Several market commentators are saying that everything happening now can be compared with what happened in the 1930s.  That’s interesting - especially when you consider that unemployment in the 1930s was pushing 30% and there was no effective central system to help with the management of the economy. It seems a very hollow and unreasonable comparison.  Come to think of it, I can't accept it as a valid comparison at all. 

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Please register or login to view the rest of this article.||The best conclusion I can come to, is that the articles being published in the business pages have been written by the journalists who failed the exam to write for the sports pages. It's amazing that the press has not picked up on the fact that unemployment actually fell last month.  By all means, it may increase in the months ahead.  But here we are with an unemployment rate of around 5.5% nationally and the markets have already factored in a potential unemployment rate of 8 or even 9% or higher. 

The example of shares in the Commonwealth Bank is worth noting: in February 2008 it would have cost you around $60 per share for CBA and they declared a dividend of around 4%.  In February 2009 a CBA share would have cost you around $30 but the bank declared that it was making a greater profit than the previous year.  Oh, by all means, you can argue that there is a portfolio of non-performing loans within CBA which has yet to be revealed.  It is unlikely that the bank will let that interfere with the retaining of faith with shareholders by maintaining its dividend in pure dollar terms.

Interest rates are now as low as any of us can ever remember them.  The fiscal packages by the government and the extension of the first homebuyers/builders boost have been enough to bring first homebuyers/builders and many other people out of the woodwork to borrow money for residential property.  This can only have a positive impact on the economy as it serves to push recovery in the building sector.

The Australian sharemarket fell to around 3100 points on the All Ordinaries index.  It has now rebounded to the 3800 level.  Most commentators anticipate it exceeding 4000 points in the near term and stabilising on 4500 early in 2010.  Of course, it is also likely that it will be a ‘three steps forward, two steps back’ process so don’t be surprised if you see ongoing volatility in markets.

I spent some time in hibernation last week trying to figure out where we should be investing our money for the most benefit and speediest recovery as the market comes back, which it surely must do.  It took a lot of convincing but I now think that we should still be looking to maintain a strong presence in international shares although that presence should still be limited when compared with exposure to the Australian sharemarket.  For the first time I have looked at including commodities and infrastructure in portfolios for those who are prepared to invest in alternate assets and possibly more volatile assets.
I am sure you have heard of the struggles and potential demise of some of the major companies in the world.  We are disappointed to note that companies of the ilk of Timbercorp and Great Southern have had to go into administration. 

Whilst it is still too early to know, it would appear to be quite likely that those with investments in Almond lots will be safer than others.  We are watching this space with great interest and anticipation.

The government gave us its second budget a couple of weeks ago.  After all the hoo har it turned out to be a relatively innocuous document which has concentrated on putting Australia back into debt after the previous government spent so much time and energy in taking us out of debt. 

I was alarmed to read some comments by Matthew Drennan, Director of Investments at Zurich Investment Management, when he stated in his newsletter earlier this week that the UK government was put on negative credit watch by S&P.  This means their borrowing costs are about to go up - a lot.  He stated that the UK government has debt of around 80% of GDP.  The US is no better with the government debt to GDP ratio of around 100%. 

Japan has a ratio of 190%.  No wonder people are saying Australia is in a better position to ride the current economic downturn out when it's debt to GDP ratio is around 5%.  The latest budget is suggesting it might rise to a peak of 13.6%.

The only people who might be adversely affected by the contents of the federal budget are those who are in the very high income earning brackets and others who have been or are anticipating making concessional contributions to superannuation of more than $50,000 in a financial year.  I think we all understood that the changes to superannuation contributions which came into effect in 2007 were probably too generous to last for too long.  There are also changes to the health insurance rebate and Medicare levy for high income earners.  Interestingly, the major policy changes will not take place until after the next election.

I also think it is interesting that a Labour government is willing to raise the age for qualifying for the age pension when the core of its support will be adversely affected because of the manual nature of their employment.  Increasing pensions and providing an extension to the first home buyers' incentives should be seen as good news for most.

This article was never meant to become so long winded.  I just wanted to put some thoughts on paper to let you know that things haven't changed.  Investment markets still go up and down.  Some companies which have been around a long time may disappear in the months or years ahead but we will always find a way to recover.  You might think I'm an unbridled optimist but I think we've got recovery on the way and those who sit outside the market waiting may well find that the train has left the station and they were left behind.

I guess it's always fair to say that hindsight will show whether we were right or wrong.  It's also fair to say that history has only ever taught us one thing: the fact that we have never learnt anything from history. 

We can predict the past with incredible accuracy.  Even the weather bureau has problems with telling us what's going to happen tomorrow.{/accesstext}