Peter Switzer – the founder of the Switzer Super Report, a newsletter and website for self-managed super funds– writes :
This budget should have been a beauty with an improving economy and a rate cut to boot but right now it’s looking like a budget balls up.
The election campaign ahead better bring out the best in Malcolm and Scott or else there could be a personal income fall for both of them that they hadn’t budgeted for.
Overseas factors : Negative impacts to dominate
RISK Summary: There appears a growing band of knowledgeable voices highlighting foreign economic and financial risks.
With regard to current market conditions, we should be very clear that reliable valuation measures are presently consistent with S&P 500 nominal total returns in the range of 0-2% annually over the coming 10-12 year horizon. Given that the current S&P 500 dividend yield is slightly above 2%, this implies that we expect the S&P 500 Index itself to be lower a decade from now, than it is today (an expectation that I also correctly expressed in 2000 based on similar arithmetic). From a cyclical perspective, a 40-55% market retreat over the completion of the current cycle would represent a run-of-the-mill outcome, not a worst-case scenario.
As can be seen from the below graph of John Hussman’s model, it is very reliable:
Note how the American S&P 500 index is currently (Arrow and blue line) at extremely expensive levels … more expensive now than at end of 2007, before the GFC crash
Let the following consideration always guide your business and financial activity :
Conclusion
American Stock Markets are significantly expensive. Economic growth is struggling there, as is profitability. Alarming rounded top formation in share prices appears evident.
Australia has not used the Budget to adequately reduce risks of anaemic economic growth.
Refrain from accepting personal and business risk. Adjust operations and finances to accord with conservative financial and economic outlook.
Graham Brecker 