Black Monday

[skid]

So back to the grindstone--we have alot of earnings coming up in the US--It will be interesting to see how they go.
There seems to be some disagreement on the fundamentals of the US economy--Earnings will help to paint a clearer picture--then its just a matter of whether the share markets start looking at fundamentals instead of groveling at the feet of Janet.

[Hoop]

So back to the grindstone--we have alot of earnings coming up in the US--It will be interesting to see how they go.
There seems to be some disagreement on the fundamentals of the US economy--Earnings will help to paint a clearer picture--then its just a matter of whether the share markets start looking at fundamentals instead of groveling at the feet of Janet.

Or....looking forward as Mr Market has done these last 12 months...treat the recent earnings trend weakness as a short term downward blip before the next big up wave of earnings (http://www.aliexpress.com/w/wholesale-rose-colored-glasses.html)..

[workingdad]

been a great couple of months but I do wonder if it will last. Not making any doomsday predictions but theres been enough global uncertainty to make me take stock.

Anyway, todays herald.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11617625

[King1212]

Warren Buffet said once "Don't be afraid when the share is down, but be afraid when the business is down"

Media creates and finds new stories to scare and stir the market, then the market over reacted....all just for their own benefits...selling stories.

[dobby41]

They say that this is the second longest (or thrid - can't remember which) bull run ever.
Obviously there is a longest and I always wonder what they were saying about that when it was on the way up.
They speak as if it isn't possible to have a longer run than the current logest - like it is some rule.

But it does have to stop at some stage - they always do!

[workingdad]

Agreed with the media and having had dealings with them know they rarely get it right but that aside they have the power to lead a flock whether we like it or not.

I don't think any length is self limiting just because of how long it runs for, it comes down to what's driving it. It's the fundamentals below that can be overlooked and I enjoy reading up on both sides perspectives.

I haven't been in the market for long and learning as we go so perhaps a bit more cautious than others. My greenie perspective is that we are in a global economy that is not in great shape or reflects continued growth.

[skid]

Or....looking forward as Mr Market has done these last 12 months...treat the recent earnings trend weakness as a short term downward blip before the next big up wave of earnings (http://www.aliexpress.com/w/wholesale-rose-colored-glasses.html)..

When I pressed your statement (thinking it was a link)I came to a site selling womens sunglasses:)

[BlackPeter]

When I pressed your statement (thinking it was a link)I came to a site selling womens sunglasses:)

I think this was as intended ... the glasses to buy were pink :cool:!

[skid]

I think this was as intended ... the glasses to buy were pink :cool:!

Ahhhhhhhh...I get it now:)

[kiora]

been a great couple of months but I do wonder if it will last. Not making any doomsday predictions but theres been enough global uncertainty to make me take stock.

Anyway, todays herald.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11617625

And when the NZ RB drops the OCR again what will happen to NZ share market?
Go up/down?
What would they like the NZD exchange rate to do?
Go up/down?

[Lewylewylewy]

Personally, I don't care if it's up or down... If it's up, I buy stock abroad, like VHP, if it's down I buy export companies.

[workingdad]

And when the NZ RB drops the OCR again what will happen to NZ share market?
Go up/down?
What would they like the NZD exchange rate to do?
Go up/down?

One would expect it to go up as those with cash chase a better return.

The majority would prefer to see the NZD to drop in line with an OCR cut which is better for exporters but hard on importers and end consumers.

I am no expert by any stretch of the imagination and earnings from the USA will paint a more detailed picture but even then, the undercurrent of uncertainty globally has got to be a cause for concern.

7963

Global corporate profits and article from todays Sydney herald.

http://www.smh.com.au/business/markets/global-profits-recession-leaves-investors-with-no-place-to-hide-20160405-gnzdqc.html

I have the cash sitting handy and looking for short term opportunities, just not holding long term shares without seeing some reassuring foundations for growth.

[sb9]

Not sure about others, but I'm slowly culling out some big ones out of portfolio and holding onto the ones that are less risky (or bigger margin of safety).

Although NZX market seem to be having good run in the last 4 weeks or so, I've sense of feeling that its the "Calm before the big Storm". Just my gut feel!!!

Some of the stocks seem to be getting bit ahead of themselves at current levels.

[bull....]

reached 80pts below our dow target 17800 may still reach? but chopping back and forth at highs is a worry

[couta1]

Volatility and Fear returning to the U.S markets, more buying opportunities, gotta love it aye.

[trader_jackson]

I'm sure you have already seen this
"high single digits"... I like it
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11618764

[skid]

Heres the bit to take note of in his article.....''The benchmark index closed at a record 6755.22 last night, having gained 6.8 per cent in the year to date and 13.8 per cent from the low it reached on February 12 amid the turmoil that enveloped markets during the opening weeks of 2016.''
So reading between the lines,heres the inconsistency to watch out for---They obviously spent alot of resources researching NZ shares--that has advantages and disadvantages. The advantages are obvious ,you know your product. The disadvantages are that you can get caught in the ''bubble'',by this I mean you get so caught up in your local shares that you perhaps dont pay enough attention to the effect of the really large markets on our tiny market (hence the low on the NZX amid the turmoil that enveloped overseas markets.) ..a key phrase

So that complicates things making it a 2 part game--identifying good NZ shares and at the same time trying to keep your finger on the pulse of the world(esp US) markets.

This last period,the outside markets have created an atmosphere that has been kind to the NZO.As long as that atmosphere is sustained (outside markets) then his predictions may well come true. But if they swing back to January mode,his predictions can quickly come unstuck...IMO.....We are just to small.

To put it another way--Dont give up on your local market--but dont ignore the big overseas markets.
If things change and they take a ''tumble'',it maybe the time to take a 'vacation'' from you NZ shares until the storm clouds dissipate.(easier said than done in terms of timing)

[bull....]

my pick is 10000 on the nzx only if wall st bull remains alive otherwise all bets off

[winner69]

I'm sure you have already seen this
"high single digits"... I like it
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11618764

Already up high single digits - not much lrft for thecrest of the year?

[trader_jackson]

Heres the bit to take note of in his article.....''The benchmark index closed at a record 6755.22 last night, having gained 6.8 per cent in the year to date and 13.8 per cent from the low it reached on February 12 amid the turmoil that enveloped markets during the opening weeks of 2016.''
So reading between the lines,heres the inconsistency to watch out for---They obviously spent alot of resources researching NZ shares--that has advantages and disadvantages. The advantages are obvious ,you know your product. The disadvantages are that you can get caught in the ''bubble'',by this I mean you get so caught up in your local shares that you perhaps dont pay enough attention to the effect of the really large markets on our tiny market (hence the low on the NZX amid the turmoil that enveloped overseas markets.) ..a key phrase

So that complicates things making it a 2 part game--identifying good NZ shares and at the same time trying to keep your finger on the pulse of the world(esp US) markets.

This last period,the outside markets have created an atmosphere that has been kind to the NZO.As long as that atmosphere is sustained (outside markets) then his predictions may well come true. But if they swing back to January mode,his predictions can quickly come unstuck...IMO.....We are just to small.

To put it another way--Dont give up on your local market--but dont ignore the big overseas markets.
If things change and they take a ''tumble'',it maybe the time to take a 'vacation'' from you NZ shares until the storm clouds dissipate.(easier said than done in terms of timing)

Very well said... I'll just add to the above (well these are my thoughts anyway) and that is that foreign ownership of the NZX is pretty much at all time highs (almost 50% of the NZX 50 according to a recent Forsyth report) which is well above any other level since the 1990's (I think... it was about 15% in 2008)... my view is that if the rest of the world was to come "unstuck" then two things could happen: foreigners could see NZ as a big safe haven due to yeild and the market won't fall as much (like in January/February) OR foreigners might "want out" and initiate a wave of 'panic selling' which would push the NZX 50 down a substantial amount... particularly blue chip stocks (Spark has the biggest percentage of foreign ownership).

I think the former scenario would happen (if things were to turn bad) but the latter could also happen (if things were to turn really bad)... I am still personally of the view that things won't "turn bad" but that is just my opinion, as always DYOR.

[xafalcon]

After the stellar bull run on the NZX all my price targets have been met and I am now "all out" in anticipation of the upcoming Brexit and Trump market perturbations. I don't know if either will eventuate, but I'm happy to sit on the sidelines until next year.

[sb9]

I think its the big overseas boys driving up the values currently. As a retail investor one should be bit vary and shouldn't get sucked in. When those big boys start to exit there's no where to hide, just my 2 cents not trying to scare anyone. GLTA!!!

[Mickey]

I think its the big overseas boys driving up the values currently.
Now if only I could get those overseas boys to drive up NZR a bit - currently my worst performer :(

[sb9]

Now if only I could get those overseas boys to drive up NZR a bit - currently my worst performer :(

I know this not NZR thread, but for the sake of disclosure I got out recently from this pup.

As for the big boys currently they have access to lot of cheap funds and it only takes one more hike from FED and they'll running like headless chicken....

[couta1]

Now if only I could get those overseas boys to drive up NZR a bit - currently my worst performer :( Be patient with this one,it will come right:cool: Disc-Holding in the red.

[Beagle]

Scenario 1 33% probability. Base Case. Market goes sideways, (at least as likely as any other scenario given many companies on the NZX will enjoy profit growth this year) and the NZX50 ends the year at circa 7000 because its a gross index and includes accrued dividends.

Scenario 2. 33% probability. Interest rates head to 100 year lows to stimulate the economy because dairy stays stubbornly low and we see further PE expansion and combined with profit growth NZX50 heads to 7500 - 8,000

Scenario 3. 25% probability. Version of the above two which sees some capital increase in value because of average company profit growth plus accrued dividends sees the NZX50 somewhere between 7,000 - 7,500 by year end.

Scenario 4 8% Probability. World wide growth concerns force a world-wide recession and we have a substaitial fall from here.

Basically that's how I see it. With call account interest rates currently at circa 2% and headed lower I think its more than likely that central banks around the world keep interest rates ultra low for the foreseeable future, likewise the RBNZ and with the N.Z. market having a very high dividend yield I expect this to be a supportive environment for equities.

[workingdad]

Very well said... I'll just add to the above (well these are my thoughts anyway) and that is that foreign ownership of the NZX is pretty much at all time highs (almost 50% of the NZX 50 according to a recent Forsyth report) which is well above any other level since the 1990's (I think... it was about 15% in 2008)... my view is that if the rest of the world was to come "unstuck" then two things could happen: foreigners could see NZ as a big safe haven due to yeild and the market won't fall as much (like in January/February) OR foreigners might "want out" and initiate a wave of 'panic selling' which would push the NZX 50 down a substantial amount... particularly blue chip stocks (Spark has the biggest percentage of foreign ownership).

I think the former scenario would happen (if things were to turn bad) but the latter could also happen (if things were to turn really bad)... I am still personally of the view that things won't "turn bad" but that is just my opinion, as always DYOR.

I think the later going by Sept last year and January this year...... Showed me the international effect is not something we are immune to and as the sheep start to follow the worse it gets.

[workingdad]

After the stellar bull run on the NZX all my price targets have been met and I am now "all out" in anticipation of the upcoming Brexit and Trump market perturbations. I don't know if either will eventuate, but I'm happy to sit on the sidelines until next year.

I am in the same boat, happy to dip my feet on some quick turnarounds but I am watching it very closely.

No one has a crystal ball but I had a thought this morning (yes I needed a lie down afterwards). The real estate market is being pushed up beyond any real sense of true worth and will continue its rise while money is being thrown at it the way it is. The market is the same to me at the moment, its beyond a historical real sense of worth with P/E considerably higher than anytime in the past and I know we are in new territory with so many new factors in the mix globally but looking at the rationale I cant understand what the underlying stimulus is other than more money being thrown at the market riding the wave. There are a lot of very average and sub par economic indicators out there that are being overlooked and the word bubble comes to mind. I am not a doom and gloom kind of person but I am cautious and happy to take a breather and see where things end up, I am willing to miss out on some growth having already hit some decent profits this year and ready to take advantage of an opportunity that if and when it happens will really serve my investment well.

[Leftfield]

Scenario 1 33% probability. Base Case. Market goes sideways, (at least as likely as any other scenario given many companies on the NZX will enjoy profit growth this year) and the NZX50 ends the year at circa 7000 because its a gross index and includes accrued dividends.

Scenario 2. 33% probability. Interest rates head to 100 year lows to stimulate the economy because dairy stays stubbornly low and we see further PE expansion and combined with profit growth NZX50 heads to 7500 - 8,000

Scenario 3. 25% probability. Version of the above two which sees some capital increase in value because of average company profit growth plus accrued dividends sees the NZX50 somewhere between 7,000 - 7,500 by year end.

Scenario 4 8% Probability. World wide growth concerns force a world-wide recession and we have a substaitial fall from here.

Basically that's how I see it. With call account interest rates currently at circa 2% and headed lower I think its more than likely that central banks around the world keep interest rates ultra low for the foreseeable future, likewise the RBNZ and with the N.Z. market having a very high dividend yield I expect this to be a supportive environment for equities.

Good summation thanks Roger.... another scenario is that we see a mix of all these scenario's!!

[BlackPeter]

Scenario 1 33% probability. Base Case. Market goes sideways, (at least as likely as any other scenario given many companies on the NZX will enjoy profit growth this year) and the NZX50 ends the year at circa 7000 because its a gross index and includes accrued dividends.

Scenario 2. 33% probability. Interest rates head to 100 year lows to stimulate the economy because dairy stays stubbornly low and we see further PE expansion and combined with profit growth NZX50 heads to 7500 - 8,000

Scenario 3. 25% probability. Version of the above two which sees some capital increase in value because of average company profit growth plus accrued dividends sees the NZX50 somewhere between 7,000 - 7,500 by year end.

Scenario 4 8% Probability. World wide growth concerns force a world-wide recession and we have a substaitial fall from here.

Basically that's how I see it. With call account interest rates currently at circa 2% and headed lower I think its more than likely that central banks around the world keep interest rates ultra low for the foreseeable future, likewise the RBNZ and with the N.Z. market having a very high dividend yield I expect this to be a supportive environment for equities.

Great post ... it is so easy to forget that the future holds always plenty of options (some good, some not so good) - and it is up to us to prepare for all of them instead of just for the worst thinkable scenario (with a quite low probability of happening).

Obviously - nobody knows what the likelihood for the various scenarios really is (and nobody ever will know ;)), but I agree that the chance for further (modest) growth is IMHO much higher than the likelihood for a big crash (though yes - it might happen).

The best method to prepare for all scenarios is in my view not sitting on cash (worst case all in one bank account) but to diversify. The beauty of this strategy is as well, that it benefits not just in bad times, but in good times as well.

Just wondering how the people feel who had during the GFC all their "safe" cash with the Lehmann brothers ... as compared to the investors who had a diversified share portfolio amended with some gold, some (solid) bonds and some cash. Come the next crash (and I am sure, it will, just don't know when ...), than I prefer to be in the latter position.

Anyway - each to their own ...

[winner69]

Hey Roger - that NZ50 index assumes dividends are reinvested as well - another way to make the index look good, Did you factor that in?

And if they kick HBL out it'll look even better eh!!!!!

[couta1]

Hey Roger - that NZ50 index assumes dividends are reinvested as well - another way to make the index look good, Did you factor that in?

And if they kick HNZ out it'll look even better eh!!!!! No such share as HNZ, that be HBL, kick out MPG instead after all that's a bit of a dog isn't it.

[winner69]

The NZ50C (capital index without this dividend rubbish) is 3291 today - a tad lower than the 3298 high in july 2007. Nearly 9 years and no capital gain

NZX50 up 60% in same period - thats the impact of all those dividends

Some might say the NZ50C is showing a double top on the chart - all down hill from here?

[Beagle]

Aussie capital index the same, gone sideways for 10 years. I have always believed that dividend yield is very, very important to investors.

Where the yield is low, like SUM or CVT which I hold I need to be thoroughly convinced there is a clear pathway to it becoming meaningful. Stocks like PEB and XRO that promise the world but currently deliver nothing (to name just two) leave me stone cold...I guess being a bean counter is no fun if there's no beans to count :lol:

[freddagg]

Now if only I could get those overseas boys to drive up NZR a bit - currently my worst performer :(

Oddly enough NZR, with a gross yield of 10.75%, is my best performer. I largely buy for dividends and potential dividend growth so NZR fits nicely.

[skid]

Scenario 1 33% probability. Base Case. Market goes sideways, (at least as likely as any other scenario given many companies on the NZX will enjoy profit growth this year) and the NZX50 ends the year at circa 7000 because its a gross index and includes accrued dividends.

Scenario 2. 33% probability. Interest rates head to 100 year lows to stimulate the economy because dairy stays stubbornly low and we see further PE expansion and combined with profit growth NZX50 heads to 7500 - 8,000

Scenario 3. 25% probability. Version of the above two which sees some capital increase in value because of average company profit growth plus accrued dividends sees the NZX50 somewhere between 7,000 - 7,500 by year end.

