NZSX50 - Good News!

[Beagle]

https://www.cnbc.com/world/?region=world

I see the trade deal as very good news for global growth. As I see it this is a real "risk on" environment.
NZX50 is said to be on a forward PE of 29 already and after gaining ~ 30% in 2019 I am not sure how much gas is in the tank for a big 2020 but I like the prospects for the American market, (forward PE is 19 for S&P 500), and the Australian market in particular which should see very good growth from a resurgent demand for base metals and minerals, (forward PE about 18).

I hold significant positions in Marlin (MLN) and Barramundi (BRM) to enjoy what is hopefully an exceptional year for the American and Australian markets.
I think this environment is also very good for financials, (sizeable holding in HGH) retirement stocks, my preferred ones are MET and SUM and growth stocks on reasonable PE's.
Bonds are a very bad place to be in 2020 in my opinion.

[winner69]

Beagle - Jardens have NZX50 on a forward PE of 33


The median stock is on a 19x PE with 6% earnings growth which is pretty good compared to market being on a 33x PE with 0% growth,

Thought you’d be interested

[blackcap]

Beagle - Jardens have NZX50 on a forward PE of 33


The median stock is on a 19x PE with 6% earnings growth which is pretty good compared to market being on a 33x PE with 0% growth,

Thought you’d be interested

How is that forward PE calculated though? Is it weighted by capitalisation? If so the PE of our power stocks will have a huge bearing so the NZ PE may not be as terrible as it actually looks. If its not weighted, well then the NZX has a problem Houston.

[Beagle]

Thanks Winner. Could well be. Its been a while since that 29 figure was bandied about and the market has been rampant.
I think it is market weighted Blackcap and you're quite right that stocks trading on cash flow yield like the gentailiers distorts the picture.
Winners median PE forward PE of 19 and growth of 6% look quite reasonable to me for where 10 year Govt stock is.
I think some of the retirement stocks could see quite a significant rerating in 2020 as we return to a rising Auckland housing market. Median PE of 19 for instance applied to the likes of MET, SUM and OCA, (ARV already about there and RYM well north of that), could see substantial price appreciation in 2020.
As I see it, anything that's got a well proven track record of growth and is under a PE of 19, is basically "game on".

[percy]

[QUOTE=Phaedrus;259002]It will take a 53% rise from current levels for the NZSX50 to regain its 2007 peaks. I am pleased to be able to report that this will happen at 2.15 pm on 19/12/2011.

Naturally, such a confident assertion rests on a couple of minor assumptions :-
(1) The bottom of the Bear market was reached on 3/3/09.
(2) The subsequent recovery will be at the usual 20% per annum.




The above is the first post on this thread.
It was posted on 4/6/2009 when the NZ50 index was 2,809.82
............................Today the NZ50 is 11,482.29.
1 year ago [21/12/2018] it was ......... 8,686.19
2 years ago [24/12/2017 it was.............8,398.08
5 years ago [21/12/2014 it was.............5547.42............note index has doubled since.
10 years ago[6/12/2009] it was ............3127.98

[winner69]

[QUOTE=Phaedrus;259002]It will take a 53% rise from current levels for the NZSX50 to regain its 2007 peaks. I am pleased to be able to report that this will happen at 2.15 pm on 19/12/2011.

Naturally, such a confident assertion rests on a couple of minor assumptions :-
(1) The bottom of the Bear market was reached on 3/3/09.
(2) The subsequent recovery will be at the usual 20% per annum.




The above is the first post on this thread.
It was posted on 4/6/2009 when the NZ50 index was 2,809.82
............................Today the NZ50 is 11,482.29.
1 year ago [21/12/2018] it was ......... 8,686.19
2 years ago [24/12/2017 it was.............8,398.08
5 years ago [21/12/2014 it was.............5547.42............note index has doubled since.
10 years ago[6/12/2009] it was ............3127.98

Amazing eh percy ...great times to be invested

And this time last year many were saying 2019 was going to be a bad year for the NZX ...crash or big correction I recall ....and we have just had the most successful year ever (according to man on radio)

And it will much of the same in 2020 I reckon

[percy]

[QUOTE=percy;783160]

Amazing eh percy ...great times to be invested

And this time last year many were saying 2019 was going to be a bad year for the NZX ...crash or big correction I recall ....and we have just had the most successful year ever (according to man on radio)

And it will much of the same in 2020 I reckon

Yes amazing.
Yet over the last 5 or 6 years a number of posters have had a case of bad nerves and gone to cash..?
NZ is in good shape,low interest rates set to continue,and most companies are focussed with strong balance sheets, paying increasing dividends..
2020.Any sensible portfolio should continue to do well.

[BlackPeter]

... Bonds are a very bad place to be in 2020 in my opinion.

Horses for courses. While I agree that a 100% bond strategy might not be the most profitable in 2020 - I do hold a certain percentage of my portfolio in bonds (currently roughly 20%) - and actually, they did gain in 2019 (around 4% interest + 5 to 6% capital appreciation) and so far I don't see a reason for this trend not to continue in 2020 (with interest rates staying low and another round of QE looming).

Look at bonds as an insurance policy. Sure - the gains are typically not that outrageous as with (successful) shares, but when the next black swan event happens (and honestly, who can guarantee that it does not), than I expect my bonds to help me to bridge the time until share prices recover plus they will provide at least some dry powder to allow me to buy more shares when these bottom out.

[Beagle]

Fair enough BP, I understand your perspective and I can see you understand that bond prices can give capital appreciation, but they can also give you capital losses when interest rates increase and quite frankly I think that's highly likely in 2020.

[percy]

[QUOTE=Phaedrus;259002]It will take a 53% rise from current levels for the NZSX50 to regain its 2007 peaks. I am pleased to be able to report that this will happen at 2.15 pm on 19/12/2011.

Naturally, such a confident assertion rests on a couple of minor assumptions :-
(1) The bottom of the Bear market was reached on 3/3/09.
(2) The subsequent recovery will be at the usual 20% per annum.




The above is the first post on this thread.
It was posted on 4/6/2009 when the NZ50 index was 2,809.82
............................Today the NZ50 is 11,482.29.
1 year ago [21/12/2018] it was ......... 8,686.19
2 years ago [24/12/2017 it was.............8,398.08
5 years ago [21/12/2014 it was.............5547.42............note index has doubled since.
10 years ago[6/12/2009] it was ............3127.98

Not exact,but the index going from 2,809.82 to 11,482.29 is near enough to 15% compound per year..

[Bjauck]

[QUOTE=percy;783160]

Not exact,but the index going from 2,809.82 to 11,482.29 is near enough to 15% compound per year.. That does look impressive.
However that is a gross index return. How many investors actually reinvest, for all their shareholdings, all their gross dividends on the date when they are declared?

I am unclear as to what is included in the NZSX50 index. As the index includes gross dividends, does that mean it includes the dividend declared (on the date it is declared) plus imputation credit if any? If the dividend is unimputed, does it include the gross dividend without an allowance for tax.

[percy]

Yes the gross index can be misleading,however it is the only NZ index I can find.Being gross I take it takes the gross dividend.
I have noted my own portfolio's net value is approx five and a half times the value it was in 2009. On top of that I have received sizeable dividends.

[Bjauck]

I can't really do a meaningful comparison apart from my RYM holding. I have halved (unfortunately) that holding over the intervening period, but my remaining shares have been held at least since 2009. In the time since 2009 their capital value has increased by 8.3 times. (About 23% annual increase compounded.)

The dividend yield was minimal initially. I am very confident that the rest of my portfolio as a whole would not have performed so well!

[peat]

 Gross Total Return (TR) versions reinvest regular cash dividends at the close on the ex-date


without consideration for withholding taxes.




Specifically for the S&P/NZX Indices, S&P Dow Jones Indices also calculates Gross with Imputation indices that reinvest the regular, as reported


dividend on the ex-date, along with any associated Imputation Credits, as declared by the respective company.

[winner69]

 Gross Total Return (TR) versions reinvest regular cash dividends at the close on the ex-date


without consideration for withholding taxes.




Specifically for the S&P/NZX Indices, S&P Dow Jones Indices also calculates Gross with Imputation indices that reinvest the regular, as reported


dividend on the ex-date, along with any associated Imputation Credits, as declared by the respective company.




I gather that for the NZX50 any dividends received are reinvested across all the stocks in the index.....not just reinvested in the divie paying stock

Like for a SPK divie some of the proceeds goes into buying more ATM (which doesn’t pay divies

That’s what a broker told me once.

[peat]

I gather that for the NZX50 any dividends received are reinvested across all the stocks in the index.....not just reinvested in the divie paying stock



That's weird. And impractical.
Meaning even a DRP would not cut it!

Dumb!

[winner69]

That's weird. And impractical.
Meaning even a DRP would not cut it!

Dumb!

Brokers are good at making stuff up so he may have misinformed me eh

It was put this way - you’re ‘invested’ in The Index (not the individual stocks) and any income (ie dividends received) is reinvested in The Index

Computers can do all sort of ‘impractical’ calculations

[Bjauck]

 Gross Total Return (TR) versions reinvest regular cash dividends at the close on the ex-date


without consideration for withholding taxes.




Specifically for the S&P/NZX Indices, S&P Dow Jones Indices also calculates Gross with Imputation indices that reinvest the regular, as reported


dividend on the ex-date, along with any associated Imputation Credits, as declared by the respective company.





As I understand it, no investor investing at the same weightings in the index stocks could attain the return that the NZSX50 indicates. So the NZSX50 is an inflated index.

Irrespective of tax and imputation issues, just with relation to dividends, FBU for example has a lag of about of about three weeks from the ex-date until the payment of the dividend is made to shareholders. That’s when they could reinvest in the index stocks.

[SailorRob]

The NZ capital index is the NZ50C and should be used when comparing to other indexes such as S&P 500 or ASX200. We are about 45% above the previous 2007 high now, or about 170% off the low in 2009. Brain Gaynor wrote a great article in the Herald regarding the NZX50 being Gross and how misleading it is comparing to other indexes.

[Beagle]

So...if one has easily beaten the NZX50 gross index of a gain of ~ 30% in 2019 they really have done well....not saying I have or haven't, just pointing out its not as easy to do this as it seems.

[percy]

Well I have with the help of an usx.co.nz {Unlisted} stock....lol.

[Beagle]

I wonder which one that is lol

[Snoopy]

Yes the gross index can be misleading,however it is the only NZ index I can find.Being gross I take it takes the gross dividend.


If someone had told me at the start of the year that the total return my dull boring dividend yield investment portfolio would be up by 20% for the year I would have been rapt. So I am extremely happy with my result (touchwood given the year has not finished) , even though I am some ten percentage points down on the 'NZX50 index' return. I know that the strategy that I follow will underperform the market in high growth years but will outperform the market in poor years (even if 'outperformance' means I lose less money that the index).

I personally think it is amazing that despite my 'sins', my Sky City has returned a positive for the year in spite of the disastrous fire. Utility type shares like Contact Energy and Spark were never going to be king hit performers. But they were unlikely to crash by 20% either. This is the bit that most shareholders don't get when they are entering a competition like that run by our mate Sylvester, and then pat themselves on the back for outperforming the index 'on paper'. If there is no risk of losing real capital then you can pick all kinds of high risk shares and then pat yourself on the back when those high risk choices come off. Over the long term, such gains are unlikely to be repeated. In fact if you did following such a strategy in real life, because year on year returns are cumulative and not independent, you will almost certainly end up near bankrupt.

To me the risk (which is never reflected in index returns because historical risk is always zero - the event you are measuring has already happened) is just important as the return. So in this strong bull market I am happy to remain a perennial underperformer.

SNOOPY

[winner69]

Quite a few of us on here reaping the rewards of booming share markets are of the older generation ....even if I use the phrases like ‘silent generation’ (really old) and ‘baby boomers’

We have been fortunate to have been born when we were to reap these benefits

Even though we have have worked hard the phrase ‘accidental millionaires’ isn’t out of place in this discussion.

I suppose we have to be to be kind hearted to those who go around saying ‘OK boomer’ ,...the younger generations aren’t going to have it so easy investing wise as us oldies.

Merry Christmas and a Happy New Year to everybody, young and old

[pierre]

I suppose we have to be to be kind hearted to those who go around saying ‘OK boomer’ ,...the younger generations aren’t going to have it so easy investing wise as us oldies.



That's very true Winner, however many of them are or will be the ultimate beneficiaries of the success of the lucky generation. They will inherit the results without any of the work or the angst.

[peat]

This is the bit that most shareholders don't get when they are entering a competition like that run by our mate Sylvester, and then pat themselves on the back for outperforming the index 'on paper'. If there is no risk of losing real capital then you can pick all kinds of high risk shares and then pat yourself on the back when those high risk choices come off.
SNOOPY
it is like trading forex price n demo mode - meaningless!

[Bjauck]

That's very true Winner, however many of them are or will be the ultimate beneficiaries of the success of the lucky generation. They will inherit the results without any of the work or the angst. An important issue for the future generations is in your post when you say “many of them will be the ultimate beneficiaries”.

I would say that many will indeed need to inherit a share of the (inflated) estates of their elders, just so that will be able to afford to get into home ownership, purchase shareholdings with inflated valuations, and to able to have the same standard of living as their elders. However of course wealth is not evenly distributed and of course it will be the rich minority getting richer. Many may actually inherit insufficient assets to enable them to maintain the standard of living of their parents.

[winner69]

An important issue for the future generations is in your post when you say “many of them will be the ultimate beneficiaries”.

I would say that many will indeed need to inherit a share of the (inflated) estates of their elders, just so that will be able to afford to get into home ownership, purchase shareholdings with inflated valuations, and to able to have the same standard of living as their elders. However of course wealth is not evenly distributed and of course it will be the rich minority getting richer. Many may actually inherit insufficient assets to enable them to maintain the standard of living of their parents.

Currently record low interest rates and shares with ‘inflated valuations’ implies long term (say 10 yea s) investment returns aren’t going to be much at all

We’ll probably be spending a lot of our ‘inflated’ estates before the young ones get their hands on it.

[percy]

Go to YouTube.."Roger Penske at 2008 Winter Commencement."

