My previous prognosis about investments could have been a light year away from now, with all the financial disasters that have occurred lately.

I am not advising any of my clients to invest in anything at the moment as I believe that this financial meltdown has a long way and a long time to go. I think we are still about 15-20% from the bottom of the share market but that may take 18 months to 2 years to reach.

I am anticipating that after Christmas there will be a severe downturn and loss of jobs in Australia. My advice is to be as debt free as possible and wait for buying opportunities but don’t be impatient.

I think that house prices still have a major fall coming and that could be anything up to a further 30-40% from current values. As we have seen recently Government attempts to buttress markets (or even banks) has had unexpected consequences elsewhere in the financial scene , so until all the dust settles and the smoke clears away, just sit on your hands and do nothing except survive, is my advice.

For those of you who have debts, as long as the payments are made there is no problem. Lenders are laying out the red carpet everywhere for regular income sources (receivables). In times of crisis, receivables are like gold and that is why banks and financiers are courting their good customers now, as good customers represent the intrinsic value of their business.

And whilst paying for debts (which were incurred in rosier times) may seem like a drag, when the markets do turn around these assets will go roaring up in value and you will own a much bigger slice of the action.

Is the share market going to continue rising? Will the housing bubble burst soon?

All I can say is that there are always opportunities.

Why is this? Answer. Because human nature doesn’t change. There may be newer ways of doing business to-day but the result is always the same, in that there are winners and losers out of every market movement whether it is up or down.

In investments, most people buy at the top of a market and sell at the bottom, whereas if goods are on sale at the retailers we tend to buy more when the goods are discounted even though we don’t need to buy them at all.

On the one hand we are expecting investment markets to fall but conversely we expect that retail goods will get dearer. This logic doesn’t make any sense at all!

I don’t pretend to be a psychologist but from experience whenever I hear comments about a particular market “It’s different this time!”, be it from a marketing guru or a person in the street, that sends shivers down my spine.

Our DNA is the result of millions of years of evolution and the reaction of flight or fight to a set of events is so embedded in our psyche that we don’t even realise that it is controlling markets or more specifically our reaction to marketing conditions because it is controlling us, and we are the ones who influence marketing conditions.

A chartist’s comments on a particular market accompanied by graphs and squiggly lines might look like gobbledy gook, but have you ever wondered why all markets behave in a similar fashion? It is because the charts are a plot of human reaction to particular marketing conditions.

Remember most people buy at the top of a market and sell at the bottom.

The difference between a buoyant economy and one that is struggling is a shift of people’s sentiment of only 5-10%.
• When recession hits the unemployment rate rises by as little as 3% (5% to 8%)
• A change of Government is caused by a swing in voting of as little as 3-5%
• Interest rates cause market shifts with even less movement

What do interest rates have to do with the economy? People’s reaction to investment is to compare it against what they can receive at the bank through interest payments.

So unless the return on an investment is considerably higher than it is from getting a regular interest payment, why would people bother?

Makes sense?