Market Commentary

by Chris Limberg on Sep 15, 2011

The September quarter has been the most stressful since 2008 / 2009. Notwithstanding that the Australian and Chinese economy are resilient. The volatility has been driven by Europe and the daily movements on Wall Street.

The years 2011, 2012 and possibly 2013 of this decade, I consider to be the years that will be most difficult, primarily due to the time required to recover from the debt issues of the previous decade.

The northern hemisphere will not easily address these outstanding debt issues due to historical attitudes towards each other and possibly due to uncertainty in how to resolve the issue with respect to the amount of debt. It translates as the frugal north attempting to impose standards on the prolifigate southerners. It was recently reported that Greece manipulated their debt levels to be admitted into the European Union.

I have previously outlined the strength of earning and dividends of Australian based companies. To date it would appear that the banks NAB, ANZ, WBC are continuing the trend. Earlier in the year Commonwealth Bank (CBA) increased the final dividend by 10.5% from $1.70 to $1.88, National Bank when it recently reported increased the final dividend from $0.78 to $0.88 and I would be very surprised if both Westpac and ANZ do not report increased profits and elect to increase their final dividend payout. A similar scenario occurred in the early 1980’s; it was the time after the Poseidon crash. Good companies with strong earnings and high yields eventually rebounded strongly during the rest of the 1980’s.

I believe, when the Australian share market is below 4000 points we will find strong value and in due course will be the basis of recovery for all portfolios.

While the quarter has not been the best, the recovery since 30 September has been heartening.

I trust that the Reserve Bank applies common sense and begins to lower interest rates to assist in the recovery of the economy in eastern Australia.

Should you have any queries or want to discuss the above or your portfolios please do not hesitate to contact us.