Interesting stuff--First speaker was enough and the one worth her salt.
I wonder how many have actually thought much about the affects of the QE cuts on China. Which of course has already caused pain in OZ and NZ as well has put alot of eggs in that basket.
The lady is onto it but now that this view is prevalent in the market is it priced into the resource and services stocks?
Jim Chanos was one of the first to warn about China when no-one was listening.
A China crash would greatly affect NZ and Australia especially the crazy property bubble and it's impact on the big four australian banks which are all at stretched valuations.
There is always another crisis and this one could be particularly nasty for us but my feeling is the best approach is to have a diversified portfolio of cheap stocks and keep the debt very low rather than to hide under the bed and go all cash.
This view on China is also the reason for the strong NZ dollar vs the aussie creating a good chance to pick up the three or four companies on the ASX worth buying.
In the long term I like the Aussie economy much more than the NZ economy which depends only on 1080 flavoured milk powder and building houses for Asian/European immigrants.
ANZ looking relatively cheap. ;-)
One issue I think the banks will face at some point is a crash in property markets both Australia & Auckland.
That could be very messy for the banks.
Hopefully you find my posts helpful, but in no way should they be construed as advice. Make your own decision.
I normally value companies on their 10 year average of historical earnings but lets not do that as it would take too long. The banks are a highly leveraged investment and normally trade (over the last 20 years) on a PE of around 11.5 in the case of the big four.
So I compare them to themselves.
Maybe you have last years earnings here so at least 30% overvalued and I would argue that the amount of debt in the economy means that their extraordinary historical rate of growth at best cannot be sustained and at worst could lead to a recession. So they are something more than 30% overvalued because they have saturated the market.
I sold my mac bank at $50 because I thought it fully valued, it is more fully valued now
I have WOR, STO, CDD, TPI and QBE with an overall yield of 5% and I think a lot less leverage, risk in the price and greater ability to grow earnings and dividends from the present cyclical lows.
Right now oil and gas and anything related to resources is selling cheap, like the big aussie banks were during the GFC when I bought my mac bank for an average of $30. A lot of the resources stuff is deservedly cheap with more tough times ahead but I have tried to pick to avoid china risk as much as possible.
I am a long term investor and expect these things to fluctuate in price over the short term but the share price will track the earnings as they recover over a 5 year period say.
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