Market Wrap - Week Ending Friday 25th July 2008

By Jason Fittler

The events unfolding with NAB and ANZ.  

We can now see that fear has a firm grip on this market.  “Chicken Little” can be heard loud and clear, however, the sky is not falling.  On Friday we saw NAB come out with some major write downs and again on Monday we’ve seen ANZ with a similar announcement.

Were these announcements unexpected?  Not at all, the market has been expecting Australian banks to announce write downs in relation to mortgage back securities associated with the sub prime.  

So why have both of these stocks fallen 12%?  First the big boys are protecting their positions, and second the retail investor is panicking and is most likely in margin call situations.

For the cashed up investor with a long term view, this is a great buying opportunity. Again, steady as she goes, do not put all of your money in straight away, this will be a story played out over a couple of months. I also caution you on trying to pick the bottom, the funny thing about the market bottom is you don’t know that it’s happened until after the event.

If you are a serious retail investor, buy the yield and be prepared to hold long term. Long term is at least 5 years, not 5 minutes. Unfortunately we now live in the age of speed and people’s perception of “long term” is about 5 days.  If you truly have a long term view, this market is for you if not hold cash.  When the market dips like it is now the small retail investor has an opportunity to pick up the bargains.

Our market closed down at 5031 on Friday and has only moved down another 50 points on Monday after a heavy sell off in the banking sectors.  There is a lot of good value in the market right now.

It is time to find out if you are a leader or a follower.

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Until next week...