Lighthouse Securities Monthly Investment Letter

May 17, 2011

FOREX, Global Macro

 

Welcome to the Lighthouse Securities Monthly Investment Letter

 This letter has been developed with your help as readers and clients and we hope that you find it both interesting and informative and particulalry that it helps us all achieve the investment edge necessary to make sustainable profits in the markets.

 As we finalise this month’s letter markets appear to be at an important juncture.

 The US Dollar appears to be trying to base at a time of European Sovereign Crisis but against a backdrop of both the US President and the US Treasury Secretary Geithner raising the spectre, however remote of a US default.

  • In Australia our economic analysis tells us that the RBA is on the verge of tightening too much. Already retail spending, demand for credit, house prices and employment growth are in a downtrend. Further tightening risks putting the household sector deeper into the mire.
  • Why senior market economists don’t challenge the RBA’s view of things is not hard to fathom but it is disappointing – not even the RBA is always right.
  • Equity markets have recently started their May sell off and the Australian market, having consistently lagged the US market and been unable to hold above 5,000 for a long while now, is vulnerable to the headwinds of the Australian economy and the globe.
  • On currency markets it appears that the AUD/USD’s medium term top is in place at 1.1013 as the USD strengthens and commodity markets recede from the bullish froth that saw futures market regulators so worried that they changed margin requirements in the Silver Pit in order to knock out the speculators.
  • All in all there are many opportunities in the markets but it is a time of caution and use of options to protect hard won portfolio gains of the past few years is favoured.

 Next month we will hear from Tristen Cosgrove our new Financial Planning partner. Tristen has been running his own financial planning practice for more than a decade now and shares a common set of goals and understanding on markets and economics and crucially has the client at the centre of his practice which has been all too rare over the past 10 years.

As Benjamin Graham once wrote “The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.”  

 In light of this we hope that you find this new publication of use.

Lighthouse Monthly Market and Economic Spotlight May 2011

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