[SailorRob]

So...if one has easily beaten the NZX50 gross index of a gain of ~ 30% in 2019 they really have done well....not saying I have or haven't, just pointing out its not as easy to do this as it seems.


Really have done well is an understatement yes. It's really interesting to trend the NZ50G alongside the 50C. The relatively high div yield really gets the 50G going too.

[SailorRob]

10910


See NZ50G in blue (highest) against other non gross indexes the SP500 in green, then the NZ capital index and the ASX200. As can be seen 50% of gains alone in the NZX50 we all look at is from div reinvestment compounding over 10 years. Brain Gaynors article really worth a read.

[bull....]

while the nzx is making new highs heres a good article on how having bonds in your portfolio as well has made you big gains , even beigger than stocks on this example. ( of course they would have lost heaps if rates had gone up)

https://www.interest.co.nz/bonds/103254/capital-gains-bonds-can-far-exceed-coupon-interest-when-interest-rates-fall-they-have

[bull....]

NZ equity returns for the next decade?
https://www.goodreturns.co.nz/article/976516165/nz-equity-returns-for-the-next-decade.html


I think this is the most important thing to take from the article

each additional year of above normal returns makes any return to a more “normalised” PE more painful.

[Hoop]

10968

10969

[Bjauck]

NZ equity returns for the next decade?


https://www.goodreturns.co.nz/article/976516165/nz-equity-returns-for-the-next-decade.html


I think this is the most important thing to take from the article

each additional year of above normal returns makes any return to a more “normalised” PE more painful.

A worry for residential land prices too? I think residential land/property comprises a larger proportion of household wealth now compared with 2008 and 1987.

How each inflated asset market adjusts will probably be different. House prices tend to stagnate whilst the sharemarket tends to be a rollercoaster. However who knows what it will be like next time?

[bull....]

A worry for residential land prices too? I think residential land/property comprises a larger proportion of household wealth now compared with 2008 and 1987.

How each inflated asset market adjusts will probably be different. House prices tend to stagnate whilst the sharemarket tends to be a rollercoaster. However who knows what it will be like next time?

it will happen , who knows when is the million dollar question?


Auckland motorways, Harbour Bridge Skypath big winners in Government's $12 billion infrastructure spend-up
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12304150


doing more 4 lane highways is good news helps improve nz productivity

[Bjauck]

it will happen , who knows when is the million dollar question?


Auckland motorways, Harbour Bridge Skypath big winners in Government's $12 billion infrastructure spend-up


https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12304150


doing more 4 lane highways is good news helps improve nz productivity It should not come at the cost and disadvantage of property owners along the routes though. Some have to suffer from having a Notice of requirement on their title for years - or decades - before the finalisation of the route and funding! With compensation being unavailable or at the expense and inconvenience of going to Court. NZ compensation provisions need a thorough update and over-haul.

[bull....]

China bans hit $3.5b of tourism, education exports


https://www.newsroom.co.nz/2020/02/02/1015809/china-ban-to-hit-35b-of-tourism-and-education-exports


NZ tourism braces for coronavirus hit, 9000 cancellations already


https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12305050


Outbreak will hit exports, says port boss

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12305365


all the stories are coming out at least there realistic , only a very naive person would believe it wont have an impact on NZ. i n fact the people who compare it to sars i would say are naive why because china is so much more important to NZ now for exports than when sars was around so the .08% they parade round is crap it will be a much bigger impact on NZ GDP. did people notice the retailer stocks getting sold off last week thats an indication investors are expecting slowdown in retail to come from all this at some stage. I imagine the RBNZ will cut rates again mid yr once the slow down hits and people start losing jobs ( hopefully not to many but unfortunately tyhere will be some). govt infrastructure package wont help as they are long term projects. they may need to do more if it gets really bad.

[King1212]

OMG..no more Chinese money!! We will be in trouble...now it will make kiwis appreciate more Chinese tourists instead of racist them....

[Bjauck]

OMG..no more Chinese money!! We will be in trouble...now it will make kiwis appreciate more Chinese tourists instead of racist them....
I presume you meant "some Kiwis"...after all, if you generalise a nationality, that itself is racist or bigoted.

[King1212]

dont be too naive...we all have to agreed..it is on the news....we or some kiwis are really racist to them.....not only to them but to migrants....

[bull....]

nz50 index currently displaying a negative divergence on weekly rsi . if you dont know what that is have a read here its a charting term

https://www.investopedia.com/ask/answers/05/052905.asp


pays to keep an eye on these things , even if it doesnt eventuate into anything

[Bjauck]

dont be too naive...we all have to agreed..it is on the news....we or some kiwis are really racist to them.....not only to them but to migrants.... Sure some Kiwis...and maybe more kiwis are really hospitable...maybe not as newsworthy?

[bull....]

log exports been suspended from port gisbourne. if this flows on be massive hit to nz gdp if more log exports hit

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12305292

[BlackPeter]

log exports been suspended from port gisbourne. if this flows on be massive hit to nz gdp if more log exports hit

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12305292

I guess putting this into the "good news" thread is clear evidence that you are a shorter :p;

And yes - the overreaction of our authorities is quite concerning. It won't be a flu like virus taking us down, but the idiocy of our authorities who seem to follow more the hype created by a wild internet mob of fear mongers rather than common sense.

[winner69]

Not as much carnage on the NZX today as some thought there would be

Been some worse days than this recently

[King1212]

I guess putting this into the "good news" thread is clear evidence that you are a shorter :p;

And yes - the overreaction of our authorities is quite concerning. It won't be a flu like virus taking us down, but the idiocy of our authorities who seem to follow more the hype created by a wild internet mob of fear mongers rather than common sense.

He is a shorter..don't see it from all his posts?...l

[bull....]

I guess putting this into the "good news" thread is clear evidence that you are a shorter :p;

And yes - the overreaction of our authorities is quite concerning. It won't be a flu like virus taking us down, but the idiocy of our authorities who seem to follow more the hype created by a wild internet mob of fear mongers rather than common sense.

lol shorter just informing the masses .... information is key

[Timesurfer]

log exports been suspended from port gisbourne. if this flows on be massive hit to nz gdp if more log exports hit

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12305292


While a suspension is abnormal, the industry regularly goes through periods of pushing and cutting right back inline with prices. As long as it is only a short term blip (which is what they seem to be suggesting with Chinese holidays etc) then it should have little overall effect on the GDP. Different story for those in the local industry who won't be getting pay packets after Christmas splurging though.

[bull....]

While a suspension is abnormal, the industry regularly goes through periods of pushing and cutting right back inline with prices. As long as it is only a short term blip (which is what they seem to be suggesting with Chinese holidays etc) then it should have little overall effect on the GDP. Different story for those in the local industry who won't be getting pay packets after Christmas splurging though.

your right about the ebbs and flows of forestry in a normal cycle , the big unknown though is how long or how big the virus gets. if the worst happens it will affect forestry along with every other exporter from nz in reduced demand , port issues , labour at ports to unload , unused inventory buildup driving prices down etc.

i see other exporters reviewing shipments already due to chinese port issues

[Timesurfer]

As you say, in a worst case scenario the would will come crashing to standstill. However, I survived Y2K, the end of the Mayan calendar, and numerous other world ending events so every day is a bonus - live on the edge and keep investing I say.

[bull....]

As you say, in a worst case scenario the would will come crashing to standstill. However, I survived Y2K, the end of the Mayan calendar, and numerous other world ending events so every day is a bonus - live on the edge and keep investing I say.

lol you done well to survive for so long as for living on the investing edge ill wait for more clarity on the virus being contained i dont mind missing the bottom

[bull....]

While a suspension is abnormal, the industry regularly goes through periods of pushing and cutting right back inline with prices. As long as it is only a short term blip (which is what they seem to be suggesting with Chinese holidays etc) then it should have little overall effect on the GDP. Different story for those in the local industry who won't be getting pay packets after Christmas splurging though.

read this for update on the forestry very bad situation

http://www.gisborneherald.co.nz/frontpage-featured/20200204/the-perfect-storm-exporters-stop-buying-wood/

[winner69]

Should be a good day on the NZX today

Bull.. might say last chance to sell before the real collapse

King probably buying a few

[peat]

Re Milk Auction
" there does not appear to have been a large drop in Chinese demand.”

[bull....]

Should be a good day on the NZX today

Bull.. might say last chance to sell before the real collapse

King probably buying a few

always alert

did you know NZ gdp has been falling since 2015 and likely to get worse becuase of corona virus yet stock prices keep going up ? if you believe in the gdp , stock price relationship over the long term

[Bjauck]

always alert

did you know NZ gdp has been falling since 2015 and likely to get worse becuase of corona virus yet stock prices keep going up ? if you believe in the gdp , stock price relationship over the long term I thought that gdp growth has been at about 2.5% pa since 2015
https://en.wikipedia.org/wiki/Economy_of_New_Zealand

Asset prices though have surged perhaps owing to interest rate movement.

[bull....]

I thought that gdp growth has been at about 2.5% pa since 2015
https://en.wikipedia.org/wiki/Economy_of_New_Zealand

Asset prices though have surged perhaps owing to interest rate movement.

should have said gdp % growth has been falling since 2015

https://www.stats.govt.nz/topics/gross-domestic-product

and your right about its only the interest rate effect to support stock prices at these levels

[dobby41]

Should be a good day on the NZX today

Bull.. might say last chance to sell before the real collapse

King probably buying a few

I am hoping for a real collapse.
The amount of money I am about to invest eclipses what I already have invested so a collapse would put me in a good starting position with my changed investment structure.

[BlackPeter]

I am hoping for a real collapse.
The amount of money I am about to invest eclipses what I already have invested so a collapse would put me in a good starting position with my changed investment structure.

Problem is - the real crashes occur only if nobody has any money left to buy (i.e. everybody is fully invested). It is people like you and me who spoil what could turn into a really beautiful stock market crash ...

[peat]

crashes cause years of stagnation
nobody got time for dat.

[dobby41]

crashes cause years of stagnation
nobody got time for dat.

Bulls last 8.something years (on average) whereas bears last something like 1.7yrs.
May take a while to get back to the last peak but when buying at the bottom who cares?

[bull....]

westpac just downgraded nz gdp

[winner69]

SRA (a truely Independent economic commentator) just raised his nz gdp forecast for 2020

I see unemployment rate fell again

[peat]

SRA (a truely Independent economic commentator) just raised his nz gdp forecast for 2020

I see unemployment rate fell again
you can rely on Rodney being independent coz he's always such a bastard to all the bankonomists

[winner69]

Good that Orr and RBNZ didn’t panic and cut the OCR ....the cheerleaders or a cut will be pissed off

[bull....]

Good that Orr and RBNZ didn’t panic and cut the OCR ....the cheerleaders or a cut will be pissed off

still plenty of time

[Hoop]

Bulls last 8.something years (on average) whereas bears last something like 1.7yrs.
May take a while to get back to the last peak but when buying at the bottom who cares?

Dobby ..you must tell me your secret of being able to buy in at the bottom..I've being trying for 45 years :p.

[dobby41]

Dobby ..you must tell me your secret of being able to buy in at the bottom..I've being trying for 45 years :p.

Context Hoop.
Was in relation to the thrust that I'd be happy for a real collapse as I have a significant (in relation to what I own now) investment to make.
It was suggested that a collapse causes years of stagnation - hence the stats on Bulls and Bears.
When buying after a 'collapse' you are buying at a significant low (maybe not the bottom but low) and it will get back to the last peaks - always has and always will.

[Hoop]

Context Hoop.
Was in relation to the thrust that I'd be happy for a real collapse as I have a significant (in relation to what I own now) investment to make.
It was suggested that a collapse causes years of stagnation - hence the stats on Bulls and Bears.
When buying after a 'collapse' you are buying at a significant low (maybe not the bottom but low) and it will get back to the last peaks - always has and always will.
Yes very true Dobby..History agrees too.
My post was a tongue in cheek humour..probably for most it's was bad humour.

The interesting thing about the NZX50 is the amount of record highs being achieved and yet this news is being buried with the avalanche of hyped up (dramatic) negative media...hmmm maybe that's what is keeping the Bull market going..negative media suppressing investor exuberance and keeping some of us on the sidelines + the continuing fall of interest rates + moderate organic growth + high property prices giving home owners more spending power (high domestic economy activity)..

Another interesting thing seen on the chart (not shown) is the uptrend of this 11 year old NZX Bull...The last 4 years has been a constant uphill trend with 2 minor/medium BM corrections of 12% (2016) and 10% (2018)..In the long term scheme of things history says these minor BM corrections would not seem potent enough to keep the Bull Market going , but the Bull Market has defied these odds. To defy the odds even more, the last year has seen the uphill trend steepened and unbelievably has managed against the odds again to sustain this very steep uptrend...

Totally amazing run and very scary

[winner69]

@stevebiddle
I had a term deposit that finished yesterday after a 8 month period. I've had almost identical returns from it over the last 8 months as I have had from a managed growth fund of the same value in the past 8 days. We live in such a screwed financial world right now.


What does he expect in a world where set prices are so inflated expected future returns are getting lower. One guy says expected 10;year return on a balanced portfolio (u#) has fallen below 0% pa

[Davexl]

Yes very true Dobby..History agrees too.
My post was a tongue in cheek humour..probably for most it's was bad humour.

The interesting thing about the NZX50 is the amount of record highs being achieved and yet this news is being buried with the avalanche of hyped up (dramatic) negative media...hmmm maybe that's what is keeping the Bull market going..negative media suppressing investor exuberance and keeping some of us on the sidelines + the continuing fall of interest rates + moderate organic growth + high property prices giving home owners more spending power (high domestic economy activity)..

Another interesting thing seen on the chart (not shown) is the uptrend of this 11 year old NZX Bull...The last 4 years has been a constant uphill trend with 2 minor/medium BM corrections of 12% (2016) and 10% (2018)..In the long term scheme of things history says these minor BM corrections would not seem potent enough to keep the Bull Market going , but the Bull Market has defied these odds. To defy the odds even more, the last year has seen the uphill trend steepened and unbelievably has managed against the odds again to sustain this very steep uptrend...

