Forum Archive Index - June 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

That was an excellent post, Peter!

 

I knew that the US firms had been borrowing heavily but I did'nt know that the total debt to equity ratio had gone up from 84% to 116% durring the last 15 years!

 

Obviously, this ratio will be a lot higher for many firms; I read that quite a few non ' dot com '  companies were in strife and dread the day, consumers lower their spending drastically.

 

I believe that many US firms are starting to cut back on capital expenditure.

 

One can keep on lowering interest rates but if these consumers, who, I understand, are responsible for two thirds of the US economy, won't spend, then the positive effects of a drastic lowering of interest rate will be diminished.

 

We have seen what happened in Japan. If the companies cannot repay their capital borrowing, then the Banks will be tightening up on their lending!

 

When I was referring to holding NZ cash, I meant short term interest deposits, obviously.

 

Nobody is willing to seriously predict, which way the official interest rates are moving - they ought to come down -, but we all know that dr. Brash' actions with regard to interest rates cannot be predicted!

 

As you say, PE levels in NZ are rising. ' Fortunately ', a lot of this is due to impending or perceived large stake building or takeovers, I think.

 

Just about every worthwhile company has been mentioned at some stage in this context.

 

Perhaps some  60% of the increase in PE levels is due to the real - or perceived stake building or takeovers going on. Who knows? 

 

Theoretically, this effect should be lessening once the new legislation takes effect on July 1.

 

However, it may only be marginal; the combination of a low NZ dollar and some remaining desirable assets wanted by foreigners, can only cause more stakebuilding or takeovers!    

 

Your posts certainly force thinking people to take notice. But what else can we expect from the - in my opinion - most versatile writer on this Forum!!

 

Regards,

 

Gerry