Finally some green on my quote charts which is a great releif from the red over the last few days.
Of course the only company that is red is the one I want to sell
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Great Post Hoop, appreciate you sharing.
I reliance on a bubbling economy to increase the shareprice is possible but not always true....there is a poor correlation between Equity Market Cycle / Economic cycle. ..sometimes it happens sometimes it doesn't....Equity Investors should not rely on the economic cycle..yet nearly all do...you hear them say that they can't wait until the economy comes right...
You hear all the positives about the good times...so lets balance out the positives with some negatives that can affect Equities during the boom times
.....Central Banks tighten money supply to dampen signs of increases in inflation by increasing interest rates.....company debt expenses rise
.....More consumer spending attracts new competitive players into the consumer market, existing players expenses increase to protect market share
.....More listed companies enter the exchange competing for investors moneys as well as most investors are fully invested....a lot of investor money is unavailable therefore available money supply for Equities shrinks or gets redistributed causing some stocks to suddenly "correct"
.....As interest rates rise Equity market competes by lowering the PE Ratio to increase yield rates.
.....With increasingly tightening of the money supply there is an increase in financial instruments offering attractive rates of return by Companies taking on more debt so to expand and meet the increasing consumer demand.......................extra debt expense
.....An increasing employee expense as Companies take on new workers to cope with increased consumer demand and protect their market share.
.....Supply/demand //price interaction..........price rises when demand outstrips supply and puts strain on supply lines....Logistic price increases, raw materials prices rises, Oil , Power
.....Lack of available investment money forces investor speculation ...buying high cost debt and entering into stretched supply lines such as oil, minerals etc to make a fast $$$...thus creating well overpriced commodities "bubble" that relates to extra manufacturing company expense
Let the good times roll ...eh :D
Edit: The best time for Equities strangely enough (illogical to the layman) is when Equities are oversold...due to political/ business/economic cycle environments being turbid and in a uncertain state, and the investor has to climb that "wall of worry" for that year or two before the good times return
last first...yeah sure 2,6,7 can be both ways ...but a humming economy does put strain on the system ...how often have you heard from a CEO "profits would've grown if Joe Bloggs had fillfulled his obligation to supply us with raw materials we had the buyers out there waiting...or the unions refuse to move goods because they expect their workers to receive some benefit from the economic boom....or the extra machines on order haven't arrived ..etc.
The banks awash with cash...doesn't automatically translate to available money for the Equity market...There are reasons why a bank has a lot of money.......There are other markets than the Equity Markets that may be perceived by the investor to be a better bet. Us Kiwis moan about our good companies being takeover cheaply...the reason is obvious the NZX has to be second fiddle to the Kiwis love affair with the property market which has now reached to a point in some areas of being in a bubble.
This also raises another point... available money on Wall St does not translate to having available money on the NZSE...it just happens that the NZx50 oscillations are similar to the S&P500 at the moment..it doesnt necessarily mean that we will stay in sync for the next year or so.
In saying that, both Equity markets look oversold to me and must be due to correct...
Nikkie 225 down by 3.25% below 14000 so far today, Hong Kong HSI below MA60. ...............
NZX has been sitting smack on it's trend line for three trading days in a row now, tomorrow could be an interesting watch heading into the weekend.