Totally amazing run and very scary


Scary is the right word to use alright. Not sure about the NZX but the ASX200 just retested it's all time high yesterday at 7145 before dropping back under the new Coronavirus results. Looking at the big picture the graph is shaped like a big "M" formation (indicating a market top) with the dropping right hand leg missing.

Last time I saw this was just before the Dot-Com crash. It will be more than interesting to see if there is a short term retest of this high, which if it fails means 'LOOK OUT BELOW' IMHO.

I'm holding 67% cash ATM plus hedging the ASX200 with BBOZ for insurance against my remaining NZ & Aussi shares.

Good luck to NZX holders too, though don't think you can hedge the NZX as easiliy.

[peat]

with everyone holding so much cash the market can run further (up)!

[Davexl]

with everyone holding so much cash the market can run further (up)!

Interesting thought Peat! Lets see if we can push through to new highs and defy the Macro market forces at work...

The way I see it is there are only a few of us so far holding large cash positions and the others may need to too.

[Beagle]

On the subject of the Bull run continuing one of the theories espoused on CNBC by one of their "experts" was that many market participants had run large cash positions in 2019 due to trade war concerns and now they've abated and those fund managers and individual investors have underperformed the index for 2019 they simply don't want the risk of underperforming again in 2020 so holding too much cash now is seen as inappropriate.

I think that's a load of rubbish and smart people who outperformed the index last year and got 40%+ returns on their portfolio are realising from an economic growth perspective we're in a brand new high risk environment and are making the appropriate portfolio adjustments.

[kiwico]

I'm holding 67% cash ATM plus hedging the ASX200 with BBOZ for insurance against my remaining NZ & Aussi shares.

Thanks, I hadn't previously been aware of BBOZ.AX (https://www.marketindex.com.au/asx/bboz). Current holders would have had a bad last year given it's down 39% over the last 12 months and a whopping 56% against the ASX.

[bull....]

always alert

did you know NZ gdp has been falling since 2015 and likely to get worse becuase of corona virus yet stock prices keep going up ? if you believe in the gdp , stock price relationship over the long term

add the rsi divergences and narrow leadership propelling indexes higher and the bigg gdp hit coming some stocks are well over priced. expecting big hit today

[bull....]

Coronavirus impact: ANZ says three OCR cuts now likely by May
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12313066

obviously seeing a severe downturn in NZ coming then. makes the NZX even more seriously overvalued

[BlackPeter]

Thanks, I hadn't previously been aware of BBOZ.AX (https://www.marketindex.com.au/asx/bboz). Current holders would have had a bad last year given it's down 39% over the last 12 months and a whopping 56% against the ASX.

BBOZ is not meant to be a long term hold. If shareprices go up, BBOZ goes down. However - it is a great hedge if the stockmarket plunges (as it is now).

Horses for courses ...

[blackcap]

BBOZ is not meant to be a long term hold. If shareprices go up, BBOZ goes down. However - it is a great hedge if the stockmarket plunges (as it is now).

Horses for courses ...

Exactly. If you hold for a year for example and the ASX stays flat then BBOZ would be down quite significantly. It is definitely not for the long term. Short term only.

[stealthmaster]

Get your money out while u can....

[BlackPeter]

Get your money out while u can....

... and bury it all in the veggie garden :p;

Ah yes, and don't forget to publish your address if you want some help with digging :);

[couta1]

Get your money out while u can.... Very well explained advice. Lol

[bull....]

always alert

did you know NZ gdp has been falling since 2015 and likely to get worse becuase of corona virus yet stock prices keep going up ? if you believe in the gdp , stock price relationship over the long term

NZX severely overvalued

[couta1]

NZX severely overvalued Some of it and some of it undervalued now IMO.

[bull....]

Some of it and some of it undervalued now IMO.

really

ANALYSIS: Don't be surprised if the Reserve Bank slashes the official cash rate by as much as 50 basis points within days.

https://www.stuff.co.nz/business/119935031/reserve-bank-may-not-wait-three-weeks-for-coronavirus-special-on-interest-rates

sounds like the banks in NZ are starting to panic now about whats coming

[couta1]

really

ANALYSIS: Don't be surprised if the Reserve Bank slashes the official cash rate by as much as 50 basis points within days.

https://www.stuff.co.nz/business/119935031/reserve-bank-may-not-wait-three-weeks-for-coronavirus-special-on-interest-rates

sounds like the banks in NZ are starting to panic now about whats coming If they do that will encourage punters to snap up stocks with a history of good divvies and yes really.

[bull....]

If they do that will encourage punters to snap up stocks with a history of good divvies and yes really.

lol temporary drug for the addicts. havnt you been reading that one of the greatest investors in your time buffett has been moving to cash since last year.

[couta1]

lol temporary drug for the addicts. havnt you been reading that one of the greatest investors in your time buffett has been moving to cash since last year. Haha the very same man that said" Dont buy any stock you wouldnt be happy to hold for 10 yrs if the stock market shut down."

[Blue Skies]

Some reassuring news reported in NYT, around 80% of cases are mild like a common head cold, vast majority of those infected so far have only had mild symptoms & make a full recovery & even mild cases should provide future immunity.
Virologist says many people are panicking and exaggerating the risks.

There is also a massive difference in the severity rate, related to age & pre existing chronic health conditions which is obviously what you would expect.
Healthy individuals under 50 (& not worked to the point of exhaustion & repeated contact with the virus like the doctor) seem to have little to worry about.


https://www.nytimes.com/2020/02/27/world/asia/coronavirus-treament-recovery.html

[bull....]

fed does an emergency rate cut and the stock and bond markets are crashing. expect similar result in nz. nz stock market severley overvalued

[winner69]

fed does an emergency rate cut and the stock and bond markets are crashing. expect similar result in nz. nz stock market severley overvalued

Rates this low sort of says long term expected returns on the S&P are zilch or

Have to stick to stock picking and hoping like hell trading works out

[bull....]

Rates this low sort of says long term expected returns on the S&P are zilch or

Have to stick to stock picking and hoping like hell trading works out

to much uncertainty to hold stocks for me , ill wait for earnings to catch up with reality or for a cure to the virus before i go all in again. although in a bear down draft day trading can sometimes be profitable or shorting stocks.
long term returns guess come from buying at reasonable levels eh guess if you own stocks from 10 yrs ago or what who cares eh unless its air or thl etc lol

[couta1]

NZX holding up well this morning by comparison but I reckon it's going down further once the Aussie opens.

[bull....]

NZX holding up well this morning by comparison but I reckon it's going down further once the Aussie opens.

stubborn mule the nzx thinks it can stay up fore ever

[macduffy]

stubborn mule the nzx thinks it can stay up fore ever

Perhaps the glass is half-full. The stubborn mule managed to finish the day in the green - just!

:)

[dreamcatcher]

Currently DOW 26217 up 300 points........ S&P 500 up 29....... Nasdaq 100 up 103

[Hoop]

The NZSE Bull officially died this morning .You made our economy very strong, helped reduce unemployment and created us wealth...you will be missed old friend.. RIP

11119

[Biscuit]

The NZSE Bull officially died this morning .You made our economy very strong, helped reduce unemployment and created us wealth...you will be missed old friend.. RIP



Maybe the world needs a decent recession/debt-default to re-balance things and change the way central banks are currently pursuing monetary policy.

[peat]

China could well be our saving grace at this point with their recovery dawning , both Australia and NZ should benefit from that sooner than some others perhaps

[BlackPeter]

China could well be our saving grace at this point with their recovery dawning , both Australia and NZ should benefit from that sooner than some others perhaps

Good point. They might as well be not just our economical savior but provide as well short and midterm some medical relief. I hear there are by now plenty of empty isolation rooms in the Wuhan province, as well as staff not just experienced to deal with the virus, but as well already immunized (because they lived through the virus by themselves). Maybe NZ should book some of these rooms for the expected onslaught on our medical facilities.

[winner69]

Somebody needs to change title of this thread as NZX50 heads to 4,000

[Filthy]

it'll never get to 4000. the world will end before then.

[ratkin]

China could well be our saving grace at this point with their recovery dawning , both Australia and NZ should benefit from that sooner than some others perhaps

Further evidence today in the Warehouse result, their Chinese suppliers are back up and running and the Warehouse has already taken delivery.
This country needs to align itself more with Asia, they seem to have more sense than the west. Apart from eating Pangolins

[BlackPeter]

it'll never get to 4000. the world will end before then.

The world would hardly notice ...

[winner69]

NZX getting closer to 4000 by the day

[SailorRob]

Another 8% down from here and we're at pre GFC levels.

Nobody seems to realise the NZX50 is a gross index dividends reinvested. The 50C is the real index and we almost pre GFC.

All or most other indexes are gross, the NZX50 is completely irrelevant. So Winner you're much much closer to your prediction.

11146

[SailorRob]

Brian Gaynor has a great article explaining it, the NZX50 is a con job index designed to pull the wool as the 87 hangover affected NZ investors so badly.

[winner69]

Another 8% down from here and we're at pre GFC levels.

Nobody seems to realise the NZX50 is a gross index dividends reinvested. The 50C is the real index and we almost pre GFC.

All or most other indexes are gross, the NZX50 is completely irrelevant. So Winner you're much much closer to your prediction.

11146

OK ...NZX50 Capital Index heading to about 2200

Only another 25% (from high) to go

[winner69]

Interesting

Worth looking at from Mark Lister

The NZX 50 index is down just 7.2% in 2020. However, the AVERAGE share price move is a much more substantial 19.5% decline. The difference is due to the impact of a couple of very big companies which dominate index weightings (ie ATM and FPH). https://t.co/Mm4WFt2zEU

[sb9]

Cool interactive graph that shows how NZX big caps have moved over a period from 2002 to 2020..

https://public.flourish.studio/visualisation/2580017/

[whome]

Very cool video SB9. Fascinating changes in the relative NZX50 rankings since 2002

[blackcap]

Cool interactive graph that shows how NZX big caps have moved over a period from 2002 to 2020..

https://public.flourish.studio/visualisation/2580017/

Wow awesome video there. Thanks for posting. That is some cool graphics there and shows the recent phenomena that is ATM and FPH.

[Leftfield]

Cool interactive graph that shows how NZX big caps have moved over a period from 2002 to 2020..

https://public.flourish.studio/visualisation/2580017/

Fab video... thanks for posting.
Highlights the need to be constantly reviewing your investments!
(XRO was looking impressive for a quick glimpse....pity it is not there any more!)

[sb9]

Wow awesome video there. Thanks for posting. That is some cool graphics there and shows the recent phenomena that is ATM and FPH.

Very fascinating indeed, wonder what it might look like in another 10 years time...

[Phant]

Anyone noticing recent disparity btw FNZ and NZ50?
eg today market is up about 50 points but FNZ fallen 2.6 cents. It seems to me that lately FNZ falls have been larger than they should be and rises smaller

[Hoop]

The bump and run pattern is a reversal pattern. Has this reaction rally run it's course? or will it carry on upwards?...4900 is the key area to watch at the moment.

11731

[Cadalac123]

The bump and run pattern is a reversal pattern. Has this reaction rally run it's course? or will it carry on upwards?...4900 is the key area to watch at the moment.

11731

Hoop where did you learn your TA

[Panda-NZ-]

NZX seems to be the best performing stockmarket in the world without the artifical boosts of tax cuts. currently at least it can all change of course we will see. It's much more diversified than australia so is worth more. I wish XRO was still in there though...

XRO/CSL on ASX is fantastic the rest is barely investable concerning the large stuff at least.

[Bjauck]

NZX seems to be the best performing stockmarket in the world without the artifical boosts of tax cuts. currently at least it can all change of course we will see. It's much more diversified than australia so is worth more. I wish XRO was still in there though...

XRO/CSL on ASX is fantastic the rest is barely investable concerning the large stuff at least. The NZX capitalisation is very small for the size of our economy - so many overseas based companies operate here.

Since the beginning of 2020, I wonder how much of the positive boost to the NZX index performance is due to just three big stocks: CNU, FPH and ATM.

[Hoop]

The NZX capitalisation is very small for the size of our economy - so many overseas based companies operate here.

Since the beginning of 2020, I wonder how much of the positive boost to the NZX index performance is due to just three big stocks: CNU, FPH and ATM.

On Wall St indexes it is the FAANG

[Hoop]

Hoop where did you learn your TA
Before the mid 1990's I was a strict Fundie I originally viewed TA as "dark arts" The meaningless squiggly line method with a voodo type of self-fulfilling prophesy, if most people used TA and saw doom then bad things would happen. Back then a couple of "young turk" investors i occasionally bumped into down at the Pub had this"program thing" running on windows (before windows 95). It happened to be Metastock and these guys were making serious money out of it..Metastock was expensive back then and I bought a share of their program..That was the start of my journey to the "dark side"..Ridiculed by my other investing buddies and University teachers, I stayed with FA and dabbled with Metastock and made more money than them..until ..crash!!! my computer died and so did my Metastock..The "young turks' had finished Varsity and vanished so I started to do it manually and learn't TA from the ground floor upwards..Virtually self taught until early 2000 I then met up with TA Guru Phaedrus on Sharechat and later on Sharetrader forum.he was my Mentor so to speak..There were so many things I didn't know...
Many years ago the Melbourne University had two major text books for their TA courses (https://handbook.unimelb.edu.au/2020/subjects/fnce90032)within their Business degree.
1..Technical Analysis of the Financial Markets --John J.Murphy
2..Encyclopedia of Chart Patterns --Thomas N Bulkowski.
Learn these two books and you will be well on your way to be TA literate.
A part of TA is Charting, this takes a while to understand..It may look easy but you have to develop an "eye" to see the chart's the correct way..this takes time and experience (viewing thousands of charts and their outcomes)
Bulkowski has a website called The Pattern Site (http://thepatternsite.com/)

[Cadalac123]

Before the mid 1990's I was a strict Fundie I originally viewed TA as "dark arts" The meaningless squiggly line method with a voodo type of self-fulfilling prophesy, if most people used TA and saw doom then bad things would happen. Back then a couple of "young turk" investors i occasionally bumped into down at the Pub had this"program thing" running on windows (before windows 95). It happened to be Metastock and these guys were making serious money out of it..Metastock was expensive back then and I bought a share of their program..That was the start of my journey to the "dark side"..Ridiculed by my other investing buddies and University teachers, I stayed with FA and dabbled with Metastock and made more money than them..until ..crash!!! my computer died and so did my Metastock..The "young turks' had finished Varsity and vanished so I started to do it manually and learn't TA from the ground floor upwards..Virtually self taught until early 2000 I then met up with TA Guru Phaedrus on Sharechat and later on Sharetrader forum.he was my Mentor so to speak..There were so many things I didn't know...
Many years ago the Melbourne University had two major text books for their TA courses (https://handbook.unimelb.edu.au/2020/subjects/fnce90032)within their Business degree.
1..Technical Analysis of the Financial Markets --John J.Murphy
2..Encyclopedia of Chart Patterns --Thomas N Bulkowski.
Learn these two books and you will be well on your way to be TA literate.
A part of TA is Charting, this takes a while to understand..It may look easy but you have to develop an "eye" to see the chart's the correct way..this takes time and experience (viewing thousands of charts and their outcomes)
Bulkowski has a website called The Pattern Site (http://thepatternsite.com/)

Appreciate it hoop

[Baa_Baa]

A part of TA is Charting, this takes a while to understand..It may look easy but you have to develop an "eye" to see the chart's the correct way..this takes time and experience (viewing thousands of charts and their outcomes)
Bulkowski has a website called The Pattern Site (http://thepatternsite.com/)

The really hard part is 'believing' ones analysis sufficiently to 'act' on it! Bulkowski is awesome, the bible of TA charts and patterns.

