnings forecasts.

There is however some dark clouds over the banks, in the US and UK we are still look for them to fully re-capatialise themselves and back here at home the banks are looking at fully value and perhaps a little over valued.

I have some concerns also over the price of BHP and RIO which are both also looking top heavy.

On top of my wish list is to see the market pull back a little say 5-10%, this would provide an opportunity for investors to get the last of the cash into the market and also allow us to see that the support is real.

I am concerned that a continued rally could lead to a larger fall in the coming 12 months as there are still economic issues to be dealt with.

Finally, be aware of the property spruiker. I am currently hearing the ads, “The share market has rebounded, property is next.” Do not be a sucker.  Property has some big issues coming up in the next 12 months, interest rate hikes, high unemployment and tough lending policies.

Do not buy property unless you are happy to hold for 10 years with the understanding that any short term investments in property will result in a loss of money.

For more information, give me a call on (07) 4771 4577 or send me an email.

The Market Wrap Friday 16th October 2009

4800 and beyond.

Last week the market pushed through 4800 and just touched 4900, the US also moved back above 10,000. The question is… Can they maintain this level?  There are a couple of issues to look at here.

First, the concern is that the market has run ahead of the fundamentals, in fact this is not the case.  Market prices are currently sitting slightly below where they should be for the current earnings and in line with forecast earnings.  What this tells me is that the market has regained its faith in the earnings forecasts which the market is putting out. As such we can expect to see the market return back to a fundamental base.

Second, Australia has picked up on the back of the China story, in the short term our future will depend on China’s stimulus package. I am comfortable with this as I fully expect China to continue to spend.

Third, our banks and large Blue Chip companies have led the way in re-capitalising themselves, putting them in a good position moving forward. The rest of the world has not quite followed suit yet, as such we can still expect a lag before the world is back to normal.

At present we are in a good position, I think that the market will hold around these levels for some time. Any pull back is an opportunity to get those last cash holdings into the market.

The Market Wrap 18-9-09

4800 - Will we get there?


The last few weeks in the market have been a welcome relief.  For those who were looking at massive losses in their portfolio only a few months ago and had the will to stay with the market have now been justly rewarded. The confidence has indeed come back into the market place with a lot of those losses now recovered.

But now is no time to get carried away, you would be forgiven for forgetting that we are still in a Bear market and in a Bear market caution is important. It is a good time now to take some profits and continue to look for value.

If you think you have missed the run, it is not all bad news. There is still plenty of value in the property and infrastructure sectors. Also some good plays in copper, gold, oil and coal sector.

Now is the time to take action as good profits await those who do.