Scenario 4 8% Probability. World wide growth concerns force a world-wide recession and we have a substantial fall from here.

Basically that's how I see it. With call account interest rates currently at circa 2% and headed lower I think its more than likely that central banks around the world keep interest rates ultra low for the foreseeable future, likewise the RBNZ and with the N.Z. market having a very high dividend yield I expect this to be a supportive environment for equities.

Thats an interesting post Roger ,but I wonder about your %s--You have only allowed 8% for a market drop (It can still hurt and not be a full blown recession)--and remember we are not just talking NZX--We know the big markets have an effect--so we are really talking about them as well--about USA earnings --about oil-and about janet--and whether the Dow(as well as the NZX) is just plain overbought.
I would venture to say all these possible scenarios can conjure up alot more than a measly 8%...(and I would have thought a bean counter would not lose 1% out of the total:):)....(just a friendly dig on that last statement)


Just remember --when things are relatively normal -everyone thinks about how to make money--but when (or if)fear fills the air ,that all goes out the window.

Reminds me of something Mike Tyson said once....''everyone has a plan...until they get hit''

[workingdad]

Thats an interesting post Roger ,but I wonder about your %s--You have only allowed 8% for a market drop (It can still hurt and not be a full blown recession)--and remember we are not just talking NZX--We know the big markets have an effect--so we are really talking about them as well--about USA earnings --about oil-and about janet--and whether the Dow(as well as the NZX) is just plain overbought.
I would venture to say all these possible scenarios can conjure up alot more than a measly 8%...(and I would have thought a bean counter would not lose 1% out of the total:):)....(just a friendly dig on that last statement)


Just remember --when things are relatively normal -everyone thinks about how to make money--but when (or if)fear fills the air ,that all goes out the window.

Reminds me of something Mike Tyson said once....''everyone has a plan...until they get hit''

Did he also say 'Id like to say, boxing hasn't effected me in.... in..... ahh thank you' :)

Regardless of whether one is the in bull or bear year camp surely we all agree there is a lot of nervousness out there with traders quick to sell off risk.

Central banks have freed up cash and don't have much more head room to prop economies up. Earnings season in the US is going to be a telling time and give an indication as to where the markets are heading from here and the reaction on earnings if forecasts are accurate could be ugly.

[skid]

Did he also say 'Id like to say, boxing hasn't effected me in.... in..... ahh thank you' :)

Regardless of whether one is the in bull or bear year camp surely we all agree there is a lot of nervousness out there with traders quick to sell off risk.

Central banks have freed up cash and don't have much more head room to prop economies up. Earnings season in the US is going to be a telling time and give an indication as to where the markets are heading from here and the reaction on earnings if forecasts are accurate could be ugly.

8%..+??????

[workingdad]

8%..+??????

Sorry skid, the boxing thing was a joke that went around a while ago and lost a lot of its quirk without the punch drunk slurred speech that went with it.

The rest of my comments were in general along the theme of the thread not aimed at your response.

[skid]

I agree with your comments --Even what Tyson latter said which shows no one is exempt---sometimes Im still a little punch drunk from the GFC :cursing:

[Beagle]

Alright 9% then..just testing if you guys were awake. :) RBNZ is only getting into second gear with interest rate cuts and the hunt for yield has only just begun in earnest.
All those retired folks with tens of billions of dollars in term deposits will be desperate to get a return on their money when their bank offers to roll them over at 2.5% as RBNZ moves into overdrive to stimulate the N.Z. economy and they'll be chasing safe yield like crazy, REIT's are a prime candidate as an alternative to term deposit money. Article behind the NBR pay wall today saying low dairy is the new normal and farmers better get used to it e.t.c. will see tremendous stimulus applied to the N.Z. economy IMO.

Nobody is suggesting the N.Z. economy exists in a bubble and isn't affected by world events and other markets in particular but a lot lower for a lot longer is my key theme for interest rates here and that's a very supportive environment for an equity market that most importantly has one of the highest dividend yield's in the world. Most other central banks have fired off a fair bit of ammunition already but RBNZ can cut many more times yet and probably will have to. Also the lower interest rates will keep the currency under pressure which will assist a significant number of our exporters and continue to drive robust tourism growth.

Caveat to all this is a GFC Mk2 but as I don't think we're completly out of the first one I see that as very unlikely...always watching and ready to take action whenever needed...I guess that's akin to keeping your guard up when you're boxing :)

While the current market average PE is somewhere between 18 and 19 and that's high by historical standards, its not that high in the context of interest rates heading to 100 year lows. The other thing is that on average we will see some earnings growth from N.Z. companies this year so if the market goes sideways and simply grows to 7,000 by virtue of accrued dividends during the year, through earnings growth the average market PE multiple will come down a little this year...and this is happening while interest rates are being lowered still further.

Under this scenario the market at 7,000 is actually pretty good value at the end of the year.

Govt posted an unexpected surplus today...just a thought, maybe the N.Z. economy outside of dairy is actually trucking along reasonably well.

[workingdad]

Alright 9% then..just testing if you guys were awake. :) RBNZ is only getting into second gear with interest rate cuts and the hunt for yield has only just begun in earnest.
All those retired folks with tens of billions of dollars in term deposits will be desperate to get a return on their money as RBNZ moves into overdrive to stimulate the N.Z. economy and they'll be chasing safe yield like crazy, REIT's are a prime candidate. Article behind the pay wall today saying low dairy is the new normal and farmers better get used to it will see tremendous stimulus applied to the N.Z. economy IMO.

Nobody is suggesting the N.Z. economy exists in a bubble and isn't affected by world events and other markets in particular but a lot lower for a lot longer is my key theme for interest rates here and that's a very supportive environment for an equity market that most importantly has one of the highest dividend yield's in the world. Also the lower interest rates will keep the currency under pressure which will assist a significant number of our exporters and continue to drive robust tourism growth.

Caveat to all this is a GFC Mk2 but as I don't think we're completly out of the first one I see that as very unlikely...always watching and ready to take action whenever needed...I guess that's akin to keeping your guard up when you're boxing :)

I hope your right Roger. However I don't think the majority of retirees not already in the market will start to play in it though, they are too risk averse and afraid to loose too much of their nest eggs value in case there is a significant downturn and a lot would have a preference to real estate as a 'comfort zone' of something they are familiar with but in saying that I am only 43 so well off thinking like a retiree :p - just going by the parents views after a number of discussions with them. At least the RBNZ has room to apply further stimulus, one would hope further stimulus is better applied by the banks looking ahead than the last OCR cut, the bigger global central banks have a lot less ability and I do wonder how long it will prop things up for.

I don't think a downturn would be a dramatic drop, if it happens I am picking a gradual erosion of value with some spikes both positive and negative but trending down while people steadily sell down.

I am no boxer, currently still sparring with headgear on to avoid a possible TKO from an unpredictable opponent that seems to have no rhyme nor reason of late :)

[winner69]

Workingdad - i am amazed at how many retired people have given up on term deposits and buying high yielding shares.

Like a neighbour who was bemoaning that his HLG shares had fallen much more in price than he collected in dividends. His investing 'strategy' is following the mob down at the bowling club. He, and others, has cut their losses on HLG and reinvested in AIR because the guys down the bowling club says its got a great dividend (and its cheap). He tells me his broker is not discouraging him either.

Roger goes on about the billions that might move from term deposits to the high yielding stocks. He might be right but when interest rates in NZ increase (maybe as early as next year) they might regret joining the movement as they see their capital diminish in value (assuming they not smart enough to get out early enough)

My grandfather as well as my father always kept reminding me 'winner, there's no such thing as easy money son'. A lot of people think high yielding shares is a no lose situation.

[workingdad]

Workingdad - i am amazed at how many retired people have given up on term deposits and buying high yielding shares.

Like a neighbour who was bemoaning that his HLG shares had fallen much more in price than he collected in dividends. His investing 'strategy' is following the mob down at the bowling club. He, and others, has cut their losses on HLG and reinvested in AIR because the guys down the bowling club says its got a great dividend (and its cheap). He tells me his broker is not discouraging him either.

Roger goes on about the billions that might move from term deposits to the high yielding stocks. He might be right but when interest rates in NZ increase (maybe as early as next year) they might regret joining the movement as they see their capital diminish in value (assuming they not smart enough to get out early enough)

My grandfather as well as my father always kept reminding me 'winner, there's no such thing as easy money son'

My parents got 3.6% on greater than half a million in the bank just prior to the OCR cut and took it but other than that and her cards group I have very limited anecdotal evidence to go by. Its not much minus tax and I have tried to get them into shares in the past to no avail. One things for sure, it will be interesting to see how the year unfolds.

My grandfather and father used a different name to address me growing up but I will keep that to myself haha.

[skid]

My parents got 3.6% on greater than half a million in the bank just prior to the OCR cut and took it but other than that and her cards group I have very limited anecdotal evidence to go by. Its not much minus tax and I have tried to get them into shares in the past to no avail. One things for sure, it will be interesting to see how the year unfolds.

My grandfather and father used a different name to address me growing up but I will keep that to myself haha.

It was working son and grandson..

[skid]

Alright 9% then..just testing if you guys were awake. :) RBNZ is only getting into second gear with interest rate cuts and the hunt for yield has only just begun in earnest.
All those retired folks with tens of billions of dollars in term deposits will be desperate to get a return on their money when their bank offers to roll them over at 2.5% as RBNZ moves into overdrive to stimulate the N.Z. economy and they'll be chasing safe yield like crazy, REIT's are a prime candidate as an alternative to term deposit money. Article behind the NBR pay wall today saying low dairy is the new normal and farmers better get used to it e.t.c. will see tremendous stimulus applied to the N.Z. economy IMO.

Nobody is suggesting the N.Z. economy exists in a bubble and isn't affected by world events and other markets in particular but a lot lower for a lot longer is my key theme for interest rates here and that's a very supportive environment for an equity market that most importantly has one of the highest dividend yield's in the world. Most other central banks have fired off a fair bit of ammunition already but RBNZ can cut many more times yet and probably will have to. Also the lower interest rates will keep the currency under pressure which will assist a significant number of our exporters and continue to drive robust tourism growth.

Caveat to all this is a GFC Mk2 but as I don't think we're completly out of the first one I see that as very unlikely...always watching and ready to take action whenever needed...I guess that's akin to keeping your guard up when you're boxing :)

While the current market average PE is somewhere between 18 and 19 and that's high by historical standards, its not that high in the context of interest rates heading to 100 year lows. The other thing is that on average we will see some earnings growth from N.Z. companies this year so if the market goes sideways and simply grows to 7,000 by virtue of accrued dividends during the year, through earnings growth the average market PE multiple will come down a little this year...and this is happening while interest rates are being lowered still further.

Under this scenario the market at 7,000 is actually pretty good value at the end of the year.

Govt posted an unexpected surplus today...just a thought, maybe the N.Z. economy outside of dairy is actually trucking along reasonably well.
The NZ economy is trucking along reasonably well,and why not? Things are pretty settled overseas as we speak(at least thats how it looks) ..but shake things up a bit ..and..
Baby Boomers.
I sincerely doubt that if you go out and talk to 100 retirees ,you will find the majority will be desperate to get a better return on their money in the share market--i believe most are still afraid of the share market--Remember they have not done the research you have done. I believe the share market in general is a young mans game(or middle aged) Maybe a few will have a few GNE but nothing of any size,and should they?
Most are not educated in the world of share market investing. An exception may be managed funds but my guess is most would be very conservative. WE know there is a big difference between a well managed fund and the likes of Bridgecorp,Hanover,South Canterbury,etc. -but do they?---The only way to know is to ask around I suppose.

you can seldom eat your cake and have it too.
If interest rates cuts bring down the $Kiwi ,alot of overseas investment may become discouraged to find thier money has diminished in value.
From what I have seen,when (if)things go pear shaped the first thing foreign investors do is get their money into a safe haven--that is not NZ dollars or the NZX,those 2 things are on the fringe.
If,however, things cruise along internationally with no big problems,then NZ will do just fine. So if we go sideways for the year,this will be a good place for you and some overseas investors to park their money--If things get volatile and drop,as many fear,then being so small I believe that once a certain point is hit,it will become an exponential drop, here.
Theres alot of good companies here in Godzone--but the big markets trump all in the end.

But regardless of our differing opinions ,that ''keeping the guard up'' you mentioned, is the point we both can totally agree on.

Go out and ask oldies about the share market (not just well to do customers who need an accountant) but a good cross section, and Im betting they will tell you stories of the crashes of the past ,not the fortunes made. (be interesting to do a survey on the grey power newsletter or something)

[couta1]

Actually Skid you might be surprised to learn that a good number of elderly I talk to at the different retirement villages are holding shares in that sector and the likes of the power companies, heaven forbid some of them are even holding Peb, quite a few of these folk are in their eighties.

[winner69]

Roger the statistician offering odds of different scensrios unfolding prompted me to read this recent note from renowed commentator John Msy

Radical uncertainty: The importance of the things we do not know we do not know

06 April 2016, Financial Times

The excellent new book by Mervyn King, former governor of the Bank of England, is inevitably noticed mainly for its views on banking regulation and the outlook for the eurozone. For me the most important message of The End of Alchemy is its emphasis on radical uncertainty — or, to quote Donald Rumsfeld, former US defence secretary: “The things we do not know we do not know.”

That emphasis reflects the parallel intellectual paths Lord King and I have taken since we were young dons 40 years ago. In a book published in 1976, economist Milton Friedman disparaged a tradition that “drew a sharp distinction between risk, as referring to events subject to a known or knowable probability distribution, and uncertainty, as referring to events for which it was not possible to specify numerical probabilities”.

Friedman went on: “I have not referred to this distinction because I do not believe it is valid. We may treat people as if they assigned numerical probabilities to every conceivable event.” Asked, “Who will win the war?”, Churchill might have responded, “Britain, with probability 0.7”; and Hitler with a similar answer but perhaps different number.
However absurd, this is what we were taught and what we passed on to the next generation of students. It seemed an exciting time for young turks in finance; insider trading in an old-boy network was to be superseded by a new generation of quants and rocket scientists. We had the mathematical tools to revolutionise investment banking. Our theory came to underpin the risk models used in financial institutions and imposed by regulators.

But Friedman was wrong. There really are limits to the range of problems susceptible to the mathematics of classical statistics. He was, erroneously, rejecting the concept of radical uncertainty described 50 years earlier by the economists John Maynard Keynes and Frank Knight.

“By uncertain knowledge,” wrote Keynes in 1921, “I do not mean merely to distinguish what is known for certain from what is only probable. The sense in which I am using the term is that in which the prospect of a European war is uncertain . . . There is no scientific basis to form any calculable probability whatever. We simply do not know.”

There is a world of difference between low-probability events drawn from the tail of a known statistical distribution and extreme events that happen but had not previously been imagined
While the long-term future of interest rates or copper prices, about which Keynes also speculated, might be ap*proached probabilistically, questions about the social system 50 years hence are too open-ended, and the outcomes too varied and insufficiently specific, to be described in probabilistic terms.

A recent book on superforecasters, co-written by Philip Tetlock, illustrates the point well. By trying to turn multi-faceted questions into ones precise enough to enable those who proffer answers to be assessed for their accuracy, he makes the questions narrow and uninteresting: “How will the Syrian war develop” and “How will Europe manage its refugee crisis?” become: “How many Syrian refugees will land in Europe in 2016?”

More fundamentally there are things we do not know because we cannot imagine them. If you had described your smartphone to Mr Friedman in 1976 he would not have understood what you were talking about, far less been able to speculate intelligently on the probability that it would be invented or bought. These are the “black swans” Nassim Taleb has described. The reader who once asked me which black swans were most likely to materialise in the next five years could not have missed the point more comprehensively.

There is a world of difference between low-probability events drawn from the tail of a known statistical distribution and extreme events that happen but had not previously been imagined. And it is usually the latter that give rise to crises — and opportunities.



This article was first published in the Financial Times on April 6th, 2016.


http://www.johnkay.com/2016/04/06/radical-uncertainty-the-importance-of-the-things-we-do-not-know-we-do-not-know
[

[p2r]

http://www.telegraph.co.uk/business/2016/04/06/time-to-stop-dancing-with-equities-on-a-live-volcano/

[Beagle]

Good debate.
Skid, you are absolutely right in a sense that many older people are scared of shares BUT there's an important distinction, most of them are familiar with property and how it goes up over the long run.
Its this level of comfort with tangible assets, property, that makes real estate investment trusts like GMT ARG e.t.c. an attractive alternative. I like them myself for the same reason.

