Investing strategies and secular bear markets

[kiora]

SBQ
Bold statement that they where completely viable before the virus escaped ......

Which companies from the 80's have gone now,all for different reasons?
The point the article makes is
" Financial markets don’t work when people feel no consequences for bad decisions"

[SBQ]

True enough. In the New Zealand environment, successive governments have ensured that property is the most rational choice.

From a NZ perspective, this is not to say there are no OTHER investment choices. It seems successive NZ governments have pulled the wool over the public eyes. Bill English brought in Kiwi Saver without even addressing the tax benefit of investing in residential houses. At this was during a time where we had no 'ring fencing' or 'Brightline Test' on real estate assets.

I would encourage those to check out what Canada has done to make houses affordable or address getting 1st Time Home Owners into a home. Today's radio talk on this subject made no mention what Canada has done and instead, just talked about changing the LDR deposit ratio on a mortgage. They talked about loosening up the Foreign Buyer's ban but the caller didn't seem to understand the reason why we had it in place. In Canada the Federal gov't will loan up to 10% on the value of a NEW home for 1st Home Owners. This loan effectively means the person isn't stuck with trying to save 20% for a mortgage when the housing prices over years keep going up (in effect, never getting into a house at all). It boosts the person immediately by meeting their deposit on the mortgage. Re-payment is due WHEN the hold is sold or in 25 years (and is not tagged on as part of the mortgage repayment); the savings to the home owner in terms of compound interest saved is immense and I applaud the Cdn gov't for promoting this scheme. For existing 2nd hand older homes the gov't only puts up 5%. Anyways, a little off topic.

SBQ
Bold statement that they where completely viable before the virus escaped ......

Which companies from the 80's have gone now,all for different reasons?
The point the article makes is
" Financial markets don’t work when people feel no consequences for bad decisions"

You do realise that it was the gov'ts that caused all this mess? They've destroyed the most critical, productive, part of the economy ; the Working Class. The rich don't need to work, the poor don't work, so what effectively happened? For the majority, all in the effort to save the deaths of the elderly and sick. But no gov't around the world wants to look like a fool, well there were exceptions like S. Korea and Sweden that didn't do a full scale lockdown.

I'll reiterate again, don't blame the financial markets for the collapse of the global economy. We're not talking about an Enron (financial accounting fraud), or the GFC in 2008 where banks misbehaved so how is this an issue of 'accountability' ? No one was misbehaving until this virus broke out and the article is completely missing the point that consequences don't apply if it COULD of been avoided. I have friends in America that are quite pissed off at China for not containing it ; China just played ignorant until it was too late. Now everyone is looking at their gov't to see what they're going to do next. How much $ are they going to dish out and how many of those are going to fight over that money like hungry animals. So in response, the gov't is taking the position that the financial markets must not fail at all costs, even racking up debt exponentially. and gold? lol we're a lot closer to fighting over food than to worry about buying gold.

[kiora]

"The NZ equity market and the potentially the NZ dollar FX market are not pricing-in a prolonged economic recession. However, here in New Zealand there appears to be a weird competition amongst the various economists as to who can have the most doom and gloom in their forecasts for unemployment and GDP growth."
"It is near time for the medico’s, politicians and bureaucrats to step aside and allow our innovative and smart business entrpreneurs shape the new economy with private capital from whereever we can get it"
https://www.interest.co.nz/currencie...ugh-government

[SBQ]

"The NZ equity market and the potentially the NZ dollar FX market are not pricing-in a prolonged economic recession. However, here in New Zealand there appears to be a weird competition amongst the various economists as to who can have the most doom and gloom in their forecasts for unemployment and GDP growth."
"It is near time for the medico’s, politicians and bureaucrats to step aside and allow our innovative and smart business entrpreneurs shape the new economy with private capital from whereever we can get it"
https://www.interest.co.nz/currencie...ugh-government

Let me pick some quotes from the article: "However, China is back to work and very soon Australia and New Zealand will largely be back to work. For this reasons it is difficult to be negative on the NZ dollar outlook, as in relative terms we are just so far ahead in the recovery stakes than Europe and the US."