[Hoop]

With all the media good news and the NZ overall economy (GDP) running at a very high growth rate (unsustainable?) it may come as a surprise for a few non-observers to find that the NZ stock market index (NZ50C) has fallen about 9% this year.

Nothing unusual for those who know that the Stock market correlates poorly with the economy.
As the recovering economy nears its mature part of the cycle (supply shortages, increased inflation, etc) the market gets a little wary as where too next and can fall back into a holding pattern (rectangle pattern).

As you can see on the chart below we are seeing the NZ50 capital index hugging the weekly MA40 (equivalent to daily MA200) bear line. As long as the index doesn't distance itself too far from that MA40 it should be OK. Rectangle patterns are called continuation patterns, in other words when the pattern breaks the previous trend should resume.
The chart also shows the Bollinger Bands (BB). The BB are squeezing up (see large brown arrows) indicating that the Rectangle Pattern could be nearing the end of its life cycle. Note though the Chart below is a 3 year period chart, so the indicating change could still be month or so away.

The change...is it going to be up or down?
TA is neutral.
The Chart favours an upward breakout
Stock Market theory says Inflation is the primary driver (positive correlation)...therefore rising inflation favours an upward breakout.
Rising Interest Rates favours a downwards breakout.

BUT!!!..the Covid crisis has turned Fundamental theory on it's head. The theories I had learnt over the decades aren't working very well

I'm not sure which way the NZ50C index is going to go...I only know that the Chart is telling me something is going to change, warning me to be cautious, alert and focused..

Your Guess?

12702

[Jaa]

I feel you Hoop. A rise in inflation should lead to a rise in interest rates.

[winner69]

I feel you Hoop. A rise in inflation should lead to a rise in interest rates.

Maybe Hoop can elaborate on that statement

[Count von Count]

Fascinating chart. Thanks

[BlackPeter]

Hoop, I hear what you are saying ...

... however, not quite sure that the drop of the NZX50 is a useful indicator in this context. We should not forget that it was the dismal performance of a small number of big NZX 50 companies like ATM (coming down from speculative heights to reality), FPH (recovering from the Covid price bubble), SML (paying for their non diversification policy) and the Gentailers (coming down from their safe haven bubble) which brought the index down. Not sure we can read into that too much about the general status of the economy?

For what it is worth - my NZX portfolio had this year a healthy gain, but admittedly - I don't own any of above companies (well, I bought recently a handful FPH).

I agree however that caution is always appropriate when one is in uncharted territory, though personally would I think that the reserve banks are in the meantime so used to print more cheap money, that this will (together with all the planned infrastructure projects) keep the economy still going for a while. But yes - interest rates will be interesting, and markets don't seem to be sure where they are going either. No question however - a crash will come, and it might well be big.

Still remembering the good old times when our governments and economies owed a pittance compared to today and we thought already that this might be a problem. Well - some day it will be.

[Panda-NZ-]

No question however - a crash will come, and it might well be big.


Good time to add leverage so you win either way.

Stay invested -> win.
Drop in value -> add leverage and buy more.

Though with interest rates rising it may turn this idea on it's head slightly.

[Snow Leopard]

....
I'm not sure which way the NZ50C index is going to go...I only know that the Chart is telling me something is going to change, warning me to be cautious, alert and focused..

Your Guess?
....

Hoop, I commend you on your use of a log chart. :)

[alokdhir]

After consolidating for about 6 months ....most likely NZX50 will break on the upside with FPH also doing the same which will help index move up

After many months index closed over 12700 !!

Me is on the upside breakout of this sideways movement .

Also too soon for another crash to happen IMHO

[alokdhir]

Bonds yields plummeting the world over ...At least bond market thinking no big growth ahead ...no big inflation fears ahead ...US10year from recent top of around 1.75% hit 1.25% in just 2-4 months time frame !! That should be making some stock investors sleepless ?

Normally bond prices go up as money moves from stocks to bonds ...at present both bonds up and stocks still holding ...something is going to give in soon

Maybe change Hoop was predicting after finishing of rectangle consolidation is round the corner

NZX being defensive market but very yield oriented ...so we may start to outperform wider world markets ....

NZX50 has some catching up to do ...with 4% down on YTD

Still trying to think why bond market suddenly become so bearish on future growth ....Do they fear long term Covid problems ? Or something else ??

NZD coming down also helps NZX going up !!

[greater fool]

Bonds yields plummeting the world over ...At least bond market thinking no big growth ahead ...no big inflation fears ahead ...US10year from recent top of around 1.75% hit 1.25% in just 2-4 months time frame !! That should be making some stock investors sleepless ?
Normally bond prices go up as money moves from stocks to bonds ...at present both bonds up and stocks still holding ...something is going to give in soon

<<<<< snip some stuff >>>>>>>>>>>

Still trying to think why bond market suddenly become so bearish on future growth ....

<<<<<< another snip >>>>>>>>>


Maybe it's not a bearish bond market?
Maybe it's about capital preservation. Put a dollar now into bonds, get a dollar back if held to maturity, and a small non-negative yield meantime.

[TeslaGod]

Still trying to think why bond market suddenly become so bearish on future growth ....Do they fear long term Covid problems ? Or something else ??

NZD coming down also helps NZX going up !!

Every bank economist are screaming inflation.. the bond market is pricing in deflation.

The bond market has got it right every time.

[alokdhir]

Every bank economist are screaming inflation.. the bond market is pricing in deflation.

The bond market has got it right every time.

Bond market pricing in deflation can be seen from dropping yields ...but why ? What makes them think so ? Why they thinking suddenly from growth and inflation to this new scenario ...maybe due to many countries admitting defeat in war against CORONAVIRUS . Many already saying publicly that we need to learn to live with it !!!

Maybe that makes quick recovery and tremendous economic activity on back burner for a long while .

Now if bond market is right then stock market will catch its vibes sooner then latter

[JohnnyTheHorse]

Every bank economist are screaming inflation.. the bond market is pricing in deflation.

The bond market has got it right every time.

Inflation is here and in absolute earnest. The level of debt will probably lead to long term deflation though?

Yields dropping could just be a case of far too much liquidity looking for a home? It has to go somewhere...

[alokdhir]

Will TA consider todays NZX over 12800 convincingly as a Breakout ? We are making 7 months highs now ..

[mistaTea]

If you had a decent chunk of cash to invest...and let's say you subscribed to the Jack Bogle notion that index fund investing over time was the way to go...

Would you just buy into an index fund over time (or funds) and pay the modest management fee?

Or would you construct your own 'index fund' by weighting the stocks appropriately, but owning each business directly? For example, you might construct your own "NZ50" and then all you need to do over time is rebalance occassionally based on your own tolerance for how close you need to keep your weighted percentages for each company to the actual NZ50. More effort, but no management fee at all.

What would be the better approach?

Just buying a Smartshares ETF over time is defiitely the 'easiest'...but is it the best approach?

[Monarch]

I think a simple way to determine what is best for you is to compare the two options in terms of cost. Determine the total management fee you would incur using an etf, then compare that to the time it would take to invest in companies yourself, and the value of that time. Balancing 50 stocks to replicate the nzx50 sounds like a huge time consumer, especially keeping book work to track your returns, dividends etc. Lets not forget the risk of being labelled a trader because your making buy and sells of 50 different stocks quarterly. The management fee for NZ50 smart shares is like 0.20% or something? You'd need a lot of dosh to make DIY worth it from a cost point of view. Personally, I'm aiming to use etfs for majority of my holdings (Especially foreign) and compliment it with a few personal picks.

[mistaTea]

I think a simple way to determine what is best for you is to compare the two options in terms of cost. Determine the total management fee you would incur using an etf, then compare that to the time it would take to invest in companies yourself, and the value of that time. Balancing 50 stocks to replicate the nzx50 sounds like a huge time consumer, especially keeping book work to track your returns, dividends etc. Lets not forget the risk of being labelled a trader because your making buy and sells of 50 different stocks quarterly. The management fee for NZ50 smart shares is like 0.20% or something? You'd need a lot of dosh to make DIY worth it from a cost point of view. Personally, I'm aiming to use etfs for majority of my holdings (Especially foreign) and compliment it with a few personal picks.

Thanks for your thoughts...

0.2% doesn't sound like much...

But consider this...let's say you had $500K to invest. And let's just say that the average market return before fees is 7%. You have to pay the likes of ASB 0.3% or $30 per trade whether you are buying ETFs or stocks...so we can ignore that for our purpose.

Ok, and let's say you are 30 years old...and you want to invest your $500K today but not add any more money to your investment (you will just reinvest your returns).

And you either get 7% a year return if you DIY your own ETF...or you get 6.8% after fees if you just buy the ETF...

By the time you hit retirement age at 65...

The DIY portfolio (that required effort to rebalance occassionally) would be worth ~$5.34M. The ETF portfolio would be worth ~$3.38M. That is damn near $340,000 opportunity cost given away in fees.

[mfd]

I think a simple way to determine what is best for you is to compare the two options in terms of cost. Determine the total management fee you would incur using an etf, then compare that to the time it would take to invest in companies yourself, and the value of that time. Balancing 50 stocks to replicate the nzx50 sounds like a huge time consumer, especially keeping book work to track your returns, dividends etc. Lets not forget the risk of being labelled a trader because your making buy and sells of 50 different stocks quarterly. The management fee for NZ50 smart shares is like 0.20% or something? You'd need a lot of dosh to make DIY worth it from a cost point of view. Personally, I'm aiming to use etfs for majority of my holdings (Especially foreign) and compliment it with a few personal picks.

Would you need to rebalance? Your holdings will rise and fall as the weightings do, so I wouldn't expect to have to do much beyond replacing companies that are removed from the index.

[mistaTea]

Would you need to rebalance? Your holdings will rise and fall as the weightings do, so I wouldn't expect to have to do much beyond replacing companies that are removed from the index.

Yes I agree…there would be almost nothing to do if you approached the DIY method correctly I think…

[Monarch]

That's true, it does add up to a large amount over that timescale. The glorious power of compound interest. But one thing to consider is, we all have limited time, we are only willing to "work" for a certain amount of time each week. I can't imagine how tedious it would be to keep records of all transactions/dividends etc for 50 stocks manually. With 500k I would seriously consider the diy approach and use sharesight (30 bucks a month) or maybe try make my own software. Using share sight to track would equate to around 0.1% fee pa.

[mistaTea]

That's true, it does add up to a large amount over that timescale. The glorious power of compound interest. But one thing to consider is, we all have limited time, we are only willing to "work" for a certain amount of time each week. I can't imagine how tedious it would be to keep records of all transactions/dividends etc for 50 stocks manually. With 500k I would seriously consider the diy approach and use sharesight (30 bucks a month) or maybe try make my own software. Using share sight to track would equate to around 0.1% fee pa.

I think once you set the portfolio weighting’s you only need to glance at it occasionally to see if the index weighting’s for each business have diverged a great deal from your portfolio weighting of each business. Then you may do a little buying/selling to rebalance if you want to.

But you wouldn’t need to spend a lot of time tracking dividends etc.

[Monarch]

But you should keep track of your dividends to make sure you don't overpay tax. I find it time consuming and tedious even for my limited portfolio. Another advantage I have forgotten is that the NZ50 etf is a PIE fund to my knowledge, so could be better from a tax perspective for higher income individuals who don't have holding companies etc.

[bull....]

looks like it wants to test prior support around 12100.
not much spupport levels till way below after that level breaks

[JohnnyTheHorse]

looks like it wants to test prior support around 12100.
not much spupport levels till way below after that level breaks

The Feb 21 lows on NZ50C have broken this morning. If this level isn't quickly regained we are in a monthly downtrend and what I would consider a bear market.

[bull....]

The Feb 21 lows on NZ50C have broken this morning. If this level isn't quickly regained we are in a monthly downtrend and what I would consider a bear market.

yea im looking at those levels on the gross index

[Panda-NZ-]

Ok dokey red alert time on world markets.

Lower/postponed interest rates would boost it back up again, though at the cost of inflation.

[bull....]

Ok dokey red alert time on world markets.

Lower/postponed interest rates would boost it back up again, though at the cost of inflation.

biden said he wants inflation down , so i guess that means at the expense of some equity falls happening

[Biscuit]

biden said he wants inflation down , so i guess that means at the expense of some equity falls happening

Yes, there seems to be little choice but to try to squash inflation. Logically it shouldn't have that much effect on NZ shares unless we are pushed into a recession, but there is little logic in the markets. Interest rates are going to rise, but the bigger issue is how quickly can we move on from covid and normalize the economy. The outbreak of omicron in NZ isn't necessarily a bad thing from an economic perspective as it is going to force some kind of normalization that would take much longer to happen otherwise.