When people are offered 2.5% by their bank later this year as a rollover on term deposit funds alternatives like an investment in a real estate trust that owns a bunch or modern securely leased commercial properties paying 5% after tax is not as big a psychological jump for many as I think you might imagine. Many need yield to maintain a comfortable standard of living and most HATE seeing their capital erode just as much as you and I do. Most of these trusts are running very conservative gearing of 30-40% and have secure long teases to a wide range of commercial tenants so its easy to point out that they're intrinsically safer,(with a wide spread of properties and tenants) than owning one or two rental properties, another asset class many older investors are very familiar with.

I think many fell into the trap earlier this year, myself included (and ran a cash allocation that was too high), of thinking we're sliding into a serious bear market and I guess my main point is as always, there a wide range of possible scenario's and its very difficult to predict the future so maybe best to pick a few key themes and work them ? My key theme is ultra low interest rates for many years to combat the seemingly never ending effects of the GFC and low commodity prices with it and in that environment exporters, high yield shares, REIT's and tourism do very well.

[skid]

Good debate.
Skid, you are absolutely right in a sense that many older people are scared of shares BUT there's an important distinction, most of them are familiar with property and how it goes up over the long run.
Its this level of comfort with tangible assets, property, that makes real estate investment trusts like GMT ARG e.t.c. an attractive alternative. I like them myself for the same reason.

When people are offered 2.5% by their bank later this year as a rollover on term deposit funds alternatives like an investment in a real estate trust that owns a bunch or modern securely leased commercial properties paying 5% after tax is not as big a psychological jump for many as I think you might imagine. Many need yield to maintain a comfortable standard of living and most HATE seeing their capital erode just as much as you and I do. Most of these trusts are running very conservative gearing of 30-40% and have secure long teases to a wide range of commercial tenants so its easy to point out that they're intrinsically safer,(with a wide spread of properties and tenants) than owning one or two rental properties, another asset class many older investors are very familiar with.

I think many fell into the trap earlier this year, myself included (and ran a cash allocation that was too high), of thinking we're sliding into a serious bear market and I guess my main point is as always, there a wide range of possible scenario's and its very difficult to predict the future so maybe best to pick a few key themes and work them ? My key theme is ultra low interest rates for many years to combat the seemingly never ending effects of the GFC and low commodity prices with it and in that environment exporters, high yield shares, REIT's and tourism do very well.

Well,you may be right about the oldies--Couta seems to think so and he is closer to the coal face than me--and I have been known to attempt to think outside the box on issues that in some cases may only have the benefit of giving some pause for thought.

But think of this when reconsidering that 8%----why is there a relatively good chance that we will see the end of this 7 year dream run in equities?.......because whether we like it or not....we are ready.

We are not in a normal economy --there is a man (or women)behind the curtain --We've been ''off to see the wizard'' for some time now.
Its a game that cant go on forever,and there can be Hell to pay for those low interest rates--forcing money into an overbought share market may be good for shares in the short term--but it can set up a dangerous situation when the bubble gets over inflated and is just waiting for a needle (catalyst) to prick it and cause a messy explosion. IMO investors should be buying into companies because they are healthy and growing,not because they have no other option for a return--thats a recipe for overvalue. It may work for awhile,but what better scenario for creating a bubble.
We can find all sorts of ways to validate that our NZ shares are not overvalued--but increasing SP is not enough. We in turn need to validate that the US share market is also not over valued.---Im not sure we will make it through the year under that scenario--If for no other reason than that there are to many people looking over their shoulder.

But you know the old saying ''bad things take time''

[Beagle]

I hear what you're saying Skid and certainly agree the market overall is not cheap but if most brokers risk free rate in their DCF's is modelled around 4.5% and we're at 2.5% and the economy outside of dairy is chugging along just fine then maybe an average market PE of 18.5 isn't too bad ?

Looking further afield if one is a comfortably well off typical overseas investor they're looking at super low interest rates in most countries on their fixed income portfolio so do you really imagine they'll increase their allocation to that part of their portfolio at this time ?

Considering overseas interest in our market, with our currency somewhere around the twenty year average so called "Goldilocks level" maybe offshore investors will continue to see our average dividend yields as highly attractive ?

Look at it this way, if you were a 70 year old American investor with a nest egg of say $U.S1m wouldn't you want a piece of the action of good companies on good yields like SCL still trading on very reasonable metrics ? Everyone likes a 100% pure N.Z. apple right :) I think there's always small pockets of value and opportunity even if the market overall looks fully priced and even acknowledging that to some extent we're trading at the behest of stable foreign markets.

Nothing is completly risk free, (apart from paying off debt), not even money in the bank. Some people are going to get a really nasty shock about the open bank resolution if the custard hits the fan in a big way so why not get double or triple the bank deposit rates seeing as investors are in effect taking a quasi equity risk with their money in the bank ?

All good food for thought...let the debate continue :)

[percy]

At the coal face.!!
One week's bookselling in Nelson.
Great weather.
Great number of travellers on the roads.
Motels at Tuahunanui Motor Camp full.
So busy they have put the price of the studio units up from $80 a night to $120.
My biggest year ever with book sales.
My eps growth companies are paying increasing dividends,so if you are in the right sectors at the right time you remain "well positioned".
Footnote.Talking to a young American guy who was enjoying the million dollar view from his camp site.Introduced me to his Austrian girlfriend,who he met at Franz Joseph.
What a wonderful world.

[fungus pudding]

Footnote.Talking to a young American guy who was enjoying the million dollar view from his camp site.Introduced me to his Austrian girlfriend,who he met at Franz Joseph.


:p Hope that was a million dollar view. :cool:

[percy]

:p Hope that was a million dollar view. :cool:

Best described as he showed very good judgement,as did she.
A very pleasant young couple of people.

[Hoop]

Remember Guys...there's a poor correlation between the Economic Growth (GDP) and Stock Market returns

[percy]

Yet there is a direct correlation between eps growth and the share price.

[skid]

At the coal face.!!
One week's bookselling in Nelson.
Great weather.
Great number of travellers on the roads.
Motels at Tuahunanui Motor Camp full.
So busy they have put the price of the studio units up from $80 a night to $120.
My biggest year ever with book sales.
My eps growth companies are paying increasing dividends,so if you are in the right sectors at the right time you remain "well positioned".
Footnote.Talking to a young American guy who was enjoying the million dollar view from his camp site.Introduced me to his Austrian girlfriend,who he met at Franz Joseph.
What a wonderful world.

Yes ..scarey isnt it? (in terms of where to from here growth) but thats no reason not to enjoy the now.

[skid]

I hear what you're saying Skid and certainly agree the market overall is not cheap but if most brokers risk free rate in their DCF's is modelled around 4.5% and we're at 2.5% and the economy outside of dairy is chugging along just fine then maybe an average market PE of 18.5 isn't too bad ?

Looking further afield if one is a comfortably well off typical overseas investor they're looking at super low interest rates in most countries on their fixed income portfolio so do you really imagine they'll increase their allocation to that part of their portfolio at this time ?

Considering overseas interest in our market, with our currency somewhere around the twenty year average so called "Goldilocks level" maybe offshore investors will continue to see our average dividend yields as highly attractive ?

Look at it this way, if you were a 70 year old American investor with a nest egg of say $U.S1m wouldn't you want a piece of the action of good companies on good yields like SCL still trading on very reasonable metrics ? Everyone likes a 100% pure N.Z. apple right :) I think there's always small pockets of value and opportunity even if the market overall looks fully priced and even acknowledging that to some extent we're trading at the behest of stable foreign markets.

Nothing is completly risk free, (apart from paying off debt), not even money in the bank. Some people are going to get a really nasty shock about the open bank resolution if the custard hits the fan in a big way so why not get double or triple the bank deposit rates seeing as investors are in effect taking a quasi equity risk with their money in the bank ?

All good food for thought...let the debate continue :)

Im concerned about the bank situation as well,but in saying that ,there is still a pretty good odds that your money will still be there in a year ,even with a pittance of interest---thats not the case with shares--they are a huge risk ,comparatively.

No if I was the 70 yr old American i would not invest in SCL--especially if I was starting to get just a bit scared from all Ive been hearing---Baby Boomers are conservative--(or should be)---not that they really have full control of all their assets --many took a big hit on their Gov Pensions (401K or whatever its called)that were tied up in the stock market ,compliments of Uncle Sam.

speaking of banks--esp. big banks --they are the ones in danger from your low interest rates-(much less of a spread)...(and were'nt they involved somehow in the last GFC?(ha ha)--if things do get scarey --ill go for KIwi Bonds.....but of course nothing is risk free --Its more a case of assigning odds to each scenario,in terms of risk.

[Hoop]

Yet there is a direct correlation between eps growth and the share price.

In board overall terms...No there isn't a direct correlation....its complex.

Over time EPS correlates with Share price..but in the shorter term its complex as there are other factors in play...there are hundreds of research papers dealing with this very subject and not much for the investor to understandout of it as they all say maybe maybe not depends on the surrounding business/trading/industry sector/Government environment..in other words affected by both macro and micro factors..these factors can interact at different time at different degrees or not at all in certain periods..

But...cyclical stocks are very much affected by economic factors so the best way to value a cyclical (as they know that EPS correlates with price over a long term) is to average the EPS over the length of it's cycle be it 5 years 7 years or whatever....For semi-cyclical stocks (those with an uptrending cycle or downward trending cycles) it may be wise to average EPS over 2 cycles or 3 cycles and expoliate the Average EPS upwards or downwards what ever the growth/retrenchment is...

[davflaws]

Please explain "expoliate"

[Brovendell]

Extrapolate

[skid]

From what Ive read --EPS is just the start when evaluating a company--next step is- Operating cash flow=keeping them honest...with some exceptions ie .. market cycle or research and dev. and marketing (sacrificing short term profit for long term growth.)

But generally a positive EPS with a negative operating cash flow spells danger.---Im sure others can elaborate

[Lewylewylewy]

I think people are missing the sentiment of Percy's post, that is, when there's fear that the sky is falling, if a company is still pulling in dollars, the value is related to how many dollars they're pulling in.

[winner69]

I think people are missing the sentiment of Percy's post, that is, when there's fear that the sky is falling, if a company is still pulling in dollars, the value is related to how many dollars they're pulling in.

E(ps) can grow ........P(rice) can go down

Heartland a good example - earnings up strongly over the last year but price down (esp if you reference Feb 15)

Sentiment is often a driver of 'value'

[workingdad]

Well tomorrow is the start of reporting for earnings season in the US and it will either be another hurdle overcome for the market to keep trucking along or the fragility of all becomes as apparent as it did Sept last year and the start of this one.

[percy]

E(ps) can grow ........P(rice) can go down

Heartland a good example - earnings up strongly over the last year but price down (esp if you reference Feb 15)

Sentiment is often a driver of 'value'

Totally agree .
But that then means to me that sentiment is mispricing HBL.
Further eps growth with see sentiment change.
When it does, those of us who are "well positioned" will reap the rewards.
In the meantime, growing eps will mean growing dividends.
With HBL it is their correlation with Australian Banks.The market sentiment is against Australian Banks.
Yet HBL does not face those issues,ie having to raise more capital,mining sector debts,more expensive European Wholesale funding,over exposure to Australian and Auckland housing markets.
A company's improving fundamentals will always win over unfounded sentiment.Some times it takes a little time.
Proof of this was after GFC, it was the companies who kept increasing their dividends who saw their share prices recover first.

[skid]

Totally agree .
But that then means to me that sentiment is mispricing HBL.
Further eps growth with see sentiment change.
When it does, those of us who are "well positioned" will reap the rewards.
In the meantime, growing eps will mean growing dividends.
With HBL it is their correlation with Australian Banks.The market sentiment is against Australian Banks.
Yet HBL does not face those issues,ie having to raise more capital,mining sector debts,more expensive European Wholesale funding,over exposure to Australian and Auckland housing markets.
A company's improving fundamentals will always win over unfounded sentiment.Some times it takes a little time.
Proof of this was after GFC, it was the companies who kept increasing their dividends who saw their share prices recover first.

So that implies that it is the market cycle (sentiment towards Australian banks) that is keeping it down--Even with decent operating cash flow if the market cycle (for banks) is down ,thats a tough thing to fight--Its one of the text book reasons why sometimes good eps,and cashflow,can be spoiled.
Its possible that those rewards to be reaped may have to wait for the entire sector to turn--then they may be first off the blocks.
Some do say the housing market is looking dangerous--(hav'nt read the article ,just saw the headline)

[percy]

So that implies that it is the market cycle (sentiment towards Australian banks) that is keeping it down--Even with decent operating cash flow if the market cycle (for banks) is down ,thats a tough thing to fight--Its one of the text book reasons why sometimes good eps,and cashflow,can be spoiled.
Its possible that those rewards to be reaped may have to wait for the entire sector to turn--then they may be first off the blocks.
Some do say the housing market is looking dangerous--(hav'nt read the article ,just saw the headline)

Yes a tough thing to fight,but sound fundamentals ,ie stong balance sheet,good cash flow and a major focus on eps growth and you have a safe form of investing.
Market sentiment. I recall fondly the local men's hairdresser in Sydenham in 1987 who was on of NZ's leading fountain of "sentiment" advice.He had a lot of followers until October that year. Often today taxi drivers offer the same "sentiment" advice.Run with the crowd,sometimes works.
Other great "sentiment" investors [?] either buy just brewery shares because my dad told me to,or property companies because you can't make more land.Often successful.
Each to their own.

[fungus pudding]

Yes a tough thing to fight,but sound fundamentals ,ie stong balance sheet,good cash flow and a major focus on eps growth and you have a safe form of investing.
Market sentiment. I recall fondly the local men's hairdresser in Sydenham in 1987 who was on of NZ's leading fountain of "sentiment" advice.He had a lot of followers until October that year. Often today taxi drivers offer the same "sentiment" advice.Run with the crowd,sometimes works.
Other great "sentiment" investors [?] either buy just brewery shares because my dad told me to,or property companies because you can't make more land.Often successful.
Each to their own.

There's plenty of land around. The problem is finding somewhere to put it! :laugh:

[winner69]

Sentiment is driven by the major shareholders and not those who listen to hairdressers or taxi drivers ....or even what's said on forums

The biggest shareholders are the ones who move the share price

[Baa_Baa]

Sentiment is driven by the major shareholders and not those who listen to hairdressers or taxi drivers ....or even what's said on forums

The biggest shareholders are the ones who move the share price

And for many of our largest companies, those are offshore shareholders. So sentiment can change in a heartbeat, like when they think it's time to wade in and ride the wave and we're euphoric at our markets' resilience against internationals. Or when they think it's time to take profits and leave the hapless wondering whether to exit, or even where the exit is. Sentiment is everything, but only if one is concerned to manage capital invested. Otherwise, sentiment is just another blip in the bumpy journey to sustained earnings from reliable profitable company's. An intriguing conundrum, perhaps which makes the market what it is.

[bull....]

wall st close right on support - make or break tonight?

[workingdad]

Alcoa has kicked off earnings season. As always - mixed and open to interpretation.

Analysts had estimated an EPS of 0.02 on revenue of 5.2 billion. Reported is an EPS of 0.07 on revenue of 4.95 billion (5.84 billion was the previous years). First-quarter earnings of $16 million from $195 million a year earlier.

SP for them today, started at $9.37, went as high as $9.92. Post earnings announcement down to $9.37 on low volume and sitting where it started the day....

Going to be an interesting week.

[skid]

In the States from what I read, there is much less room on the high side as there is on the low side for stocks.

What will be interesting is when the Banks report.

[Hoop]

Alcoa has kicked off earnings season. As always - mixed and open to interpretation.

Analysts had estimated an EPS of 0.02 on revenue of 5.2 billion. Reported is an EPS of 0.07 on revenue of 4.95 billion (5.84 billion was the previous years). First-quarter earnings of $16 million from $195 million a year earlier.

SP for them today, started at $9.37, went as high as $9.92. Post earnings announcement down to $9.37 on low volume and sitting where it started the day....

Going to be an interesting week.

This Wall St Rally has a poor reported season factored in...that sentiment for ya....eh!!

Percy...EPS is history.. Price is the present... here lies (pun) the problem....Research has shown Investors over-estimate earnings going forward during the later stages of a bull market cycle especially so near the top (exhuberance phase) and during stage 1 of the new bear market cycle...and... investors under-estimate EPS near the end of the bear market cycle and during stage 1 and the "wall of worry" early part of stage 2 of the bull market cycle..

Wall St may come unglued when "America,,the promised land doesn't deliver" and the forward EPS doesn't meet the expections..Actually forward earnings haven't reach their expectations since 2014...that is a sign of a cyclical top and the denial phase of stage 1 Bear cycle...

Same thing but more exaggerated with stocks that have cyclical tendencies...Mr Market is no slug...cyclical stocks are running at very low PE's and the Financial stocks e.g Banks are down around -30%....they are warnings folks..it may come to nothing and the stocks turn out to be great buys but the risk is very high..

