Well done Oliver you make some very good points.
----- Original Message -----
Sent: Sunday, April 16, 2000 7:31
PM
Subject: [sharechat] A jungen's
viewpoint
SORRY IF THIS IS TOO PHILOSOPHICAL, BUT HERE'S A
COUPLE OF THINGS TO THINK ABOUT!
Well, I've been kinda looking forward to this and
my anticipation has been well justified. Didn't experience 1987. I
was still playing with trucks and toy soldiers in primary school and my
parents never had any money so they weren't about to slit their wrists over
losing some. I've taken a pasting in the past week, but lucky for me
I'll be playing the markets for another 50 years so I'm not so
concerned. I just find this interesting, and here's why...
I see fear, read fear, hear fear. Then I
see, read and hear smugness, a little "haha told you so". There's the
explanations, the justifications, the corrections, the criticisms. All
of these are cast around in a pool that resembles a bloodbath.
Why? It's just money!
I sense a few too many criticisms being fired
around, and some rather random assertions. Ril is actually quite right -
at least in my opinion - about the larger nz "blue chips" being
overvalued. When business confidence falls, consumer confidence
falls. Spending is reduced just out of a lack of confidence, and it's a
reduction in ALL spending. Then businesses really feel the pinch as
sales are down, and they have to lay off people (and no employment law is
going to stop this), which means less take home pay for billy-joe and
billy-sue, which means less spending in even wider sectors. Sorry, no
money to take that trip. AirNZ makes one less ticket sale, cuts flights
further, cuts jobs, removes some of the excessive telephony services, gets the
cleaners in one day less a week... anyone who can't see the contractionary
pattern arising here which is very REAL needs to open their eyes a little and
view the wider picture. Yes, random fear and a dip in the stockmarket
actually does cause more than just an "imaginary" paper loss. There are
real losses which then cannot help but feed in to the revenues of the blue
chips and WILL hurt the dividends. Now directors don't like to reduce
their dividends, but IMHO you'll see a few drop in the next six months.
Or maybe in a year. They will drop unless the psychology that's
driving all the selling is overborne by psychology that drives confidence back
in again. This is what I find interesting - that something as intangible
as psychology can have such a profound effect on economics. The question
then is "can economics have a countering effect on psychology?"
This market correction is big enough to warrant a big drop in interest rates
by the Fed in the States and the RB here. I actually think Alan
Greenspan will announce a drop in the next seven days. If he doesn't,
I'm afraid I'm thinking there will be a prolonged depression. Why should
I be interested?
There's only two things certain in life.
Death and taxes. Oh to be a funeral director or tax lawyer in times like
this. Sorry, my smugness might be coming through.
On the positive side? Perhaps this will be
the catalyst for an increased commitment to saving in New Zealand. One can
only hope Labour will take this opportunity to start thinking seriously about
forcing people to save money for their retirement given the correction in
investment valuations. Bringing in a compulsory scheme now, I'd say
there's less chance of people being stung by fund managers screwing up, which
was an underlying factor why National pulled their support on Winston's
plan. Of course a better scheme needs to be devised - despite all the
good a scheme would do, Winston's was a financial dog (I liked the idea in
theory, crunched the numbers and saw the bleeding obvious), but that's a
different story. RIL - what do they do in the UK for superannuation
provision? (And please be nice Ril - I'm very interested in your
comments but they are rather too inflammatory for others sometimes and I'd
hate to see you censored off entirely)
The jungen.
See IRG research reports
