Is a Bear Market starting to play out on the NZX ?

[moka]

The jobs report had a ‘misclassification error.’ Here’s what happened - The Washington Post

https://www.washingtonpost.com/busin...appinstalled=0

For those of us who do not subscribe to the Washington Post here is the article in the Stamford Advocate.
https://www.stamfordadvocate.com/business/article/The-May-jobs-report-had-misclassification-error-15320999.php

And a CNN article on the jobs report misclassification error.
BLS, however, noted its data collectors — for the third month in a row — misclassified some workers as "employed not at work," when they should have been classified as "unemployed on temporary layoff."
Barring that issue, the unemployment rate could have been as high as 19.2% in April and 16.1% in May, not including seasonal adjustments, the BLS said.
https://edition.cnn.com/2020/06/06/p...ntv/index.html

[King1212]

Bastard..I knew it....it is political play by Trump admin...so he can keep saying....great....great..great...

[moka]

The disconnect between the underlying economy and the sharemarket is getting really bizarre.

I will not join in the madness so will stick with stocks that are sensible value and have a clearly defined pathway through the effects of Covid 19 without being seriously affected.

Yes Bizarre..
Being investing over 40 years and I can not understand what is happening..It goes against everything I've been taught..
This time is different?..When a grow an extra arm or leg I will believe it.

What is driving this market is a bailout for big business or as Jim Cramer explains the reason for the big disconnect is one of the greatest wealth transfers in history.

https://markets.businessinsider.com/...0-6-1029284194
"The market doesn't represent the economy, it represents the future of big business," he said. "This is the first recession where big business … is coming through virtually unscathed, if not going for the gold."
"Small businesses, the ones that aren't publicly traded, they're dropping like flies," he said. "It's been one of the greatest wealth transfers in history, and it's a wealth transfer that was mandated by the state."
"It will have a horrible effect on our country, and we've barely begun to see the impact," he added.
Cramer pointed to the 48% surge in bankruptcies year-on-year in May, despite only a handful of public-companies going bust, as proof of the uneven playing field. He added that public-health measures only worsen that imbalance.

https://www.cnbc.com/2020/06/04/cram...-transfer.html
Jim Cramer: The pandemic led to ‘one of the greatest wealth transfers in history’.
“I think we’re looking at a V-shaped recovery in the stock market, and that has almost nothing to do with a V-shaped recovery in the economy,” he said.

[dreamcatcher]

Has the markets lost its mind? Probably. But there's a slim chance that equities are entering a new era of high valuations

"If you're one of those calm, rational investors who believes that earnings, not wild shifts in momentum, drive stock prices, you'll probably draw the logical conclusion from the phenomenal rally in stocks: The markets are unhinged from reality.

Indeed, the view that stocks are defying gravity and will fall to earth is probably the right one. But a slim chance exists that equities are entering a new era of super-high valuations, and not just for a couple of years—a trademark of past bubbles—but as an enduring new normal. The reason: Interest rates on risk-free Treasuries that compete with stocks for investors' dollars will remain far below historic norms for many years to come."

https://fortune.com/2020/06/05/stock...ns-news-today/

Rest is paywalled

[Hoop]

I respect Jim Cramer and what he says as he is at the "coal face" and sees it for himself...I find it difficult to comprehend his recession call...The definition of a recession is negative rate of growth for 2 quarters..USA is not in an official recession yet....officialdom is a laggard and that is part of the reason on the charts why the stockmarket always seem to react before a recession (leading indicator).

I still don't understand the transfer of wealth part either at a time when there is an unknown amount of Wealth Destruction going on...OK Jim, you can see large amount of wealth transferring but how much is being vapourised??? ..and has the FED +Government able to match that vapouratiion amount.. Surely we don't know those figures yet..
A large part of the economy is made up of small business activity...and.. I'm one of the few that do know the economy and the sharemarket correlate poorly. so yes as long as there is enough "available money" the sharemarket could plod on irrespective of the economy..however it would be very unusual to see a stock market reaching a record high during the 1st half of an "official" economic recession....

[BIRMANBOY]

See below the interest rates from the Reserve bank. Historically at the lowest point (so far) but obviously could go lower yet. So it would appear that the option of first resort to share investors of sticking the cash in a TD is not available..well available but realistically not viable or worth the effort. So its not surprising that many are rewriting the guidelines they previously used about when to stay in and when to get out. Options are few so yes it is possible that we are entering the twilight zone.. Economic fundamental analysis is overwhelmed by conflicting drivers of sentiment, FOMO and momentum. Volatile as hell but still better than money in the bank...?? probably.

