NZSX50 - Good News!

[BIRMANBOY]

If you could actually accomplish anything or implement changes then I might bother being interested....until then...its all a waste of time. However by all means don't let me stop you.

It's easier to keep ones head in the sand and mock those who dare to raise that the world is not all fiscal peaches and cream, than have considered discussion on rationale responses to an inevitable downturn, for whatever reason it occurs. The 'Investment Strategies' might be better place for the discussion, I agree it is not well placed here.

[Onion]

The whole world is financially in a terrible mess

If that is so, why are stock markets around the world hitting all time highs?

[winner69]

If that is so, why are stock markets around the world hitting all time highs?

Investors see/very little no risk at the moment .... worlds all honky dory and markets will keep going up

[Baa_Baa]

Good point, though my suggestion to discuss it is not about changing the world, it's about what we, you or I do, as individuals (many with associated responsibilities and dependents), otherwise I agree it is a waste of time trying to change the macro economics. So few saw the previous fiscal liquidity/debt burdens relationship to the market crashes that came about I thought it might be helpful to point out that if anything, global liquidity underpinned by unsustainable and potentially un-repayable sovereign, business and personal debt, has increased umpteen-fold (since even the last crash) and so with it comes the greed and risk taking, which pre-cursors market failures. If we don't or won't consider that, or the personal consequences of ignorance, are we not neglecting our personal responsibility to protect our own meagre place in it?

If you could actually accomplish anything or implement changes then I might bother being interested....until then...its all a waste of time. However by all means don't let me stop you.

[BIRMANBOY]

Meagre are you?? Ok I am now channelling Yoda..so bear with me.... If you want to start a thread...how about
NON-Investment strategies, because that's what that leads to. It means you consider withdrawing from mainstream investing and focus instead on protecting what you have. Problem is of course where do you draw the line...banks fail..better withdraw funds and bury gold bars in the back garden, stock markets collapse so you better cash up and ...and....and...what...? Dwelling on and planning for unknown and possibly unlikely scenarios is all well and good if you know when and how. Either you have an optimistic outlook and believe that the basically intelligent animal that we are will find a way through the difficulties, (as we do and have been doing for centuries), or you start gnawing on your fingernails and start looking for the signs of imminent financial disaster. Up to the individual of course however if you feel strongly maybe start a new thread over in the Investment Strategies.

Good point, though my suggestion to discuss it is not about changing the world, it's about what we, you or I do, as individuals (many with associated responsibilities and dependents), otherwise I agree it is a waste of time trying to change the macro economics. So few saw the previous fiscal liquidity/debt burdens relationship to the market crashes that came about I thought it might be helpful to point out that if anything, global liquidity underpinned by unsustainable and potentially un-repayable sovereign, business and personal debt, has increased umpteen-fold (since even the last crash) and so with it comes the greed and risk taking, which pre-cursors market failures. If we don't or won't consider that, or the personal consequences of ignorance, are we not neglecting our personal responsibility to protect our own meagre place in it?

[Baa_Baa]

It's about liquidity Onion, and what generates that money, and where it eventually ends up, because it has to go somewhere, so the stock markets are just one of the logical destinations.

The point though is by who, how and even is it possible, to repay the sovereign debts that underpin the liquidity, granted by the government and guaranteed by the tax payer, and what can you or I do about foreseeing this and protecting ourselves from the inevitable next rout?

As an aside, the trigger for the recent meltdown (but not the root cause of the problem) was pure greed, by previously respected financial institutions, who lent money beyond the ability of the debtor to repay, who then sold the loan books to the suckers who eventually realised they weren't going to be repaid. Then the house of cards came down and it rippled around the world, including NZ where the NZX dumped. Not quickly like '87, but fast enough to catch many out.

Today there is substantially, even inconceivably more global liquidity, underpinned by sovereign debt, sloshing around the world, including in NZ, making the haves feel happy, and the risk takers less worried and the greedy more emboldened.

The cycle continues. Are we even interested to consider whether it's a problem or whether we as individuals can do anything about it, like foreseeing it and preparing ourselves in advance?

BAA

If that is so, why are stock markets around the world hitting all time highs?

