Forum Archive Index - May 2000

["Derek Watt" <watt250@hotmail.com>]

I think that FFS would be affected if the Nasdaq fell. As would the Dow 
Jones index, and most NZ stocks. I'm not thinking of a few % fall but a 
catastrophic fall which is overdue IMHO. This is my bush-economics rundown 
-I'm no expert ;

I once saw a comparison of risk-premium, expected returns on share price etc 
and the predicted Dow Jones Index. A 1% increase in interest rates, or a 1% 
increase in risk premium for shares had a disastrous effect on the DJI (I 
can't remember the details exactly, but I think it made gave a DJI of 
something like 6000 rather than 10000.)
Since interest rates and the US dollar are rising, U.S. manufacturers will 
find it harder to compete with imports and their profits may suffer. Since 
interest rates have gone up, the sharemarket is less attractive relative to 
the bank. It is harder for companies to borrow thus companies in debt may be 
having difficulties, people with mortgages won't have so much to spend, also 
effecting the profit of companies. Since the wind has gone from the tech 
sector there may also be a lack of enthusiasm from share market punters.

Since the US has been the engine room of the world economy of late (largely 
due to inflated share prices and a false sense of wealth) if its' markets 
react violently and suddenly then it may lead to a global recession. This 
would result in less profit for FFS due to a downturn in log & product 
prices, if the FFS sale doesn't proceed until after the proposed US market 
correction then the amount that FFS will sell for will be reduced.

Having said that I hope it doesn't happen. The resignation of the CEO at 
this time seems odd and I'm not sure what to make of it.

Derek

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