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Thursday, June 10, 2010

Like sands through the hourglass, so are the days of our Europe...

The market’s been very volatile lately, partly due to employment data coming out of the US, but largely, it comes back, yet again, to my “rumours” theory.

So, let’s go back to the protagonist of our ongoing soap opera – Europe, and this time it’s Hungary causing trouble. Now Hungary have a government that hasn’t been in place for very long and during their election campaign, they made certain tax cut promises.

Recently they came out and said that unfortunately the debt situation was more difficult than they had initially thought, and that they wouldn’t be able to follow through on a lot of these promises. I can hear everyone gasping with shock over the thought of a government reneging on a promise, but yes, it happened.

The result was that it sent people into a bit of a panic, as it was interpreted by many that Hungary was in serious trouble.

In reality, the Hungarian government was probably being quite responsible by deciding that it was a time to tighten the belt rather than cut taxes, but let’s be real, I don’t think it’s a stretch to suspect that they may have used the situation to wriggle out of some tax cuts.

So the situation is not as bad as people thought, and the International Monetary Fund (IMF) have come out and confirmed that they do not have concerns regarding Hungary’s debt levels, but the damage was done at least for the short-term.

So where's the upside? The upside is exactly where it has been for the 16 years I’ve been financial advising – the best time to invest is when share prices are low.

That may sound like common sense, but the fact is that most people do the exact opposite – buy high and sell low.

The Australian All Ordinaries index keeps currently hovering around 4,500 points, but it reached over 6,800 points in 2007. Historically the sharemarket has always returned to a higher point than it’s previous record. Now I don’t advocate actively trying to time the market (no one can do that), BUT, if an opportunity is staring you in the face, it’s probably worth at least exploring.

Talk soon,

1 comment:

  1. Caren,

    I read your article and you have some very good points. If I was to start investing, how would I go about that? Am I best off investing in Australian shares or looking to countries that are currently struggling?