[Baa_Baa]

Well yes, meagre in the scheme of things, but that's all I have, and it's worth protecting. I thought that given a conversation about Greece's problems, that maybe we could sheet it home to something a bit more real. I'll start a thread in the Investment Strategies and post copies of my recent comments. Last word here, cheers.

All the best.
BAA

Meagre are you?? Ok I am now channelling Yoda..so bear with me.... If you want to start a thread...how about
NON-Investment strategies, because that's what that leads to. It means you consider withdrawing from mainstream investing and focus instead on protecting what you have. Problem is of course where do you draw the line...banks fail..better withdraw funds and bury gold bars in the back garden, stock markets collapse so you better cash up and ...and....and...what...? Dwelling on and planning for unknown and possibly unlikely scenarios is all well and good if you know when and how. Either you have an optimistic outlook and believe that the basically intelligent animal that we are will find a way through the difficulties, (as we do and have been doing for centuries), or you start gnawing on your fingernails and start looking for the signs of imminent financial disaster. Up to the individual of course however if you feel strongly maybe start a new thread over in the Investment Strategies.

[winner69]

An inverted yield curve is generally not good news, a bearish outlook toward the future direction of the economy.

Check out the latest swap rates ....yield curve looking ugly

Bugger

[MAC]

A nice piece from Harbour this morning for the FA’s.

http://www.goodreturns.co.nz/article...+15+April+2015

It’s been an observation of mine for some time now that the forward NZ50 P/E is high, presently 18, due primarily to the demand in dividend paying stocks, not helped by the SOE and other infrastructure IPO’s coming to the market over the last year or so

“The New Zealand equity market now has a high percentage of defensive stocks – 43% of the index”

“The balance of the market is also trading at a small discount to average valuation multiples, estimated to be -2% relative to the last 5 years. However, for the cyclical and growth sectors EPS growth is expected to average 13.6% pa in the next three years”

I’ve little exposure to yield stocks now, they have run their course and IMO are overvalued, and the down side risk is greater than the up side potential, especially when a flood of cash may well exit from these stocks ahead of US interest rates starting to rise in either June or September.

NZX growth stocks on the other hand (and I don’t necessarily mean tech stocks) seem to me to be well undervalued in several cases, and I reckon we may well equally see a rotation from yield into growth also during the remainder of 2015.

[Beagle]

Good article and interesting debate. I see U.S. retail sales disappointed and there's further talk of interest rate increases in the U.S. being delayed. With the ongoing problems surrounding Greece its hard on a global front to see any other scenario avoiding a catastrophe other than ultra low interest rates almost indefinitely.

Harbour talk about rotating into companies exhibiting strong growth such as F&P Healthcare and Mainfrieight as alternatives for REIT's and electricity sector stocks which are trading as bond proxies. Lets unpack that a bit. MFT have enjoyed 14% average growth in EPS for the last five years but recently their updated guidance significantly disappointed the market and growth looks like being in the mid single digit range...strong growth really ? F&P Healthcare are very, very expensive on a forward PE basis and growth needs to continue almost indefinitly at low double digit rates to support that valuation.

Harbour seem to imply ongoing medium term EPS growth of 13-14% per annum is attainable, hmmm, maybe ?

I agree the market per se is expensive not helped by some of our largest companies with modest growth prospects trading on very high multiples, e.g. AIA, POT, RYM, FPH. however in an uncertain world with subdued economic growth and ultra low interest rates for as far as the eye can see, whilst its easy to make the case that stocks such as GNE, GMT HLG PGW, all of which I own may have limited upside potential I think investors can take comfort from a basket of stocks like this offering circa 10% gross yields.

If global interest rates do eventually rise a little, so what ?...you're still going to get 10% gross yields whereas on the other hand if stocks like Harbour are suggesting don't meet their growth aspirations...oh dear ! Factor in a perhaps meaningful contraction in the PE attributable from lower growth if their blue chip growth record doesn't continue, along with a possible general contraction in market PE if interest rates rise materially and you have the recipe for tears.

In a fragile global economy still reeling from the ongoing effects of the GFC and with little prospect of meaningful interest rate increases I continue to favour defensive yield based investments for the medium term. Maybe I should change my user name to conservative bean counter