Monthly Newsletter - August 2009

by Andrew Newman
in Newsletter
30 Aug 2009 | 0 Comments

Editors Note

This edition includes an inspirational and funny quote, the main market index returns during July 2009, a market commentary and a feature story. I encourage you to make comments.

World equity markets extended their recent strong run in July as the recent reporting season proved more positive than expected. The Australian market also rose in July after confidence grew that Australia's economic downturn would be shallower than expected.

Inspirational Quote

If you don't know where you are going, you will wind up somewhere else! - Lawrence "Yogi" Berra.

Funny Quote

When I was young I used to think that money was the most important thing in life. Now that I am old, I know it is - Oscar Wilde.

Market Statistics

The table below shows the monthly returns for the main market indices during July 2009.

Market Index	July 09
S&P/ASX 200 Accum	7.31%
Dow Jones	8.58%
S&P 500	7.41%
Nikkei	4.00%
AUD/USD	1.93%
Oil	-0.63%
Gold (USD/oz)	2.96%

Market Commentary

World equity markets extended their recent strong run as the MSCI World Accumulation Index (AUD Hedged) gained a further 7.6% in July. Markets were buoyed by the recent reporting season which proved more positive than expected given the current difficult economic environment. It is important to note that in many cases the better earnings results were due to impressive cost-cutting measures which is more of an indication that companies are stabilising than improving sales growth and revenue. As the market focuses more on 2010 earnings, companies that are raising their earnings guidance are boosting investor sentiment in a highly accommodative environment of low interest rates and fiscal initiatives.

The US market was buoyed by recent figures showing a rise in home starts as the pace of decline in the US economy, according to Federal Reserve Chairman Bernanke, appears to have slowed significantly and showing tentative signs of stabilisation. The US equity market gained 7.5% on improved corporate and investor sentiment. Unemployment however, continues to rise while the financial system, according to the Federal Reserve, despite massive injections of cash has not seen a material improvement in bank lending. Moreover, the financials sector and the US economy are facing growing concerns that a wave of commercial real estate defaults due to significant difficulties in refinancing, declining rents and falling prices will provide further challenges beyond those of the residential mortgage market. Approximately $2.2 trillion of US commercial properties refinanced or bought since 2004 are now worth less than their purchase price.

On the back of global demand starting to pick up, Europe's economy is moving closer to recovery as recent reports indicated that manufacturing and service industries contracted at their slowest rate since August 08. European markets reacted positively to the data posting a 9.2% gain in July. The turnaround is most evident in Germany as investor confidence and manufacturing jumped markedly as it leads the Euro-zone in showing stronger signs of stabilisation. Strongest performing markets in Europe were Netherlands (+13.2%), Spain (+13.0%), Germany (+10.6%), Switzerland (+10.0%) and France (+9.4%). The UK market also performed well as it gained 7.5% after better-than-expected corporate results renewed investor confidence led by financials such as HSBC and Barclays.

The Materials sector reflected the signs of an economic improvement as it posted a 10.1% gain in July followed by Financials (+10.0), Consumer Discretionary (+9.5%), IT (+8.0%) and Industrials (+7.8%). Consumer staples also recorded solid numbers (+6.7%) as did Healthcare (+6.4%) and Telecos (+6.2%) with Utilities (+3.1%) and Energy (+3.0%) the laggards in July.

Australian stocks rose for the 5th consecutive month in July after confidence grew that Australia's economic downturn would be shallower than expected and commodity prices rose on the better world outlook. The benchmark S&P/ASX 300 Accumulation Index rose 7.3% in the month.

The Market Commentary has been sourced from Global Value Investors Ltd and Barclays Global Investors.

Feature Story - 10 Rules for Achieving Financial Freedom (Rule 3)

Follow all 10 rules and you will be on the way to achieving financial freedom.

Rule 3 - Pay down non-tax deductible debt

Once you start saving, you should aim to pay down high interest and non-tax deductible debt on non-growth assets such as the debt on your credit cards. If this debt can't be paid off in one payment, work out a monthly repayment schedule.

Then you can start thinking about strategies to pay down the mortgage on your home. This is a non-tax deductible debt on a growth asset. This means you are at least building equity over time, but you are paying it off with after tax money and you are not getting any tax breaks for doing so. One approach is to use your 10% savings to pay down the mortgage rather than a separate investment.

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Past Issues

Please click on the Newsletter category on the left or click Newsletter Archive to view past issues.

Important Information

Information provided in this newsletter is general in nature and does not constitute financial advice. While I have taken reasonable care in providing this information, it should not be construed as being specific to your investment objectives, financial situation or particular needs. It's important for you to consider these matters before making any financial decision and we recommend you seek financial advice.

Monthly Newsletter - August 2009

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