NZSX50 - Good News!

[winner69]

Demand Drive inflation with low interest rate environment, NZX is breaking to 5000 soon.

Hope so mate

I have been wrong for the last two years saying 5000 by Xmas

This year maybe?

You would have thought that a decent load of reinvested dividends would have got I ther by now, but alas my forecast was tong ...twice

[winner69]

Thanks winner.

I have afew concerns about the slides that I just saw.

1) I don't see any obvious relationship between the two (inflation and PE). I could probably connect the dots and draw a poodle that reflected as much of a relationship that they have
2) There is no explanation as to why they believe such a trend exists (I would want some kind of interpretation / explanation from a macro/micro perspective to really start to consider their theory in more detail - maybe it's in their book?)
3) Slide 21 states "the impact of rising inflation or deflation in the P/E ratio...." CPI inflation is a point in time measure which a scatter plot of CPI on PE can not reflect. Therefore the Y slide can not show anything about rising inflation (only inflation / deflation) maybe that is just poor wording from them but for me it is indicative of the quality of their work.

Hopefully hoop will summarise the theory behind the statement and then maybe I will get a better handle on it.

For now though I'm not sure that Crestmont slide show does much to convince me of anything...

That's a shame.

Maybe it is the terminology used but that abbreviated presentation supports a lot of what both you and hoop are saying, which is almost the same anyway.

Whip posted (you sort of agreed?) - Annecdotal and empirical evidence shows that the Stock Market does best (on average) when inflation is moderate (i..e around 2% - 3%) however bull markets can occur in both high inflationary and deflationary environments.

Doesn't the Y-curve thing on his chart on slide 21 support that statement, esp if you think about the cyclical behaviour of the PE ratio

Maybe Hoop can explain it better

[winner69]

Turmeric, you a Dr yet?

Hope your thesis isn't on the relationship between stock markets and inflation. If so I had better stop arguing with you eh

Or did you just concentrate on mundane things like business cycles?

Just curious

[winner69]

remembering of course that better than expected pay roll tends to imply faster than expected FED tapering and equity market declines. That is where I'm a little confused about your comment, not to mention it seemed to come during a discussion on gold so I thought maybe you were saying you are bullish on gold re expected payroll numbers.

So the payroll numbers were weak, a disaster really, much weaker than moosie would have expected anyway after the previous months number that was an anomaly

As you pointed out turmeric (at least the inverse of what you said) the weak job numbers is good news and the US markets rally strongly.

I take heart from ths guy . “The market’s bottom this week has the potential to be a significant bottom as we’ve seen signs of major capitulation by investors as evidenced by ETF fund flows in the world’s largest ETF,” Puplova writes.

Up up and away for the nzx next week

[winner69]

All this weirdness and things not seeming to be at all logical reminds me of this joke about economists.

When an economist says the evidence is "mixed," he means that theory says one thing and data says the opposite.

[Santiago]

... Up up and away for the nzx next week

You'd have to think so if the Dow (up almost 1% today) and the Nasdaq (up 1.5%) is your cue.

Anyone have strong views on share buy backs? Apple has bought back $14 billion in the last 10 days- seems to have held the SP above $500 and now propelled it. I suppose they do have over $150b to play with. IFT did the same and the SP has been tepid. I'm no expert but I'd prefer companies to invest in growth rather than buy back stock, though I do like the confidence it installs when a company bets on itself.

[MAC]

The US unemployment rate falling to 6.6% seems to have fired US market’s today.

This one point fall in January to 6.6% followed by the three point fall in December put’s the unemployment rate well off the three year trend line, this in conjunction with much lower non farm payrolls in both December and January seemingly provides for two consecutive months of reasonably anomalous data.

Maybe its extreme weather related maybe not, it is though outside of seasonal adjustment.

I just wonder if a reversion back closer to the unemployment trendline, presently 7.0%, over the next few months may catalyse a much larger sentiment driven correction, let's wait and see.

[Hoop]

The correct analogy would be a wheel where there is a 2% chance that a spoke will break. It does not matter how much the wheel revolves the probability that the next spoke will break remains 2%.