Has the markets lost its mind? Probably. But there's a slim chance that equities are entering a new era of high valuations

"If you're one of those calm, rational investors who believes that earnings, not wild shifts in momentum, drive stock prices, you'll probably draw the logical conclusion from the phenomenal rally in stocks: The markets are unhinged from reality.

Indeed, the view that stocks are defying gravity and will fall to earth is probably the right one. But a slim chance exists that equities are entering a new era of super-high valuations, and not just for a couple of years—a trademark of past bubbles—but as an enduring new normal. The reason: Interest rates on risk-free Treasuries that compete with stocks for investors' dollars will remain far below historic norms for many years to come."

https://fortune.com/2020/06/05/stock...ns-news-today/

Rest is paywalled

[blackcap]

See below the interest rates from the Reserve bank. Historically at the lowest point (so far) but obviously could go lower yet. So it would appear that the option of first resort to share investors of sticking the cash in a TD is not available..well available but realistically not viable or worth the effort. So its not surprising that many are rewriting the guidelines they previously used about when to stay in and when to get out. Options are few so yes it is possible that we are entering the twilight zone.. Economic fundamental analysis is overwhelmed by conflicting drivers of sentiment, FOMO and momentum. Volatile as hell but still better than money in the bank...?? probably.

I remember a time when you could get 5-10% in the bank on TD's regularly. Some stupid folk decided the extra 1-2% on sub or unsubordinated bonds was a better bet. These days you are lucky to get 2% for your TD. If you say the rate required is interest plus some "risk premium" and that premium is about 5% then previously you would want a return of about 10-13%. So a no growth company would require a PE of 6-10 give or take. These days you only need 7% or so so a PE of 14 for a no growth company will suffice. So PE's of 20-25 for growth companies seem on the face of it about correct. But man its weird investing with these parameters.

[BIRMANBOY]

Hah...you cant be cherry-picking on predictions now....what about all the other ones? The longer an investor is in the market, the more selective is the memory But you MAY have nailed it....maybe...check back Xmas eve and you will either be certified guru or Ogg with eggnog.

My prediction starting to materialise.

https://www.sharetrader.co.nz/showth...l=1#post794640

[BIRMANBOY]

Yes, weird is the new normal so bit difficult coming to grips with things that don't make sense. What will really seem weird is seeing previous dividend payers at the "old" prices but not paying any dividends. OUCH...

I remember a time when you could get 5-10% in the bank on TD's regularly. Some stupid folk decided the extra 1-2% on sub or unsubordinated bonds was a better bet. These days you are lucky to get 2% for your TD. If you say the rate required is interest plus some "risk premium" and that premium is about 5% then previously you would want a return of about 10-13%. So a no growth company would require a PE of 6-10 give or take. These days you only need 7% or so so a PE of 14 for a no growth company will suffice. So PE's of 20-25 for growth companies seem on the face of it about correct. But man its weird investing with these parameters.

[Cyclical]

Some good thought provoking discussion here people. I'm slowly resigning myself to the fact that I've had it wrong this last 3 months and previously held beliefs about sound investment practices need something of a reset, or at least be realigned to the environment we now find ourselves in. I doubt any of this stuff hasn't already been discussed, but for me, the contributing factors that combine to bring about this "disconnect" that maybe we'll just need to embrace going forward:
1) QE and lots of it. Governments throwing the kitchen sink at it with at times questionable actions aimed at shoring up the house of cards.
2) Negligible interest rates. There is the realistic prospect of your TD like investments eroding away, especially after inflation.
3) Kiwisaver - NZ only of course - This was only born around about GFC time, but now probably helps provide some good foundation to the market and the inflow of funds keeps coming. Plus it would have helped educate people about the share market over those years, with some taking a more active approach towards investing, in and outside of KS.
4) Lockdown - money that would normally be spent on the usual day to day stuff is chasing stocks, plus people have had a lot of time on their hands to look into the share market.
5) Sharesies - Makes trading more affordable and accessible for the smaller investor and makes day trading a breeze.
6) Interest in the share market - Points 3, 4 and 5, plus the corresponding snow ball effect as people make a bit and tell their mates etc means we're seeing interest in the market at levels not seen since the decimation of investor confidence in '87. And it's spanning the generations from kids with a few bucks to the oldies with their fat expiring TD's looking for a yield chasing home.
7) Plenty more cash to be poured into the markets off the back of the above points, plus from those of us with a more traditional conservative approach to investing resigning to the fact we're missing out.
8) Something of a boom as the world continues to get a handle on this virus.
9) Asset price inflation with economies awash with low interest money - what's that about the markets being forward looking?

No doubt there are other contributing factors I've not captured. It remains to be seen how long the newbies will be around for when things slow up. Meanwhile, although it makes me nervous, time to adopt a more aggressive approach in the short term i think, underpinned by property related stocks with good yield for the long term.