Quote Originally Posted by Aaron View Post
No idea but I am picking at minimum a retest of the March lows at some time within the next 12 months as the effects of the lockdown ripple through company earnings and further dividends get cut.
0% in the bank might be better than 0% in equity if combined with capital loss as well. At least in the short to medium term.

People may even start to question trickle down economics and the need to artificially keep asset prices at elevated levels(see Bill English's concerns in his report). The Covid-19 lockdown might be the pin that pops the everything bubble.

Or we could have a currency crisis/inflation first and asset prices continue to rise substantially in nominal and not so substantially in real terms and anyone in cash gets wiped out. I am picking the former rather than the latter but do not have strong convictions that this will happen. From what I read Mr Balance has pretty strong convictions it will be inflation/monetary crisis due to ever more unprecedented central bank monetary stimulus globally as well as rampant govt spending.

I am hopeful NZ is not quite as insane as the US, China and Europe and the NZ dollar will hold some value but if foreign funny money is pouring in to buy NZ equities we will have no chance of any significant fall in asset prices.

Negative interest rates means there is no limit to asset valuations. The only restriction becomes how much you can borrow and US hedge funds are closer to the monetary spigot than I am.

Something else entirely may happen as lately historically significant events and actions seem to be happening on a regular basis e.g. the speed of the latest bear market and the size of central bank stimulus as well as the speed to the return (possibly (not likely in my opinion)) of a new bull market.

You make some statements but with what backing or reference?

What does Bill English know? He knows how to screw the average NZ worker with Kiwi Saver as it's a proven money tree for IRD to tax year after year.. while the smarter investor looks to buying tax free real estate. Show me where assets prices are elevated? Oil? = nope, precious metals? = nope, houses? = nope. In my view, prices have deflated as the 'money supply' has vaporised. If there was no gov't printing of $, we would be in great serious state to the point of having wars.

Again, where's the proof of rampant inflation? In 2008 the US gov't did massive QE and have prices ran out of control? Nope. In recent events is the $3T in monetary printing in the US going to cause inflation? Again, look at the 'money supply'. Easily over $3T has been lost out of thin air through assets vaporisation.

https://www.thebalance.com/causes-of...prices-3306094

Above link talks of 2 key causes of inflatio - also worthy to click on the link on 'Quantity Theory of Money'.

But the average NZ investor doesn't read this kind of stuff. They coddle around, see and hear what others say and bode along agreeing (such as at any point gov'ts go on a spending spree = inflation).

The NZD currency is not going to hold value. That's because we're too small of a country and what we have to offer is 2 tricks. One = agriculture resource extractions and Two = Tourism. You can bet tourism won't come back any time soon and it would take AirNZ several years to regain what they last recently in global flights (as globally disposable incomes disappears). If you want a strong NZD, you need LESS of it's currency exported (as locals buy imported products because NZ doesn't make many things), and / or have more of NZ products exported as more currency flows into NZ than going out.


Not sure where you mean about asset valuations in a negative interest rate environment. What negative rates really mean is savers of cash are punished and those that borrow are rewarded. So the person that has more incentive to borrow funds from the bank to buy more houses will stand in a much better position than the person that has cash (a solution where the rich get richer). Banks aren't going to give $ to anyone... just those that meet the requirement and the same would apply to corporate shares that try to vie for bank loans instead of borrowing privately from the public. There is no free lunch even at negative interest rates, meaning the banks (lenders) will gain more in the spread.