INVESTMENT CLOCK

The investment Clock – My friends at Bourse Communications investor relations services sent this over yesterday. It is the Investment clock first published in the Evening Standard in London in 1937. The World is probably a little bit after four. In December this clock was published in the Herald Sun and it was half past one. Here are Bourse Communication’s comments on the clock…as good (better) than anything I could write:



“Financial markets continue to be in a daily tailspin, their direction dependant on the receipt of good or bad news. The stock market remains vulnerable as many companies struggle to maintain earnings in a recessionary cycle and even the Aussie dollar has fallen substantially against the greenback- Investors should now be asking themselves, what time is it?

Investment experts have often looked to a well respected technique called The Investment Clock to work out what they should do with their money next and in order to determine where we are in the current investment cycle.

We were first introduced to The Investment Clock concept as share broking rookies in the early 1980s and were often struck by how accurate it was at predicting what might lay ahead. The real difficulty was determining exactly where the hand on the clock should be placed at any given point in time.

The Investment Clock has been around since it was established and first published in London's Evening Standard in 1937.

While not flawless, the clock often provides a useful guide for making investment decisions.

HOW TO DETERMINE THE TIME

‘The economic climate at Twelve O’clock is boom time’. At One O'clock interest rates are rising. By Two, share prices start to fall and by Three commodity prices are decreasing as un-employment levels increase. At the moment, we are seeing commodity prices fall as part of the current cycle.

At Five O’clock, real estate beings to feel the pinch and at Six O'clock it is recession time.

At Seven O'clock the Reserve Bank begins to cut interest rates to kick-start the economy and by Eight share prices, anticipating an improving economy, begin to rise.

Commodity prices perk up at Nine O'clock and, as unemployment falls, real estate makes a comeback at about Ten or Eleven O'clock.

So, what's the time right now?



We're probably well past Four O'clock, where commodity prices and overseas reserves have already begun to fall. Our currency is presently under enormous pressure and this could be followed by the labour market contracting, money getting tighter and further falls occurring in real estate. These are the classic signs of a bear market in full swing with investor sentiment on knifes edge.

Importantly, however, time does not always divide up evenly on The Investment Clock, like a real timepiece. The actual times between Three and Six can be indirectly determined by special factors like demand for commodities, driven by China and India.

The US Central Bank and our own Reserve Bank now have a vital job - to cut rates enough to prevent a recession without letting the inflation genie come any further out of the bottle.

It is entirely your subjective judgment as to exactly what time it is now on The Investment Clock, yet this decision could prove to be very significant in terms of what might be ahead for investment markets and how this will impact on investors benefiting from getting the time right.

The following factors need to be considered in selecting the current time on The Investment Clock:

* Share prices are continuing to fall
* Many companies are finding it hard to maintain earnings and possibly their dividends over the next year or so
* Capital is now hard to raise, unless the company has or is close to achieving an earnings profile
* Investor sentiment continues to be precariously placed, with 'fear' well and truly taking over from 'greed'
* Commodity prices have now fallen significantly
* The property market is under huge pressure with clearance rates at auctions hovering around 50% and many vendors unable to sell due to unrealistic price expectations
* Retailers are having the worse time in many years as consumers have stopped spending
* The Reserve Bank has now dropped the cash rate by 300 basis points. Further easing is likely to occur up to March/April 2009
* Employment begins to be an issue with a downsizing in the labour market a real possibility
* Greater scrutiny of executive pay and a higher level of accountability expected
* Fund managers are waiting with baited breath for a signal to move from a cash weighted position back into the share market
* The inauguration of the new president in the US may well herald the commencement of the recovery cycle
* No one can accurately pick the bottom of the market. Those that get close to picking it will benefit greatly in the years ahead”