Market Strength

[troyvdh]

Our mkt is certainly on a role at present,overseas money piling into TEL etc.This somewhat confuses me.Why when a company supposedly announces that it will pay increased divies (say 20-30 cps more)why does it then command a price significantly higher (approaching at least a dollar or more).At the same time the "Fund" industry reports significant "outpouring" of money in preference to deposits.I acknowledege that companies a reporting solid profits etc but is that primariarly what is driving this ? Is it overseas money ? No doubt this will cease eventually.....Is it the "Cullen fund"?.Should we be all very weary at present for any indications that overseas folk have had there fill and soon depart ?.Is it very significant that the likes of Mr Masfen has invested 200-300 million in this mkt recently ?
Fortunately,like many of you I ignored many of the "experts" who over the years have been telling us to "Go offshore" and have suffered the now familiar fate of loosing a significant amount of capital.
I apologise if this subject has been covered in other threads.

[bongo66]

I think we are seen as a relatively safe haven by foreigners-that may or may not be true-in the current political climate.

If more overseas investors knew we even had a stock exchange I think the outlook would be even better.

B

[Cooper]

I agree with Bongo... we rode out the last Global economic downturn quite well... a drift away from mutual funds would indicate (to my mind) that people are dissatisfied with managed funds themselves rather than the markets the funds invest in. A certain part of the current market strength must surely be a correction of the poor performance of the last decade and a half and although I would hope I don't get carried away to the point of holding too many shares when the eventual downturn comes I don't see anything yelling at me to get out yet...

[Cooper]

That said I think the contrarian nature of thinking "yes, but..." is very useful no matter what is happening.

[Gryffyn]

Yes, drift from funds probably due to adverse press lately and perception that people can do better themselves.

Who, knows, maybe a few interest rate hikes have started to bite and people are pulling out cash to cover committments.

[foodee]

Troyvdh
Brain Gaynor had an article on dividend this week. Interesting read if you haven't done so.
Do not think that TEL sp rise is based soley on increased div payout.TEl is making inroads in the playing field, for example you only have to listen to TC losing 2 big contracts.
That said div is an important marker of cos performance. Just look at the sp of any cos announcing a cut in div! TEL did that a couple of years ago and look at the effect.

[star]

The high interest rates definitely encourage people to withdraw from managed funds to earn over 6.35% pa without risk and any deduction of fees.

[Nimble]

The Consumer Magazine has also recently published a few articles slamming the funds management industry for high fees and poor performance, stating in a number of cases over the last 10 years (which included a good sized bull run) clients would have been better off leaving their money in bank deposits, which also comes with a lot less risk.

[Halebop]

I worked for an insurance company for several years. One of the perks offered was a subsidised super scheme - they matched dollar for dollar up to 9% of your income (I think gross income from memory) into a superannuation scheme. However, the returns had been so appalling for the 20+ years it had been running that I calculated I would outstrip the dollar for dollar subsidy within 5 years (In fact, the actual time frame was probably about 3 years), so the only interest it piqued was the "certainty" of the extra dollar.

There are very few fund managars who "manage". And even less are actually good at it. Probably why Mary Holm's well intentioned advice on indexing receives a ready audience.

[foodee]

Star & others
You're so right. Any other products with any fees - management, exit, brokerage etc will need gross return of at least 2% above term deposits to be competative.
As an aside a lot of term deposits offer a flat rate with little compounding advantage. In these cases I usually arrange interest to paid monthly into my call a/c which is earning over 5%pa calculated daily.:D

cheers

[nelehdine]

On the market strength issue ... I think the Kiwi and Aussie markets are a little to bullish at the moment ... lots of P/E's into the mid 20's ... with growth in both economies likely to slow over the next 2 years I think the market is at least 10-12pct over-valued. Dow Jones and FTSE have gone south over the last 3 months while our markets are both up around 8-10pct. I have sold approx $80k worth of shares in the last 3 weeks including SKC,HBY,BHP,WPT to name a few. Will probably invest the cash for 180 days at the National Bank at around 6pct. Happy with my gains since the New Year and good luck to the buyers of my shares who I feel overpaid for a share in the businesses they were buying into.

Disc: Still hold NOGOC,HQP and KCN ( +BP in UK )