[winner69]

No worries - according to media reports NZX50 only in correction mode

Not a crash ...just a correction

[bull....]

looks like it wants to test prior support around 12100.
not much spupport levels till way below after that level breaks

bounced pretty close of that level today. not expecting it to hold for ever

[bull....]

probably not going to hold that support level today , not much support under 12100 till way down

[winner69]

From market day end review -

Analysis by Forsyth Barr shows the average price-to-earnings ratio for the NZ market has already fallen to 26.8x in February, down from 30x late last year. Low-interest rates were largely responsible for pushing the average price-to-earnings ratio so high – it is still 12% above the five-year average despite the recent decline.


Jeez still a long way down if PE revert to the mean ….saca result of rising interest rates

[bull....]

From market day end review -

Analysis by Forsyth Barr shows the average price-to-earnings ratio for the NZ market has already fallen to 26.8x in February, down from 30x late last year. Low-interest rates were largely responsible for pushing the average price-to-earnings ratio so high – it is still 12% above the five-year average despite the recent decline.


Jeez still a long way down if PE revert to the mean ….saca result of rising interest rates

and thats on current earnings :scared:
what if earnings fall :scared: much lower to get to that mean

[winner69]

and thats on current earnings :scared:
what if earnings fall :scared: much lower to get to that mean

I didn’t want to mention that :scared:

[alokdhir]

Rare W69 agreement with Bull who is actually a big bear at the moment ...:D

IMHO NZX will NOT go to 0 as feared by u both ...soon market will look thru near term troubles and then sobriety will return ...lets see it happens from where ...

Time to do blue chip shopping on every down day ....or convert duds to blue chips as this market has sunk all ...converting OCA to SUM trade maybe in order

Dont underestimate the effect of free falling NZD which is making all NZ assets very attractive to foreign money ...so big names like FPH MFT FBU etc will find support soon

[JohnnyTheHorse]

Rare W69 agreement with Bull who is actually a big bear at the moment ...:D

IMHO NZX will NOT go to 0 as feared by u both ...soon market will look thru near term troubles and then sobriety will return ...lets see it happens from where ...

Time to do blue chip shopping on every down day ....or convert duds to blue chips as this market has sunk all ...converting OCA to SUM trade maybe in order

Dont underestimate the effect of free falling NZD which is making all NZ assets very attractive to foreign money ...so big names like FPH MFT FBU etc will find support soon

Sobriety returns??? Only a couple of times in history have we been so drunk as we are now that we are completely blinded about reality. We are currently feeling a bit worse for wear as we have run out of beers and feeling the very beginning of a come down. Usually the Fed would rush out to quickly get us more beers so that we can keep drinking and avoid any hangover. Unfortunately this time inflation means they are going to be forced to leave us dry, so we are in for one hell of a hangover.

Don't fight the Fed.

[winner69]

Sobriety returns??? Only a couple of times in history have we been so drunk as we are now that we are completely blinded about reality. We are currently feeling a bit worse for wear as we have run out of beers and feeling the very beginning of a come down. Usually the Fed would rush out to quickly get us more beers so that we can keep drinking and avoid any hangover. Unfortunately this time inflation means they are going to be forced to leave us dry, so we are in for one hell of a hangover.

Don't fight the Fed.

Prob right there Johnny

When market turns sour all stocks get affected - especially the high flyers who see their elevated PE's halve (or more)

Seen it all before

What price FPH at a PE of 20? and even then some would say expensive

[winner69]

this is quite good - from kiora on another thread

"“Buyers will start accepting overoptimistic accounting adjustments and financial forecasts to justify taking on high levels of debt.”

This is another more subjective one, but ask yourself this; how many times have you seen “EBITDA” or “Adjusted EBITDA” in company accounts recently?"

https://www.livewiremarkets.com/wires/how-to-tell-when-the-market-s-bottomed

[Hoop]

Re:The Market... We have been here before...many times actually...

My first post for a while and was inspired to post this very basic learner chart.
A young person came to me interested in learning to chart with the objective to create algorithms. We got talking about how bad the Market is and saying it's wise to be sitting on the side lines.. Starting the first lesson I thought the easiest indicators to talk about would be trend lines and Support and Resistance lines (S&R)..
I've haven't been observing the market much lately just remarking on want the media is telling me (which has been negative)..Then a drew this chart.
The question I got asked was..."I thought you said we should buy near support and sell near resistance, why are you so negative?"
The thought ran through my mind that I should had used another chart example..

13458

[BlackPeter]

Re:The Market... We have been here before...many times actually...

My first post for a while and was inspired to post this very basic learner chart.
A young person came to me interested in learning to chart with the objective to create algorithms. We got talking about how bad the Market is and saying it's wise to be sitting on the side lines.. Starting the first lesson I thought the easiest indicators to talk about would be trend lines and Support and Resistance lines (S&R)..
I've haven't been observing the market much lately just remarking on want the media is telling me (which has been negative)..Then a drew this chart.
The question I got asked was..."I thought you said we should buy near support and sell near resistance, why are you so negative?"
The thought ran through my mind that I should had used another chart example..

13458

Great question, hoop. Did you find an answer to it as well ?

[Hoop]

Great question, hoop. Did you find an answer to it as well ?

No answer ..I've been investing on and off in shares for nearly 50 years, still have no clue..

I do have many prediction indicators to help me create a probability of an outcome...Hasn't helped much these last 5 years.

[Hoop]

I know the economy is not a Stockmarket primary driver (Inflation is the primary driver)..it is a secondary driver ..I expect the company reporting season to show some strong results so this may help create a floor at the current support level...who knows..

Sediment rules the short term...and with many investors not experienced a bear market before these next few weeks will be interesting...In saying that, the NZX50 has to fall below 10600 (>20% fall) to be fundamentally confirmed a Bear Market Cycle... Between now 12080 and 10600 it is termed a correction...

[BlackPeter]

No answer ..I've been investing on and off in shares for nearly 50 years, still have no clue..

I do have many prediction indicators to help me create a probability of an outcome...Hasn't helped much these last 5 years.

I am sure this puts you into outstandingly good company :) ; I guess many try with the same success, but only few admit the outcome.

Just one of these human habits - trying to identify patterns when there is due to the complexity of the combination of individually deterministic systems really only white noise ... chaos theory is enlightening.

quareholes.com/blog/2019/07/05/chaos-and-how-to-predict-the-future

[alokdhir]

Just to wanted to write this info to let people know relativeness of inflation / growth / sentiment .

India has the highest running inflation since maybe last 50 years thus they have one of the highest 10 year bond yields ...still they have many companies on bluechip list with P/E in excess of 50 and not all are tech companies ...eg HUL ...FMCG company . If u study its last 20 years charts it will show most regular SP growth in high inflation and high rates environment too .

Indian markets have done pretty well with persistent high inflation and high rates environment but with regularly depreciating currency ...maybe currency picks up the inflation burden thus keeping SP rising in local currency and also markets .

INR is not fully convertible currency but its on current account and partly on capital account ...much freer then RNB .

NZD has started going down and it will realign the economy from consumption to exports ...NZD is fully convertible thus its movement will be fast and more truer then stock markets .

IMHO it will help us understand our economy state more then stock markets and it will be leading indicator of what kind of readjustments needed and it will do it by adjusting its value vs outside world . Everything will become cheaper for outside world when NZD goes down 10-15% ...below 60 cents its real power house of capital flows and economy readjustment from consumerism to exporter

[winner69]

Remember when the NZD went below US$0.40 at the turn of the century ..... that caused some chaos .... and I think NZ was in recession then ..... bought on by 2 consecutive droughts

Bugger - wonder when we will our next big drought .... haven't factored that in yet

[bull....]

how about that nzx opened up around that 12100 support but could not get above it . bad sign the break down is confirmed. timber :scared:

[Panda-NZ-]

NZD now 0.658 lol

[Hoop]

Remember when the NZD went below US$0.40 at the turn of the century ..... that caused some chaos .... and I think NZ was in recession then ..... bought on by 2 consecutive droughts

Bugger - wonder when we will our next big drought .... haven't factored that in yet

The Country's currency reflects the Country's economic health/wealth...eh Winner

[fish]

The Country's currency reflects the Country's economic health/wealth...eh Winner

Never forget how we get most of our wealth-
https://www.rnz.co.nz/news/country/457944/primary-sector-exports-tipped-to-exceed-50bn-in-2022-report

[Bobdn]

NZX50 back at 2020 levels just after we beat Covid and restrictions were lifted. Seems like yesterday.

[winner69]

The Country's currency reflects the Country's economic health/wealth...eh Winner

…but some on here would disagree …never mind

[winner69]

NZX50 closed 2019 out at 11491 ….say pre-covid baseline

So today at 11852 it’s only up 3% ….and that’s with 2 years of dividends reinvested

Anybody now what NZX50Capital Index was back then …..2 years of going backwards I suppose

[clearasmud]

NZX50 closed 2019 out at 11491 ….say pre-covid baseline

So today at 11852 it’s only up 3% ….and that’s with 2 years of dividends reinvested

Anybody now what NZX50Capital Index was back then …..2 years of going backwards I suppose
Just deduct 3% compounding per year Close enough.

[Bjauck]

NZX50 closed 2019 out at 11491 ….say pre-covid baseline

So today at 11852 it’s only up 3% ….and that’s with 2 years of dividends reinvested

Anybody now what NZX50Capital Index was back then …..2 years of going backwards I suppose
The smart money at end 2019 should have been stuffed into residential land and not into businesses employing people paying taxable salaries and earning taxable income?

https://www.nzherald.co.nz/nz/housing-market-mints-more-kiwi-millionaires-than-ever-before/NWX5QSTJSGROGKRNVHFAU7HIKY/

[Hoop]

NZX50 closed 2019 out at 11491 ….say pre-covid baseline

So today at 11852 it’s only up 3% ….and that’s with 2 years of dividends reinvested

Anybody now what NZX50Capital Index was back then …..2 years of going backwards I suppose

Just deduct 3% compounding per year Close enough.

Bang on

13460

[alokdhir]

Big swings in moods of people is making everything swing ...after lockdowns ...people went crazy spending money ...now its going other way round ...IMHO this new pessimism is going to make the big fears of INFLATION go away sooner then many thinking . Rates will not rise so much ...they dont need to ...people dont have money and security of mind to keep spending .

Already retail is getting hammered as masses have closed their wallets ...Euphoria is over ...now the pendulum will swing other side

Dont write off markets and productive assets ...its not doom and gloom ahead ...Surprise surprise will happen when most realise inflation will be easy to tame when people dont have money and confidence to chase prices up

Consumerism which led to inflation will vanish with this bust of confidence and vanishing money from wallets

[Beagle]

Feeling like its been a brutal January for your portfolio ? You're not alone I can assure you. I have crunched the numbers and the NZX50 is down exactly 10% from 5 January 2021 to date.

If you've lost less than 10% this year you're beating the market. This is by far the toughest start to a year I can recall.

Please remember to take the time to look after your physical and mental health during these tough times. Recent research I have read suggests that even a brief 20 minute walk in nature makes a meaningful difference to your physical and mental health.

I am trying to get four to five 45 minute walks a week through and around a local park and feeling a lot better for it. Lost 3 kg's this month doing it and eating healthier...only another 20 kg's to go lol

[Old mate]

Nice one beagle bit of exercise always helps the mental health and mood:t_up:

[Greekwatchdog]

Well said Beagle, be a lot of new investors out there that have never experienced anything like this including whats going to happen with interest rates over the next 18 months. I hope they haven't gone "All In" thinking this is easy money. Nothing easy about investing for your future.

[BlackPeter]

Feeling like its been a brutal January for your portfolio ? You're not alone I can assure you. I have crunched the numbers and the NZX50 is down exactly 10% from 5 January 2021 to date.

If you've lost less than 10% this year you're beating the market. This is by far the toughest start to a year I can recall.

Please remember to take the time to look after your physical and mental health during these tough times. Recent research I have read suggests that even a brief 20 minute walk in nature makes a meaningful difference to your physical and mental health.

I am trying to get four to five 45 minute walks a week through and around a local park and feeling a lot better for it. Lost 3 kg's this month doing it and eating healthier...only another 20 kg's to go lol

Jeez, now you spoiled my afternoon. Normally I do the accounts only end of month and would have had another couple of days with this nice fluffy feeling from end of last year (which was with +23.1% the fourth best year since I started to measure my results in 2005).

Anyway - my spreadsheet says 8.9% down since 31/12. So, this is what beating the market looks like?

Still - for some funny reason I don't feel too concerned, even if my spreadsheet tells me that if we continue with this "earnings" progress, I've lost it all prior to the end of the year. Spreadsheets are not always right ;):

Agree however that its good to do some exercise - I feel much better since I re-started a daily routine - no matter whether the markets are up or down :); Highly recommended!

Obviously - if you buy any necessary gear either from Torpedo 7 or Kathmandu (discl: hold both :sleep: , than this adds as well to my financial health, but anyway - just move these old bones ... it is good.

[percy]

I expect the capital value of my portfolio at the end of the year will be up,down, or the same.
My dividend income should be well up on last year's.I expect SFF [unlisted] and HGH to pay increasing divies,while GNE and SPK should be the same,and adding more SEK and some STU will add to the divie stream.DGC will most probably pay a divie too.
A few Aussie small cap companies divies,ACF,ADA JYC,PTB,SEQ,SHM,SSG,and XRF,will be the icing on the divie cake.
As always the portfolio will be driven by a company's result.Good result I keep and possibly add more.Poor result I sell.
If I am unsure I usually give the company a bit more time,if the reasons I bought in remain the same.