An argument saying that the price will eventually rise up to meet its EPS value so we should buy more while the stock is under-valued is fraught with danger..EPS being history is a revision mirror..we don't drive our cars forward relying on that revision mirror..

Just llike to mention about the DOW chart...it's starting to look bloody ugly...indicators turning and today's gravestone doji doesn't help

[skid]

And banks are an even more interesting example because they are so interconnected--New Zealand (and Australia) are still very dependent on the whole banking system.
Heartland may not be invested big in farming ,but low interest rates are much more of an issue--You just cant make the same money in a low interest Environment..-the spread is thinner.

[workingdad]

Yep, the expectations for earnings season is poor - if they fail to meet those low expectations things could get ugly.

Great post Hoop, very well summed up

[percy]

Percy...EPS is history.. Price is the present... here lies (pun) the problem....Research has shown Investors over-estimate earnings going forward during the later stages of a bull market cycle especially so near the top (exhuberance phase) and during stage 1 of the new bear market cycle...and... investors under-estimate EPS near the end of the bear market cycle and during stage 1 and the "wall of worry" early part of stage 2 of the bull market cycle..

igh..

An argument saying that the price will eventually rise up to meet its EPS value so we should buy more while the stock is under-valued is fraught with danger..EPS being history is a revision mirror..we don't drive our cars forward relying on that revision mirror..

Just llike to mention about the DOW chart...it's starting to look bloody ugly...indicators turning and today's gravestone doji doesn't help


EPS.When you have 25 years of EPS history with a company such as Ebos,and they say they expect double digit growth you can safely assume it is going to be above 9%.
It is very easy to compare results with projections.
A lot of companies achieve what they say they will do.

[percy]

And banks are an even more interesting example because they are so interconnected--New Zealand (and Australia) are still very dependent on the whole banking system.
Heartland may not be invested big in farming ,but low interest rates are much more of an issue--You just cant make the same money in a low interest Environment..-the spread is thinner.

The spread is very thin should you be chasing retail mortgages,however the spread remains very healthy in the niche areas Heartland service,ie motor vehicle finance,reserve equity loans,seasonal and livestock rural loans,etc.

[Hoop]

Please explain "expoliate"

Sorry I wrote the post in haste.had 2 minutes to get out of the door..yeah meant extrapolate.

I've added a theoretical example ..extrapolation of a mean reversion line can be a useful check back when using data analysis.

Edit:...Chart error Mean reversion ..not Mean revision
http://i458.photobucket.com/albums/qq306/Hoop_1/cyclical%20diagram%20A.png (http://s458.photobucket.com/user/Hoop_1/media/cyclical%20diagram%20A.png.html)
http://i458.photobucket.com/albums/qq306/Hoop_1/Cyclical%20Diagram%20b.png (http://s458.photobucket.com/user/Hoop_1/media/Cyclical%20Diagram%20b.png.html)

[Hoop]

EPS.When you have 25 years of EPS history with a company such as Ebos,and they say they expect double digit growth you can safely assume it is going to be above 9%.
It is very easy to compare results with projections.
A lot of companies achieve what they say they will do.

A lot of companies don't acheive what they say too.
EBOS is a fine example..Percy pity the many others in the NZX50 don't take EBO as an example...
However there is some things I don't understand...
EBO has outlooks and the next years EPS backs their claims but the running EPS totals in the following reports see the EPS adjusted mostly downwards...
e,g in the 2010 annual report (2010AR) eps is 47 in the 2011AR the 2010 is now 39.5 which now below 200AR esp of 41.1..the 2011 ESP is a stellar 61.2
in the 2012AR the 2011ESP has shrunk back to 45.4 from the reported 61.2..
I now and again try to draw EPS charts and keep on running into this type of changing the playing field...
Now the problem I have with this sort of manipulation is the investors read the AR then apply forward EPS projections then find out 6 months to an year later the original figures are out of wack and your forward projection is way out of line
Also...these downward revises ESP go unnoticed by most and their perception is that the management hold true to their word that for example 2007 that the projected outlook is for earning to be near 50% increase in 2008 which over revision never happened until 2012...Remember...EBO EPS did not fall during the 2007-2008 GFC but its shareprice did from ~500c to ~350c...Sentiment that this time and the perceived future will be different..eh :)

[Snow Leopard]

...200AR esp of 41.1..the 2011 ESP is a stellar 61.2
in the 2012AR the 2011ESP has shrunk back to 45.4 from the reported 61.2...

As a technical guy we do not expect you to be able to understand annual reports properly :p.

The numbers for 2011 in the 2011 FYR and the 2012 FYR are actually the same.

The 61.2 is earning from continuing and discontinued ops

The 45.4 is earning from continuing only.

[Both numbers appear in both years report]

You just may find the same thing for the 47/39.5 as well :ohmy:

Best Wishes
Paper Tiger

[percy]

A lot of companies don't acheive what they say too.
EBOS is a fine example..Percy pity the many others in the NZX50 don't take EBO as an example...
However there is some things I don't understand...
EBO has outlooks and the next years EPS backs their claims but the running EPS totals in the following reports see the EPS adjusted mostly downwards...
e,g in the 2010 annual report (2010AR) eps is 47 in the 2011AR the 2010 is now 39.5 which now below 200AR esp of 41.1..the 2011 ESP is a stellar 61.2
in the 2012AR the 2011ESP has shrunk back to 45.4 from the reported 61.2..
I now and again try to draw EPS charts and keep on running into this type of changing the playing field...
Now the problem I have with this sort of manipulation is the investors read the AR then apply forward EPS projections then find out 6 months to an year later the original figures are out of wack and your forward projection is way out of line
Also...these downward revises ESP go unnoticed by most and their perception is that the management hold true to their word that for example 2007 that the projected outlook is for earning to be near 50% increase in 2008 which over revision never happened until 2012...Remember...EBO EPS did not fall during the 2007-2008 GFC but its shareprice did from ~500c to ~350c...Sentiment that this time and the perceived future will be different..eh :)

So we can take that the sentiment investor usually loses out to the fundamental investor in the longer term.
So ignore sentiment ,or should we say ignore the noise.!!..lol.

[skid]

So we can take that the sentiment investor usually loses out to the fundamental investor in the longer term.
So ignore sentiment ,or should we say ignore the noise.!!..lol.

I would venture to say ,that depends on the company and when they buy.

[Hoop]

So we can take that the sentiment investor usually loses out to the fundamental investor in the longer term.
So ignore sentiment ,or should we say ignore the noise.!!..lol.

An investor is really trading within a specialised market place..when you buy into the stock you are buying into the marketplace...you are then governed by what that marketplace is willing to buy or sell those stocks for..

Don't blame me if a lot of research papers all conclude that EPS correlates with the shareprice only after a long duration of time..Research has found that In the short term there's correlation or no correlation, the situation is complex ...so the sentiment investor has the advantage over a long term investor....Over the long term however, as the correlation becomes stronger the long term investors discipline becomes stronger, the sentiment investor using the shorter term sentiment discipline which is not designed as a long term discipline becomes weaker... (obvious and commonsense...eh!!) therefore if the sentiment investor holds long term he/she is probably breaking the rules of their sentiment discipline..........so we can take from that quote "..the sentiment investor usually loses out to the fundamental investor in the longer term..."....

[Hoop]

As a technical guy we do not expect you to be able to understand annual reports properly :p.

The numbers for 2011 in the 2011 FYR and the 2012 FYR are actually the same.

The 61.2 is earning from continuing and discontinued ops

The 45.4 is earning from continuing only.

[Both numbers appear in both years report]

You just may find the same thing for the 47/39.5 as well :ohmy:

Best Wishes
Paper Tiger

yeah yeah I know..accounting is a discipline that numbers can mean other numbers when given a set of rules.... I can't defend an argument that 2 is really a 3 but 3 is only a 3 when it is actually 2..eh?

Yeah I got screwed by FBU a few years ago when their EPS and PE Ratios got altered..caught out a lot of financial "experts" as well...Winner69 was going on about these alien figures that were different to the websites brokers figures...he turned out to be right..and we were unintentionally comparing cheese with chalk

[Hoop]

Yeah I got screwed by FBU a few years ago when their EPS and PE Ratios got altered..caught out a lot of financial "experts" as well...

goes to show TA has it's advantages over FA...eh:D

[percy]

Yeah I got screwed by FBU a few years ago when their EPS and PE Ratios got altered..caught out a lot of financial "experts" as well...

goes to show TA has it's advantages over FA...eh:D

Dishonest reporting,or presentations have screwed us all far too often.
Maybe it is the reason I much prefer companies who achieve what they say they will do.
Usually they speak in simple clear language,are approachable,and share their disappointments, as well as their successes with shareholders.
They also have a record of returning phone calls.

[Major von Tempsky]

Yep, the expectations for earnings season is poor - if they fail to meet those low expectations things could get ugly.

Great post Hoop, very well summed up

But is it....there was a report in the media today/yesterday that for the first 3 months of this year Eftpos plus credit card spending in NZ is up 13% on last year. And we have 2 to 3% GDP growth so unless you are restricting your analysis to dairy farming you could be forecasting wrongly....

[Snow Leopard]

But is it....there was a report in the media today/yesterday that for the first 3 months of this year Eftpos plus credit card spending in NZ is up 13% on last year. And we have 2 to 3% GDP growth so unless you are restricting your analysis to dairy farming you could be forecasting wrongly....

I believe the conversation was with regard to South Canada.

Best Wishes
Paper Tiger

[workingdad]

But is it....there was a report in the media today/yesterday that for the first 3 months of this year Eftpos plus credit card spending in NZ is up 13% on last year. And we have 2 to 3% GDP growth so unless you are restricting your analysis to dairy farming you could be forecasting wrongly....

Reference is to the Q1 2016 earnings season reports in the US markets which we are not immune from and exerts a substantial influence on what happens here.

Or as Paper Tiger put it, South Canada :t_up:

[Baa_Baa]

I think NZX had it's largest monthly gain during March than anytime for the past 15 years. Pretty impressive really, hitting new highs, defying all but a very very small few international equities markets.

Some time back I asked if anyone knew of a time when the NZ equities market had a decent 'correction' based solely on it's own fundamentals going haywire, but I don't think anyone answered.

What is starkly apparent is that the really big corrections in our equities market aren't related at all to NZ economic fundamentals, they are routs triggered by global sentiment in the big equities markets going off the cliff.

So while it's all hunky dory with NZX and record highs are being set, one might turn ones attention to whether world peace has broken out, or whether systemic superpower economic malaise have been solved, or perhaps whether global deflation is correcting, maybe even whether that bugaboo of private; business; and sovereign debt is correcting?

If not, it seems history is sure to repeat, perhaps soon enough, and our darling market on the end of the whipping hose gets crushed again by something (apparently) unforeseen, even when the evidence is staring us in the face.

Of course the party could go on, and if one has faith in that scenario they'll be buying these very toppy NZ yielding companies and saying "to hell with the macro scenario, doesn't afff ... aaffffec ... aaffeeectt ... bugger, doesn't matter to us."

For others, it might be take profits and risk off.

[winner69]

See price does follow EPS .... Well sort of .....at least for EBO

But there are periods when sentiment rules, like when the blue line goes below the red line and vice versa. Currently sentiment is really winning (in an exuberant sort of way)

And it shows that Ebos doesn't always do what they say they will do

Price is yahoo and not adjusted so probably wrong - (they fiddled around with bonus/splits a few years ago which nobody could understand the impact of)

EPS is June reported number ex Morningstar so probably wrong as well. I have displayed EPS as calendar years (ie 6 months 'forecast' and 6 months actual sort of basis)

Sorry its not a log scale either

hmm - share price might be getting a bit ahead of itself but then again once it hits $20 its zooming to $100

What a load of rubbish - sorry

[dobby41]

Baa Baa - it must go on. It is different this time.:t_up:

[Major von Tempsky]

But are they toppy compared to near zero interest rates return?
And the world forecasts, American forecasts are not for a crash but for slow growth. Besides which the US is nowhere near our top export market.
Have a look at the NZX website table of NZ companies arranged in order of Gross Dividend yield, consider, say, Spark on 5.760%, or Genesis on 7.940% and Meridian on 6.830% vs how much do you get for a savings deposit at the banks these days?
It's a no-brainer.

[workingdad]

But are they toppy compared to near zero interest rates return?
And the world forecasts, American forecasts are not for a crash but for slow growth. Besides which the US is nowhere near our top export market.
Have a look at the NZX website table of NZ companies arranged in order of Gross Dividend yield, consider, say, Spark on 5.760%, or Genesis on 7.940% and Meridian on 6.830% vs how much do you get for a savings deposit at the banks these days?
It's a no-brainer.

If by slow growth you mean the 20 to 30% chance of a global recession this year being factored in this and the 103 negative EPS company preannouncements versus 27 positive ones, the prediction of a 4th consecutive quarter of falling profits not to mention the state of the global economies.

A no-brainer..... so the potential to lose 3 times the dividend yield as the value of your portfolio drops is wise?

I am not a doom and gloom person, we all accept a certain amount of risk investing in the markets, weighing up the risk versus the returns with some more adverse to risk than others, I am of the opinion that the increased risk at this point and time is at the very least something than needs to be given due consideration, for me that's a no-brainer.

It has very little to do with exports to the US. Our market is exposed to the behaviour of the big money and how would you explain sept last year and the start of this years drops when we have such great companies with high gross dividend yields?

[bull....]

bounced nicely off those supports I mentioned yesterday, bullish

[workingdad]

bounced nicely off those supports I mentioned yesterday, bullish

But for how much longer? Good read below with graphs.

http://davidstockmanscontracorner.com/the-implosion-is-near-signs-of-the-bubbles-last-days/

"at a point which is month #61 of the current business cycle, and thereby already beyond than the average cycle since 1950, why would any one in their right mind say a market is not bubbly when it’s trading at nearly 20X reported earnings. Indeed, in a world where interest rate and profit rate normalization must inevitably come, the capitalization rate for current earnings should be well below normal—-not extended into the nosebleed section of historical results.

At the end of the day, the Fed and its fellow traveling central banks have systematically dismantled the natural stability mechanisms of financial markets. Accordingly, financial markets have now become dangerous casinos in which speculative bubbles are guaranteed to build to dangerous extremes as the central bank driven financial inflation gathers force. That’s where we are now. Again."

[bull....]

But for how much longer? Good read below with graphs.

http://davidstockmanscontracorner.com/the-implosion-is-near-signs-of-the-bubbles-last-days/

"at a point which is month #61 of the current business cycle, and thereby already beyond than the average cycle since 1950, why would any one in their right mind say a market is not bubbly when it’s trading at nearly 20X reported earnings. Indeed, in a world where interest rate and profit rate normalization must inevitably come, the capitalization rate for current earnings should be well below normal—-not extended into the nosebleed section of historical results.

At the end of the day, the Fed and its fellow traveling central banks have systematically dismantled the natural stability mechanisms of financial markets. Accordingly, financial markets have now become dangerous casinos in which speculative bubbles are guaranteed to build to dangerous extremes as the central bank driven financial inflation gathers force. That’s where we are now. Again."

Another person who cant understand the new world and tries to reason with old school tools that no longer work.

[dobby41]

Another person who cant understand the new world and tries to reason with old school tools that no longer work.

It's different this time - where have I heard that before?

[workingdad]

Another person who cant understand the new world and tries to reason with old school tools that no longer work.

I think it's fair to say I doubt anyone understands the new world and foolish if they think they do. No one has a crystal ball and tools aside, markets have proven to be nervous and react significantly in the last 6 months. What the next catalyst will be only time will tell.

[Hoop]

Another person who cant understand the new world and tries to reason with old school tools that no longer work.

Bull...Are you suggesting this time is different on the S&P500 and we should invest "all in" ...and don't worry about the old school figures of PE Ratio at 22.74 (12th April 2016) and Shillers PE Ratio (also known as CAPE, or PE10) 26.04 (4th April 2016)

[bull....]

It's different this time - where have I heard that before?

it is, has been for last 8yrs the current environment can last for ever

[bull....]

Bull...Are you suggesting this time is different on the S&P500 and we should invest "all in" ...and don't worry about the old school figures of PE Ratio at 22.74 (12th April 2016) and Shillers PE Ratio (also known as CAPE, or PE10) 26.04 (4th April 2016)

all that stuff is worthless in this environment the last 8ys provides evidence to justify this

[BlackPeter]

Choose your type: be considered as a "smart" pessimist (but probably constantly feeling miserable) - or do you prefer to be optimistic (and make money on the way)? I know which type I prefer, but there seem to be a lot of "smart" guys and gals around on this thread ... ;)

http://news.fisherfunds.co.nz/t/d-l-tlbdly-hjlukhsj-q/

[Hoop]

Informative EBO chart ..Thanks Winner...

Based on your chart, is it in prospective to assume that EBO may have over-extended itself with it's catch up??

