I agree. Brilliant in its complexity and simplicity at the same time while maintaining a haunting poetic rhythmic quality; not to mention its relevance.
NZ50C reverted to a technical bear (below ema200) a couple of days ago. This could be confirmed if the market falls to below this bull/bear line 4550 - 4600. Actually it isn't a line more like a zone so the fall may (may not) be slowed down as it goes through this soup like support zone..and medium term investors should by theory change their strategies from Bull market strategy to bear market strategy (short/medium term investors already have)..
The very long term Bull Market cycle is still in place..The primary trend-line ( primary tide) is currently at 4200 so the very long termers in theory should still be holding..
Its this 4200 area that is the danger line as a new group (longer termers) of investor selling could emerge as the NZX reverts into a text book bear market cycle (primary tide)
A chart will follow
Long run average PE on the NZX going back a decade is 18.
According to a couple of experts on CNBC this morning the average earnings decline in recession is 13%. I think its quite probable this is a very bad recession or even a depression so my thinking is the market earnings will contract by approx. 20%.
Adding those two factors together I am of the view this bear market has the potential to wipe circa 50% off the NZX50 index.
Some people who have never experienced a bear market before and think such a thing can't happen could be in for a very painful lesson.
Last edited by Beagle; 12-03-2020 at 09:33 AM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Long run average PE on the NZX going back a decade is 18.
According to a couple of experts on CNBC this morning the average earnings decline in recession is 13%. I think its quite probable this is a very bad recession or even a depression so my thinking is the market earnings will contract by approx. 20%.
Adding those two factors together I am of the view this bear market has the potential to wipe circa 50% off the NZX50 index.
Some people who have never experienced a bear market before and think such a thing can't happen could be in for a very painful lesson.
Worse than that me old mate
Bear markets end with PEs way below the long term average
Using your EPS decline of 13% that would imply NZX50 falling to 3300 (PE of 10) to 4000 (PE about 12)
That’s more than 60% down from highs
Could easily happen
No worries as divies will still be paid
Last edited by winner69; 12-03-2020 at 09:44 AM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Crikey mate, that's a very sobering thought. Even with 10 year Govt stock at very close to zero, (which ordinarily would be supportive of slightly higher than average PE's) multiples could easily contract to below the long run average due to the very slow growth with a W or L shaped recovery and a woeful lack of investor confidence.
I think all things considered, it is prudent to be extremely cautious for the foreseeable future.
Last edited by Beagle; 12-03-2020 at 10:26 AM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
Crikey mate, that's a very sobering thought. Even with 10 year Govt stock at very close to zero, (which ordinarily would be supportive of slightly higher than average PE's) multiples could easily contract to below the long run average due to the very slow growth with a W or L shaped recovery and a woeful lack of investor confidence.
I think all things considered, it is prudent to be extremely cautious for the foreseeable future.
US 10 year bonds on a PE of 200 ...not cheap
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Originally Posted by dobby41
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