November Review Comments
Written by Tony Gray   
Tuesday, 16 November 2010 11:31

Portfolio Valuation & Comment

Our outlook remains unchanged.  On the positive side company and property trust balance sheets remain generally very sound and the market is at the higher end of the 18 month price band.  We are regularly seeing investment opportunities as various stocks and sectors cycle down and back up.

On the negative side, uncertainty remains in relation to European debt issues, continued money creation by the US (quantitative easing), distortions in global currencies and Chinese efforts to slow their economy.  Locally, the Reserve Bank increased interest rates in order to slow the economy to head off an expected jump in inflation due to labour shortages associated with construction and mining projects.

The combination of falling business and consumer confidence, higher interest costs, rising wage costs and the high Australian dollar is likely to sap the profitability of many Australian companies.  This is not apparent if tracking the All Ordinaries Index, since the fall in the price of many stocks has been masked by international investor buying of Australian mining stocks.

A flood of international money has gone into commodities and commodity linked companies seeking to protect against a falling $US – which is down as that economy persists in printing money to buy back debt and issue fresh debt as a means of keeping interest rates low and stimulating the economy – never mind the global trade distortions or the historical lessons from this approach.

Elsewhere, share prices are well down in the price range for a wide number of stocks and due to cyclical factors – representing long-term investment opportunities.  While the Australian dollar may trend higher, we feel the current high level represents an opportunity to increase international investment in portfolios.

Please contact us with any queries in relation to your portfolio and/or planning queries.

Please treat the above comments as General Advice, with no action to occur until we have considered with reference to your financial position, needs and goals.


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