Chart of NZ index late 1980s

[Nurg]

Can anyone point to (or post here) a chart of the NZ index (Barclays?) covering the late 80s and possibly into the early 90s. What I'm specifically after is (from memory) the period from the first peak at the start of 1987 (or was it the end of 86), the 2nd peak mid 87, the crash, the rally, then the decline during 1988 until it bottomed (not sure if it bottomed in late 80s or not until early 90s).

thanks

[Lizard]

Here's one I have in the file, though not exactly what you're wanting (sorry about the scan watermark - I scanned this with demo software some time ago). It comes from an old issue of "Market Analysis" newsletter.

Hope Phaedrus or another more charty poster can do you something better!

(Makes you think that we 2008 er's have nothing much to complain about. Yet. I often think about how relentless that last grind down must have felt!)

http://www.sharetrader.co.nz/attachment.php?attachmentid=2354

[Nurg]

Hi Lizard
I can't see it. Not sure where it should appear.

[Lizard]

Weird. It is showing on my screen - is it just slow to load? Can others see it?

It is hosted on ST, so perhaps there is something in the settings. Will try swapping it to photobucket.

[Lizard]

Can you see this one?
http://img.villagephotos.com/p/2006-8/1204598/NZX-1986-1991.jpg

[winner69]

Yep ... well done

Looks like we going throught he same process again ... all the way to 2014?

[Lizard]

Why 2014? Since we've already dragged our way through the first leap down and recovery, I would have thought 6-12 months might see us through the worst?

As for the relative scale, I'm not sure this is the best comparison - the factors are so different leading into this. Property bubble vs sharemarket bubble. Private debt vs public debt. I would have thought the NZ second dip might be closer to the NZ version of the 1930's, where (from memory) the second dip didn't take us as low as the first.

Property and private debt probably has a 3-5 yr readjustment to work through and this is the big risk to consumer spending and the internal economy, but hopeful we can transition to offsetting with more export income and bigger productive sector.

[Hoop]

Good news...A number of "experts" expect all the ducks to line up in a row and maul the secular bear to death in 2014.
Bad news.... Some other "experts" expect the world to end on 21- 12- 2012.

[percy]

Why 2014? Since we've already dragged our way through the first leap down and recovery, I would have thought 6-12 months might see us through the worst?

As for the relative scale, I'm not sure this is the best comparison - the factors are so different leading into this. Property bubble vs sharemarket bubble. Private debt vs public debt. I would have thought the NZ second dip might be closer to the NZ version of the 1930's, where (from memory) the second dip didn't take us as low as the first.

Property and private debt probably has a 3-5 yr readjustment to work through and this is the big risk to consumer spending and the internal economy, but hopeful we can transition to offsetting with more export income and bigger productive sector.
The balance sheets of most of the companies I follow are a lot stronger than in 1991.The capital growth from 1991 onwards was huge.I must admit my mistake lately has been thinking we are in 1991 again,when we are not there yet.I also think the companies I follow are better focused."I am poised for the upturn."

[Lizard]

The balance sheets of most of the companies I follow are a lot stronger than in 1991.The capital growth from 1991 onwards was huge.I must admit my mistake lately has been thinking we are in 1991 again,when we are not there yet.I also think the companies I follow are better focused."I am poised for the upturn."

Have faith, percy. Not far through the bottom of Mr P's range (http://www.sharetrader.co.nz/showthread.php?6952-NZSX50-Good-News!&p=309054&viewfull=1#post309054). 2938 now... now testing his prescience.

