Share Market Wrap 6th Oct 06

This week the government launched its marketing campaign to promote the sale of Telstra’s T3 float. This may sound a little cynical but I can’t help but think that this marketing show is like the old snake oil salesman looking for a sucker.

Let’s face it both the Australian and international institutions have already indicated they are not interested in Telstra, which is supported by the government’s admission that they expect to sell the bulk of the float to mum and dad investors. So if the informed don’t want to buy Telstra, what do you think the government is planning to do? Invest millions in promoting this share to those they deem ignorant with the dangling carrot being an offer of a larger than normal dividend. But how good is it to receive a dividend of around 12% when Telstra has fallen over 40% in price in the last year, and from what I can see there is more downside to come. Buying an investment that looses more money than it provides is what I call financial suicide – no wonder the institutions don’t want this share.       

So what is happening in the market?

 Right now it is looking very nice having risen strongly over the past week. In fact it has risen stronger than expected, which has resulted in me revising my target for the current rise.

Over the last few weeks the All Ordinaries Index has traded above the previous peak of 5125.60 achieved on 6 September as expected to move closer to my target of 5200 points. However, if the market maintains its current strength, we may see it rise up to its previous all time high of 5352.10 achieved on 10 May 06 although I believe, at this point in time, the probability of the market rising above this point is very low.