Market Wrap 25-11-11

By Jason Fittler

We find ourselves in a world of technology, where information is being pushed at us twenty-four hours a day, seven days a week. This results in our idea of long-term becoming shorter and shorter.

My view is that time is relevant to the amount of information we receive in any given time frame. Due to technology we receive so much that time seems to pass very quickly.

It’s time to slow down.

Take a look at the below chart. We are expecting that the market will move back towards 5,000 points in the short-term. This is the level the market was back in 2006, a mere 5 years ago. 

You can see this on the left hand side of chart. It them moved rapidly up before the GFC occurred pushing it down to 3,100 in 2009. This entire move took around 3 years, a very short time when speaking of investments.

In less than a year the market recovered to 5000 from the lows.  It then travelled sideways for about a year before pulling back to the current levels.

Getting back to 5000 points in the next 6-12 months and back to the pre-GFC level of 2006 in not an unreasonable expectation.

This current fall is on the back of the Euro Crisis. We all know this because every financial commentator tells us around 20 times a day.

The real problem is that we do not know who is affected by this crisis.

However, we do know the businesses that are not affected.

Many large Australian blue chip shares have been oversold on the back panic. I do not know when they will recover, but I do know that they are very cheap at these prices.

To me this is a great buying opportunity. 

So instead of focusing on what we do not know or understand we should focus on what we do.

We know the businesses that are well financed, have strong cash flow and growth that will not be affected by the Euro Crisis. We also know that long-term in the market is 20 years not 2.

Long-term investors will make money in this market.