[Hoop]

NZ share index is not entirely influenced by company profits..there is a network of factors in play all of which are variables. To change one variable alters the index outcome but altering many variables causes some to counter-pose the other altered variables so you have to think 3D and apply using your knowledge of cause of effect....r better still use a computer simulation program) Its possible that other variable factors would negate the positive effects of company profits factor such as decrease in money supply, higher interest rates, higher inflation (or deflation) rate
Research on the DOW and S&P500 which are very large traded markets show that the primary driver is the PE ratio followed by inflation as the Key secondary Driver..There is little to no correlation between the economy and share price. (its a myth)

However in a much smaller regional share market other factors become secondary key variable drivers, money supply, the GDP, interest rates as well as the key inflation rate driver.

see here (http://www.britannica.com/bps/additionalcontent/18/23530136/MACROECONOMIC-VARIABLES-AND-STOCK-MARKET-INTERACTIONS-NEW-ZEALAND-EVIDENCE) .. this partly published paper on this site, examines the relationships between the New Zealand Stock Index and a set of seven macroeconomic variables from January 1990 to January 2003 using cointegration tests.


Using a entirely different discipline.... TA charts helps out by mapping investor behaviour from the past and as we are still human (obviously a constant factor) future behaviour patterns would therefore be similar...hence history repeats itself chartwise. I think the NZX50 is in a secular (long-term) bear cycle where company profits doesn't push stock prices as high as it would do than if the market was in a secular bull cycle so this variable factor is weakened and can be more susceptible to be dominated by other macro variable factors in a bear market environment.

...Secular cycles is all to do with the fluctuation of the annualised PE Ratio cycle. What governs a Secular bear cycle is the behaviour of investors. They are less risk takers and more yield conscious so effectively want more "Bang for their Buck" so the PE Ratio will downtrend and stock yields will increase.... stocks that look good value in the middle of the Secular bear cycle will look better value by the end of that cycle.

At this moment... many investors see no sense in this suddenly bearish sentiment in a recovering market where 80% of the USA company's have just reported an increase in profits in their latest reporting period....However this market logic becomes understandable when you say that the market is presently re-rating its higher than normal PE ratio downwards ...after all we are in secular bear environment and we should expect these sorts of things to happen.

As Secular bear cycles last for about 14 years on average..2014 is the expected target time for this secular bear to die as Winner69 pointed out to us. I'm hoping this cyclic bear market to be short and have another cyclic bull cycle before 2014... as its always the cyclic bear which eventually kills off the secular bear.

Liz your reference to P's chart.... note that Secular Bear environments produce secular sucker rallies (cyclic bulls) so P's trend channel rally could go all the way up to 4300 but its much more likely to breakout before then

[Lizard]

Hoop, genuine question, but other than academic interest, have you actually found the secular bear market theory helpful to your investing?

I mean, I notice you haven't taken a 14 year holiday from investing, so you are still having to decide when to get in out of either individual shares or the market as a whole... how does being "in a secular bear market" affect your decision-making? Just curious...

[Lizard]

Okay, well for those people who like patterns in charts....

The 1929 crash took 2 years, 10 months to reach a market low. The NZ 1987 crash could be taken to have occurred from a peak in 1986 - in which case the low took 4 years to reach - or could be taken from October 1987 (and doesn't that look like a desperate chart anomaly attributable only to some astrological, gravitational influence from here?), in which case we're talking 3 years 2 months.

So far, we've had near on 3 years since the NZX peaked. How long till it reaches a low?

(Personally, if I had to be prescient, I'd go for 2800-2850 on 13th-20th July. But I'll work with whatever we get.)

[Hoop]

Hoop, genuine question, but other than academic interest, have you actually found the secular bear market theory helpful to your investing?

I mean, I notice you haven't taken a 14 year holiday from investing, so you are still having to decide when to get in out of either individual shares or the market as a whole... how does being "in a secular bear market" affect your decision-making? Just curious...

Investing in individual stock you would not activity use the secular theory for obvious reasons.
Decision -making...yes.... In prediction mostly because cycles reach a point when everything starts again....so you can have a limited foresight.
e.g
1... At the end of equity secular bear cycles inflation is higher than the average for that overall period of the secular cycle. So armed with this "foresight" you don't really want to be in an inflation prone stock long term....you are warned ahead of time of future problems. This scenario seems paradoxial to the layman because of the false logic of deducing that inflation should be high at the top of a bull (boom) cycle when in realty it happens to be falling to below its average. (A classic warning sign that a secular bull is nearing its end and so is its cyclic bull stage).