[Hoop]

all that stuff is worthless in this environment the last 8ys provides evidence to justify this

All that stuff is a part of Market Physics so its definitely not useless..it's still intact..nothing has changed..it is not different this time..the current environment is just a repeat of the 1960's when the inflation back then was in the same sweet spot (~+1%)..
Market Physics says PE Ratios are high when inflation is low..Looking back in history proves this, with long periods of very high PE Ratios (20-23%) corresponded with low inflation around the 1% level..This sweet spot environment has been shown from past history to hold a 20 -23 PE Ratio for several years and not been judged as extremely overvalued

To prove my point..I have attached a Shiller PE (CAPE, PE10) 130 year chart blue line and added a red line overlay showing the inflation rate..

Share Market Theory says Inflation is the primary driver of the sharemarkets annualised P E Ratio trends...As seen on the chart high inflation and deflation results in a much lower PE Ratio..


it is, has been for last 8yrs the current environment can last for ever

Your statement is true as long as inflation stays within its sweet spot...any rise/fall of inflation/deflation outside that sweet spot and the PE 10 Ratio will revert back towards and go down through its mean value (16.6)

Take note.....1...the PE Ratio range Max 44.19 Min 4.78
..................2...From history most markets go bear cycle at or around the PE 25 area....

http://i458.photobucket.com/albums/qq306/Hoop_1/SampP500%20PEOL%2012042016.png (http://s458.photobucket.com/user/Hoop_1/media/SampP500%20PEOL%2012042016.png.html)

[skid]

Choose your type: be considered as a "smart" pessimist (but probably constantly feeling miserable) - or do you prefer to be optimistic (and make money on the way)? I know which type I prefer, but there seem to be a lot of "smart" guys and gals around on this thread ... ;)

http://news.fisherfunds.co.nz/t/d-l-tlbdly-hjlukhsj-q/

Gee BP...your not providing us with many scenarios...I think you may have left out a few.

[skid]

Another person who cant understand the new world and tries to reason with old school tools that no longer work.

Thats an interesting statement Bull..could we have a bit of clarification on ''the new world''..Everyone ,Im sure,is interested in the same thing ,(bearing in mind that making money,and not losing money is basically the same thing)

[skid]

Choose your type: be considered as a "smart" pessimist (but probably constantly feeling miserable) - or do you prefer to be optimistic (and make money on the way)? I know which type I prefer, but there seem to be a lot of "smart" guys and gals around on this thread ... ;)

http://news.fisherfunds.co.nz/t/d-l-tlbdly-hjlukhsj-q/

I like the part in the article where it says


''Optimism requires action (to buy in before missing the boat) where as pessimism (caution) means staying the course(and waiting for the storm to pass)
Optimism forces us to take action (to buy in,in the hopes of profit) which feels better than just waiting ,which requires patience.''


interesting that the article is by Fisher Funds

[Hoop]

I like the part in the article where it says


''Optimism requires action (to buy in before missing the boat) where as pessimism (caution) means staying the course(and waiting for the storm to pass)
Optimism forces us to take action (to buy in,in the hopes of profit) which feels better than just waiting ,which requires patience.''


interesting that the article is by Fisher Funds

'Optimism requires action (to buy in before missing the boat)...The bad news: I missed the boat..the good news: the boat sunk today

I've been trying to top up on PAY for days now, setting and resetting my buy order upwards chasing this rapid price move upwards from 240..Today when it reached 280 my order was still trailing at 273 I got pissed off, packed a sad, went pessimistic and cancelled the order...
Edit :: fell back to 255 up to 260 now

[percy]

I like the part in the article where it says


''Optimism requires action (to buy in before missing the boat) where as pessimism (caution) means staying the course(and waiting for the storm to pass)
Optimism forces us to take action (to buy in,in the hopes of profit) which feels better than just waiting ,which requires patience.''


interesting that the article is by Fisher Funds

May be a case of "do as I say,not as I do."

[skid]

I guess for those who didnt bother to read the article or were not paying attention -I should mention I took the liberty of changing a few things in that statement from the article (just to make a point--comes with the usual disclaimer)

For the others,who caught it right away, apologies if I insulted your intelligence by mentioning it :):)


Meanwhile here are 2 of the (what I consider )myths I have noticed of late

1-Buy shares because you get a better % return ,and it is the same risk as money in the bank.

2-If you are cautious in todays market you are automatically a pessimist and are gloomy and hate life.

[BlackPeter]

Meanwhile here are 2 of the (what I consider )myths I have noticed of late

1-Buy shares because you get a better % return ,and it is the same risk as money in the bank.

2-If you are cautious in todays market you are automatically a pessimist and are gloomy and hate life.

Care to share with us who would spread this ill defined nonsense? I hope you didn't deduct that from my posts ;) - otherwise I need to improve my communication skills.

Any generalisations about shares as well as about banks are obviously plain nonsense. Some shares provide a better return than some banks ... and some shares provide a worse return (including total loss) than some banks (though some of the banks offer as well the loss option, incl. total loss - ask the clients of Lehman brothers or talk with some Greek or Cypress banks re haircuts ...). I guess this clarifies as well the risk bit - any investment is risky (but so is to store cash under the mattress), but we probably agree that shares have typically a (somewhat) higher risk than (NZ or Australian based) banks.

Who said that cautious people are pessimists? Not being cautious is not optimistic, but inconsiderate or stupid. But I guess there are "degrees of caution" - and being too cautious is as dangerous as being not cautious enough. People who expect the next GFC anytime soon with a nearly 100% probability and who have nothing better to do than filling forums with warnings of blood moons, bad moons, Jewish financial cycles going to bust, warnings of crashes due to buyback restrictions and doomsday after doomsday scenarios are in my view not cautious, but either neurotic, stupid or sensationalist (or all of the above). I assume we agree on that one as well - don't we?

So - who is spreading the urban myths you have noticed - or did you make them up yourself?

[bull....]

looking good still on for target for those levels mentioned

[fish]

looking good still on for target for those levels mentioned

Growing population,low interest rates,cheap resources.
Stress on populations/companies etc speeds up evolution.
The fittest bull will survive and propagate

[couta1]

The gloom merchants may need to go and take a nap with the bears, she's onward and upward folks.

[bull....]

6pts away from breakout target 17520 - 17720 = 17920 consolidation then or higher to 18200 2100

[winner69]

2135 next target - not far away

New all time high coming up

[macduffy]

NZ market attracts international attention.

http://www.bloomberg.com/news/articles/2016-04-13/foreign-invasion-of-tiny-new-zealand-stock-market-threatens-boom

[Beagle]

European, (in particular) Asian and U.S. markets kicking on strongly. Ultra low interest rates seem to be having the desired effect in tandem with the benefits consumers are enjoying world-wide with low fuel prices. 7500 on the NZX50 by the end of the year looking increasingly likely IMO. 7500 wasn't on anyone's radar two months ago, who would have thought...

[workingdad]

NZ market attracts international attention.

http://www.bloomberg.com/news/articles/2016-04-13/foreign-invasion-of-tiny-new-zealand-stock-market-threatens-boom

Good link thank you.

A couple of quotes I took note of.

“It’s swamped the market and it leaves them very vulnerable. We’re somewhat nervous.”

At the point the music stops, it’s a small door as well, so that tends to exaggerate moves on the way up and on the way down.”

I don't think I am a gloom merchant just because I think there are enough factors to cause concern. Yes I got rid of my shares of which a lot were buy and hold, I am dabbling in some quick turnovers and being prepared for a catalyst that could bite hard doesn't make me a pessimist, I think it makes me cautious and I sleep well at night so it makes me relaxed :)

[Baa_Baa]

NZ market attracts international attention.

http://www.bloomberg.com/news/articles/2016-04-13/foreign-invasion-of-tiny-new-zealand-stock-market-threatens-boom

Good read, thanks for posting.

[Hoop]

This gloom merchant is still awake..:p:p:t_down:

Wall St is still in a bear tide (confirming Bear Market cycle state)..For 9 months I have said the market is probably in stage 1 Bear market cycle..since then nothing has changed to confirm its not...

Even with last night Wall St short term breakout the charts still look ugly..

NZX50 has been fantastic of late record high after record high, the NZX50 is one of the very few stock markets that is still in a Bull market Cycle..The OBV shows for the last 2 years available money has been pouring into the market..With this recent very strong rally we all have made a lot of money these last couple of months...
The not so good news..These last 3 weeks has seen many TA indicator negative divergences being created..these are warning signs that this present huge rally is losing momentum and running out of steam ...these market signs tend to tempt investors to take profits, a self-fueling human behavioural event

For the die hard optimistists.....Wall St had a good day so we should expect another record close for the NZX50 today...eh?

[skid]

Care to share with us who would spread this ill defined nonsense? I hope you didn't deduct that from my posts ;) - otherwise I need to improve my communication skills.

Any generalisations about shares as well as about banks are obviously plain nonsense. Some shares provide a better return than some banks ... and some shares provide a worse return (including total loss) than some banks (though some of the banks offer as well the loss option, incl. total loss - ask the clients of Lehman brothers or talk with some Greek or Cypress banks re haircuts ...). I guess this clarifies as well the risk bit - any investment is risky (but so is to store cash under the mattress), but we probably agree that shares have typically a (somewhat) higher risk than (NZ or Australian based) banks.

Who said that cautious people are pessimists? Not being cautious is not optimistic, but inconsiderate or stupid. But I guess there are "degrees of caution" - and being too cautious is as dangerous as being not cautious enough. People who expect the next GFC anytime soon with a nearly 100% probability and who have nothing better to do than filling forums with warnings of blood moons, bad moons, Jewish financial cycles going to bust, warnings of crashes due to buyback restrictions and doomsday after doomsday scenarios are in my view not cautious, but either neurotic, stupid or sensationalist (or all of the above). I assume we agree on that one as well - don't we?

So - who is spreading the urban myths you have noticed - or did you make them up yourself?

That was not specifically aimed at you BP--it was just a general impression because the low interest returns on Bank deposits vs shares get brought up alot,as do the ''glass half full vs empty'' and surly you have noticed that many who advise caution do get labelled gloomy pessimists and worry worts,
my point was that it is easy to be cautious and perhaps minimise share investing ,at the risk of losing profits ,and still go out and enjoy life.

Your ''choose your type'' post was a bit narrow on the choices though I thought-------''Choose your type: be considered as a "smart" pessimist (but probably constantly feeling miserable) - or do you prefer to be optimistic (and make money on the way)? I know which type I prefer, but there seem to be a lot of "smart" guys and gals around on this thread ...

Being perhaps cautious about the economy in general AT THIS STAGE doesnt imply that one is necessarily a pessimist in general,and of course these economic issues are but a small part of life.

I could be dead wrong,in which case I will lose a growth in profits and a change in the basics of the economies in general could also change me into a raging optimist.---Its ever changing

But having said that --I may have misinterpreted your post and was'nt directing the myths at you in particular anyway, so no offense intended

PS-my whole point (bank vs shares) was about the fact that risk was often deducted from the equation---there is indeed risk in everything,even the mattress,but to be fair one must assign what they think the general odds are for each particular risk and factor it into the particular ''mode'' you are in ,which is either going for growth and profits or preservation of capital.

100% probability of anything...yep we agree on that....(Whats a Blood Moon?):)

[skid]

NZ market attracts international attention.

http://www.bloomberg.com/news/articles/2016-04-13/foreign-invasion-of-tiny-new-zealand-stock-market-threatens-boom

Thats an awfully high percentage of foreign ownership--Its like riding the tiger--big gains while things are going well--but if you fall off the tigers back ,you get eaten.

Im sure many posters will get different messages from this article.

[Mickey]

Thats an awfully high percentage of foreign ownership--Its like riding the tiger--big gains while things are going well--but if you fall off the tigers back ,you get eaten.

Im sure many posters will get different messages from this article.

The article confirmed what I believed was happening (although I didn't think foreign ownership was that high) and adds further support to why I liquidated approximately 50% of my share portfolio over the past 3 weeks. I've missed out on some gains for sure but ultimately I favour preservation of capital vs. hanging on for a few extra gains and I want a pile of cash on standby should I need it.

Another factor that influenced me to adopt this position was hearing people at work talking about investing in the market for the first time to beat the low interest rates. If I hear anyone mention "Share Club" - then I'm all out (I remember the 80's well). Also, Kiwi Saver funds continue to receive large cash injections each week, which are no doubt fuelling the current bull run and contributing to some over-pricing. Sooner or later - Newtons Law will prevail and personally - I want to be in a strong cash position to maximise any investment opportunities when and if there are some material corrections to certain stocks.

Maybe I'm right - maybe I'm wrong - but that's how I intend to play my game for now.

[Biscuit]

Sooner or later - Newtons Law will prevail and personally - I want to be in a strong cash position to maximise any investment opportunities when and if there are some material corrections to certain stocks.



Newton made up many "laws". His first law was thata moving object tends to carry on at the same speed and direction until a force is applied to it - ie the law of inertia. Applied to the share market I guess that would mean that currently you should be all in?

[Snow Leopard]

...Newtons Law will prevail...

This probably an oblique reference to "What goes up must come down" which is often, wrongly, attributed to Isaac Newton.

In actual fact "What goes up must come down" is Isaac Newton's Wife's Law of the Toilet Seat.

Best Wishes
Paper Tiger

[couta1]

F=MA. As long as force is applied to said mass it will continue to accelerate.:cool:

[Biscuit]

This probably an oblique reference to "What goes up must come down" which is often, wrongly, attributed to Isaac Newton.

In actual fact "What goes up must come down" is Isaac Newton's Wife's Law of the Toilet Seat.

Best Wishes
Paper Tiger

He never married which might explain why he had time to sit around under apple trees contemplating gravity

[fungus pudding]

He never married which might explain why he had time to sit around under apple trees contemplating gravity

A further demonstration of his outstanding intellect.

[skid]

Newton made up many "laws". His first law was thata moving object tends to carry on at the same speed and direction until a force is applied to it - ie the law of inertia. Applied to the share market I guess that would mean that currently you should be all in?

I think that would only work in a vacuum(as gravity-air-wind,etc are all forces,working against the object)--so if one thinks the share market operates in a vacuum,no problems.

PS-Wouldnt that be great..one push on the scooter or peddle on the bike and off you go ,all the way to your destination!

[BIRMANBOY]

This thread was started in August 2015..so that would have made a similar decision wrong at that point. Question is of course what will next 8 months (or one month) hold. The classic conundrum about investing in the share market..is what you miss out on by being out of the market better or worse than being in.... And the answer is.....obvious in hindsight but not so obvious in a reverse format. Amazing that so many investors fancy their chances in being able to outguess the market.
The article confirmed what I believed was happening (although I didn't think foreign ownership was that high) and adds further support to why I liquidated approximately 50% of my share portfolio over the past 3 weeks. I've missed out on some gains for sure but ultimately I favour preservation of capital vs. hanging on for a few extra gains and I want a pile of cash on standby should I need it.

Another factor that influenced me to adopt this position was hearing people at work talking about investing in the market for the first time to beat the low interest rates. If I hear anyone mention "Share Club" - then I'm all out (I remember the 80's well). Also, Kiwi Saver funds continue to receive large cash injections each week, which are no doubt fuelling the current bull run and contributing to some over-pricing. Sooner or later - Newtons Law will prevail and personally - I want to be in a strong cash position to maximise any investment opportunities when and if there are some material corrections to certain stocks.

Maybe I'm right - maybe I'm wrong - but that's how I intend to play my game for now.

[dobby41]

I ahve cut the problem in half by liquidating half my portfolio.
Though I only participate in half of any gains I only get half of any losses also.
Using the other half elsewhere seemed to be a prudent move.

[Mickey]

This thread was started in August 2015..so that would have made a similar decision wrong at that point. Question is of course what will next 8 months (or one month) hold. The classic conundrum about investing in the share market..is what you miss out on by being out of the market better or worse than being in.... And the answer is.....obvious in hindsight but not so obvious in a reverse format. Amazing that so many investors fancy their chances in being able to outguess the market.

I agree with what you say BB.

Time will tell. As I said "Maybe I'm right - maybe I'm wrong - but that's how I intend to play my game for now". The good thing about playing my own game is that I can change my self imposed rules any time I want, I don't need anyone else's approval and only I am fully accountable for the consequences of my actions.

Fun times :)

[macduffy]

I ahve cut the problem in half by liquidating half my portfolio.
Though I only participate in half of any gains I only get half of any losses also.
Using the other half elsewhere seemed to be a prudent move.

That depends on the "elsewhere's" performance!

;)

[Snow Leopard]

He never married which might explain why he had time to sit around under apple trees contemplating gravity

But his father, Isaac, did.

Whenever young Isaac went to visit his mother she would say, when he came back from the privy at the end of garden.
"Did you remember to put the seat down young man? As I used to say to your late father, 'What Goes Up Must Come Down'".
And it is, in part, this remembrance which later inspired him.

