By Joe Cardone
EIGHT per cent bank interest rates may look attractive, given the fall in the stockmarket has been substantial, but it is valid to start buying shares in small quantities if you are investor with a 10 to 20-year view rather than a 10 to 20-day view.
Remember, buying low and selling high is a myth. What people really mean is they want to buy LOWEST and sell HIGHEST.
However, in practice, the best you can do is to buy in when the news is still negative to catch any turn.
Despite the stockmarket receiving a lot of bad news lately, it has remained reasonably supported. The one significant positive, crude oil falling $US20 a barrel off its highs, probably helped.
In fact, the risk of a rapid stockmarket sell off was probably averted by the US Government’s policy to virtually nationalise, and/or save anything in the banking sector big enough to tie its shoelaces.
The fact that the Australian stockmarket refused to go down despite the negative environment is a positive sign and a victory for contrarian investors watching sentiment indicators (“CityNews”, July 24) closely to judge that the collective selling crowd had exhausted themselves in the short-term.
The recent bounce in the market had many market commentators predicting that this could be the end of the bear market… some for the fifth time! The great thing about this approach is that if you just keep doing it eventually you will be right.
The US housing market continues to be of concern. It has been artificially created by lax regulatory and lending standards and the Federal Reserve maintaining interest rates too low for too long.
Based on the Shiller Index (a widely used measure of housing), the current US boom is the largest in index-point terms going back to 1890.
Housing in the US will stabilise mid 2009 to late 2010. And just in case you were wondering, both the UK and Australia have had similar run-ups in housing over the period 1997 to 2005. We have, luckily, avoided America’s 20 per cent plus falls.
US housing and financial sectors aside, a great deal of the outcome of the direction of our stockmarket in the coming months will depend on the oil price and that, in turn, will depend heavily on Iran negotiations (next two weeks) and the Gulf hurricane season (peak season September and ending in November).
The Gulf region accounts for 25 per cent US oil production, so anyone wanting to start predicting the base of this stockmarket had better be good at weather forecasting.

Stockbroker Joseph Cardone is an experienced adviser and the Canberra branch manager for Patersons, “The Australian Stockbroker”.  Any advice provided in this article is general in nature and should not be solely relied upon when making any individual investment decision.