The numbers i've seen for China do not imply they are back to work and the public there has lost confidence in Xi Ping Pong. Their central gov't basically is forcing the people back to work while trying to impose some level of normality. I'm surprised that Mr Kerr is not looking from the US perspective, specifically that the US is the BIGGEST economy in the world. What does being the largest economy in the world mean? It means they have the biggest wallet and buying power, in terms of disposable income per individual, no other nation is greater. Paraphrasing, "The nation that holds the wallet demands where the products are to be made". Think about it. How does that affect NZ? Well for the past 30 or so years NZ has benefited from Made in China products because the many brands we see at the retail shops are American brands (or Chinese knock offs stolen from western technology). If the US goes on a trend to move production away from China, perhaps say nearby Vietnam or closer to the US say Mexico, then NZ is not going to get the benefit. Certainly not the benefit that we have a Free Trade Agreement between NZ & China. Earlier in the year GM announced to exit the NZ & Australian markets by winding up Holden. Many big American names could do the same as these corporations scale down and focus on their core markets. On the other hand, if China is on a path of decline, so will their demand for NZ products such as our dairy. Remember, NZ on a whole is only a 2 trick economy. 1) being our agriculture exports and 2) our tourism.

"In my view, it is always preferable to take more note of what the financia/investment markets are telling us about likely future economic conditions than what economists and politicians are telling us."

He has a point, but he's not saying much. The fact is NO ONE knows the state of global financial markets at any given time. But the obvious is that they are lower than their Feb peak and by that metric, if you're investing for the long run (10+ years), you're never going to lose by investing now. However he does speak a bit about the NZ exchange rate but makes no mention of NZ's monetary balance sheet, and in relation to NZ's massive drop in GDP. Investors don't want to hear what happened - as his graphs show and no one cares if so and so could of done this or that - that's just 20/20 hindsight waffle.

"New Zealand has a unique opportunity to sell itself as a safe-haven sanctuary for global businesses – a “Switzerland of the South Pacific”.

Not gonna happen. Just look at the nations with favourable tax haven status? They're usually developing economies or a nation known for shady practices. Switzerland historically use to be a tax free haven but the recent introduction of CRS (Common Reporting Standard - by the OECD group) has essentially stripped their bank secrecy laws. Even tax free havens in the Carribean islands have lost that status due to CRS. Also NZ's image has always been on the liberal socialist side and paying taxes so happens to be part of that model. PM Ardern would know (coming from the socialist Labour camp) and if you want NZ investment, then you need to start thinking more American like. For example, "The deaths of Americans lives over COVID19 do not amount to the cost of the economic loss in society". For the past 2 centuries the US came out #1 because of their model of attracting wealth and skilled migrants. Very hard for any other nation to achieve that status today.

I'm no expert, but I do find the NZ local view only paints a partial picture when it comes to investing. Follow where the rich go in terms of investing? They're investing in the US equity markets.

[Saamee]

Another very good reminder about The Bear Market personality...

>> https://www.zerohedge.com/markets/le...g-bear-markets <<

[Snow Leopard]

...I'm no expert...

Distilling your post down to the releveant bit.

[SBQ]

Another very good reminder about The Bear Market personality...

>> https://www.zerohedge.com/markets/le...g-bear-markets <<

The lessons of bear markets have not been forgotten. They're just reflected in the state of the economy meaning, in times of euphoria with record high stock prices, investors tend to have funds for investing. Why is that not a surprise? Hindsight thinking says one should sell at record highs and buy at record lows. Yes the layman person gets that but that's not what happens. In major recessions or depressions, there is simply no $ around for those to invest. If unemployment is at 20 or 30%, that's a fair amount of workforce that won't have the $ to invest. I mean you can't blame people for not having $ to start buying at times when they should. This is no different to the managed funds that make similar claims telling people their managed fund is top performing when their inflows of cash are directly tied to the # of those that contribute on a regular basis.

I use to follow a lot of Zerohedge reporting but their quality shifted towards more sensationalism than being factual. Listen to someone more credible here with Ray Dalio doing a TED discussion online on the impact of the COVID19: (and not some fluff from NZ based websites)

https://www.youtube.com/watch?v=yrxYhv2O3wU

[Hoop]

Current status of the Wall St Secular Market Cycle (see Chart) and a very simplistic over-review of what the Secular Cycle is all about...

The current Secular Bear Market has been operating since the year 2000.
Even though it is 20 year old it shows no signs that it is near its end..Although this Secular Bear seems unusually old, Secular Cycles are not time dependent. This Secular Bear has to fall below PE(10) and then do a trend reversal before it is considered dead..this indicates the secular cycles are dependent on distance traveled, not length of time..

Because the cycles are secular (very long term), the crises (both booms and busts) during any secular cycle are considered oscillation noise which establishes the downward trend line points..This suggests the GFC and Covid-19 market crises are just corrective actions helping to confirm the long term (secular) downward trend of this current Secular Bear Market Cycle....Debating and forecasting day by day events or any other major medium term period events in length are not relevant on this forum thread..Its OK to mention them (e.g covid-19) as a possible deciding factor in the long term so we can monitor what effect it could have on a secular level going into the future...The GFC did have a delaying effect on the PE(10) primary downward sloping trend and possibly helped to extend the age of the secular bear..However major noisy events are better written up in detail else on the forum site..

