Upfront Investor | US Investors Riding a Debt Wave….

It’s not just the US government that is cranking up debt levels, we are seeing US investors, spurred on by a rising share market, once again leveraging their investments to increase exposure to the US market. Currently, debt levels over US equities are back into record territory, at around $400 billion US dollars, surpassing the debt in the markets seen prior to the market top in 2007. So as an investor, seeing this occur is going to give you good reason to wonder whether the US market is again overheated and what ramifications could this have for your investments if it is trading at another top?

Even the most seasoned technical analysts will tell you it’s not easy to pick a market top with pinpoint accuracy. So if you have money invested in the market you need to understand how the market works as once your armed with this knowledge you will understand how to protect your investments in the event that conditions change. What we are seeing on the American market is simply a cycle repeating. Remember the market is either running on greed or fear and right now the US is showing us that greed is the controlling factor. Therefore we need not be fearful, just cautious.

So what do we expect in the market?

The Australian share market has continued up this week, with most of the rise occurring in the first couple of days. On Wednesday although the market made a strong start, having achieved the 5400 point mark in early trade we saw short term profit takers come back into the market later in the day to push the All Ordinaries back down from this level and to see it close low for the day. That said at the time of writing the market continued to hold up very well, which indicates that a target of between 5500 and 5800 points is still very likely this year.

It is important to remember that when the market is at its most bullish this is often the time when investors who have stayed completely, or largely, out of equities since the GFC will begin to take interest and possibly venture back in without having learned the lessons of the past, and so the cycle repeats. In my opinion the risk in the market now is much lower than it was right before the GFC hit. However, as I mentioned last week, as the market rises investors still need to be vigilant, monitor recent purchases and be prepared to act should the market start confirm it may be topping.


To your profitable trading,

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’. Dale has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment adviceto traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.