Forum Archive Index - August 2000

[Brian Gale <brigale@i4free.co.nz>]

I'd go along with the extract below Ben. I shudder to think where the NZ 
market would be without some return from one's investment - we sure don't 
get much  back in capital value. I cannot agree with the article  "High 
dividend  culture sees shareholder wealth erode "  At best this is an over 
simplification at worst it is a ridiculous statement.

Market capitalisation (shareholder wealth)  is share price x shares issued. 
The value has fallen because prices have fallen.  To say prices have fallen 
because companies pay dividends doesn't make sense to me. Take our high 
flyer BCH - they pay high dividends and have the highest P/E.

By and large the NZ share market hasn';t really recovered since 1987 and 
the reason it hasn't recovered is lack of confidence, in other words pessimism.

This, to me,  is the overriding factor in the malaise...............Pessimism.

For share prices to climb there must be optimism i.e. hope that the Company 
will do better in the future.
In the USA we see this optimism taken to the nth degree and prices skyrocket.

Because of our pessimistic outlook, the number of  personal investors per 
capita must be very low. So there just aren't enough people wanting to buy 
shares to keep the prices moving. Overseas investors pull out because they 
don't see local support

And many of those who do invest seem to be afraid of an imminent crash. 
Fearing the NASDAQ will send us bankrupt.  If our Market is worth anything 
at all why don't we have more confidence in it ?

Of course having said that we have to look at the broader picture which 
isn't very bright.
         Bad government
         Unsustainable Welfare
         Horrendous personal debt  (No wonder Baycorp does well)
         Poor savings. Joe Blow wouldn't have money in the bank never mind 
the Sharemarket.

Sorry, I don't know the answer, as to how the change from pessimism to 
optimism can be achieved.
It is a classic Catch22 situation.
BG

At 14:33 03-08-00 +1200, you wrote:
>But, on the other hand, some have argued that it is the dividends that NZ 
>companies pay that is actually keeping the NZ market alive.  Stop paying 
>dividends, it has been said, and NZers will pull their money out of the 
>market, dragging down the NZSE from its current flat-line state.


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