So what's the use of Secular Cycles to the average investor?
Its no use at all for short term investor...It is a long term generational behaviour thing. In saying that many investors consider themselves as long term using Buffett type strategies, but in reality many end up not being so..Many are emotionally driven and unintentionally use the unsuccessful conservative buy near the top (perceived safe to enter due to all the good news and employ a long term investment goal only to sell near the bottom suffering losses and rescue what's left of their capital then precede to repeat the whole thing again ...So the secular cycle stuff is no use to these investors either..This is the reason why Secular Cycles are not on most investors radar and by not focusing on secular theme they don't learn or understand how secular works..

Secular cycles are useful to investors that want to understand stock market physics. It helps answer questions that seem paradoxical or a perception that the market is asleep at the wheel..Questions such as of why investors can be so optimistic/pessimistic/ conservative/speculative consistently over a long periods of time causing the valuations to be (perceived) over or undervalued at the time.. like why the PE ratio can stay so low during an economic boom in relation of the PE ratio being a lot higher during the previous economic boom.
Secular cycles are most of the time a generational thing and the behaviour is not confined only to investors but evident throughout the population as a whole. such as being conservative during the 1930's yet were daredevil risk takers during the 1920's..
1....So its about generational behaviour ,,Daredevil behaviour occurs during the height of secular bull market cycles...an interesting correlation is when PE(10) trends up so does the hem line and song and dance go informal .eg roaring 20's the late 60's and the 90's etc.
2...During periods of conservatism, speculation and risk taking are lowered and this lowers the PE Ratio..This behaviour becomes ingrained and can last up to a generation or longer.
3...To better understand the chart below we know with hindsight that it is not all bad news when the PE(10) line is primary down trending..a lot of Cyclical Bull Markets occur causing PE(10)secondary up trends within the primary down trend such as the recent longest Cyclical Bull market in modern history (2009 - 2020)..Just as many cyclical bull market cycles occur in either bull and bear secular cycles..
Understanding Secular cycles helps expose inaccuracies, such as when a long term normal PE Ratio Chart is displayed and the writer draws an median line through the middle then says that the market is overvalued because the PE Ratio is above the median line..
Also a secular understanding helps an investor creating there own superannuation fund or invest in the equivalent like Kiwi-saver..Basically put, these last 2 decades has not been the optimum time to start superannuation type portfolios. Theoretically the optimum time is at the beginning or during a Secular Bull Market cycle...
3...Predicting the future...How many times how you heard "this time its different"..actually it can be true if that time coincides with a Secular cycle reversion..This time may be different, but not unique as it has happened many times before in history but not during the investor adult lifetime..The secular cycle analysis can confirm this and because it is a cycle future investor behaviour can be predicted to reoccur..As this secular bear cycle is still got along way to fall you can predict that the population ( & investors) will continue to increase their bias on the conservative side (conservatism era)..Conservative investors will be wanting more value/less risk for their money therefore the PE Ratio will trend lower creating that invisible underlying downward pressure on stock prices..Stock price will still rise rises but will have an element of under-performance in relation to their fundamental performance..
4...Predicting the future....Secular Bear cycles that continue to have higher than normal PE(10) as time passes on tend to forecast a period (maybe a decade) of low equity growth..Secular cycles whether bull or bear have no significant effect on economic cycles..The economy performs equally as well under either secular cycle..
5...Although stock prices and Secular cycle PE(10) rises and falls often coincide, you can not look at a price index and indicate an end to a Secular Cycle..Cyclical cycles and Secular cycles are determined by different factors/variables..


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[kiora]

Thanks Hoop
For a minute there I thought we might be getting another bowl haircut like in the Quarantine
http://timothypower.dreamhosters.com...-bowl-haircut/

But apparently not since that was the start of the 80's & bull territory

[Hoop]

Thanks Hoop
For a minute there I thought we might be getting another bowl haircut like in the Quarantine
http://timothypower.dreamhosters.com...-bowl-haircut/

But apparently not since that was the start of the 80's & bull territory

Kiora..
I googled The 3 Stooges.. they started at the beginning of the Roaring 20's (secular bull)...I was amazed they entertained us for 48 years!! (1922 - 1970)..must had been Mo's Bowl haircut..eh .
The Beatles likewise beginning early 60's (secular bull)...
The Mullet became famous with David Bowie, Rod Stewart in the early 70's (secular bear).. I'll say no more.