Forum Archive Index - December 2001

["hugh webber" <hugh.webber@clear.net.nz>]

Really depends on to what extent governments are educated enough to
manage their economic cycle. If we're talking about Japan the answer is they're
not. They appear to have passed through Keynesian economics without 
understanding it into attempted Thatcherism in inappropriate circumstances.
The remedy for Japan is very simple but enough to make conservative 
politicians and economists choke: print more money - heaps of it.
With negative inflation, growing unemployment, zero interest rates, large
overseas reserves and assets and huge balance of payments surpluses
their situation is screaming out for it.
Unfortunately they have just trendily made their Central Bank independent
and it doesn't understand the above situation. Lend say 10 trillion yen to
the Central Government at zero interest for 200 years with rollover provisions.
The Central Government then needs to spend up large on housing, education,
health, marginal roads, tourist tracks and accommodation. Really Japan should
be dragging the rest of the world's economy out of recession but the clever 
Japanese are too stupid to see the big picture. Probably why they are not much
good at inventing.
As for the US, cheap money is not enough, consumption or investing spending
impetus is needed. Luckily some of it is coming from the events of Sept 11 and
the War on Terror but probably more is needed and Alan Greenspan has done
his job magnificently but he needs help. Luckily the prognosis is better than 
in 
Japan, Keynesian economics have been absorbed in the US and they're more 
switched on.
But as it was pointed out a growing economy doesn't necessarily correspond 
with a bull market, particularly if P/E multiples are too high already and 
company
profits are not growing again yet.
Which is one of the reasons I prefer the NZ market with much lower P/E's and
more reliable company profits - in selected companies.
So my prediction on logical grounds for the US markets is stagnation and my 
prediction on logical grounds for the NZSE is growth. But share markets 
are only logical in the long run. And in the long run, as Keynes pointed out,
we're all dead.
Still you pays your money and you takes your choice.
And mine is to prefer the NZSE, particularly with imputation tax credits, 
lower P/Es and without any currency exchange worries.
Vote New Zealand early and often, to plagiarise the words of the late great
Al Capone ;-)

cheers,
Hugh

----------
> From: winner69 . <wwinner69@hotmail.com>
> To: sharechat@sharechat.co.nz
> Subject: [sharechat] Somebody else suggests a  bear market is likely
> Date: Sunday, 2 December 2001 20:09
> 
> Further to my post re what might happen in the future some more support for 
> a likely downturn in the markets comes from man in charge of Global Asset 
> Management (in today's Sunday Star Times) -
> 
> "....world markets could increase another 15% into early next year, but 
> could fall as much as 40% after that as the reality of recession finally hit 
> home"
> 
> So that man is undecided but he obviously wouldn't be surprised if the 
> markets fell by 40%
> 
> Capitalist - your husband dismisses the idea of a long bear market as 
> nonsense because he believes a recovery will come sooner than expected.
> 
> I presume he is talking about an economic recovery. No doubt a world  
> economic recovery will happen soon, probably late next year. The US economy, 
> for instance, will probably grow and at a good rate for the next decade.
> 
> What we do tend to overlook is we can have a long term bear market while the 
> economy is still growing. For instance during the 1970's (a bear market) GNP 
> per capita increased by 24%.
> 
> The markets decline because investor's willingness to pay excessive earnings 
> multiples will wane.
> 
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