This week, we discuss how hysteria is trumping reality when it comes to the markets. We explain why you don’t need to believe all the hype in the media, with stats that show the Australian economy is not in nearly as dire a state as newspapers will lead you to believe.
The Dow Jones industrial average had its largest advancing day on the 8th of January, with 91 advances to every one decliner – one of the largest advances seen in the last 70 years or so. The Dow was up 24 of the last 25 times this has occurred 12 months later for an average return of 20%.
In addition, one of the key things to note when you see a huge amount of fear and panic is investors pulling money out of equity managed funds. Global equity funds saw the largest withdrawals in the last week of December since 2008 – US$28 billion in one week. You would think this was a negative sign for stocks, but the last two times this has occurred (August 2011 and October 2008), the market was higher by more than 25% in the following 12 months after experiencing such levels of redemption. Continuing that theme, it actually is a contrarian indicator that we think could support markets as money flows back into the market over time.
Our Investor Exchange Round Table Discussion Covered:
- Joel raises recent news on Australian unemployment stats indicating a decline from 5.1% to 5%, showing we are gradually inching towards full employment. Further, the RBA released stats that mortgage repayments sit at about 25.5 – 26% of total household income, showing we aren’t in a housing stress situation at this point in time. Tune in now for more info. (5:36)
- Louis explains how common fears surrounding money can help and hurt your financial situation. How does the fear of not having money serve you, and how does fear of what to do with your money hurt you? The psychology of fear can motivate or paralyse, and has a very real impact on your finances. Listen in for more insights on how to handle fears surrounding money. (11:30)
- Brett discusses the lack of demand from Chinese investors to buy Australian property, due to limitations the Chinese government put on Capital controls, the increase on stamp duties and taxes on foreign investors put in place by state governments, and inability to get access to funding from Australian banks. Tune in for more info on the impacts of these policy changes. (28:36)
You Cannot Be Serious this week:
A gentleman in Vietnam drank to so much excess that he had to have his stomach pumped, but with more booze! Why? He fell unconscious and had a high level of methanol in his system, which oxidises to formaldehyde. The only way to reduce the potential for the formaldehyde to come about was to transfuse 3 cans of beer to dilute the amount of methanol in his system. Please don’t try this at home!
If you’re going to steal someone’s phone, it’s probably best not to steal from a UFC fighter. A man tried to steal Polyana Viana’s phone in Rio De Janeiro, suggesting that he had a gun on him. Her response? She went to town on him, and rearranged his face!
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The Investor Exchange Theme Music: “Happy Happy Game Show” by Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0.
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