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TIME TO REVISIT AN OLD FAVOURITE – THE INVESTMENT CLOCK
> 'No one rings the bell at the top or the bottom of the market' In October 2008, we witnessed the 21ST Anniversary of the Sharemarket Crash of 1987. Some would argue that there is a sense of déjà vu with the current market decline, yet it seemed to take longer to go down this time around, whilst the contagion effect for the current ‘bear market’ commenced back in November 2007.
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. I was first introduced to The Investment Clock concept as a sharebroking rookie in the early 1980s and was 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 12 o’clock is boom time. At 1 o'clock interest rates are rising. By 2 o’clock, share prices start to fall and by 3 o’clock commodity prices are decreasing as un-employment levels increase. At 5 o’clock, real estate beings to feel the pinch and at 6 o'clock it is recession time. At 7 o'clock the Reserve Bank begins to cut interest rates to kick-start the economy and by 8 o’clock share prices, anticipating an improving economy, begin to rise. Commodity prices perk up at 9 o'clock and, as unemployment falls, real estate makes a comeback at about 10 o’clock or 11 o'clock. So, what's the time right now? We appear to have moved past 6 o'clock towards 7 o’clock, where interest rates are falling as we move into the Recovery Phase. Our currency has been under enormous pressure in recent months and this has been followed by a substantial labour market contraction. A consequence of money getting tighter and significant job loss often puts enormous pressure on the property market. These are all the classic signs of a bear market in full swing with investor sentiment remaining on knife edge. Importantly, however, time does not always divide up evenly on The Investment Clock, like a real timepiece. The actual times between 3 o’clock and 6 o’clock 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 continue to cut rates enough to prevent a deepening 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 should be considered in selecting the current time on The Investment Clock:
If you would like your own Investment Clock for $8.95 (includes postage and handling) please send a request to
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We will be publishing a book entitled, 'Understanding The Investment Clock - Your Road to Recovery', to be released in May/June 2009 ($19.95). To register your interest please email This e-mail address is being protected from spambots. You need JavaScript enabled to view it
© Bourse Communications 2009 All Rights Reserved Rodney North has written this article for ABA and has given ABA permission to publish this article on ABA's website
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