That's a rap Baa_baa
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That's a rap Baa_baa
Good post by BaaBaa
That’s why the book JUST KEEP BUYING is selling well and articles on dollar cost averaging are getting high numbers viewing them
Book here https://www.fishpond.co.nz/Books/Jus...xoCW7cQAvD_BwE
Or you try a free trial at audible.com and hear it while on way to work or whatever
https://www.audible.com.au/pd/Just-K...E&gclsrc=aw.ds
Eventually market is coming around to fact that rates do not need to go sky-high as thought by many before ...but I will still say its early days to do the final assessment . Market at present do seem convinced that long term rates have already peaked thus SP contraction based on DCF has bottomed thus high PE stocks have some basis to come back to normal recessionary levels at least .
Final chapters of this saga are yet to be written so I will try to keep open mind to further setbacks in this fight with Inflation
But my prognosis for this downturn remains same as I thought before that economies are so fragile that they dont need super high rates to fight Inflation ...recessions thus end of inflation will be much easier to achieve .Also with quantum of household and govt level debts so high that small incremental rates increases cause high absolute depletion of inflationary resources
NZD getting close to 60 Cents which works very well to rebalance NZ economy ...exporters have a strong tailwind with overseas revenues getting almost 12% NZD boost from 70 levels ....FPH comes to mind ...this should help it bottom out and start a new uptrend soon
It was a good post from Baa_Baa. And being a long term investor myself it is a point of view that I have a lot of sympathy with. However, it wasn't a wrap, because there is one ultra important angle missing that is required to 'wrap' up this story.
A good measuring stick of value is something called the Price earnings ratio or PER for short. Baa-baa has spoken eloquently about the 'P' but said nothing about the 'E'.
The problem I see, as someone who has been involved in markets well before the current record breaking bull run, is that I see very few if any companies on the NZX trading at below intrinsic value. I can see plenty of companies where the share price has been hammered. But in most cases that simply reduces the price from 'exorbitant' to merely 'expensive'. As an example I have seen mention that a growth company trading on a PE of 15 is 'cheap'. No it isn't. A PE of 15 means considerable future growth is already built into that share price. And execution of growth plans is always subject to uncertainty that has derailed many 'sure thing' prospects in the past.
Factor is prospective earnings declines on top of the negative share price action and I would say the NZX is currently significantly overvalued. I am not saying there is no value to be had for the careful buyer. But before any buying decisions are made, I would suggest a lot of prodding with the value probe is required.
I also take issue with the comment that such investment opportunities in the market come along infrequently. I agree there has been a recent drought in value purchasing opportunities. But this is unusual for markets. There are more often than not in the history of markets many opportunities to make value purchases. Don't fall for that FOMO hook just because opportunities have been sparse in recent years.
Fellow, investors, be very careful out there.
SNOOPY
Another wise post,thanks Snoops.Not much on the NZX for me either but there are on the ASX especially small techhie type plays and small oil producers if you believe in the oil deficit story from hereon. Im still not convinced of transitory inflation, or a shallow recession ,could be something bigger, but im buying great companies below their intrinsic valuation.Mainly topping up actually.
The other worrying thing is this oil issue.As was pointed out to me NZ at the bottom of the world with no refinery.If oil does head to say $150 until green energy catches up(if it ever does) we are in a very weak position down here.
How's that for timing btw ,refineries can't keep up ATM and are making a killing margin wise
It is a rap for investors buying now for long term future earnings and evaluating short term volatility in earnings and share prices
The Black Monday thread has got to being an interesting and educational reading site recently..A high quality investor-wisdom post from Baa_Baa..equality so with Snoopy's high quality post which somewhat rained on Baa_Baa's parade..but that happens when one dives deeper into a generalised posting.
So with that in mind I apologise to Snoopy as I dive a bit deeper into his quality post.
When looking at PE ratios it isn't as easy as looking at a long list of companies and say "that stock has a very low PE ratio, it must be cheap and therefore a 'long term must buy' ". As most of us know it's a little more complex than that...Investing in a Bull market run makes one lazy and skip our homework and over time these habits makes us forget...
So with a bear market and using time as a friend we have to re-learn and re-start the homework.
Relating back to PE Ratio's and this being a generalised post it's advisable to look back to long term history of that stock PE and compare it with other stocks PE's within its industry sector as well as looking at the PE ratio trend..Some stocks run with a higher average PE than others...some may have underlying problems and their price is discounted accordingly, some may have long term underlying problems out of their control and the whole sector is affected, such as a government regulated industry..Some Companies may have (with a quick glance) a higher PE ratio than the stock
market indices average yet considered cheap (Utilities spring to mind)..Or on the other hand a falling trend with PE ratio in single digits and well below the stock market indices average, maybe, a warning sign with Cyclical Stocks....
Life ain't easy..eh
While I'm at it on the Sharetrader forum I might as well...cry doom.
As we know you often hear in media about this inverted curve thing being a predictor of a coming recession.
Well the Media has been rather quite about it this this time around.
The truth is with Media is when you hear it has already happened and some times its too late as the opportunity has passed.
When hearing about the Inverted Curve prediction it is not too late as it is a leading indicator by several months.
Why many people believe in the Inverted Curve/Recession prediction is due to its high success rate.
Below are two charts a long term and a very long term chart.
Notice on the very long term chart that the 1945 1948 1953 recessions where not predicted..not sure why, if anyone reading this post know can they post the reason why..it will save me the time.
Attachment 13943
Is the approaching technical recession going to be one with full employment and a housing market still standing? Because, if so, then so what?
Inflation will not be tamed unless we loose some jobs and shed some housing market confidence ...Aim is to control Inflation not cause recession but that becomes inevitable especially in current scenario of job market and housing confidence ...people need feel scared financially so that they control their spending which was happening due to covid backlash also . Jobs and housing market downturn will surely be collateral damage otherwise Inflation will not be tamed ...sooner both collapse faster will be overall recovery
Much of the Inflation is from overseas ,, higher energy costs ..supply disruptions ... these form knock on affects across many sectors .. along with Govt adding costs to businesses through Regs levies law changes COVID lockdowns... then to throw petrol on the fire they dropped Interest rates to record lows and through the media promoted low rates for longer ,build houses etc etc ...