Monthly Newsletter - June 2009

by Andrew Newman
in Newsletter
30 Jun 2009 | 0 Comments

Editors Note

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

With increasing evidence suggesting that the world economy is past the worst and looking for a recovery later in the year, the world stock markets had another positive month.

Inspirational Quote

Whatever the mind can conceive and believe, the mind can achieve - Napoleon Hill.

Funny Quote

Instead of getting married again, I'm going to find some woman I really don't like and just give her a house - Rod Stewart.

Market Statistics

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

Market Index	May 09
S&P/ASX 200 Accum	1.36%
Dow Jones	4.07%
S&P 500	5.31%
Nikkei	7.86%
AUD/USD	10.41%
Oil	29.71%
Gold (USD/oz)	10.24%

Market Commentary

World equity markets recorded a 3rd consecutive positive monthly return as the MSCI World Accumulation Index (AUD Hedged) gained another 5.5% in May with increasing evidence suggesting that the world economy is past the worst and looking for a recovery later in the year. However, markets did pull back from a strong start in May realising that prices have run too hard and too fast in such a short space of time, with many structural issues yet to be resolved. Oil prices surged to over $66 pb in May fuelled by falling US stockpiles, rising demand from China and positive data from US, Japan and India. Under these conditions investors began to shift to higher-yielding currencies which saw the US dollar come under selling pressure in May exacerbated by concerns over rising US government debt levels.

The US equity market (in local currency terms) advanced 5.5% on the back of central bankers pointing to signs of a recovery supported by the stress test results on US lenders which reassured investors. However, yields on 10-year US treasury notes spiked to 6 month highs raising fears that higher borrowing costs may thwart an economic recovery.

If unemployment rises to 10% as suggested by many economists (the restructure of GM and Chrysler only reinforces this view), there may not be the household income needed to propel spending and encourage a strong recovery.

European markets advanced 4.7% in May with the strongest performing markets being Austria (+17.5%), Norway (+16.2%), Greece (+11.3%) and Portugal (+8.4%). A sobering statistic though is that the euro zone annual inflation rate is at 0% raising concerns of the region slipping into deflation over the next few months. Similarly, the UK market gained 4.6% despite the economy clearly facing a slow recovery from its recession and growing risks to the UK credit rating, due to record levels of borrowings. Japan surged 7.0% in May after a major turnaround in industrial output resulting from a rebound in exports, while both Hong Kong (18.1%) and Singapore (22.1%) posted very strong returns.

In line with improved investor sentiment and prospects for economic growth, Energy (10.8%), Materials (9.6%) and Financials (9.5%) led the markets strongly over the month. They were followed by Consumer Staples (5.2%), Healthcare (5.1%), Industrials (4.4%) and Utilities posting 3.8% in May. The laggards of the month were IT (2.8%), Telcos (1.3%) and Consumer Discretionary which retreated by 0.2%.

Australian stocks rose for a 3rd consecutive month in May after more signs emerged that the global economy was stabilising and Australia's downturn might be shallower than expected. The benchmark S&P⁄ASX300 Accumulation Index rose 1.5%.

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

Feature Story - 10 Rules for Achieving Financial Freedom (Rule 1)

Over the next 10 issues of this newsletter, I will present 1 rule per issue.

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

Rule 1 - Establish a budget

Having trouble saving money? You're not alone! Budgeting and saving is a little like keeping to a strict diet or a healthy exercise regime. We know we should do it, but we can always find a reason why we don't.

Although many of us will earn over a million dollars during our working lives, we'll only manage to save a fraction of it for ourselves. Where does it all go? Much of it is spent on luxuries and unnecessary items. These purchases add up, making it very difficult for us to reach our long-term savings goals.

Most of us spend our money first and then see if there's anything left over to be saved. There usually isn't. The approach should be reversed: begin by putting away a given amount and then paying off the essentials. The remainder can then be spent guilt-free. Establishing a budget that shows what you earn and where you spend it - is a good start.

To give you an idea of where your money goes and where you could make changes, I have included a link to a budget planner which will work out your total income and expenses. Save the Budget Planner (Microsoft Excel) to your computer and type in your income and expenses. The items used are just suggestions. Feel free to change them or add new ones if you need to. The budget planner has been sourced from Understanding Money at http://www.understandingmoney.gov.au.

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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 - June 2009

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