Today is D-Day. After six months of preparation I’m finally ready to officially launch Australia’s most exciting investment advisory service.
This afternoon you’ll receive a personal invite to join a technological revolution.
And I don’t say that lightly. You’ll find out about the simple invention that could overthrow China as the cheap manufacturer of the world…how TVs, smart phones and laptops will become so powerful and so flexible, you’ll be able to roll them up and store them in your wallet…and also how energy – rather than getting more expensive – will actually become cheaper, cleaner and more abundant than ever.
I’m certain what you read will impress you. Check your email for full details around 2pm this afternoon.
Until then, on with today’s Money Morning…
When does a bull market not feel like a bull market?
When it has gone on for four years and yet barely a day has gone by without fear the market will crash.
Investing in a bull market is supposed to be easy. But you usually only hear those claims after a bull market has ended, with the help of rose-tinted hindsight glasses.
But really, that’s not how it is at all.
Below is a chart of the US S&P 500 index:
Source: Google Finance
The chart covers the last 10 years. It covers two huge bull market rallies. The first lasted from March 2003 until October 2007.
Then followed a bear market that lasted until March 2009…when the next bull market began. Four-and-a-bit years later and this current bull market is still going.
But look at the chart. You could hardly say that both bull markets have been a walk in the park for investors. The current bull market has been especially testing. Several months of gains followed by big falls that have doubtless shaken many investors out of the market…only to see it take off again.
That pattern has repeated at least five times on the US market since 2009.
Australia’s Missing Bull Market
But despite the volatility, the US market has recovered enough to go past the 2007 high.
The latest bull market hasn’t been quite so kind to Australian investors. In fact, when we look at the chart it’s hard to claim with any conviction that the Australian market has seen a bull market since 2009 at all:
Source: Google Finance
Since 2009 the Australian market has a completely different shape to the US market. Where the US market burst higher in 2010, the Aussie market sputtered. Then when the US market took off again in 2011, the Aussie market couldn’t even muster a false start…it just fell in a heap.
It stayed that way for the best part of a year.
Even though the Australian market enjoyed a similar run to the US market in 2012, it did so from a much lower base. So that while the US market hit a record high, the Aussie market is 2,000 points away from taking out the 2007 top.
But regardless of whether you invest in US stocks or Australian stocks, we need to get away from the idea that making money during a bull market is easy, because it isn’t.
Australian Market in No-Man’s Land
The buy-and-hold investors will point to the US index and say, ‘that’s what happens next, stock prices will go back up again.’ They’ll say you should put all your money in the stock market and never sell.
The naturally bearish investors will point to a chart we haven’t shown you today, the Japanese Nikkei225 stock index. They’ll say that’s what happens when a credit-fuelled market crashes and the central bank can no longer prop up the market.
That puts Aussie investors in a bind. Right now the Australian market is in no-man’s-land. It’s a long way from both the high and the low. It’s just stuck in the middle.
This is why we encourage you not to fall for the old buy-and-hold nonsense. In Money Morning we encourage you to take a more active involvement in your investments. And we’re not saying this with the benefit of hindsight either.
In late 2010 we started telling our Australian Small-Cap Investigator subscribers to take some money off the table because we believed the market had seen the end of the best gains.
Turns out we were right.
And then in late 2011 we suggested investors forget about blue-chip growth stocks and instead invest in cash, gold and most importantly, dividend stocks…a message we repeated often through 2012 and into 2013.
But the key question is what you should do next?
A View From the Other Side of the Market
By now you should know your editor’s view on this market. While it looks dangerous and volatile, we still say this is a great time for investors to build wealth.
We say you should use the current period of falling prices to top up your portfolio with a mix of income and growth stocks.
In fact, we’re confident the Aussie market will reach a new high in 2015. But not everyone here at our Albert Park office agrees with that view. In fact, your editor is in the minority on that score.
So, what do our other editors think? One person we suggest you listen to if you’re after another view is our old pal, Sound Money, Sound Investments editor, Greg Canavan.
A few weeks ago Greg sat down to discuss a crucial influence on the Aussie stock market and economy – China. Greg says a slowdown in China could have a major impact on Aussie stocks in the months and years ahead.
In fact, it could be the single biggest influence that determines whether the Aussie market takes off on a new bull market run like the US or sinks into a decade long slump like Japan.
As we say, your editor is optimistic about the future. We believe this is the best time in four years to buy stocks in particular sectors. And that investing in businesses is the single best way to build wealth.
But we also know you can only be a truly enlightened investor if you take into account more than one viewpoint. So we suggest you tune into
Greg’s video to check out his view on the markets, the economy and China.
Cheers,
Kris
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From the Port Phillip Publishing Library
Special Report: Buy These Four Yen Dive Stocks Now
Daily Reckoning: How the Australian Dollar Stole Your Capital Gains
Money Morning: Money Weekend’s Technology FutureWatch 15 June 2013
Pursuit of Happiness: Government Spies: I Warned of This Trend More Than a Year Ago…
Australian Small-Cap Investigator:
How to Make Big Money from Small-Cap Stocks
