Australian Investment Blog

Reinforcing our current views Good Morning everyone Overview Firstly, we’d like to set out once again our current views on the market, the reasons why we should cautious, our decision to move to 39% cash in the Market Matters portfolio, and the likely path over the next month or so. We’ll also cover the rationale for the two share sales yesterday. Current positioning In recent weeks we were calling for the US market to make a new high – about 5% above where it was trading at the time and for that to support a move in the ASX 200 up to 5250/5300. We got to 5216 on the ASX 200 and felt the upside had become limited so we put ourselves into ‘sell mode’, increasing cash levels in the Market Matters portfolio. The Aussie market started to pull back from that time as concern around bad debts in the banking sector emerged. With banks such a large influence on our index, the market started to underperform pretty dramatically v the US market which continued to be well supported. That support however – as we flagged in our March 22nd report – is largely coming from the companies themselves that have large buy-back programs under way. Companies using cash to buy back their own stock on market. They then cancel the shares, which results in a smaller number of shares on issue, and they ultimately see an improvement in their earnings per share (EPS). It’s a way of manufacturing growth.
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