[Beagle]

Yeah...BP...this is what it looks like to beat the market in January...I'm so "happy"
https://www.bing.com/images/search?view=detailV2&ccid=ANa1L8lA&id=F85DDAC116B11258258210BCA215D177EDC069B5&thid=OIP.ANa1L8lAr99tPuvbjNpKNgHaFj&mediaurl=https%3a%2f%2fbuzzsharer.com%2fwp-content%2fuploads%2f2015%2f11%2fsad-beagle-dog.jpg&cdnurl=https%3a%2f%2fth.bing.com%2fth%2fid%2fR.00d 6b52fc940afdf6d3eebdb8cda4a36%3frik%3dtWnA7XfRFaK8 EA%26pid%3dImgRaw%26r%3d0&exph=480&expw=640&q=Sad+Beagle+Puppy&simid=608016190771000927&FORM=IRPRST&ck=1AB8618C2E433D47C664D696F4FBF7F0&selectedIndex=5&ajaxhist=0&ajaxserp=0...as you can probably tell I also updated my spreadsheet today.

I think a good walk gives you perspective. Its only some of last years gains going down a rat hole...maybe they'll come back...maybe they won't, time will tell.

[Panda-NZ-]

You can add leverage though.. such as through some ETFs like GGUS.

[Rawz]

My portfolio is only down 4.5% YTD. Glad I didn't go through the fuss of selling up and moving to cash

(famous last words)

[Beagle]

Market started the year at 13,060 and closed today at 12,413. Now down almost exactly 5% year to date so that's a pretty useful rebound so far in February off the January low when it was down almost 10% at one point.

[alokdhir]

Shane Solly has put it very correctly while sharing Guru Listers views ....We went big down in Jan ...now onwards it will be slow grind up with two steps forward and one back at a time . Today is step back time after retracing almost 5% back from 10% drop .

Inflation and rates will be dominant themes for the year but as rising rates reduces valuations similarly rising inflation increases replacement costs too thus making the businesses look cheaper . Rising rates also means economies are running hot ...in such cases stocks are not a bad place to be .

I still think we will end year much higher on index then from here . My pick is close to 14000

[JohnnyTheHorse]

Shane Solly has put it very correctly while sharing Guru Listers views ....We went big down in Jan ...now onwards it will be slow grind up with two steps forward and one back at a time . Today is step back time after retracing almost 5% back from 10% drop .

Inflation and rates will be dominant themes for the year but as rising rates reduces valuations similarly rising inflation increases replacement costs too thus making the businesses look cheaper . Rising rates also means economies are running hot ...in such cases stocks are not a bad place to be .

I still think we will end year much higher on index then from here . My pick is close to 14000

Don't fight the Fed.

[BlackPeter]

My portfolio is only down 4.5% YTD. Glad I didn't go through the fuss of selling up and moving to cash

(famous last words)

I think it was Buffett who said something like: people lose much more money in preparation for a crisis than sitting through it.

Doing nothing can be bliss.

Discl: Still 5.7% down since Jan 1st ... i.e. you did well :):

[winner69]

WTF ....NZX if free fall today

Blue chips dragging it down but Truscreen, Paysauce and Blis doing their best to stop the rot

[777]

WTF ....NZX if free fall today

Blue chips dragging it down but Truscreen, Paysauce and Blis doing their best to stop the rot

Down 1.6%. Hardly free fall. Much the same as the Dow and less than the Nasdaq.

[alokdhir]

WTF ....NZX if free fall today

Blue chips dragging it down but Truscreen, Paysauce and Blis doing their best to stop the rot

Yes ...finally we closed 1.93% down ...which is huge for NZX ...normally it doesn't move that much ....Fall was mainly due to expensive growth blue chips on low volumes ... Smaller companies like SKL etc held up well .

KFL actually went up while its NAV must have dropped 3% ie almost 5 cents ....power of retail investors or ignorance ...who knows

In this reaction down we need to hold 12100 ...otherwise bigger short term pain ahead .

[alokdhir]

Results season coincide with rates / inflation and Ukraine crisis ....lets see what prevails finally ...EPS growth or ....

Having done nothing in 2021 ...our market is best placed to manage this rates revaluation .

IMO soon we will decouple from high flyers markets of the world of 2021 like US

[percy]

I an expecting solid results from my divie payers,and increased divies.
My non divie payers may however come under pressure.

[JohnnyTheHorse]

Results season coincide with rates / inflation and Ukraine crisis ....lets see what prevails finally ...EPS growth or ....

Having done nothing in 2021 ...our market is best placed to manage this rates revaluation .

IMO soon we will decouple from high flyers markets of the world of 2021 like US

NZX50 is showing relative weakness against the SP500. Govt bonds soaring. Good luck in your quest for capital gains this year as there are only a handful of stocks that'll end the year positive in my opinion.

[Beagle]

2022 is all about capital preservation and doing your best to get a reasonable income from your portfolio, in my opinion.

[alokdhir]

NZX50 is showing relative weakness against the SP500. Govt bonds soaring. Good luck in your quest for capital gains this year as there are only a handful of stocks that'll end the year positive in my opinion.

Lets see how it pans out ...I have an open mind ....but never ever NZX has given two negative years in a row in last 20 years ...which cover many bigger events then just rates trying to be normal ...which maybe 2-2.5 % OCR only

Also seeing such unanimous opinion of experts towards bearishness ...will surely lead to something special

[Beagle]

2 year declines when they do happen can be a viscous thing with no mercy.

Nasdaq lost a whopping 90% of its value in the 2 years following the dot.com bubble burst. But that was ~ 20 years ago...lucky this time its different for tech stocks ;)

For example. No accountant I know that's a skilled investor can understand Xero's share price whether they're a user of the software or not. I wonder why that is...could it be that the price of these sort of companies is VASTLY more than its really worth ? Surely not !

History never repeats regarding that 90% tech rout...or maybe something similar does :eek2:

To me 2022 is the year investors demand "show me the money". No earnings or very high PE stocks are VERY vulnerable to a major retracement.

[Biscuit]

I expect 2022 to be a great year. Sure, there is actual inflation - remember a couple of years ago when everyone was talking about Japan's stagflation and twisting themselves into knots worrying about the lack of inflation? Some inflation is a good thing and easily reined in by increased interest rates. We actually need growth, demand, and higher interest rates to cushion the system for the downward end of the cycle. Employment rates are great, covid will be tamed by vaccination and border opening, businesses are either humming or poised to crank up once the borders open. The fear and doom on here has no rational basis.

[Rawz]

I do not understand why you would want to be cash when there is inflation?

I do not understand why stocks are drifting down?

I would have thought that the revenue lines of the companies I own will all increase with inflation. Sure cogs and expenses will increase as well but overall I expect it to be relative. At least my dollar buying power is increasing with inflation when sitting in equities vs sitting in a bank account

[Beagle]

I do not understand why you would want to be cash when there is inflation?

I do not understand why stocks are drifting down?

I would have thought that the revenue lines of the companies I own will all increase with inflation. Sure cogs and expenses will increase as well but overall I expect it to be relative. At least my dollar buying power is increasing with inflation when sitting in equities vs sitting in a bank account

I'll take that one.
Cash goes backwards with inflation but gives you valuable optionality when it comes to buying stocks at cheaper prices in the future.
Not everything will go up this year. I predict that for example the current white hot market for family holiday homes and boats will not last and if you want a fancy high end Riviera launch or a lakefront home in Taupo this is probably not the right time to do it.

If the market drops 15-20% this year and someone like me has a high allocation to cash they will lose a LOT less.
We live in very interesting times and the average PE of NZX stocks is still quite abnormally high by historical standards.

[Biscuit]

I do not understand why you would want to be cash when there is inflation?

I do not understand why stocks are drifting down?

I would have thought that the revenue lines of the companies I own will all increase with inflation. Sure cogs and expenses will increase as well but overall I expect it to be relative. At least my dollar buying power is increasing with inflation when sitting in equities vs sitting in a bank account

Inflation over a certain threshold is dealt with by increased interest rates. Increased interest rates act as a damper on the economy, reducing demand, providing a head-wind for companies.

[FTG]

....but never ever NZX has given two negative years in a row in last 20 years ...

Amazing. Over 20 years, that is quite an achievement for the NZX. One can certainly have some empathy with your sentiment. However, I would encourage keeping open minded to all sorts of different scenarios playing out. Market "rule books" aren't necessarily sacrosanct.

Here's a play on a market mantra that may be worth keeping in mind:

"Just because something doesn't appear to be inevitable, doesn't mean that it may not be imminent"

[Rawz]

I'm looking at a couple of charts on the RBNZ website and specifically looking for periods of raising rates and inflation.

Starting with rates, the most recent rate rising cycle i can find was a 5 year period 2003-2008

2 year mortgage rate:
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-mortgage-rates

From mid way through 2003 the 2 year mortgage rate goes from about 6% to 9.5% until it hits 2008 GFC time.

And inflation:
https://www.rbnz.govt.nz/monetary-policy/inflation

Goes from about 1.5% to 5% during the same period.

NZX50 Growth:

Now what does the NZX50 do during that time? Yahoo charts tells me from 01/01/03 to 01/01/2008 it increases from 1953 to 4041 i.e. 107%

Conclusion:

The market increases during raising rates/ and inflation.
Raising rates and inflation eventually leads to correction. However this could be 5 years away and 107% gain away... who can time that market? Who can sit in cash for that long?

Ps. hope the links work
Pps. wiser more experienced heads feel free to critique this post

[alokdhir]

I'm looking at a couple of charts on the RBNZ website and specifically looking for periods of raising rates and inflation.

Starting with rates, the most recent rate rising cycle i can find was a 5 year period 2003-2008

2 year mortgage rate:
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-mortgage-rates

From mid way through 2003 the 2 year mortgage rate goes from about 6% to 9.5% until it hits 2008 GFC time.

And inflation:
https://www.rbnz.govt.nz/monetary-policy/inflation

Goes from about 1.5% to 5% during the same period.

NZX50 Growth:

Now what does the NZX50 do during that time? Yahoo charts tells me from 01/01/03 to 01/01/2008 it increases from 1953 to 4041 i.e. 107%

Conclusion:

The market increases during raising rates/ and inflation.
Raising rates and inflation eventually leads to correction. However this could be 5 years away and 107% gain away... who can time that market? Who can sit in cash for that long?

Ps. hope the links work
Pps. wiser more experienced heads feel free to critique this post

I agree with your conclusion ...markets do not fear rates rising ...they fear recession . At present its inflation which means high demand and hot economies ...Central Banks will try to cool the economies not kill them ...though eventually rising rates beyond required do end up in recessions but normally that happens towards the end of rates cycles not at start ...while we reach the end of the cycle maybe 2-3 years away and in those years markets generally do well after the starting hiccups like we are experiencing now ...In USA they call is FED tantrum as market operators try to scare FED from being too aggressive .

We will be on slow grind up after the rates cycle actually starts moving up ie from April onwards .

What will be low and when to deploy your cash if u r in cash is not easy to decide . Long term holders just need to hold and let the companies handle this hurdle .

[BlackPeter]

I'm looking at a couple of charts on the RBNZ website and specifically looking for periods of raising rates and inflation.

Starting with rates, the most recent rate rising cycle i can find was a 5 year period 2003-2008

2 year mortgage rate:
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-mortgage-rates

From mid way through 2003 the 2 year mortgage rate goes from about 6% to 9.5% until it hits 2008 GFC time.

And inflation:
https://www.rbnz.govt.nz/monetary-policy/inflation

Goes from about 1.5% to 5% during the same period.

NZX50 Growth:

Now what does the NZX50 do during that time? Yahoo charts tells me from 01/01/03 to 01/01/2008 it increases from 1953 to 4041 i.e. 107%

Conclusion:

The market increases during raising rates/ and inflation.
Raising rates and inflation eventually leads to correction. However this could be 5 years away and 107% gain away... who can time that market? Who can sit in cash for that long?

Ps. hope the links work
Pps. wiser more experienced heads feel free to critique this post

Clearly a valid observation and consistent with current economic teaching of how economic cycles work. Having said that - not all tightening circles are the same.

What's different this time?

1) We might sit at the brinks of a new world war. I know - most people in 1938 thought this idea as well overblown, but look what happened. Nobody is stupid enough to start a world war - right? But then, replace in the history books Germany in the past with Russia today and Japan in the past with China today and we might have some fun in the years to come. What I am saying is - it might be worthwhile to check what markets did before and during WWII and try to combine these observations with your observations above.

hint: Stock indices went down until Hitler occupied Northern France in 1940 (reduction of uncertainty?) and then they went up again. However - rather thin trading throughout the war.

2) Not sure we ever have been in a situation before where interest rates like in 2008 would have already driven major world economies into default. Just have a look at what e.g. 10% interest rate today would mean for the US (or most European countries) to service their debts. It would close down many of the major economies ... and the only ways out I see would be either debt haircuts - which somebody would need to pay, or alternatively keeping inflation higher than interest rates (than its inflation paying back the debts).

Whatever it will be - it might have some interesting impacts on the world economy .... and while NZ sits far from the hot spots (both peak war and peak debt), I doubt our economy is able to decouple itself from the world markets, though - we might turn into the Switzerland of the South Pacific ... Switzerland did rather well during WWII by allowing any crook with enough money to take asylum. Just takes a bunch of capable politicians to navigate the wee ship through the storm. Oops - did I say that?

[JohnnyTheHorse]

Rearranging the simplest stock valuation equation we can see there are two main factors at play: Stock Price = PE Ratio * Earnings Per Share (EPS).

Inflation can be good and bad for EPS. In theory companies should be experiencing bottom line 'growth' simply due to inflation, so that's a positive. However they can get to the point that they are so constrained companies start to struggle to make money.

Inflation is (indirectly) VERY bad for PE ratios. I like to simplify things, so view PE ratios as how much free liquidity is there in the system looking for a home. Right now we have a crazy amount of liquidity, hence record PE ratios (SP500 at 36, whereas the average based of 140 years of data is 17). We also have the invention and boom in crypto, NFTs, SPACS... all more evidence that there has been too much liquidity and nowhere to put it. The two main things impacting liquidity are interest rates and QE. We are now in an environment where QE will taper and rates are literally skyrocketing. Higher rates change valuation models (DCF), make debt more expensive (pulling margin debt from stock market) and change the relative attractiveness of other investments (i.e. term deposits become more attractive vs a REIT paying 4%). All of this leads to a withdrawal of money from equities in general.

