August 2007 |
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In This Issue: With the turbulence we’ve seen in the sharemarket lately, many of you are extremely nervous at the moment, so I thought I would write to you and explain my view on the situation. ______________________________________________________________ What we are witnessing in our sharemarket is the result of the collapse of the U.S. Sub-Prime lending market. Here’s what happened in the U.S… The way I understand it is that in the past couple of years anybody with a pulse who was interested in buying a home was able to get financing. Last year about 20% of loans were “subprime”. Another 20% were in a category called "alt-a," or mortgages originated with relaxed lending standards. Lenders were hoping that home prices would continue rising so much that borrowers could get some breathing room by refinancing. But that did not happen. Now, alarmists worry that a subprime mortgage disaster will ruin economic growth in two ways:
How did this affect the sharemarket: A number of major players were caught out on the sub-prime market and losses have been staggering. Many have had to close-out positions in equities (shares) to prop up their illiquid positions in the sub-prime markets, causing them to sell large quantities of equities at prices below recent trading. The effect then followed on into the Australian sharemarket. An event like this normally causes a ripple of panic to the rest of the market. This caused prices to fall even lower still. Hence the large falls in equities markets in the US has been pushed onto the Australian market as well. Up to the middle of July we saw significant rises in our sharemarket which is normally followed by periods of profit taking, so when you combine this regular activity with a major event like the collapse of the “sub-prime” lending market, it means there may be some more selling to come but the market should bottom out shortly. The way forward: With price-earnings-ratios still low in my opinion the market is not overvalued and we should see it bounce back. While on the surface this may seem scary to novice investors, it’s the type of environment that professionals revel in. The next few weeks will depend on the US and any bad news that comes out of there. A note of caution: Be careful with any leveraged exposure that you have at the moment – especially margin lending to avoid any margin calls. Novice traders should be cautious as well. You don’t want to be caught after months of great profits and turn them into losses. If you are unsure just “sit-tight”. Keep your cash aside and get yourself ready to jump as soon as oversold quality companies become evident. ______________________________________________________________
______________________________________________________________ Introduction to Shares & Options: Sat 1st September & Tuesday 4th September ________________________ "Trading Wisely" with Jules Dawson Sat 15th/Sun 16th September – 8.30am till late each day at Attend this life changing event…and get your $2,327 worth of FREE BONUSES! Click For More Information ______________________________________________________________ Next Issue of “Tales for Success” We actively encourage you to pass this onto friends and family who you feel may enjoy this information. A forwarding link may be found at the bottom of this publication. The next full edition of this free newsletter will come to your Inbox in approximately one month’s time. It will be packed with solid information to help you improve your life in ways that are always wealthy and wise. ’Til then… Many Happy Returns, Jule Corporation Pty Ltd Forward |
