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The papers have been telling us that this has been the worst fiscal year for the equity markets since year dot or when Adam was a kid. Tell us something new please.
Tell us the beginning and tell us the end. Give us some insight, not history. Think of those poor superannuants that now have to work a few extra years to rebuild the nest egg and what about the greedy ones who blew their family fortunes. Yes some lessons have been learnt in this one even by the big players.
So as we go deeper into malaise and the world becomes gloomier it is time to put on our contrarian hats. It is not so much I always want to be a happy chappy but when the doomsayers get more air time than us happy chappies it is time to step in. You do know of Sir Galahad?
So I am going to look for the silver lining.
The bad news is we probably have to go through more pain – like another 10% of it. Sorry. But the good news is that it could be over sooner than later. We have had 8 months of pain and maybe only another couple to go. And then those cashed up will rush in for the bargains as there will be.
Don’t say I told you so but markets over extend – upwards and downwards. And just as we went to ridiculous heights late last year we will go to ludicrous lows - soon. Can you imagine it the big banks are already at a 10% yield – but it will get better – barring write downs and dividend cuts? Which no-one wants to talk about – yes Mum is the word on these for a while.
So how low? Take a look at my retracement chart:
Chart 1
click chart for more detail
We are slap bang on the 38.2% retracement – mathematically a critical level but 4800 is a number I have been favouring for months now and that is 50% retracement since the move up from 2003 - a rounder figure and a more likely level.
And when that is reached I will give you the upside which you will find exciting and greed will creep back in. We are only human.
Enjoy the ride
Tom Scollon
Chief Analyst
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