Raising rates essentially always leads to a recession too. We are in my view at the high point in this earnings cycle, so it's hard to see the EPS side growing (generally speaking, as there are certainly stock that will outperform). The real risk is when a recession hits. Say conservatively EPS only halves and the PE reverts to a mean of 16, that's over a 75% drop in valuations. Very feasible for EPS to drop further and PE to move into the 10 range... now becomes clear that indexes dropping 90% is actually quite possible (although that's most certainly not my base case!).

The NZX50 is in a bear market (based on my definition) and hence capital preservation becomes the goal. I still hold long positions, however these are carefully selected stocks I expect to outperform and I am actively hedging these with short positions at key levels. If I get the time I could do a detailed post of how I'm hedging in this environment if anyone is interested?

[BlackPeter]

...

If I get the time I could do a detailed post of how I'm hedging in this environment if anyone is interested?

Absolutely ... discussions like that make it worthwhile to keep reading the forum, don't they? Might be however worthwhile to check whether there is a more appropriate thread for this ... there must be some thread around about investment strategies during uncertain times and bear markets ... probably underutilised during the long bull market we just enjoyed :):

[winner69]

my mate Hoop has posted a few times over the years about the primary driver of the PE Ratio being inflation.

I always had the feeling that people (although JTH seems to grasp this) weren't interested in such stuff ... ......maybe that's why Hoop doesn't post that often now

[Beagle]

Absolutely JohnnyTheHorse, please continue to elaborate on risk management in here. I am all ears

13511

P.S. Bassets must get terrible skin problems.

[Biscuit]

my mate Hoop has posted a few times over the years about the primary driver of the PE Ratio being inflation.

I always had the feeling that people (although JTH seems to grasp this) weren't interested in such stuff ... ......maybe that's why Hoop doesn't post that often now

Like Rawz, I've looked back at historical NZ CPI inflation compared to the NZX50 and I don't see any correlation at all. Do you have any data to support that idea?

[winner69]

Looking forward to this doubling of the NZX50 in 5 years with all this rampant inflation

Not off to a good start though .... inflation started going up a year ago (1-4% to 5.9%) and and the NZX50 down about 8%

Things should change in the next 4 years though

[Rawz]

Looking forward to this doubling of the NZX50 in 5 years with all this rampant inflation

Not off to a good start though .... inflation started going up a year ago (1-4% to 5.9%) and and the NZX50 down about 8%

Things should change in the next 4 years though

Lets see Winner grinner. Who really knows where rates and inflation will go. I for one believe its not demand driven inflation, more supply driven. So what happens when the supply side sorts itself out?

One thing I have been convinced on is no more DCA'ing into the high p/e stocks. FPH and RBD can sit for a few years. EBO reduced down heaps at $41 already so thats nice.

Beagle's GARP stocks are the go!

[Biscuit]

Looking forward to this doubling of the NZX50 in 5 years with all this rampant inflation

Not off to a good start though .... inflation started going up a year ago (1-4% to 5.9%) and and the NZX50 down about 8%

Things should change in the next 4 years though

Probably won't have to wait four years. Isn't Hoop still on the sidelines waiting for the second wave down from the GFC?

[winner69]

Nz Yield Curve looking a bit wonky ….2 yr a bit out

[Waltzing]

europe market turning up...

NZX might bounce back a bit tomorrow. Might as well send the country back to pink...

[allfromacell]

europe market turning up...

NZX might bounce back a bit tomorrow. Might as well send the country back to pink...

Yep, WW3 has been canceled apparently.

"A defence ministry spokesman said in comments carried by Russian news agencies that certain forces have been returning back to their bases from the Ukrainian border, "Units of the Southern and Western military districts, having completed their tasks, have already begun loading onto rail and road transport and today they will begin moving to their military garrisons."

As of now there's no clarity as to the authenticity of these claims or what 'tasks' these units were out to complete."

From CNBCs live updates.

[Waltzing]

yep but the tanks guard div is a shell fire away from Kharkov. When they head back to barracks till then all other drills are still underway.

you cant trade markets today without considering global risk. everything is connected and the money from the big houses just goes everywhere.

[winner69]

Brain asked how long did take for the NZX50 Capital Index take to recover post GFC on another thread. Here was I replied

NZX50C was 3326 on May 24th 2007 …..went down heaps …and recovered to 3360 on April 18th 2016

So the answer to your question …took nearly nine years for NZX50C to recover post GFC

It’s 4880 at the moment

Bear in mind it was just under 4000 in 1987 before the big crash …took until 2017 to get back there.

Just as well for divies being reinvested eh.

[alokdhir]

Index has made a higher bottom in this wave ...so it needs to cross 12400 to become more positive ...I still think we are in the process of bottoming out for the year .

[sb9]

Pretty solid results from NZX stocks so far, we could give ourselves an 8 out 10. If not for Putin and his geriatrics, there would have been some solid gains.

[Hoop]

When you see depressing media news and the hear emotive words being used such as crash when in realty its a small blip and then you read some Economists saying the economy is strong and the media is over-reporting with negative bias...who do you believe..who is right?..some say who cares as we are doing just fine..some say the opposite..Maybe both are right ...maybe there is a lack of focus towards the good news, why is that?
It seems everyone usually takes a short view of things as these make good conversational topics..Lets be boring, less interesting conversational-wise and see what has happened using a long term view from the NZ Share Market perspective.
Some times looking at the historical long term past events and remembering all the media noise over that period you can see the trends and cyclical movements, without the day by day or week by week constant media noise which does affect the market.

When investing you have to be realistic about yourself..Ask the question...Over all the years of investing have you beaten the market consistantly ? Investing in a Bull Market (which happens most of the time) you don't have to beat the market to make capital gain so no worries...However in a "normal" (average) Bear Market you not only have to beat the market you have to beat it by a large margin to create capital gain...As a large percentage of investors can not beat the market at any stage of any market cycle, it is often said in general terms ..to protect yourself "sit on the sidelines" and wait out the bear market as they don't last long ...The other school of thought is to ride it out, suck up the mental agony, take the hit and eventually regain it back plus more.
What ever is your strategy it is up to you..but in general terms what is the real state of the NZX50 index which usually reflects the stock market as a whole?
Using the old school 200 day moving average (Faint orange line on the chart below) it officially says we have been in a Bear market for most of this year.

13710

[bull....]

When you see depressing media news and the hear emotive words being used such as crash when in realty its a small blip and then you read some Economists saying the economy is strong and the media is over-reporting with negative bias...who do you believe..who is right?..some say who cares as we are doing just fine..some say the opposite..Maybe both are right ...maybe there is a lack of focus towards the good news, why is that?
It seems everyone usually takes a short view of things as these make good conversational topics..Lets be boring, less interesting conversational-wise and see what has happened using a long term view from the NZ Share Market perspective.
Some times looking at the historical long term past events and remembering all the media noise over that period you can see the trends and cyclical movements, without the day by day or week by week constant media noise which does affect the market.

When investing you have to be realistic about yourself..Ask the question...Over all the years of investing have you beaten the market consistantly ? Investing in a Bull Market (which happens most of the time) you don't have to beat the market to make capital gain so no worries...However in a "normal" (average) Bear Market you not only have to beat the market you have to beat it by a large margin to create capital gain...As a large percentage of investors can not beat the market at any stage of any market cycle, it is often said in general terms ..to protect yourself "sit on the sidelines" and wait out the bear market as they don't last long ...The other school of thought is to ride it out, suck up the mental agony, take the hit and eventually regain it back plus more.
What ever is your strategy it is up to you..but in general terms what is the real state of the NZX50 index which usually reflects the stock market as a whole?
Using the old school 200 day moving average (Faint orange line on the chart below) it officially says we have been in a Bear market for most of this year.

13710



yep dont fight the trend. those big divergences on the mthly rsi were a big red flag for me

[Hoop]

yep dont fight the trend. those big divergences on the mthly rsi were a big red flag for me

Yep and now with hindsight..it is easy to see those warnings turned out to be real.

Right!!!...second wave capitulation in this maturing Bear Market cycle (probably still stage 2 )..when will this latest rout stablise? nobody can predict 100%..
From a chartist perspective the current pattern looks to present a line in the sand somewhere around 4500 (target pricing). This figure has the best odds of a temporary bottoming out and resulting in maybe a Bear Market correction (sucker rally)..that's all just better odds...Need a few rabbits feet, optimistic crystal balls, other lucky charms.....

13785

[Beagle]

Its UGLY out there. Market down 6% just in May alone and its only the 10th of the month :eek2:

[Sideshow Bob]

Its UGLY out there. Market down 6% just in May alone and its only the 10th of the month :eek2:

14.9% YTD!! :glare:

"Sell in May and go away...."

[airedale]

There is a well signaled correction under way. But there are some aberrations. The POG in $OZ increases due to currency movement, while the POG in US$ decreases. But the OZ gold miners instead of showing strength follow Wall St. Logical.....illogical.... or back up the truck.

[winner69]

Bargain hunters starting to come out of hiding

Relax .....No worries

Better still join them .... KEEP ON BUYING one of the top selling books on Amazon

[alokdhir]

Yep and now with hindsight..it is easy to see those warnings turned out to be real.

Right!!!...second wave capitulation in this maturing Bear Market cycle (probably still stage 2 )..when will this latest rout stablise? nobody can predict 100%..
From a chartist perspective the current pattern looks to present a line in the sand somewhere around 4500 (target pricing). This figure has the best odds of a temporary bottoming out and resulting in maybe a Bear Market correction (sucker rally)..that's all just better odds...Need a few rabbits feet, optimistic crystal balls, other lucky charms.....

13785

If the Bear market rally starts from most probable target of 4500 then what can be its reasonable or most likely upside target ?

[couta1]

Bargain hunters starting to come out of hiding

Relax .....No worries

Better still join them .... KEEP ON BUYING one of the top selling books on Amazon Thunderbirds are Green on the futures, wait for the bounce back.

[Nor]

There is a well signaled correction under way. But there are some aberrations. The POG in $OZ increases due to currency movement, while the POG in US$ decreases. But the OZ gold miners instead of showing strength follow Wall St. Logical.....illogical.... or back up the truck.

Gold's up over 13% in $NZ since about a year ago according to my rough calc. Better than TDs.

[SailorRob]

Good to see people know the difference between the NZ capital market and the gross market. Good Post from winner couple of pages back. Presume you're taking about Brian Gaynor.

[thebusinessman]

As a very basic test, linear regression on NZX50C shows we're below two standard deviations from the 10 year average - which would indicate a pretty big oversell. However, stretch it out to 15 years (incorporates our last big drop 2008/2009) and we're just under the average. Either way, long-term investors probably have an opportunity.

Any TAs want to tell me how valuable or not a basic regression is for long-term views?

[Dassets]

As a very basic test, linear regression on NZX50C shows we're below two standard deviations from the 10 year average - which would indicate a pretty big oversell. However, stretch it out to 15 years (incorporates our last big drop 2008/2009) and we're just under the average. Either way, long-term investors probably have an opportunity.

Any TAs want to tell me how valuable or not a basic regression is for long-term views?

Not good because long term pricing of markets reflects long term basic factors. However it can be easier to form a view on those factors. That means you can do regression analysis of the factors to prove a relationship then use your forecast of the factor to drive an equity view. I did some regression analysis at a sharebroking firm in my first job in the very early 90s in NZ using that technique. My findings still have relevancy today. If my suspicions are correct about the macro picture then we are in for real long term trouble.

[SailorRob]

I have been looking at some NZX 50 data with the intention of finding out how much expanding profit margins have been responsible for the incredible run that our little market has had over the last 10 years. It has easily stood up to the mighty S&P500 where most of the other global markets have not. I am talking about total returns with dividends reinvested and imputation credits taken into account.

The NZX 50 has compounded at 12.32% for the 10 years to June 30th. Or a mighty 13.53% if you take imputation credits into account. You will see this in the NZ50G index we are all used to looking at. It matches the SP500 total return for the same period almost exactly. Incidentally the SP500 and the NZ50G are two different indexes, one a sneaky total return and the other a price only. I have adjusted for this.


As we have much data and commentary for the SP500 we know that it has produced this return from expanding multiples to earnings - higher P/E ratios. What we think about less is the earnings as a percentage of revenues, the profit margins. Stateside they have also expanded to levels where the greats such as Buffett thought they could never get to, let alone be sustained. This has of course boosted earnings significantly. So we have high multiples to high earnings, a nasty unwinding if it were to mean revert. Profit margins are double the 20th century average.


I wanted to discover if NZ had also had the same effect - expanding profit margins. What I discovered was that our margins are nowhere near as high as stateside. So then what is going on?


How can we have performed the same as America without having had historically high margins as well as elevated multiples to earnings? And this is where I don't have solid answers as I cannot find the historical data to know where we were at in 2012. If we had washed out multiples on washed out margins then it's easy to see how we did so well. This is what will make you rich, investing into low P/E multiples on washed out profit margins - aka 1982 the beginning of a 20 year bull market with 20% compound returns for 2 decades.


While investigating however I came across some other findings. That a full 20% of out top 50 companies had net profits higher than their annual revenues. This is compared to 1.4% of America's top 2000 companies. Now I guess I understand that some of our companies are developers who hold onto the properties like our retirement sector, so they are using capital to create property and then holding it, so they will have low revenue and post increasing book values as income, but there is more to it than that. It seems to me that a massive portion of the 'earnings' of the NZX 50 companies over the last decade has in fact come from property revaluations - take Auckland airport for example over the last 12 Months, Marsden Maritime Holdings another one.. Could this explain our keeping up with the S&P500 while having a similar P/E ratio but much lower price to sales ratios (lower margins)? Because if not then the only explanation is that in 2012 we were much more washed out or that our companies are better and have increased real earnings far more than our American counterparts. I don't for a second believe this. When I removed the 20% of companies that had higher profit than revenue, the PE ratio of what was left shot up.


How would we fare without this magic earnings stream in future, or with the magic stream running the opposite way? Keen to hear from anyone with more information or thoughts.

[Rawz]

Great post Rob, very interesting!!

[Hoop]

If the Bear market rally starts from most probable target of 4500 then what can be its reasonable or most likely upside target ?