Best Wishes
Paper Tiger

PS: The whole gravity and toilets thing could be taken further but best we do not pursue this line of thought, even if Isaac did.

[Joshuatree]

His mother also told him his most important lesson which he never forgot."If it comes back its yours; if it doesn't;it never was" Esp appropriate and poignant when sitting under an apple tree in blossom.

[skid]

But his father, Isaac, did.

Whenever young Isaac went to visit his mother she would say, when he came back from the privy at the end of garden.
"Did you remember to put the seat down young man? As I used to say to your late father, 'What Goes Up Must Come Down'".
And it is, in part, this remembrance which later inspired him.

Best Wishes
Paper Tiger

PS: The whole gravity and toilets thing could be taken further but best we do not pursue this line of thought, even if Isaac did.

I once did a job at a place where when I used the toilet, the seat, when i put it up ,would simply fall back down---I didnt say anything as one of the 2 females (partners) was kind of scary.

Im sure I could make some kind of comparison to todays market,but we have probably digressed enough for one day:)

[neopoleII]

if you look at this site
http://www.indexmundi.com/commodities/?commodity=silver&months=300
and then investigate all the different commodities over the 25 year scale it will show you one thing.
all the graphs are going downhill from 2010ish.
one graph is interesting. several makes you look further but most going down hill on the 25 year scale is an eye opener.
and the peaks of most of the graphs is similar.
and to add to all that...... we still have massive debt( from the last downturn) and are entering the world of negative interest rates....
some one has to pay...... either todays punter/ investor or tomorrows new person entering the global market / workforce / home owner.
we all have a choice......... most dont think there is a choice.

[JBmurc]

IMHO at some stage massive amounts of DEBT will be forgiven (wiped clean)...no way the world economy can grow even with neg rates ....credit expansion out of control is the story of the last 20-30yrs

[nextbigthing]

Does anybody know where I can find the historical PE for the NZX? As per this article.

http://www.goodreturns.co.nz/article/976504074/time-for-new-way-to-value-equities.html

Thanks

[Leftfield]

Does anybody know where I can find the historical PE for the NZX? As per this article.

http://www.goodreturns.co.nz/article/976504074/time-for-new-way-to-value-equities.html

Thanks

Agree, it would be good to be able to track (say) NZX 50 av P/E's to support the article's claim that "New Zealand’s equity market has a price-to-earnings (P/E) ratio of 18.5, compared to a five-year average of 16.2."

In the meantime I've been re-reading Ben Graham's 'Intelligent Investor"......his preference for investments with P/E's of below 20 to 25 is heartening. It would seem that NZX still has some room to move ? (particularly in times of low inflation and low interest rates.)

[winner69]

Agree, it would be good to be able to track (say) NZX 50 av P/E's to support the article's claim that "New Zealand’s equity market has a price-to-earnings (P/E) ratio of 18.5, compared to a five-year average of 16.2."

In the meantime I've been re-reading Ben Graham's 'Intelligent Investor"......his preference for investments with P/E's of below 20 to 25 is heartening. It would seem that NZX still has some room to move ? (particularly in times of low inflation and low interest rates.)

Did you read this comment under that article linked -

On 14 April 2016 at 9:44 am Brent Sheather said:
It’s worth thinking about what Mr Williams is saying here in terms of the discounted cash flow model. The theory says that a share price is simply the discounted net present value of a stock. The very much simplified DCF model is the value of a company’s cash flows in perpetuity discounted at an appropriate discount rate.

Thus what Mr Williams is saying is that the lower the discount rate, which is a function of interest rates, the higher will be the value of the stock. This is quite correct except for the fact that interest rates don’t fall in isolation. As a recent Bank of England report shows the major factor pushing interest rates down globally in the last 30 years has been lower inflation, lower growth and various other factors. So it may not be correct to argue that lower interest rates imply higher price earnings multiples because we are ignoring the top half of the equation ie lower sales growth and thus lower profits and thus lower cash flows. It may be correct but it may not.

Philip Coggan in the Economist magazine frequently argues this point. For example look at Japan in the last 20 years – interest rates have continued to fall but price earnings multiples have fallen with them.

So there is some free CPD but unfortunately it doesn’t involve maximising the value of your business or how to more effectively close a sale.

[winner69]

Agree, it would be good to be able to track (say) NZX 50 av P/E's to support the article's claim that "New Zealand’s equity market has a price-to-earnings (P/E) ratio of 18.5, compared to a five-year average of 16.2."

In the meantime I've been re-reading Ben Graham's 'Intelligent Investor"......his preference for investments with P/E's of below 20 to 25 is heartening. It would seem that NZX still has some room to move ? (particularly in times of low inflation and low interest rates.)

Your broker should have historical PE of the NZ50

If he does ask him how they treat the big losses that XRO etc make

As an aside Morningstar say PE currently is 15.65 and AMP Capital quote a more than 19.......hmmm

[skid]

so one thing that caught my eye was that the US is warning the big banks they do not have enough reserves to make it through another bad patch--and this after gov bailouts ,practically giving money to banks--Everyone knows that they have used the money to speculate but to the point of to little reserves? These big merchant banks are lose cannons---Should we be concerned? It appears to me to be one of those things that doesnt affect day to day trading but could be a real problem if it gets to the point the reserves are needed.

[winner69]

Agree, it would be good to be able to track (say) NZX 50 av P/E's to support the article's claim that "New Zealand’s equity market has a price-to-earnings (P/E) ratio of 18.5, compared to a five-year average of 16.2."

In the meantime I've been re-reading Ben Graham's 'Intelligent Investor"......his preference for investments with P/E's of below 20 to 25 is heartening. It would seem that NZX still has some room to move ? (particularly in times of low inflation and low interest rates.)

I thought that a PE of 15 was the most Mr Graham would go to .....and didn't he tie it with the Price Book ratio as well by mltiplying the PE by PB and if it was more than 22 (?) bad luck no buying hat one

He not the Father of Value Investing for nothing

[trader_jackson]

PE's are higher than usual, lets see if NZ earnings growth can keep up (like it has done in the past few years, mostly)

So far this quarters American reporting season (which, yes has only just started), is no where near as bad as most were forecasting (reminds me of last quarter...)

[Leftfield]

I thought that a PE of 15 was the most Mr Graham would go to .....and didn't he tie it with the Price Book ratio as well by mltiplying the PE by PB and if it was more than 22 (?) bad luck no buying hat one

He not the Father of Value Investing for nothing

Graham suggests four key rules for selecting stocks.... see his rule 4.
1.) "There should be adequate though not excessive diversification (in your portfolio..... he suggests a minimum of 10 stocks)
2.) Each Company selected should be large, prominent and conservatively financed
3.) Each Company should have a long record of continuous dividend payments
4.) The investor should impose some limit on the price he will pay for an issue in relation to its average earnings over, say, the past 7 years. We suggest this limit be set at 25 times average earnings and not more than 20 times in the last 12 month period."

I guess if you follow these rules you won't be so worried about a Black Monday event.

[winner69]

Graham suggests four key rules for selecting stocks.... see his rule 4.
1.) "There should be adequate though not excessive diversification (in your portfolio..... he suggests a minimum of 10 stocks)
2.) Each Company selected should be large, prominent and conservatively financed
3.) Each Company should have a long record of continuous dividend payments
4.) The investor should impose some limit on the price he will pay for an issue in relation to its average earnings over, say, the past 7 years. We suggest this limit be set at 25 times average earnings and not more than 20 times in the last 12 month period."

I guess if you follow these rules you won't be so worried about a Black Monday event.

As years go by the numbers seem to get bigger but if that is what they are now i won't argue

Old school value investors who follow Ben always work on a PE of about 10, preferably less, but definitely no more than 15 (and only if other criteria is met). Pretty scarce these stocks though.

I just can't believe that Ben would buy at a PE of 25 - thats growth investor territory and Ben was famous as a value investor. If his 'rules' have changed i am shattered and disillusioned.

[Major von Tempsky]

You would be a far more Intelligent Investor if you followed the Gross Dividend table on the NZX site than following P/Es.

[bull....]

You would be a far more Intelligent Investor if you followed the Gross Dividend table on the NZX site than following P/Es.

such wise words for the current environment, just make sure the company is a sound company that's not got a high yield because its got problems

[Leftfield]

You would be a far more Intelligent Investor if you followed the Gross Dividend table on the NZX site than following P/Es.

Can you provide the link?

[percy]

such wise words for the current environment, just make sure the company is a sound company that's not got a high yield because its got problems

Exactly.!
Therefore we must watch the company has growing eps,and the capacity to both continue to pay their dividend, and increase it.

[Lewylewylewy]

http://www.dividendyield.co.nz/hightolowgrossdividend.php

Things that can warp the div yield view are:
A drop in share price (IQE is a good example).
A special dividend, say from the sale of a large asset.

Personally, I used the above link to find companies to look into. Then once I found ones with good returns, I look at things like PE and NTA to see if it's a bargain, company news, ST threads, announcements, industry stats and signs of headwinds \ tailwinds, how much cash and debt they have, what might be effecting the current SP, general market sentiment to decide if it's a good time to buy (I go against the daily flow), etc. I also try to get an idea about how easy it would be to disrupt the business, also I use my subconscious to get a feel for whether it's a good buy.

[kerryo]

http://www.dividendyield.co.nz/hightolowgrossdividend.php

Things that can warp the div yield view are:
A drop in share price (IQE is a good example).
A special dividend, say from the sale of a large asset.

Personally, I used the above link to find companies to look into. Then once I found ones with good returns, I look at things like PE and NTA to see if it's a bargain, company news, ST threads, announcements, industry stats and signs of headwinds \ tailwinds, how much cash and debt they have, what might be effecting the current SP, general market sentiment to decide if it's a good time to buy (I go against the daily flow), etc. I also try to get an idea about how easy it would be to disrupt the business, also I use my subconscious to get a feel for whether it's a good buy.

Thanks for the link Lewylewylewy :)

[Major von Tempsky]

The link is http://www.dividendyield.co.nz/hightolowgrossdividend.php

You could supplement it by joining , say, an online sharetrading outfit (just under $30 a trade) such as the below. Then checkout a particular share and where it gives you the option of "quote", "depth" "Reuters" (several other options), choose Reuters and it will give you a rundown on the share including its recent history so you can see whether it's gross yield is for temporary factors, or any other special factors apply.

https://www.anzsecurities.co.nz/directtrade/static/home.aspx?_$ja=kw:direct+broking%7ccgn:brand%7ccgi d:1435861209%7ctsid:11770%7ccn:direct+broking+bran d%7ccid:21074619%7clid:504132393%7cmt:exact%7cnw:s earch%7ccrid:4276193979&gclid=cpyw1zeapqqcfqxubaod92xd5g

[skid]

And as long as Monetary policy keeps juicing the system ,creating an environment like we have now,you'll be fine.
Only problem is ,(many think)is that the byproduct is a bubble.

On a micro level --good advice

[BIRMANBOY]

Re your link..appreciate the ref but just to point out that there is a column headed "important notes" on the far right which somehow seems to get dropped off when you follow your link. Must be some kind of programming error? i'll look into it. But yes what you do is exactly what it was intended to do..a combination of existing data and some intellectual examination of the "other" aspects. The only other thing I would mention is to offer some protection of possible SP erosion also try and pick a time when the SP is below the "average" trading price over as long a period as you can get. The only discordant note in your post is your use of "subconscious".....but hey..who am I to question others methods:eek2:
http://www.dividendyield.co.nz/hightolowgrossdividend.php

Things that can warp the div yield view are:
A drop in share price (IQE is a good example).
A special dividend, say from the sale of a large asset.

Personally, I used the above link to find companies to look into. Then once I found ones with good returns, I look at things like PE and NTA to see if it's a bargain, company news, ST threads, announcements, industry stats and signs of headwinds \ tailwinds, how much cash and debt they have, what might be effecting the current SP, general market sentiment to decide if it's a good time to buy (I go against the daily flow), etc. I also try to get an idea about how easy it would be to disrupt the business, also I use my subconscious to get a feel for whether it's a good buy.

[Leftfield]

The link is http://www.dividendyield.co.nz/hightolowgrossdividend.php

You could supplement it by joining , say, an online sharetrading outfit (just under $30 a trade) such as the below.

Thanks and appreciated.

[percy]

Re your link..appreciate the ref but just to point out that there is a column headed "important notes" on the far right which somehow seems to get dropped off when you follow your link. Must be some kind of programming error? i'll look into it. But yes what you do is exactly what it was intended to do..a combination of existing data and some intellectual examination of the "other" aspects. The only other thing I would mention is to offer some protection of possible SP erosion also try and pick a time when the SP is below the "average" trading price over as long a period as you can get.
An excellent starting point.
I then go to www.4-traders.com to see projected eps,roe,dividend yields,PE etc for the next two or three years.
Also brokers' research projections are helpful.

[Leftfield]

An excellent starting point.
I then go to www.4-traders.com (http://www.4-traders.com) to see projected eps,roe,dividend yields,PE etc for the next two or three years.
Also broker's research projections are helpful.

Thanks Percy - I hadn't used that site.... v useful.

[Major von Tempsky]

Interesting note by Martin Hawes in the business section of the Sunday Star Times today - that viewed over the last 200 years the low interest rates of today are normal and the high rates of the last 30 years are abnormal. Encouragement to stick at the investing in high gross dividend yield approach.

[nextbigthing]

I suspect things might have changed a little in 200 years Major and therefore that may not be that relevant. For example their iPads at the time were called 'slates' and apparently had no WiFi! Scoff.

[janner]

I suspect things might have changed a little in 200 years Major and therefore that may not be that relevant. For example their iPads at the time were called 'slates' and apparently had no WiFi! Scoff.


200 years.. ???

We were writing on slates, sitting in an Anderson Shelter ( A steel box ).. Wearing a Mickey Mouse gas mask.

Not that long ago.. One plus one was two then.. Also was 200 years ago..

They. Who you scoff at, set in train the inventions you are using today ..

Just a thought. No offence intended.. :-)))

[workingdad]

Not sure the extent of oil prices has on the market - I think a fair amount in the US but the freeze in production meeting has failed. No further OPEC meetings until June and unless Iran come on board with production cuts I cant see it happening then either.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11624289

[skid]

Not sure the extent of oil prices has on the market - I think a fair amount in the US but the freeze in production meeting has failed. No further OPEC meetings until June and unless Iran come on board with production cuts I cant see it happening then either.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11624289

Iran has said No...could be an interesting week

[Lewylewylewy]

I just don't get why high oil prices are good. I think it just effects people's perception because people are scared of change.

[winner69]

I just don't get why high oil prices are good. I think it just effects people's perception because people are scared of change.

I think most love low oil prices

Just that the market sees huge losses from unprofitable oilers and the debt associated with them

When thats washed through the system and oilers can make money on $30 oil it will all be honky dory again

[winner69]

When the biggest movers for the day on the nzx board are Blis, Veritas, Pumpkin, Promisia and Wellington Drive you know exuberance abounds .......... and another correctionis is around the corner

[Baa_Baa]

When the biggest movers for the day on the nzx board are Blis, Veritas, Pumpkin, Promisia and Wellington Drive you know exuberance abounds .......... and another correctionis is around the corner

Meanwhile blue chips down today, some more than others, profits being taken?

[Lewylewylewy]

When the biggest movers for the day on the nzx board are Blis, Veritas, Pumpkin, Promisia and Wellington Drive you know exuberance abounds .......... and another correctionis is around the corner

It's been like that a few times these past weeks. Good to know it's not just me who was bothered by that.

[Baa_Baa]

ACC SSH on RBD flicks a 400k+ parcel, drops out of the 5%. Prior to that, Salt Funds flicks a million shares, Westpac does as well - not an SSH anymore. All in the past week or so. Watch the big guys, they're not incredibly successful by not picking tops and taking profits (and vis versa).

[Baa_Baa]

What about the latest fear mongering, around the missing 28 pages from the Sept'11 report. Bears are always fabricating something gloomy. Saudi apparently threatening a $750 billion sell down of US Treasuries if the 'missing pages' are released and it implicates them. Why would they worry? Market shocks just seem to come out of nowhere. Probably come to nothing, maybe.

[winner69]

Whew - its taken a while but finally back to where it was nearly 9 years ago

New Zealand shares finally surpass pre-financial crisis values
http://www.stuff.co.nz/business/industries/79085817/new-zealand-shares-finally-surpass-prefinancial-crisis-values

[axe]

bring on lucky 4000???

