They are ready to ”jump ship to the safety of CASH” and will return “when things look better” and all the volatility is gone.

All of my adviser colleagues and myself here at the Hudson Institute have written in this publication many times about the folly of trying to time market movements. Really it is a mugs game. Trying to enter in at the very bottom of the market cycle is just about impossible and yet many try and do it time and time again – maybe with some limited success, but mostly with very poor results.

When members want to ‘exit shares and go to CASH’ for their super, they are really making two implicit decisions:

• This is the best time to exit the market (i.e. it will get worse from here and "so I might as well get out now") and;

• I will be able to time my re-entry into the market perfectly (i.e. "I will know when the market has bottomed and will buy back in")

Now quite frankly, this is a very ambitious scenario to achieve even one of the propositions above – let alone both.

So what do you do? Hudson advisers often remark to members that the key to long term success in share market investing is really a case of “Time IN the market not timing OF the market”. This is what really counts over the long-term.

I was reminder again of this old adage when looking at the performance of the world share markets over the past week and a half. Two weekends ago the turmoil in the world economy was front and centre - again. 

The European debt crisis was (and still is) at fever pitch as the leaders of Germany, France and smaller economies dithered from one summit after another. The Euro-zone is slowing on the back of a tightening credit crunch and many countries are staring into the abyss of default. Will the Euro survive, in what form and what will happen if it is broken up?

The US economy is growing slowly but fears over its own debt load and a grid locked Congress have caused consternation's in the equity markets that recession in 2012 is still a real possibility. It was all dome and gloom and the bears were circling. Many Hudson members were close to pulling the pin and “going to CASH”.   

THEN a few items came up that brightened the mood considerably:

• The world’s 6 leading central banks announced coordinated action to provide $US liquidity to Europe’s embattled banks;

• The European Bank indicated that if the EU governments could work more closely together fiscally, it stood ready to assist;

• The Chinese government eased monetary policy for its own banks to encourage more lending.

These few items that in specific practicality don’t add up to a great deal of hard action - were enough for the world equity markets to ignite.  By the end of the week, the share markets in France and Germany were up 11%. The US was up over 7% and the Australian markets likewise were up over 7%.

What the events of the past week and half throw up are the following questions:

• Is this the start of the equity recovery we have all been looking for? – Maybe

• Is the downward slide in equity markets over? - Hard to say

However, what is born out by these events is that trying to pick the bottom of the market – any market – is very hard to do consistently. If you were in CASH and missed this past week’s action you may well have missed 1 year’s long-term share market growth in one week!

Being invested in line with your time frame and risk profile is the best investment strategy. Don’t try to TIME the market, just be IN the market for the long-term and keep your focus on the future not on day-to-day volatility.

According to the RP Data-Rismark October Hedonic Home Value Index, Brisbane led the drop in property values at 8% for the year to October 2011 (down 2.9% for the month). In other regions was a 5% decline for Melbourne, Adelaide and Perth home values but less of a drop was in Sydney at 1.1%. Other than Sydney which remained steady for the month, all capital home prices fell in October - only Canberra registered an increase over the month of 1.6%.

Tim Lawless - RP Data director of research says the year-to-date results highlight the divergent outcomes more clearly. “Over the 10 months to October, Canberra and Sydney dwelling values have not moved a great deal: up 0.9% and down 1.4% respectively.”

“In contrast, Brisbane home values have been hit hard and are now off 7.5% while Melbourne dwellings have corrected 5.8% after very strong 25-30% capital growth over 2009-10.”

Housing stock is still on the increase with an additional 5,631 properties added for sale in November according to SQM Research. This increase of 1.5% to the current stock bringing the total national listed housing stock to 388,848. At the current level of stock, Louis Christopher from SQM Research says, the market is now “generally considered to be oversupplied” meaning it is easier to find properties to purchase, reducing demand and competition.

The good news (if your desperate) is for property investors as the current 2.8% decline in house prices over 2011 has been offset by solid growth in rents.

SOURCES: News.com.au | PropertyObserver.com.au | SQM Research

Answer read time: 2 mins

Prior to the GFC in 2008, the Australian economy was booming and the money was flowing. Post GFC and it's a different story - the heavy money ladened pockets of Australia's richest is getting lighter. Big names like Packer, Fairfax and Lowry saw their millions and billions slip away.

On the other hand, billions have been made post GFC - No surprises what industry they come from...

The Breaking...

	James Packer (Media/Gaming)		John B Fairfax (Media)		Frank Lowy (Westfields)
	2007 Valuation: $7.25 billion		2007 Valuation: $1.39 billion		2007 Valuation: $6.51 billion
	2011 Valuation: $3.75 billion		2011 Valuation: $472 million		2011 Valuation: $4.68 billion
	Loss: $3.5 billion		Loss: $918 million		Loss: $1.83 billion
The Making...
	Andrew Forrest (Mining)		Gina Rinehart (Mining)
	2007 Valuation: $1.3 billion		2007 Valuation: $1 billion
	2011 Valuation: $6.9 billion		2011 Valuation: $9 billion
	Gain: $5.6 billion		Gain: $8 billion

NOTE: The 2007 valuations are taken from the BRW Rich 200 of that year, while 2011 valuations are estimates based on share prices movements as mentioned on Crikey.

SOURCE: Yahoo finance

Share market update for week ending Wednesday 7th December, 2011

Well what a splendid week for share investors. Markets around the globe were up strongly on the back of hopes for a resolution to the ongoing saga that is the European debt crisis. The world’s 6 largest central banks banded together to make US dollar loans cheaper for struggling European Banks, and hence provide more liquidity for the limp economy as well as to give politicians more time to come up with a enduring solution. 

The local share market, as measured by the All Ordinaries index - was up a strong 3.9% or 167 points to close Wednesday at 4351 points. 

Yet another European summit this coming weekend will dictate the immediate future direction of the world’s share markets. The leaders of Germany and France have indicated they will resolve the crisis this weekend on the back of a re-write of the many treaties that back up the European zone, to draw all countries closer to together fiscally and under more direct control of Brussels, where the EU is head quartered. 

Will this closer integration ‘fly’ with all 17 members of the Euro currency block or even the larger 27 members of the European Union? Only time will tell…

Locally, the RBA cut interest rates another 0.25 % on Tuesday citing the European crisis as detrimental to the future near term health of the world economy, and a danger of financial contagion for our economy as well. The share market fell steeply after the rate cut but mostly over fears of a near term economic decline highlighted by the RBA, rather than the cut itself.  

The September GDP figures came out yesterday and showed the economy in rude health – mostly on the back of the mining boom kicking into a higher gear. The economy grew at a higher than expected 1% in the 3 months to 30 September for a yearly growth rate of 2.5%.

Offshore markets were mostly higher for the week ending Wed the 7th:

Data Sources | The Australian Financial Review | www.finance.yahoo.com.au

5 Year International Price History Graphs

Comics from Home

Nicholsoncartoons.com.au >>