I'm cheating with hindsight :) ..... alokdhir responded to my post on the same day back on the 10th of May..

https://www.sharetrader.co.nz/images/misc/quote_icon.png Originally Posted by Hoop https://www.sharetrader.co.nz/images/buttons/viewpost-right.png (https://www.sharetrader.co.nz/showthread.php?p=956098#post956098)

Yep and now with hindsight..it is easy to see those warnings turned out to be real.

Right!!!...second wave capitulation in this maturing Bear Market cycle (probably still stage 2 )..when will this latest rout stablise? nobody can predict 100%..
From a chartist perspective the current pattern looks to present a line in the sand somewhere around 4500 (target pricing). This figure has the best odds of a temporary bottoming out and resulting in maybe a Bear Market correction (sucker rally)..that's all just better odds...Need a few rabbits feet, optimistic crystal balls, other lucky charms....."

It's now 67 days later..Let see what's happened since..

A disappointing non sucker flat breather followed by another drop...The Market did see some sort of hope at 4500 but low positive momentum wasn't enough and selling recommenced..Typical bear market cycles are characterised by disappointments. one after another.

OK the market continued to drop some more and bottomed for the time being at a sharp 4200..Now its seems to have hit a strong resistance back at that magical 4500 line..The difference between the 4500"s is last time it was a technical target price of 4500 which was a line in the sand which has no support attached to it..This time 4500 is a part of the S&R (Support & Resistance) setup.

As we all know (or should know) while a Bear Market Cycle is operating any rally always fails at either it's first or second resistance levels. Rarely does it break though the second resistance level and if the Bear is hibernating it can suck investors to "back up the truck".

When do we know the bear could be dead?
Dow theory says a new up trend needs the trend line to be confirmed with at least 5 touches (3 higher highs and 2 higher lows) before it can be called an uptrend....At 5 touches or more it could still be bull trap and an extended sucker rally, although the more touches the lesser the chance of a sucker rally and higher chances of a cyclical reversal.

At the moment, the uptrend is unconfirmed so the index is not in a technical up trend and the index is having a problem busting through a very strong resistance level. The 4500 resistance has a conjunction of EMA200 + S&L line + Primary down trend line)..
Bear Market Investing Strategy uses short/medium term trading and says sell at resistance, buy at support (Rowing Strategy (https://arktoswealth.com/investment/sailing-vs-rowing/))

This is why most of us (divine beings excluded) can only use predictions. Nobody and no Discipline can predict 100%.

I would assume the NZ50C is still in a Bear Market Cycle (I see no evidence yet of a cycle reversal). In technical theory the index has a high chance of failing to bust through the ~4500 area and if it does break through be careful as there is a higher again chance of failing to bust through 4600.

In saying that the chart below tells us the 4500 strong resistance could be broken which is excellent news. However be careful buying in now...It could be a poor Risk V Reward as the next strong resistance is only +2% away. Beware of positive Media hype.

13977

[alokdhir]

I'm cheating with hindsight :) ..... alokdhir responded to my post on the same day back on the 10th of May..

https://www.sharetrader.co.nz/images/misc/quote_icon.png Originally Posted by Hoop https://www.sharetrader.co.nz/images/buttons/viewpost-right.png (https://www.sharetrader.co.nz/showthread.php?p=956098#post956098)

Yep and now with hindsight..it is easy to see those warnings turned out to be real.

Right!!!...second wave capitulation in this maturing Bear Market cycle (probably still stage 2 )..when will this latest rout stablise? nobody can predict 100%..
From a chartist perspective the current pattern looks to present a line in the sand somewhere around 4500 (target pricing). This figure has the best odds of a temporary bottoming out and resulting in maybe a Bear Market correction (sucker rally)..that's all just better odds...Need a few rabbits feet, optimistic crystal balls, other lucky charms....."

It's now 67 days later..Let see what's happened since..

A disappointing non sucker flat breather followed by another drop...The Market did see some sort of hope at 4500 but low positive momentum wasn't enough and selling recommenced..Typical bear market cycles are characterised by disappointments. one after another.

OK the market continued to drop some more and bottomed for the time being at a sharp 4200..Now its seems to have hit a strong resistance back at that magical 4500 line..The difference between the 4500"s is last time it was a technical target price of 4500 which was a line in the sand which has no support attached to it..This time 4500 is a part of the S&R (Support & Resistance) setup.

As we all know (or should know) while a Bear Market Cycle is operating any rally always fails at either it's first or second resistance levels. Rarely does it break though the second resistance level and if the Bear is hibernating it can suck investors to "back up the truck".

When do we know the bear could be dead?
Dow theory says a new up trend needs the trend line to be confirmed with at least 5 touches (3 higher highs and 2 higher lows) before it can be called an uptrend....At 5 touches or more it could still be bull trap and an extended sucker rally, although the more touches the lesser the chance of a sucker rally and higher chances of a cyclical reversal.

At the moment, the uptrend is unconfirmed so the index is not in a technical up trend and the index is having a problem busting through a very strong resistance level. The 4500 resistance has a conjunction of EMA200 + S&L line + Primary down trend line)..
Bear Market Investing Strategy uses short/medium term trading and says sell at resistance, buy at support (Rowing Strategy (https://arktoswealth.com/investment/sailing-vs-rowing/))

This is why most of us (divine beings excluded) can only use predictions. Nobody and no Discipline can predict 100%.

I would assume the NZ50C is still in a Bear Market Cycle (I see no evidence yet of a cycle reversal). In technical theory the index has a high chance of failing to bust through the ~4500 area and if it does break through be careful as there is a higher again chance of failing to bust through 4600.

In saying that the chart below tells us the 4500 strong resistance could be broken which is excellent news. However be careful buying in now...It could be a poor Risk V Reward as the next strong resistance is only +2% away. Beware of positive Media hype.

13977

I remember we discussed bounce of 4500 and at that time u suggested till 4800 possible which eventually actualised till 4600 only ...so now it need cross previous tepid bounce high of 4600 then will find your original strong resistance of 4800 !! Seems market has strong resistances ahead but we have results seasons coming with many high dividends announcements which can help get investors in .

I will hope that market will behave nicely till our results season is around and all stocks going ex dividend then that lull can lead to final leg down to reach maybe double bottom levels or just higher by mid October ...just thoughts nothing confirmed till it actually happen ...lol

[Snoopy]

How can we have performed the same as America without having had historically high margins as well as elevated multiples to earnings? And this is where I don't have solid answers as I cannot find the historical data to know where we were at in 2012. If we had washed out multiples on washed out margins then it's easy to see how we did so well. This is what will make you rich, investing into low P/E multiples on washed out profit margins - aka 1982 the beginning of a 20 year bull market with 20% compound returns for 2 decades.


You may have to go to a library and ask them to pull out some old Saturday newspapers on microfiche SailorRob. Pulling out PERs from over ten years ago means you have to have access to data from over ten years ago. Stocknessmonster, it appears pulls down their market data after ten years.

Anecdotally though, I think your possible explanation that I have highlighted in bold could be right. 2012 was before what we now call Mercury (was Mighty River Power), Genesis Energy and Meridian Energy partially floated. These heavyweights, partnered by Contact Energy, that stormed up the NZX capitalisation charts then went on to trade at what some see as frighteningly high PERs. They must have made a significant difference to the 'average PER' statistic you are measuring.

Again anecdotally for most of my investment life PERs in New Zealand were less than you might find for a company trading in a similar industry on an overseas bourse. Now, I 'expect' the PER of a New Zealand listed company to be greater. Falling interest rates and the fact that NZ listed companies have traditionally paid out a larger percentage of their earnings as dividends will account for part of this. IOW companies that pay a good yield in NZ are a real substitute for term deposits in a way that is not true in most times on overseas markets. Thus share prices in NZ have been bid up, simply because TINA for income investors.

SNOOPY

[SailorRob]

You may have to go to a library and ask them to pull out some old Saturday newspapers on microfiche SailorRob. Pulling out PERs from over ten years ago means you have to have access to data from over ten years ago. Stocknessmonster, it appears pulls down their market data after ten years.

Anecdotally though, I think your possible explanation that I have highlighted in bold could be right. 2012 was before what we now call Mercury (was Mighty River Power), Genesis Energy and Meridian Energy partially floated. These heavyweights, partnered by Contact Energy, that stormed up the NZX capitalisation charts then went on to trade at what some see as frighteningly high PERs. They must have made a significant difference to the 'average PER' statistic you are measuring.

Again anecdotally for most of my investment life PERs in New Zealand were less than you might find for a company trading in a similar industry on an overseas bourse. Now, I 'expect' the PER of a New Zealand listed company to be greater. Falling interest rates and the fact that NZ listed companies have traditionally paid out a larger percentage of their earnings as dividends will account for part of this. IOW companies that pay a good yield in NZ are a real substitute for term deposits in a way that is not true in most times on overseas markets. Thus share prices in NZ have been bid up, simply because TINA for income investors.

SNOOPY

Excellent reply Snoopy, another NZX veteran brought up the same points regarding the energy companies. Would be a great project going through the old papers. Maybe one day.

Cheers

[alokdhir]

I'm cheating with hindsight :) ..... alokdhir responded to my post on the same day back on the 10th of May..

https://www.sharetrader.co.nz/images/misc/quote_icon.png Originally Posted by Hoop https://www.sharetrader.co.nz/images/buttons/viewpost-right.png (https://www.sharetrader.co.nz/showthread.php?p=956098#post956098)

Yep and now with hindsight..it is easy to see those warnings turned out to be real.

Right!!!...second wave capitulation in this maturing Bear Market cycle (probably still stage 2 )..when will this latest rout stablise? nobody can predict 100%..
From a chartist perspective the current pattern looks to present a line in the sand somewhere around 4500 (target pricing). This figure has the best odds of a temporary bottoming out and resulting in maybe a Bear Market correction (sucker rally)..that's all just better odds...Need a few rabbits feet, optimistic crystal balls, other lucky charms....."

It's now 67 days later..Let see what's happened since..

A disappointing non sucker flat breather followed by another drop...The Market did see some sort of hope at 4500 but low positive momentum wasn't enough and selling recommenced..Typical bear market cycles are characterised by disappointments. one after another.

OK the market continued to drop some more and bottomed for the time being at a sharp 4200..Now its seems to have hit a strong resistance back at that magical 4500 line..The difference between the 4500"s is last time it was a technical target price of 4500 which was a line in the sand which has no support attached to it..This time 4500 is a part of the S&R (Support & Resistance) setup.

As we all know (or should know) while a Bear Market Cycle is operating any rally always fails at either it's first or second resistance levels. Rarely does it break though the second resistance level and if the Bear is hibernating it can suck investors to "back up the truck".

When do we know the bear could be dead?
Dow theory says a new up trend needs the trend line to be confirmed with at least 5 touches (3 higher highs and 2 higher lows) before it can be called an uptrend....At 5 touches or more it could still be bull trap and an extended sucker rally, although the more touches the lesser the chance of a sucker rally and higher chances of a cyclical reversal.

At the moment, the uptrend is unconfirmed so the index is not in a technical up trend and the index is having a problem busting through a very strong resistance level. The 4500 resistance has a conjunction of EMA200 + S&L line + Primary down trend line)..
Bear Market Investing Strategy uses short/medium term trading and says sell at resistance, buy at support (Rowing Strategy (https://arktoswealth.com/investment/sailing-vs-rowing/))

This is why most of us (divine beings excluded) can only use predictions. Nobody and no Discipline can predict 100%.

I would assume the NZ50C is still in a Bear Market Cycle (I see no evidence yet of a cycle reversal). In technical theory the index has a high chance of failing to bust through the ~4500 area and if it does break through be careful as there is a higher again chance of failing to bust through 4600.

In saying that the chart below tells us the 4500 strong resistance could be broken which is excellent news. However be careful buying in now...It could be a poor Risk V Reward as the next strong resistance is only +2% away. Beware of positive Media hype.

13977

After seeing todays close over last attempted high of 4617 ...today it closed at 4633 ...Does that make the overall charts positive ?

Now we have a very fair chance to try to reach 4800 ....your original bear market rally target if had taken support at 4500 !!

Will like to know your thoughts about latest price action and what it has done to the charts

Is 4800 still a target or higher possible ?

Also does it negate Bearish outlook or not yet ?

[see weed]

Is the NZX closed today no trades and at 10.10am

[bull....]

Is the NZX closed today no trades and at 10.10am

i had a trade go thru at open , looks like a data display issue ?

[Sideshow Bob]

Is the NZX closed today no trades and at 10.10am

Looks like is trading NZX, New Zealand’s Exchange (https://www.nzx.com/markets/NZSX)

Perahps just a little slow.....

[see weed]

I'm on the ASB Securities site and still nothing i will ring them.

[see weed]

up and running now

[Hoop]

After seeing todays close over last attempted high of 4617 ...today it closed at 4633 ...Does that make the overall charts positive ?

Now we have a very fair chance to try to reach 4800 ....your original bear market rally target if had taken support at 4500 !!

Will like to know your thoughts about latest price action and what it has done to the charts

Is 4800 still a target or higher possible ?

Also does it negate Bearish outlook or not yet ?

Hi
Its been a while since I last visited ST forum...I've only just now seen your post..
Obviously time has answered some of your questions.
I think at this stage the question has to be asked if this is a sucker rally or is it the real thing?
We don't really know the answer until it happens. We can guess or predict with models and be optimistic with these better looking fundamentals, yet the Buffett indicator shows Wall St (the elephant in the room) as still overvalued. Other variables can come into play and be problematic, such as America poking the stick up the dragons bum one to many times....

Anyway back to TA.

The Chart below shows this rally reaching an conjuntion area with primary elements in play..From a Chartist point of view this is very exciting.. Looking back through history Conjunction points have nearly always been seen as big turning events, so I'm watching this one with great interest.
To break through a conjunction area requires great buying pressure so watch out for the signs of positive sentiment with increased market activity.
This current NZX50 conjunction contain primary elements suggests if a breakthrough occurs it would be a Market Cycle reversal and the NZX50's status would change to Bull.
With the change to Bull an investor can change from rowing to sailing investment strategy with less risk/ more reward such as buy and hold strategy.

But for now, take care as we ain't quite there yet...

14068