Irrational exuberance

[troyvdh]

RyM and ZERO...plus no doubt a few others.....are we there yet...interest rates are rising.....BIG picture .....,.cheers troy

Its my experience that we must continually ask this question...true......????

[CJ]

NZ - low interest rates, low inflation, low unemployment,high consumer and business confidence, high spending in relation to ChCh repair, high spending on Auckland infrastructure.

Unknown - PIIGS, US, China

I am cautiously optimistic. NZ is in a great position with only Auckland Housing and a bit of uncertainty re how much/if any power Greens have at the next election as the only local stumbling blocks.

An Americas Cup win would also be huge for the Auckland economy. (Fingers crossed)

Re: Rym specifically, a changing demographic with means (baby boomers) which will strongly grow their market

[Sauce]

Great question IMO Troyvdh

My thought would be that they are both leaning exuberantly towards irrational. Adjusted for risk, much more so for ZERO than RYM. RYM shareprice is still way ahead of itself though. Its just that the odds of RYM growing into its skin are probably a lot greater, or at least easier to quantify, than ZERO.

ZERO could well grow into its valuation and beyond but the point is who can genuinely quantify the odds with no real runs on the board, or what competitive threats might emerge. RYM is a much lower hurdle to jump.

Both have very full valuations..

Regards,

Sauce

[MAC]

It's an interesting question from time to time to ask.

I was reading this article a couple of days ago, the author seems to think the NZ50 is overvalued, but what do outsiders looking in really know ?

http://www.tradingfloor.com/posts/irrational-exuberance-blooming-384674464

One aspect that I've yet to reconcile is the high turnover of NZ50 constituents over the last two years. We have had a large number of very strong growth stocks entering with high capitalisation levels. The discontinuity and the influx of high PE stocks makes me wonder if the NZ50 can be used as an accurate comparative gauge with previous years.

Coming up of course we have the prospect of perhaps a contrary trend, low growth utility stocks Mighty River, Meridian, Genesis etc, which may bias the NZ50 PE downward ?

[troyvdh]

Thanks ....many folk are returning to NZ....from Oz more so....the debate goes on...property prices in many countries have have plummeted and some risen...but here in NZ....property has been generally a winner (at least res prop)...../many many folk including Bernard and gareth have been saying for nigh on a decade that investing in res prop is a dead end....but bugger me gareth reveals that he has substantional amounts in res prop....its got me buggerd...

what I would like to emphasise here is real life ....money in the game .....etc ....cheers...

[Halebop]

While I'm sure data integrity is an issue, check out our proud position on these lists (try ranking the %GDP columns)...

http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

http://en.wikipedia.org/wiki/Net_international_investment_position

[winner69]

Proud to be a kiwi

The numbers must be wrong eh halebop

[Hoop]

Irrational Exuberance, Second Edition
by Robert J. Shiller


Robert Shiller is the man to google...he has spent a great deal of his academic life on this very subject.
He has written many books including Irrational Exuberance...this is one book I recommend all investors should read

He has a website which deals specifically on Irrational Exuberance (http://www.irrationalexuberance.com/)....There are many good links to explore from that site.

[Halebop]

Proud to be a kiwi

The numbers must be wrong eh halebop

Am certain the numbers are wrong.

The developed world, excluding New Zealand, include black economy estimates in their GDP calculations. I'd also suspect our overseas assets are understated when netting the debt position but it's probably a cr@p shoot compared with the rest of the world anyway. In short, even if other countries are worse than stated and us better, we're still in a pretty poor position.

Still, someone did their job during the GFC - how the PIIGS avoided becoming PIGSINZ looks like dumb luck.

[Lizard]

Am certain the numbers are wrong.

The developed world, excluding New Zealand, include black economy estimates in their GDP calculations. I'd also suspect our overseas assets are understated when netting the debt position but it's probably a cr@p shoot compared with the rest of the world anyway.

They have 2009 figures in that table for NIIP. Don't forget that Stats worked out a year or two later that they hadn't counted a few overseas assets held in retail accounts and managed to bring it down to nearly -70% GDP... (with the help of some reinsurance flow accruals). Don't think they will have been able to calculate your overseas asset capital gains yet either. :)

[Toasty]

Great question IMO Troyvdh

My thought would be that they are both leaning exuberantly towards irrational. Adjusted for risk, much more so for ZERO than RYM. RYM shareprice is still way ahead of itself though. Its just that the odds of RYM growing into its skin are probably a lot greater, or at least easier to quantify, than ZERO.

ZERO could well grow into its valuation and beyond but the point is who can genuinely quantify the odds with no real runs on the board, or what competitive threats might emerge. RYM is a much lower hurdle to jump.

Both have very full valuations..

Regards,

Sauce

I actually think that both Troys and Sauces comments are relevant and insightful, however the use of ZERO (in caps no less) repeatedly, irritates me a little. Is it a spelling error or do you have an axe to grind with this company. Perhaps you believe that they are deliberately misleading their investors and so deserve the barb? Or is it just a play on words.

I like Sharetrader because it generally contains insightful and relevant commentary and occasional a humorous exchange. What I am hoping not to see is the level of slagging reserved for the NBR comments section where people with no vested interest take shots at a company that they missed out in investing in...

Just saying.

[Hoop]

If you aren't sure whether you are in a bubble or not , then you aren't........

Shiller says........

In the second edition of my book Irrational Exuberance, I tried to give a better definition of a bubble. A “speculative bubble,” I wrote then, is “a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase.” This attracts “a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement.”

[slimwin]

[QUOTE=CJ;417974]NZ - low interest rates, low inflation, low unemployment,high consumer and business confidence, high spending in relation to ChCh repair, high spending on Auckland infrastructure.

Quick,we better change the government!