Down-trend continues, oil markets settle below US$30, ASX futures down 87 points

I apologise for the tone of today's subject; I'm not one to propagate the daily hyperbole and fear that you'll absorb elsewhere, but at the same time I'm not one to put lipstick on a pig - and this market is presently wallowing in muck, providing little respite for the daily observer. But as I tell anyone who emails or SMSs me in a panic over their portfolios, I am sitting at my desk focusing on what returns I can make in 3-5 years, and that causes me to view this little epoch as a bump along the road. I'll postscript that by saying that with regard to resource stocks, the Rivkin Local Model Portfolio has a total of just 6% of its value exposed directly to commodities producers, which is where the current crisis lies. There is no doubt that when oil falls by 70%+ in 18 months and iron ore falls by 80% in five years, then some companies are going to be in financial stress. And if you take a step back and consider what is happening both of those markets, financial stress being inflicted on higher-cost producers is partly an intentional consequence of winding back excessive global supply, now that China has lost a significant part of its appetite.

The intraday move down to 4,733 in ASX 200 futures markets back in late August is being tested again and this marks the extremities of the medium-term volatility that we can trace back to that period. Neither I nor anyone lacking a time machine will be able to tell you what the market is going to do in the next few days/weeks/months, but I will repeat my mantra that while interest rates for cash investments are being based off an RBA rate of 2.00%, no pragmatic investor is going to pass up the opportunity to own large, liquid companies with a long-term track record of low-volatility earnings and a propensity to pay them out to shareholders via dividends yielding 7.50%+. It's as simple as that.

Today's charts--which are taken from the new Rivkin Trader platform--show the AUDUSD, the copper price and the ASX 200 cash index CFD, and the look of these charts will not surprise you. The moves down have been impulsive to say the least, the moves back up will probably involve a similar pace and now is the time when you must decide whether you are a short-term trader or long-term conservative investor, because stepping out of this market and then trying to pick a 'good time' to get back in is a form of speculation - we'd much rather structure a portfolio to endure these periods rather than time the market aggressively, and that statement is characterised by the make up of the Rivkin Local Model Portfolio.


Source: Rivkin, Saxo Bank

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This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
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