Australia Market Wrap
Officially, third largest shares fall - Opportunity knocks
By Andrew McCrea
The Australian market has now fallen 46% from from its 2007 high point and that means we have surpassed the 1987 market crash which saw the market fall 45%.
We are now within reach of the 1929-30 market crash which was despite publicity to the contrary, only the second worst fall of all time. Over the year which became the Great Depression, the local equity markets fell 49 per cent.
The worst market contraction of all time occurred between 1973 and 1975, when equities crumbled by 58% due to imposition of change of government and capital gains and death duties. History would seem to be saying we might be getting toward a market bottom.
How can we profit by the fall or salvage something from the ruins?
If history is anything to go by, and equity markets remarkably tend to follow similar boom-bust mentality, and overshooting on the upside as well as the downside - opportunity is knocking.
One of "Money Magazine's legendary investors" of all time, Sir John Templeton famously made his fortune during the Great Depression crash. By applying the same principles, it is possible to select "beaten-down" stocks with above average rebound potential, buy them and simply hold and market recovery will do the rest.
How can an investor pick when is, the market bottom? The answer to that is - nobody knows. So it wouldn't pay to use this strategy with borrowed money, the mortgage money or a family inheritance. However, for the canny investor that does their homework, when there is blood running in the streets and prices are cheap - fortunes are made.
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06/01/09 Australian shares buoyed by rally in small miners
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05/01/09 Aussie shares pulled back by banks
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22/12/08 Holidays and lack of leads pulls market lower
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19/12/08 Bargain hunters scoop up Aussie banks
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18/12/08 Australian shares recover – but still catching the CBA disease
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17/12/08 Aussie shares gain, but feel CBA’s pain
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16/12/08 Local stocks fall, but off lows
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15/12/08 Aussie miners lift market on US auto bailout optimism
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12/12/08 Local shares follow fortunes of US auto bail-out
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11/12/08 Australian bourse’s no leads day
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