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3/7/13
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Despite all that, and despite the fact the S&P/ASX 200 share index is 25 per cent below its November 2007 high of 6828.7 points, the Australian market is more expensive than Wall Street. The Dow Jones Industrial Average, which hit new highs on Tuesday night US time, is valued at about 12.5 times expected earnings in the next year. The S&P index of 500 top US shares is 1.6 per cent below its high and valued at 13.6 times expected earnings. Our S&P/ASX 200 is trading at 14.5 times expected earnings. While the resources boom was raging, cracks in the industrial economy were being papered over. Now the boom has cooled. Commodity prices have eased, mining profits and mining company share prices have fallen and as interest rates and the Australian dollar remain relatively high, pressure on the industrial sector continues. Earnings growth has been outpaced by share price rises and our market has moved to a priceearnings premium. Australian companies still offer dividend yields that look good compared with fixed interest and the productivity gains are great news. A fall in the value of the dollar will be a game changer, and it will eventually happen. For now, though, this market has some pressure points. It is short of its pre-crisis high for good reason. mmaiden@fairfaxmedia.com.au Caption: CARTOON: ROCCO FAZZARI Edition: First Section: Business Page: 38 Column: Opinion & Analysis Index Terms: Economy/Financial Mark ets/Share Mark ets Stock Exchanges ; Economy/Economics Economists Location(s): USA Australia Record Number: 20130307000038560429 Copyright (c) 2013 The Age Company Limited. www.theage.com.au. Not available for re-distribution.
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