Hi Tweets, good post and great questions raised.I have operated...

Hi Tweets, good post and great questions raised.

I have operated a wealth business for a number of years now, and worked in the advice industry for almost 20....so I am at the coal face talking to some very large investors on a daily basis.

My experience is that whilst we are all looking for ten baggers and stocks that go from 1c to $1 in 12months, most investors are not of that thinking.

When we ask a client, what returns are you looking for when adjusted for the risk required to get that return, the average long term return someone is seeking usually comes back around the 6-8% return mark. Consider that it takes a 7.2% compounded return each year for your capital to double each 10 years....and really, that is what 'most' clients are looking for.

Now consider that in the US, the 30 year bond investment will deliver you less than 3% and under 1.5% for 10 years. So a long term investor seeking the risk free rate is getting nothing....infact inflation over that time will be greater, so you are infact signing up today for a negative return on your capital for 30 years. Hence faced with that outlook, the institutional money in the US allocated some of their pot to good quality blue chips like Apple, Goggle, IBM and Microsoft, who pay dividends higher than this...with the potential of capital appreciation from a company that is in a growth sector. Hence why the US equity market is already back at pre GFC levels.

Now back home in what we all thought would be the safest economy in the world to be invested in, we had such a booming economy that our wonderful reserve bank had interest rates so high, that investors were able to get 6-7% each year, with NO RISK, infact, many under $1m also received a government guarantee on their capital.

Hence investor money domestically was allocated to cash and fixed income in proportions we have never seen before. Add to that, foreign investor money has also come smashing through our shores in search of these rates, hence further contributing to the rise of the $A.... a real perfect storm for Aussie investors IMO. Why try invest in a share market that might deliver you single digit returns, or potentially massive losses when you can buy the risk free rate just a few pips below it?

Your points on manipulation, well I dont disagree with you on that, it happens right across the market daily, and always has....but I dont think that is keeping Australian investors out of the market, lets face it, most mum and dads dont even know it happens.

Yesterdays Financial review compared daily ASX turn over each month this year and the numbers look shocking. Turn over has fallen off a cliff.

Regarding Fluffy's reply explaining that the ASX is down more than the rest of the world due to its exposure to mining companies, I simply can not agree. If anything, the world has been going through one of the largest mining booms in history and BHP still cant get back to $50 it saw in 2007 some 5 years ago.

Is this now the new norm, a new paradigm for equity investing in Australia? I dont think so....investors are like sheep. Most people want to do what everyone else is doing....safety in numbers.

Someone on this thread typed that they have all their super in cash now, and that is most common right now. And next year or the one after, when the ASX is up over 20% a year for 2 years in a row...watch the money come flooding in, just in time for the deflation of the next big bubble.

Kiril.