Monthly Archives: July 2015

Mixed signals

The equity markets continue to give mixed signals. There has been a lot of volatility in markets of late, provoked initially by the Greek issues and more recently by China. The volatility on the Chinese stock markets is less important given that the equity markets in China have little correlation with the overall economy compared to Western nations. Of more significance is the underlying economy and despite the release of economic data from China suggesting that their economy is growing at the rate of 7%, all indications are that growth is slowing significantly and that the real figure is closer to 4%.

The slowing Chinese economy has had an important influence on world trade. Major commodities such as copper, oil and gold are at or near their four year lows. The Baltic dry index (BDI) which is a significant indicator of world’s economic health has recently risen only marginally… Continue reading

Is this a time to buy equities?

Has the Australian market reached an apparent bottom and is this the time to buy? The bull market in the United States remains intact at a time when the Australian market has been weak over past months. There is a lot of cash sitting on the sidelines and low interest rates make equities one of the few attractive investments. When an investor is trying to decide whether to enter the market emotion is always a factor and fundamental analysis often provides little help but technical analysis can be very useful.   Consider the following charts of the ASX200.

The weekly chart of the ASX200 below shows that the down trend is still intact and the 10/30eMA crossover contributes to a very bearish chart. There is support at the 5400 level going back nearly 10 years suggesting a possible bottom but the RSI remains negative.   Technically the weekly… Continue reading

What to make of China?

Data coming out of China have always been hard to interpret and from an economic viewpoint have little veracity.  For Australian investors there is little doubt that China is the big story and that the Greek issue by contrast is just a diversion. The Chinese equities market has now fallen 30% over a three week period. This market was a bubble, so a market crash was hardly a surprise.

The question now is how far can the Chinese market fall and what are its implications for Australia?  The stock market in China is different to western markets in many respects. The Chinese market has a very high level of retail investors/speculators with only about 17% institutional investors. These figures are very different compared to western economies. These factors along with the known Chinese proclivity for gambling, means that the stock market becomes one huge casino and with margin… Continue reading

The knowns and the unknowns – Objectivity is essential

This is indeed a time of volatility and uncertainty for investors and a time to be objective about investing decisions. Let’s face it, there are some current economic issues that are known, some that have a probability of occurring and some that are completely unknown.   The unknowns are beyond us but as investors we must be able take into account those factors which are known and make allowance for those that do have a probability of occurring. These variables can be factored into our investment plan and determine how we should be investing in this current environment?

The following knowns seem almost certain to continue over the next few years. These include the continuation of low interest rates, very low inflation rates, quantitative easing, high sovereign debt levels and a continuation and escalation of Middle East conflicts.

The following high probability events can be expected to occur over… Continue reading

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