98% probability of Best Wishes
Paper Tiger

NO!!! (put your glasses on) ...PT
I said one broken spike as the example of the 50 spike wheel ... 49 not broken +1 broken... I mention nothing about breaking spikes...just the increasing probably of when the wheel ever rolling forward and stopping on each spike ...if its not the broken spike then when the wheel turns again to the next spike the odds increase that the next spike is the broken one.

This is similar to the Bull market cycle with each forward turn and landing on a correction... the odds increase that the next one is not a correction but the cyclic reversal.

[MAC]

This is similar to the Bull market cycle with each forward turn and landing on a correction... the odds increase that the next one is not a correction but the cyclic reversal.

As with many things in life, if we don't fully understand them, they can seemingly appear random.

[Hoop]

I don't buy that.

Short-term the market is driven by investor sentiment (which affects supply & demand) and long-term by corporate earnings.

I'm not sure how inflation can be the prime driver of the share-market when inflation is instrinically linked to Aggregate or more specifically consumer demand, whilst demand for shares is somewhat instrinsically tied to the investment function of GDP. If more money in the economy is invested, then more money chasing returns leads to a bidding up of stocks and in turn a lowering of the instrinsic yield on those stock (as indicated by declining P/E's).

Annecdotal and empirical evidence shows that the Stock Market does best (on average) when inflation is moderate (i..e around 2% - 3%) however bull markets can occur in both high inflationary and deflationary environments.

Have to admit I am with you Whipmoney. What I don't get hoop is the statement highlighted above? How does inflation push down on the PE ratio? Are you talking in a real vs. nominal terms?? Can you elaborate on the theory/ the above statement a bit more so I can try and get my head around it?

Cheers.

Yes Whipmoney The bit of your post was right....Short-term the market is driven by investor sentiment....day by day markets are driven by media (outside influences), the availability of money, and investor sentiment..... and all this is becomes historical data and chartists can apply that data to specific indicators to create all sorts of results from levels of investor momentum, sentiment, smart money exiting through to overbought and underbought situations......
Short term markets are volatile, often unpredictable, noisy, often irrational, and self correct frequently and rapidly thus attracting day traders.....

Most of us investors fall into either the medium term or long term....therefore our decisions should not be influenced by the day by day noisy market but more towards what really drives the market after you eliminate the noise...
Sharemarket theory and Market Physics are areas that the media tend to avoid as it is educationally boring hard to read and even harder to get your head around and understand the logic as it seems paradoxical to the stuff that the media pumps out.

What really grabs the investor readers (and the media makes sure this happens) is the exciting day by day soap operas as the market twists and turns to the global events of the day and the daily conclusion provided by the media analysts who portrayed by their own (media) to be Gurus and that their daily opinion and logic should be taken as gospel as well as gauging (rightfully or wrongfully) the sentiments of its readers and magnifying those feelings to the whole wide world.....also it makes great posts on ST ..

You sort of see now why Company management have little time for their shareholders writing in these forums and other media..eh?


Why I'm a bit anti with Media is the fact that most people believe what they read and apply their logic taken from their media education.....when the majority apply that logic and confirm each other it must be correct ..huh?...it then becomes "reality' and the "norm" and self feeds itself to become entrenched into the main stream ......something akin to the Flat Earth Society....

What Winner has posted (which is an article I hadn't read until yesterday) explains everything in detail to what I have raving on about for years The Investing strategies and secular bear market thread started by Winner69 has it all posted in detail so there's no need to regurgitate Market Physics summary here .............

Ultimately... it is not up to Winner or I to correct or re-educate the failings of media education ... its up the ST readers themselves whether they want to embrace it or not.....

I've said enough on this subject....

We don't need no education
We don't need no thought control
No dark sarcasm in the classroom
Teachers leave them kids alone
Hey teacher leave them kids alone
All in all it's just another brick in the wall
All in all you're just another brick in the wall .....Pink Floyd ..Another brick in the Wall