Market Wrap - Week Ending Friday 29th Feb 2008

ABC as easy as 123, or is it?  Last week we saw the collapse of the ABC Learning Centers as their profits dropped on the back of the costs of re-financing the large level of debt. Eddie Groves, the rags to riches or should I say “milk man to babysitter” story watched as he saw his personal wealth slip through his fingers. However, it wouldn’t be a good story if there wasn’t at least some underhanded activity; Eddie and a number of his directors have off loaded some of their shares to protect their own wealth while the poor shareholder is left holding the debt. One director is currently being investigated for selling his shares during the black out period. (The black out period is between the end of the accounting period until the results are released, this prevents directors taking advantage of any price movements expected on the back of the results.)

The stock is currently in a trading halt while the assets of the company are being sold off. As terrible as these events are, do not let them put you off investing in the share market. We have seen these types of things happen before, the name Allan Bond may mean something to you. This type of corporate collapse will always follow a period of exceptional market performance. This is why we diversify your shares into a number of different companies.

What else happened last week?

As you can see from the below chart the market stayed in the trading range, however now that the reporting season is over we can expect to see the market move on the back of economic data. This week we also have a lot of companies going ex-dividend.

Our latest economic research still point to our market trading below fair value of 6500 and that position could worsen in the short term with further economic weakness in the US and the strength of the Aussie dollar. We expect to see our market recover later in the 2008 year.
Until next week.