2... The famous example of superannuation during Secular bear cycles...If your working career has 2 secular bear + one secular bull and you enter the workforce at the top of a cyclic bull cycle within a secular bear cycle your super is a poor investment and your retirement will be without wealth.
When Kiwisaver came out..same thing.... at the top of a cyclic bull within a secular bear....imformed people saw the ever increasing shares market so naturally the younger and middle aged would select the share containing option... if equity investing was taught a schools this secular investing problem would be avoided.

3....secular bear cycles characteristically have flat tops so over a period of a secular cycle the market will not increase much (if at all). Most passive investors portfolios never beat the market index % change so during long periods of secular bears using a very long term investing strategy is wrong....

Many other examples and investing strategy methods are here......Investing Strategies & secular bear market
(http://www.sharetrader.co.nz/showthread.php?5171-Investing-strategies-and-secular-bear-markets&daysprune=-1)

[Nurg]

Thanks for the chart Lizard. I wanted to see it for comparison with S&P now, rather than NZ now. I've been thinking about the comparison since late 2008. The rise-fall ratios are different and the S&P is on a much higher degree cycle than NZ then.

1st peak of a long bull run. NZ late 86. US early 2000.

The warning shot. NZ 7 mths, late 86-mid 87. US 2.5 yrs, 2000-02.

The last hurrah & double top. NZ 4 mths, mid 87. US 5 yrs, 2003-07.

Crash/panic/crisis. NZ 5 mths, late 87-early 88. US 17 mths, late 07-early 09.

Bounce, stall/correction, rally. NZ 18 mths, Mar 88-Aug 89. US Mar 2009- 16 mths & counting. Bounce finished, stall/correction has just started. May have years to run, with rally to come?

Long slide. NZ 16 mths. US several years?

Just saying. Not predicting. Might not follow the same pattern.

[winner69]

Couldn't help but notice this bit in an article on Business Spectator



For quite some time now we have suggested that equities investors might experience a protracted period of poor performance following the GFC-induced downturn. And our predictions appear to be proving out.

Notice how the Australian shares line in the chart above remains well below its 2007 peak. And remember that it is now mid 2010. As I have highlighted here, this is eerily similar to what happened after the 1987 crash – it took until late 1996 for the All Ordinaries Index to consistently breach its previous highs.



Heck 8-9 years eh

Full story and pictures
http://www.businessspectator.com.au/bs.nsf/Article/asset-price-bubbles-property-equities-sharemarket-pd20100702-6XV4F?OpenDocument&src=rot

[Lizard]

I can't find the evidence off-hand to prove it either way, but I had a hunch that NZ only regained 1986/7 levels in 2003. However, the listed components and the indices themselves had changed so completely by then, that it would be a moot point whether the comparison remained meaningful.

But tell me you made no money between 1987 and 2003, and I wouldn't believe you.

[Dr_Who]

So expect low rates for a period of time?

[peat]

In NZ the mid - late 80's were a serious period of speculative excess with a large number of non-productive investment holding companies being formed often having complex corporate structures designed to obfuscate the fact that they simply leveraging themselves into the market. The retail market was total froth with everybody from broker to shoeshine boy touting the next stock to double at an endless string of cocktail parties. It really was a house of cards with crazy fundamentals.
I hate to echo the phrase but I dont believe its like that this time here in NZ. Most companies are true adders of value.
So my thoughts are that while there may be a similar outcome this time - that is a period of flat or falling prices - it shouldnt be quite so destructive of capital or so lengthy as there is a lot more actual production happening.
What I'm saying is that at that time NZ created its own bubble and pop and so felt the hangover much worse than the rest of the world. The NZ market of itself is more realistic now but this doesnt remove the risk of the international/globalisation slowdown effect.