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Welcome to this newsletter

1/ Do you agree with the philosophy (or strategy) that past performance is the best indicator of future results?

2/ For example if you are picking a soccer team (well it is world cup time) would you want Tim Cahill in your side or not? I think you would because of his historical performance.

With that in mind contemplate the following.

I am old enough to remember the 1987 stock market crash, I remember it well because my brother and I bought a small industrial real estate site, and sat on it for 8 years with little gain, sold it at the worst time around 1995 before the stock and real estate markets took off. That’s called inexperience.

It took 8 years for the XAO to take out the old high, investors and traders have emotional, fearful and painful memories, it takes a while to heal, or for new blood to come into the fray.

Looking at that chart above, good times to buy were late 92 (4 to5 years after the crash) and late 95 (7 to 8 years after the crash at the new high).

Lets fast forward 

Looking at the recent chart of the XAO you can see we have not taken out the old high set in 2007.

In my opinion that’s because the big resource stocks have not been in this recent rally, if they had of been we would be well past the old highs now, like many other global markets are, but those indexes are not so commodities heavy like ours is. BHP and RIO were partly to blame for the big spike in the XAO in 06 and 07.

    Where we are now

It is 5.5 years after the GFC low. (a good time to buy like 93/94?) As I said, Investors and traders have emotional, fearful and painful memories, it takes a while to heal, or for new blood to come into the fray. Colin Nicholson calls this “the disbelief stage” of the economic cycle, I agree, a lot of people still don’t believe this market is going up.

Predictions are that the market will take out the old highs around 2015 or 2016. If past performance is a guide, then that sounds about right, 7 to 8 years after the GFC. Maybe sooner if the commodities rally.

Regular readers will know I do not make predictions, I am big on probability and keeping a cool head as much as possible. What is happening now in the markets reminds very much of the 1994/95 era, such as.

The real estate market was picking up after a long sideways grind.

“the recession we had to have” and doom and gloom of the early nineties was ending.

A conservative political era of the Howard government was beginning.

Real estate and the stock market boomed into 2000.

Negativity and fear ruled investors decisions.

Interesting, do you think?

Upcoming Courses

There will be a one day course in Sydney CBD on the 7^th of September

Also the same course in Perth CBD on the 20th of September 

In the next few days an email will go out with more details.

"if you want to be like Jesus and walk on water, you have to first take action and step out of the boat!"

Kevin Ellis (single dad of 2 boys and local barber)

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