Summary: Daniel Kertcher – Market Update October 2013 Hi, Daniel Kertcher, CEO and Founder of Trading Pursuits, one of Australia’s largest and longest running financial education company, and welcome to the monthly market review for October 2013. Now before we get started, there’s just a couple of quick points I need to share with you. Number one, what you are hearing in this presentation is what we call General Advice. It’s not individual, specific advice. Furthermore, we haven’t taken into consideration your own personal financial objectives. Trading involves risk. Past returns do not mean we’ll get the same in the future. And finally, our company Trading Pursuits, we hold an Australian financial services license. Government shutdown in America Okay, now the big news this month in case you haven’t already heard, has been of course the government shutdown in America. Basically, if you’re not quite aware, what it comes down to is that America has to increase their debt ceiling. That is the limit by which the government can borrow more money in order to keep the government running. Their debt limit is about 16.9 trillion. They’ve already hit that. So they have to increase their limit in which they can borrow. America runs a deficit of about a trillion dollars per year. That means that the government has to borrow a trillion dollars a year to keep the government open. To begin, they’ve already hit the limit and basically running out of cash, so they actually have to close the government and that’s been like that for the last three weeks. So what that means is that parks and recreation, NASA, drug testing, as well as thousands of federal ruckus, have been sent home for the last few weeks. The Republicans were fighting the Democrats because essentially they want in parts, in fact all of them if they could, of the Obama Care, their national universal health care program, that Barack Obama has been pushing through the politics over the last couple of years. And, they are using the debt ceiling debate as leverage in order to repeal the Obama Care Act. Now, of course this is crazy because Barack Obama is not facing another election. So he could remain strong, whereas all the Republicans, they are of course all facing re-election and they want to get re-elected in the future. So unfortunately for them, it’s not a winnable battle and as we just found out last night… they lost! Barack Obama stayed strong and the Republicans realized that they were losing or almost not confidence-faced against Americans themselves. So Americans have started to blame the Republicans for the terrible situation or what they are leading America into. There is a big concern that if America didn’t increase their debt ceiling, then the government will not be able to borrow any more money, and therefore they wouldn’t have any cash to pay the interest in their already seventeen trillion-dollar national debt. And if America defaults on their bonds on their debt, then it creates all kinds of uncertainty in global financial markets. Now interestingly though as we found out last night, the Republicans backed down, and they have now pushed out the debt ceiling discussion for another four months. That’s for January of next year. So essentially, they are just kicking their problem down the road. We’ll be dealing with it all over again in just a few months. Now interesting though, throughout all this, the markets never actually expected there’s a default in their bonds. There might have been a lot of fear in the public and in the media but not on the actual markets, they always knew that the Republicans would never push it so far to allow America to default on their bonds. As we can see, here is the IRISK Index. The IRISK Index, the very useful index have a look at the state of fear in actual markets. All we can see is that the IRISK Index is down near when the lowest levels it has been in five years. You can see b[...]