[bull....]

reached my target prices mentioned long ago on da thread 2100, 17800 -18000 nice ride from the 15500 lows it remains to be seen what happens now seem silly I guess not to make new highs being so close? time will tell which way the wind blows

[Bjauck]

Whew - its taken a while but finally back to where it was nearly 9 years ago

New Zealand shares finally surpass pre-financial crisis values
http://www.stuff.co.nz/business/industries/79085817/new-zealand-shares-finally-surpass-prefinancial-crisis-values

...and in the meantime NZ house prices have gone up by about 35% and inflation in the past nine years has been 19%.
https://www.qv.co.nz/resources/news/article?blogId=223

[fungus pudding]

...and in the meantime NZ house prices have gone up by about 35% and inflation in the past nine years has been 19%.
https://www.qv.co.nz/resources/news/article?blogId=223


Inflation and real estate prices have never travelled at the same speed. Real estate, particularly residential, tends to go through bursts of rising, then long periods of stalling.

[skid]

even with the stalls our 64000 house (bought in 1984) is now 1.2mill (last valuation)---There is no doubt that property has far out paced normal inflation---(whether thats a good thing is another debate)

[skid]

Is 18000 a comfortable place for the Dow to sit?

http://www.marketwatch.com/story/china-leads-trend-of-dwindling-foreign-interest-in-us-stocks-2016-04-18

[Bjauck]

Inflation and real estate prices have never travelled at the same speed. Real estate, particularly residential, tends to go through bursts of rising, then long periods of stalling. True - I guess most investment markets overshoot and undershoot from time to time. Perhaps it should be up to central government to introduce policies to reduce the swings and to ensure its people have affordable housing? In real (after inflation) terms (Auckland?) house prices are three times what people were paying in 1965! So over the long term that was a successful way of beating inflation and growing your major investment. Does anyone have any information on the capital return for NZ shares since 1965?
http://www.stuff.co.nz/business/76382935/Auckland-house-prices-unprecedented-Reserve-Bank-says

[Bjauck]

even with the stalls our 64000 house (bought in 1984) is now 1.2mill (last valuation)---There is no doubt that property has far out paced normal inflation---(whether thats a good thing is another debate)
I know several mid-20s people who have given up looking for an Auckland house as even though they have invested in NZ shares part of what is going to be their deposit, despite the growth in share values. the amount they fall short of a deposit keeps on growing. They are galled by the investors who seem to be snapping up the starter homes/flats they've been interested in.

[Hoop]

I know several mid-20s people who have given up looking for an Auckland house as even though they have invested in NZ shares part of what is going to be their deposit, despite the growth in share values. the amount they fall short of a deposit keeps on growing. They are galled by the investors who seem to be snapping up the starter homes/flats they've been interested in.

The public have to realise that all participators of that Market have to share the blame when the that market spirals rapidly upwards (downwards)...It would be interesting to see a breakdown of buyer/sellers to see who's participating...unfortunately this breakdown will fail to pick up the house flickers...and also unfortunately the media is an unreliable source to find that statistic..It's easy for the media to publicly bash the property investor as they are the publics whipping boy during tough times...but is this market participator group the major problem causing this price spiral?

In normal situations, property investors offer housing for people who can not or chose not to buy a house...so investors are useful market participants....

But these aren't normal times ...During rapid rising prices there are worse groups of market participators..The black underground world of house flickers are a destructive group of market participants, they fly below the media radar and hard to identify, they could be anyone from upward mobile 30 something couples to a scruffy looking character living in a state house .....buying a house, doing minimal do-up repairs, leaving it untenanted then sell it later on in a rising market and receive quick capital gain may be good investing but its bad for the market as it shortens supply....The market only realises the number of House flickers operating in the market when the market turns down...at the moment we don't know if house flicking is a serious unseen problem..maybe there's not enough of them to warp the number of house shortage figures..who knows??

Time will tell when the tide turns and all market participants groups are exposed...As Buffett once quoted "After all, you only find out who is swimming naked when the tide goes out."...

[fungus pudding]

The public have to realise that all participators of that Market have to share the blame when the that market spirals rapidly upwards (downwards)...It would be interesting to see a breakdown of buyer/sellers to see who's participating...unfortunately this breakdown will fail to pick up the house flickers...and also unfortunately the media is an unreliable source to find that statistic..It's easy for the media to publicly bash the property investor as they are the publics whipping boy during tough times...but is this market participator group the major problem causing this price spiral?

In normal situations, property investors offer housing for people who can not or chose not to buy a house...so investors are useful market participants....

But these aren't normal times ...During rapid rising prices there are worse groups of market participators..The black underground world of house flickers are a destructive group of market participants, they fly below the media radar and hard to identify, they could be anyone from upward mobile 30 something couples to a scruffy looking character living in a state house .....buying a house, doing minimal do-up repairs, leaving it untenanted then sell it later on in a rising market and receive quick capital gain may be good investing but its bad for the market as it shortens supply....The market only realises the number of House flickers operating in the market when the market turns down...at the moment we don't know if house flicking is a serious unseen problem..maybe there's not enough of them to warp the number of house shortage figures..who knows??

Time will tell when the tide turns and all market participants groups are exposed...As Buffett once quoted "After all, you only find out who is swimming naked when the tide goes out."...

Do house flickers add to the price or do they just benefit from the inevitable?

[Bjauck]

...But these aren't normal times ...So the financially careful young professionals will have to settle for being tenants? When was the Auckland and NZ residential property market last normal? In 1987 after the share market imploded, and a generation were more or less put off share market investments, and in the absence of meaningful superannuation schemes, did that mean that residential property became the default pension scheme in NZ. Whereas in most other countries, pension schemes helped provide investment capital for companies.

[Hoop]

Do house flickers add to the price or do they just benefit from the inevitable?

That's the million dollar question..eh :) ...I guess if they are in large numbers that affect the supply...but are they in large numbers??
Don't get me wrong I'm don't hate house flickers...If your'e into the DYO thing and have Tradie mates then this current situation is an easy opportunity..If you don't take that opportunity someone certainly else will....Then you have these TV series which promote this sort of thing..eh

[Hoop]

So the financially careful young professionals will have to settle for being tenants? When was the Auckland and NZ residential property market last normal? In 1987 after the share market imploded, and a generation were more or less put off share market investments, and in the absence of meaningful superannuation schemes, did that mean that residential property became the default pension scheme in NZ. Whereas in most other countries, pension schemes helped provide investment capital for companies.
I don't make the rules Bjack....

success is how well you play the game, My generation are full of the accidental millionaires who thought the property market always went up and the very long property market wave accommodated that belief nicely, so our generation were lucky, because no matter how badly you played the property game most of us still ended up being successful...At some stage the future generation have to pay for what the past generation did ..whether it's finding it very tough to buy a home or buying a home as the price rises or flattens out but stays too high, or watch house prices slowly fall eating away your 20-30% deposit for the next 20 years or so..

Normal?....normal is a state of mind.. but the best situation is that fleeting moment in time when demand = supply.

Owning property a Quasi superannuation scheme ? yeah..due to that self fueling belief I highlighted above..and locking up too much countries wealth/debt (GNP?) in lesser efficient assets (rate of return) such as residential properties and causing a lowering of spending power.

[fungus pudding]

I don't make the rules Bjack....

success is how well you play the game, My generation are full of the accidental millionaires who thought the property market always went up and the very long property market wave accommodated that belief nicely, so our generation were lucky, because no matter how badly you played the property game most of us still ended up being successful...



A lot of our 'luck' can be put down to high interest rates. House prices and interest rates are opposite ends of a see-saw. House prices may have been only 4 times an annual income, but interest of 10 to over 20% at times meant occupancy costs were similar to today in real terms, and it's that 'affordasbility level' that dictates house prices.
A 100,000 loan at 10% costs 10,000 while 10,000 buys a 200,000 loan at 5%. Same outgoings, but I know which one I'd rather have.

[workingdad]

A lot of our 'luck' can be put down to high interest rates. House prices and interest rates are opposite ends of a see-saw. House prices may have been only 4 times an annual income, but interest of 10 to over 20% at times meant occupancy costs were similar to today in real terms, and it's that 'affordasbility level' that dictates house prices.
A 100,000 loan at 10% costs 10,000 while 10,000 buys a 200,000 loan at 5%. Same outgoings, but I know which one I'd rather have.

Problem is its more like 4-5% at $500,000 to get into a home. I feel for those that have joined home ownership in the last few years and wonder if my kids will ever get into a home of their own without me doing a whole lot better than the 5 figure funds I have aside for them already....

[Bjauck]

A lot of our 'luck' can be put down to high interest rates. House prices and interest rates are opposite ends of a see-saw. House prices may have been only 4 times an annual income, but interest of 10 to over 20% at times meant occupancy costs were similar to today in real terms, and it's that 'affordasbility level' that dictates house prices.
A 100,000 loan at 10% costs 10,000 while 10,000 buys a 200,000 loan at 5%. Same outgoings, but I know which one I'd rather have.

A 600,000 house means a 20% deposit of 120,000. Whereas a 300,000 house means a 20% deposit of 60,000. So, roughly, in the 5% (as opposed to 10%) interest rate scenario, it takes a first home buyer twice as long to get into their first home, giving the advantage to an investor sitting with leveraged capital returns from a previous housing investment. Whilst the affordability of the mortgage may remain the same, the affordability of the deposit does not remain the same.

[sb9]

Another day of gains for NZX where the index finished touch over 6900....how does people here feel about these levels, sustainable? Time for a bit of reality check?

[777]

Like the housing market, foreign cash is looking for a home.

[Lewylewylewy]

Advert revenue is up on my Google Adsense account, due to companies spending more on advertising globally.

[bull....]

nice gains on wall st, new highs beckon breakout target upside if it happens 20000 dow , nzx 10000

[winner69]

Another day of gains for NZX where the index finished touch over 6900....how does people here feel about these levels, sustainable? Time for a bit of reality check?

This guys bit of advice

@RBAdvisors: Scared of the equity market? Consider this: When investors are over-confident is when there’s usually risk.

[skid]

its almost seems the opposite--many seem to be looking over their shoulder ,but it keeps going up---quite a few days the market was up and the accompanying article was about the dangers. (so are the numbers overconfident but not investors?--is there such a thing?--possibly because of lack of other opportunities)--guess the only way to know is what kind of reaction there will be if something comes up that spooks.

even on here ,it seems the optimists are Cautious optimists

Wall str is going up but it seems mostly from company buy back of shares ,with foreign owners selling ,especially China (US debt as well as shares)--they must be doing it at a slow pace though as otherwise one would think it would cause major problems

[Leftfield]

nice gains on wall st, new highs beckon breakout target upside if it happens 20000 dow , nzx 10000


Bring it on!

[Lewylewylewy]

If companies are buying back, that means they're doing well and expect to continue to do so, or better

[winner69]

If companies are buying back, that means they're doing well and expect to continue to do so, or better

...but not investing for the future

More like sneaky way to get EPS andshare prices up = Bigger management bonuses

Nothin more, nothin less

[Lewylewylewy]

If you own a business and decide to sell part of it to raise capital for growth, then most people would want to buy back what they sold when the buying was good.

I'd your have a company and decide to sell part of it because it's not going well, then you'd probably slowly exit the business. Future management may wish to buy back for those reasons.

Large faceless companies that area so lumbering may also but back for those reasons.

IMO

Therefore, if you think the company is a good one, but backs are a good sign.

[percy]

The beauty of share buybacks it stops management doing "lazy" acquisitions.
Yet, if an acquisition is really good, shareholders will stump up with the funds.
A good example of wasted capital spent on foolish acquisitions has been FBU.
Had they had to go to shareholders for the funds, I doubt they would have happened.
EPS growth is what drives a successful company.That is achieved by excellent acquisitions,organic growth or share buybacks .
A bit like paying dividends,good discipline for management,ie thinking about shareholders,rather than themselves.

[Mickey]

Another day of gains for NZX where the index finished touch over 6900....how does people here feel about these levels, sustainable? Time for a bit of reality check?

I'm sitting on the sideline at the moment. I don't wish rain on the current parade but personally - I wouldn't mind a Black Monday or two. I've just had a couple of term deposits mature and so my wallet is full and I'm ready to go shopping. But there's no sales on.....yet.

[Lewylewylewy]

NZX.NZX is an easy one to trade while you keep your eye out. As is FPH.

VHP is worthwhile buying.

ARV may become a discount at the end of may.

DLG had prospects. I bought in recently at $5.85.

Another option could be just to build a long term portfolio and forget about the short term ups and downs. SUM could be a good bet.

[percy]

I'm sitting on the sideline at the moment. I don't wish rain on the current parade but personally - I wouldn't mind a Black Monday or two. I've just had a couple of term deposits mature and so my wallet is full and I'm ready to go shopping. But there's no sales on.....yet.

Just wait a couple months or three for the mid winter sales.
This year I would expect they may be better than last years' buy one,get one half price.!!

[Hectorplains]

NZX.NZX is an easy one to trade while you keep your eye out. As is FPH.

VHP is worthwhile buying.

ARV may become a discount at the end of may.

DLG had prospects. I bought in recently at $5.85.

Another option could be just to build a long term portfolio and forget about the short term ups and downs. SUM could be a good bet.

What's DLG?

[Lewylewylewy]

Meant to say DGL.

Percy, why do you think prices will be down in a few months?

[Hectorplains]

Meant to say DGL.

Percy, why do you think prices will be down in a few months?

Not answering for Percy but seasonal effects have been documented.
http://www98.griffith.edu.au/dspace/bitstream/handle/10072/35737/66356_1.pdf?sequence=1

[percy]

Not answering for Percy but seasonal effects have been documented.
http://www98.griffith.edu.au/dspace/bitstream/handle/10072/35737/66356_1.pdf?sequence=1

Or simlply google ;
"Sell in May and go away."
I have just checked the chart S&P NZX50 Index, and I think it [sort of] confirms weakness in June/July each year for the last 5 years.

[fungus pudding]

A 600,000 house means a 20% deposit of 120,000. Whereas a 300,000 house means a 20% deposit of 60,000. So, roughly, in the 5% (as opposed to 10%) interest rate scenario, it takes a first home buyer twice as long to get into their first home, giving the advantage to an investor sitting with leveraged capital returns from a previous housing investment. Whilst the affordability of the mortgage may remain the same, the affordability of the deposit does not remain the same.

Wen I bought my first home most lending was done through solicitor's nominee companies. By law they could only lend 66% on first mortgage.
it was sometimes possible to get a second or third mortgage, but they were expensive.
it wasn't easy back then and it's not easy now.

[macduffy]

Or simlply google ;
"Sell in May and go away."
I have just checked the chart S&P NZX50 Index, and I think it [sort of] confirms weakness in June/July each year for the last 5 years.

Correct, percy. FN Arena made this comment in their latest weekly roundup:

"The Big Elephant in the room of global equity markets is, of course, the usual seasonal pattern that has firmly characterised five out of six calendar years post 2009.
With the exception of 2014, in all other years global indices enjoyed one last hurray leading into late April/early May only to subsequently take a dive to lower levels."

A bit strange, really, considering that the old "sell in May and go away" is said to date from the days of well-heeled London brokers taking the summer off for social reasons - Wimbledon, Lords, etc! Or at least, that's what I was told when I worked briefly in London in the 80's.

[percy]

Thanks macduffy.
I know it is a very old saying, and I am sure you are right about it coming from the well-heeled London brokers.

[bull....]

watch the weeklies

[Hoop]

It's a proved fact concerning Wall St..
Sell in May and go away..has always been a theme every March/April with the Media....except this year it's been scant mention..
Why?...At one extreme it says the investors are bullish, buying and exhurberant
At the other extreme the big players are divesting as quick as they can during this "very good feel good rally..

This latest low volume rally tells a truer story....eh

This Wall St party may be over folks the negative divergences maybe coming true as the weaker earnings are hitting the big guns in the industry and investors are waking up that just maybe the promised land maybe longer away than predicted...anyway this rally is unsustainable and its running out of buyer momentum (energy) so market physics says it must end.. As physics say energy is needed to defy gravity (descending earnings trend).

A blacker looking next Monday here, methinks

[winner69]

@RBAdvisors: People still saying US equities in bubble. Yet ICI fund flows show another week of US equity fund outflows & bond inflows. That’s euphoria??

[skid]

Correct, percy. FN Arena made this comment in their latest weekly roundup:

"The Big Elephant in the room of global equity markets is, of course, the usual seasonal pattern that has firmly characterised five out of six calendar years post 2009.
With the exception of 2014, in all other years global indices enjoyed one last hurray leading into late April/early May only to subsequently take a dive to lower levels."

A bit strange, really, considering that the old "sell in May and go away" is said to date from the days of well-heeled London brokers taking the summer off for social reasons - Wimbledon, Lords, etc! Or at least, that's what I was told when I worked briefly in London in the 80's.

Add to that ..the market both here and the States is at an all time high and the odds start leaning the wrong way...sometimes one of the hardest things for investors when considering buying is patience.

