NZSX50 - Good News!

[CJ]

Should see the NZX have a better day.

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

[shambles]

Great Post Hoop, appreciate you sharing.

[Hoop]

......

Expecting to see a nice rebound in many NZ stocks that have lost ground over the last few trading days!

Some may see these "up days" as an opportunity to offload some more of their portfolio risk and realise their gain...eh?

[000831]

Some may see these "up days" as an opportunity to offload some more of their portfolio...eh?

Yeah, big guys always doing so. rebounce for one or two weeks, then continue to dump.

[Hoop]

Could well be the case. I'm still of the opposite mind-set (for now), accumulating more on the "down days". IMO everything is much more reliant on economic data now that the FED has strongly signalled it's intent to ease back with QE, IMO sooner rather than later if economic conditions all it. So I’m particularly looking at consumer spending, housing, and manufacturing data coming out of the US and to a lesser extent the Euro zone. There is obviously a lot of room for things to improve there and IF they do I see no reason why equity markets can't head towards their 2007 peak (I'm talking capital indices not gross). My tune will change though if trends in economic data aren’t signalling improvements OR if/when we approach 2007 highs. I also feel now is the time for Kiwis (if they already have a good NZ based portfolio) to start considering a heavier weighting towards US and potentially AU stocks.

Interested in others thoughts….

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

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

[000831]

Just noticed that the Japanese N225 stops for lunch everyday.

How quaint!

Yes, Asian markets have break for lunch there. very good for us

more focus on Japanese 10 years bond yield. it is 0.92% now.

[Hoop]

Interesting thoughts Hoop and I do agree 100% with your first and last (the edit) comment. The rest are all fair observations but I think some are not very strong in this current climate so thought I would offer some counter thoughts:

Several of your points (point 1,4,5) are based on the possibility of tighter monetary policy via increased interest rates; Given that tighter monetary policy right now means the FED backing off (or indicating they are backing off) of unprecedented QE I don’t see the likelihood of interest rate hikes in the short to medium term as a strong possibility. The whole reason QE was necessary was because interest rates were at their lower bound, hence increasing interest rates is two giant steps away from where we are now. For businesses this means cash is still cheap, for investors the comparative advantage would still appear to be in equities as opposed to fixed interest or bonds.

Also, recently I had the pleasure of attending a seminar by an ex-chief economist of the First National Bank of Chicago and was also able to discuss some aspects of today’s economic climate with him after. One of the things we discussed relate, I think, quite closely to several of the points you make (points 3 and 8). In particular that QE has left banks and businesses awash with cash that is essentially just sitting there. I therefore don’t think there is a lack of investor money out there, and also think current businesses are very well positioned to take advantage of any economic upturn.

Points 2, 6 and 7 could arguably be seen just as easily as positives.

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...

[Hoop]

Fair points Hoop, so where do you sense we are placed right now? both from a TA persepective TA is favouring a mild bull correction the TA Target is around 4400 which relates to about a 6% correction...remember this 4400 is distance travelled.... the time frame is unknown the NZX50 could quickly correct or could take several months...Could the Correction be more stronger ? of course it can TA Targeting is using past data to predict the future TA target, it is only a line drawn in the sand that has a mathematically 70% chance of reaching but mainly based on a holistic view point? I like to see a continuing slowly improving economy/business cycle with a cooling off of the property market bubble and to some extent the Equity market ...From a cyclic viewpoint the present Equity bull is now a senior citizen so it wouldn't surprise me if the Equity market stagnates and starts to disappoint from here on in the face of improving company results...NZ has some major weaknesses that disturb me These weaknesses have always been with us so its nothing new, such as NZ dependence on one commodity (dairy) by one huge (too big to let fail?) monopolistic company, NZ's inability to control its own currency and thirdly the continual Kiwi love affair with the property market
Are you long or are you starting to bank some cash?.. Ive just cash out most of my longs this week so went from 2% to 75% cash So far the IRD will be very happy with me this year...All peoples exits are due to different reasons My decision to realise my gain now was due to my poor overall capital gain since 2009 which is well below this Bull market gain since 2009. I got clobbered with Pike River Coal failure which when calculated by diminishing returns I have to make +300% since 2009 just to get my portfolio back to where Mr Market is now. I can't afford to give anything back to the market during corrections if I want to reach my 300% goal

As I said earlier as long as economic data continues to generally improve and so long as markets don't get too highly valued (2007 Capital Index peaks) I'm still long. If it wasn't for PRC I would probably ride the bull market corrections too

Also the later point you raise about NZSE vs the S&P500 is part of the reason I am more inclined to weight my new investment money more towards the US.

Hmmm maybe ....if only for the currency play....Wall st Equities bull is the same age as NZX50 bull... its also a very healthy senior citizen.

[000831]

Nikkie 225 down by 3.25% below 14000 so far today, Hong Kong HSI below MA60. ...............

[MAC]

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.