[Bjauck]

Wen I bought my first home most lending was done through solicitor's nominee companies. By law they could only lend 66% on first mortgage.
it was sometimes possible to get a second or third mortgage, but they were expensive.
it wasn't easy back then and it's not easy now. I imagine that it has never been easy taking on the responsibilities of owning your first home. However present day difficulties are highlighted by the fact that, despite increasing levels of female work-force participation (from 55% to 63% of working-age females in the last 20 years), NZ home ownership is at the lowest level in 60 years (and heading lower) and the rate of owner-occupation is now heading below those countries we like to be compared with.

As the rate of ownership has been dropping for the general population, it masks the fact that more and more potential first home owners are failing to enter the market, especially in Auckland no doubt. High levels of immigration these days, with an emphasis on wealth and skills, may also make home ownership comparatively more expensive for the locally born potential first home buyers, as they compete in the housing market with these newcomers.
https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate
http://www.stuff.co.nz/business/money/70240843/nz-home-ownership-at-lowest-level-in-more-than-60-years

[Hoop]

................A blacker looking next Monday here, methinks

Hmmm Holiday...have to postpone it to next Monday?

[Sgt Pepper]

Wen I bought my first home most lending was done through solicitor's nominee companies. By law they could only lend 66% on first mortgage.
it was sometimes possible to get a second or third mortgage, but they were expensive.
it wasn't easy back then and it's not easy now.

I bought my first house in Opoho Dunedin for the princely sum of $27000. I was 23 years old, employed, good credit history. I had saved a deposit of $10000, thus needed to borrow $17000. I made an appointment with the Otago Savings Bank, the Manager considered my application and informed me that I would increase my chances of a positive response if I transferred my $4000 from the Canterbury Building Society to the OSB. I foolishly closed my account with CBS and transferred my millions to OSB. A week later I was informed that my application had been declined, he blamed it on Rob Muldoon restricting lending unexpectedly. "But I have cut off my only other source of finance!" I protested. It was to no avail, I was curtly dismissed.
I did buy the house, but had to resort to finance from a Solicitor at 14%.

Different times indeed. To get a loan now all you need is a pulse and a payslip.

[fungus pudding]

I bought my first house in Opoho Dunedin for the princely sum of $27000. I was 23 years old, employed, good credit history. I had saved a deposit of $10000, thus needed to borrow $17000. I made an appointment with the Otago Savings Bank, the Manager considered my application and informed me that I would increase my chances of a positive response if I transferred my $4000 from the Canterbury Building Society to the OSB. I foolishly closed my account with CBS and transferred my millions to OSB. A week later I was informed that my application had been declined, he blamed it on Rob Muldoon restricting lending unexpectedly. "But I have cut off my only other source of finance!" I protested. It was to no avail, I was curtly dismissed.
I did buy the house, but had to resort to finance from a Solicitor at 14%.

Different times indeed. To get a loan now all you need is a pulse and a payslip.

Holyoake was PM when I bought my first house. Jack Marshall soon followed. It was hard going, but I managed to buy a few. The trick in those days was to find a property where the vendor would leave heaps in on second mortgage. Fortunately (for me) it wasn't long before Labour came to power under Norman Kirk. Wallace Rowling was minister of finance. Completely clueless. He got all wound up because house prices were rising, so introduced the infamous spec tax. The market dried up and prices sky-rocketed; achieving the exact opposite of what he intended. I've been forever grateful to Rowling and his stupidity.

[Sgt Pepper]

Holyoake was PM when I bought my first house. Jack Marshall soon followed. It was hard going, but I managed to buy a few. The trick in those days was to find a property where the vendor would leave heaps in on second mortgage. Fortunately (for me) it wasn't long before Labour came to power under Norman Kirk. Wallace Rowling was minister of finance. Completely clueless. He got all wound up because house prices were rising, so introduced the infamous spec tax. The market dried up and prices sky-rocketed; achieving the exact opposite of what he intended. I've been forever grateful to Rowling and his stupidity.

I am interested in how you would reconcile Muldoons views on the 1973 Property Speculation Tax and the fact he did not bother to remove it until 1979, 4 years after winning the 1975 election. Mind you, if I recall correctly there were an awful lot of dancing Cossacks to hunt down. But I guess you and I are showing our age, if we talk about Muldoon, Rowling Marshall, and Holyoake to youngsters we may as well be talking about Darius the Great

[fungus pudding]

I am interested in how you would reconcile Muldoons views on the 1973 Property Speculation Tax and the fact he did not bother to remove it until 1979, 4 years after winning the 1975 election. Mind you, if I recall correctly there were an awful lot of dancing Cossacks to hunt down. But I guess you and I are showing our age, if we talk about Muldoon, Rowling Marshall, and Holyoake to youngsters we may as well be talking about Darius the Great

Muldoon was an economic clown. Ring-fencing losses to a maximum of $10,,000 per property, claw-back taxes, Rent freezes. All of course achieving the opposite of what was intended. (A poorly designed capital gains tax would do the same) Still Rowling that I thank though. Fascinating thing about Muldoon's claw-back tax: on selling a property the vendor could choose to pay tax on interest claimed or capital gained - whichever was the lesser amount. So you completed a form showing both calculations and submitted it to the IRD for approval before submitting payment. I know many who did this, but never ever heard back from IRD, so simply paid nothing.
P.S. From memory I think the speculation tax was treated much the same after the first couple of years. If you voluntarily paid it - that was fine, but if you 'forgot to' - nothing happened.

[Bjauck]

Interesting to hear about the Muldoonist era. He does sound to have been the King Cnut of economics with his rent freezes and price freezes. Back to the present day and I see average Auckland house prices have now surpassed those of Sydney. If only incomes had done the same! Even JK is threatening a land tax on overseas owners. Too little too late?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11628459

Investors are buying 80% of cheaper properties in Auckland! First home buyers being pushed aside?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11628399

[Leftfield]

A bullish view of the S&P 500??? Interesting times indeed.

http://www.bloomberg.com/news/articles/2016-04-25/tom-lee-the-s-p-500-is-in-a-great-position-to-surge-to-new-all-time-highs

[skid]

Correct, percy. FN Arena made this comment in their latest weekly roundup:

"The Big Elephant in the room of global equity markets is, of course, the usual seasonal pattern that has firmly characterised five out of six calendar years post 2009.
With the exception of 2014, in all other years global indices enjoyed one last hurray leading into late April/early May only to subsequently take a dive to lower levels."

A bit strange, really, considering that the old "sell in May and go away" is said to date from the days of well-heeled London brokers taking the summer off for social reasons - Wimbledon, Lords, etc! Or at least, that's what I was told when I worked briefly in London in the 80's.

''Sell in may''--Dont forget,in most of the world we are coming up on the summer break.

[bull....]

sell in may lol is just like santa rally doesn't always happen

[PointyHat]

''Sell in may''--Dont forget, in most of the world we are coming up on the summer break.

Sell in May and go away
Come again on derby day

Whens that? I cant rememeber
As you say its all to c ock down here
But the last 3 or 4 years have been magic.

I have reduced over the last month, and only have HBL, anyone else sold up?
Getting 1.6% on half, and 3.0% on other half at heartland - sad return but safe.

Last time I sold up was August 1996 and bought a new car.

Feeling very pessimistic at the moment ....

[couta1]

Selling stocks like IFT in May is plain dumb with the upcoming results and increasing divvy.

[xafalcon]

I have reduced over the last month, and only have HBL, anyone else sold up?

I fully sold up 3 weeks ago, now (and for the remainder of 2016) I will remain zero equities

IMO there are too many storm clouds on the horizon atm - Brexit vote, Donald Trump, US Presidential election, EU economic stagnation, Aussie double dissolution, Japanese stimulus failure (again, again), China uncertainty

If I'm wrong, it's only a year of lost opportunity

[percy]

Sell in May and go away
Come again on derby day

Whens that? I cant rememeber
As you say its all to c ock down here
But the last 3 or 4 years have been magic.

I have reduced over the last month, and only have HBL, anyone else sold up?
Getting 1.6% on half, and 3.0% on other half at heartland - sad return but safe.

Last time I sold up was August 1996 and bought a new car.

Feeling very pessimistic at the moment ....

I am being very cautious.Have taken a bit off the top on some shares.
Any share that does not meet expectations I am selling straight away.[mainly small cap Aussies]
Am carrying more cash than usual.
Brought Tegel as it is a "staple".
I see low interest rates underpinning the market for the foreseeable future, so I remain "well positioned,"

[Hoop]

sell in may lol is just like santa rally doesn't always happen

Statistics.....a bit like playing Russian roulette receiving the bullet doesn't always happen either....but why risk it when you don't have to..When there's statistically nothing much to gain and a lot to lose it doesn't make sense...same thing with Equities...

Using past history and simulations it can be proven that there are periods when investing is poor..It doesn't always occur, but a possibility it will happen and a good probably it can happen ..The proven fact is the period May to October is a poor investing period for Wall St.

There was** a wealth of info on Sharetrader on the subject..Back then (2010) Phaedrus showed the AllOrds correlated very well with the S&P500 for the last 7 years or so, Phaedrus also did a simulation (backtesting) at different months to invest into the ASX and NZX and found ...the sell in May and go away effect++ did not apply to the NZX or ASX..but did apply to Wall St....Northern Hemisphere markets seem to be more effected

**..Phaedrus charts have disappeared..no thanks to Photobucket.
++ ..Sell in May and go away is also known as a Halloween effect....November -April is the best time to be in the market

Ryan Detricks tumblr page (http://ryandetrick.tumblr.com/post/101425098005/welcome-to-the-best-six-months-of-the-year)...notice the May - Oct the poorest performing period +1.29% and Nov to Apr the best performing period +7.15% over the last 65 years..
Notice the 4year Presidential Cycle.(Winner69 already aware of this) the November to April statistics have shown 16 out of 16 times to be the strongest 6 month period.
Notice this current period..we are in the 3rd year (Nov-Apr) of the 4year term ...it's statistical average is huge (16.33%)..

[sb9]

I am being very cautious.Have taken a bit off the top on some shares.
Any share that does not meet expectations I am selling straight away.[mainly small cap Aussies]
Am carrying more cash than usual.
Brought Tegel as it is a "staple".
I see low interest rates underpinning the market for the foreseeable future, so I remain "well positioned,"

Me too, have reduced my holdings quite significantly over last month. Currently holding only those with long term buy and hold where I've big safety of margin.

[PointyHat]

I am being very cautious.Have taken a bit off the top on some shares.
Any share that does not meet expectations I am selling straight away.[mainly small cap Aussies]
Am carrying more cash than usual.
Brought Tegel as it is a "staple".
I see low interest rates underpinning the market for the foreseeable future, so I remain "well positioned,"

I just cant sell HBL I've been with them since inception, holding more or less at times.
I have a good holding at the moment, I just like the company, have an affinity with it.

I have sold the rest of my holdings.
I only deal in NZX and usually only have 5 or 6 holdings at a time. So no great spread.

"It's never wrong to take a profit" - you have to sell of course to act on that.
Okay the market or shares you sold may go up, but it secures your gains, why worry if your happy when you sell?

I was right about SCL up to last week, which I sold in multiples of 5k from 2.75 to 3.35 ps, its flattened out. Overbought?
The market seems the same to me, flat or overbought.

I just don't see much for buying at the moment.
Cash is okay for short periods in bull, and long periods in bear mkts.

No inflation either at the moment Percy, as well as the low interest for quite a time - which you pointed out.

[winner69]

Sell in May ......

Works on the S&P500

http://www.chartoftheday.com/20160427.htm?H

For NZ - hoops wise words posted yesterday apply -

Phaedrus also did a simulation (backtesting) at different months to invest into the ASX and NZX and found ...the sell in May and go away effect++ did not apply to the NZX or ASX..but did apply to Wall St

[Valuegrowth]

sell in may lol is just like santa rally doesn't always happen

Yes. I agree with you. Some say September is a bad month.

According to some:

Best months for stocks – January, March, April, July, November, and December

Worst months for stocks – February, September, October

However, on average October has given some return. In any month, there can be some of the biggest gain and some of the biggest drops depend on the market situation.

[Baa_Baa]

Yes. I agree with you. Some say September is a bad month.

According to some:

Best months for stocks – January, March, April, July, November, and December

Worst months for stocks – February, September, October

However, on average October has given some return. In any month, there can be some of the biggest gain and some of the biggest drops depend on the market situation.

It's all nonsense really, to think this year will be like last year, or the year before or before that.

Just buy or sell the market as it is right now and waste less effort on looking for historical patterns.

Jmo

[Valuegrowth]

It's all nonsense really, to think this year will be like last year, or the year before or before that.

Just buy or sell the market as it is right now and waste less effort on looking for historical patterns.

Jmo

You're right Baa Baa.

Cheers!

[percy]

It's all nonsense really, to think this year will be like last year, or the year before or before that.

Just buy or sell the market as it is right now and waste less effort on looking for historical patterns.

Jmo

"Those who ignore history are doomed to repeat it."

[bull....]

Sell in May ......

Works on the S&P500

http://www.chartoftheday.com/20160427.htm?H

For NZ - hoops wise words posted yesterday apply -

Phaedrus also did a simulation (backtesting) at different months to invest into the ASX and NZX and found ...the sell in May and go away effect++ did not apply to the NZX or ASX..but did apply to Wall St

while statistics of this particular seasonality have worked in the past the last few years it has not worked and that includes the wall st markets.

Central bankers are running the show at the moment so there actions will dictate what markets do, not some statistics.

[bull....]

nice pickings nzd :) - he was never going to drop this meeting 70c here we come

[skid]

How could anyone possibly have thought they would raise interest rate in the US--If fundamentals stay like this it is going to be very hard to even raise in the future(june) atm the fed is caught between a rock.......

[bull....]

boj decision went down well - not, anyway got 10 pips away from nzd target 70c for last night not bad effort thanks to usd declining again and wheelers lack of courage lol which by the way lower usd will feed into better s&p earnings later this year.
dow having a bad day but is good on the weekly as we needed a down week for health of the rally.

[trader_jackson]

I'm surprised nobody else has jumped on this thread to spread "impending doom and gloom"! ;) (that is after all what usually happens when there are 1 or 2 off days...)

Interesting day today that is for sure... fasten seat belts, looks like we could be a bit of turbulence in front :mellow:, not necessarily a bad thing longer term (we saw what happened after February:t_up:...)

(PS: could be a few bargains coming)

[cyclist]

I'm surprised nobody else has jumped on this thread to spread "impending doom and gloom"! ;) (that is after all what usually happens when there are 1 or 2 off days...)

Interesting day today that is for sure... fasten seat belts, looks like we could be a bit of turbulence in front :mellow:, not necessarily a bad thing longer term (we saw what happened after February:t_up:...)

(PS: could be a few bargains coming)

Lets say that this does turn out to be the start of the next leg down (wouldn't surprise me at all). Isn't this second leg down the one where we all pile back in thinking the same thing as last time will happen, only to find it just keeps going in the wrong direction? Hoop, what say you?

[percy]

Today the NZ50 Gross Index was 6834.70.
The EMA 50 day was 6851.44 which is above the Index.......Negative.
The EMA 100 day was 6658.57 which is well below the Index......Positive.
The EMA 200 day was 6388.89 which is well below the Index......Positive.
As a long term investor my concern would be for the index to break below the EMA 200 day and stay there for 3 or 4 days.

[BlackPeter]

Lets say that this does turn out to be the start of the next leg down (wouldn't surprise me at all). Isn't this second leg down the one where we all pile back in thinking the same thing as last time will happen, only to find it just keeps going in the wrong direction? Hoop, what say you?

Next leg down? Wouldn't the second leg of a down trend start below the starting level of the first leg? If it starts above the initial level of the first leg (as in this case) we typically would call it a bull market - and in this case - next leg of what?

[Baa_Baa]

Today the NZ50 Gross Index was 6834.70.
The EMA 50 day was 6851.44 which is above the Index.......Negative.
The EMA 100 day was 6658.57 which is well below the Index......Positive.
The EMA 200 day was 6388.89 which is well below the Index......Positive.
As a long term investor my concern would be for the index to break below the EMA 200 day and stay there for 3 or 4 days.

The MA's are interesting though I'm not convinced they're helpful with an index that isn't traded per se, I tend to look more for the major support, resistance and trend lines. Firstly NZX is still above the long term (previously resistance) upper trend line around 6,800, so hardly a rout at this stage even if it reverts below that trend line. A break below that brings the market back into the long term trading channel, there is an obvious support around 6,325 the Jan high. Next support though is the bottom of the long term rising channel, currently around 6,100 (this changes as time moves on). A breakdown if it happened there would be a reversal to a bear market, which is worth while being concerned about. Of course individual company's share prices will move quiet independently of the NZX50 Index, it's just a macro view of the overall top 50 sentiment.

[percy]

I do place more importance on what the chart for each individual share I hold is doing.