Forum Archive Index - June 2002

["winner69 ." <wwinner69@hotmail.com>]

For all the reasons mentioned a huge sell off is under way in many of the 
worlds markets. In the US it is not just the high proportion of overseas 
inveators taking their money out of the market but the locals as well.

The overseas punters are doing so because they see no reason to invest in a 
losing market and take currency losses as well. The locals moving out of a 
stuffed sharemarket and putting what they have left into physicals such as 
gold and houses. Human emotions are major driver of market sentiment.

The last bull market in the US started`in the early eighties after a period 
of 17 years when the DOW hardly moved. Shares traded at very low PE 
multiplies (about 10 and way below historical average). Because of so many 
years of no real returns the sharemarker was completely out of favour.

You can sympathise with the two Nicks view. Maybe they are seeing history 
repeating itself. Maybe they see another bear market that lasts 17 years 
like the previous one. Maybe they can see the times when all hopeful punters 
have deserted the market and the market is again trading at low multiplies.

We are not insulated in NZ. Hugh's summary the economy is not all that 
positive. In addition if world markets gradually (or suddenly as one Nick 
suggested might happen on July 4th) decline to below historical valuations 
we will follow.

By how much would we follow. Even though we might be horrified at the S&P 
valuation of 40 times earnings the NZ market is also presently trading at 
historical high levels. The good (relative) recent performance of the NZSE 
overcooked the situation?

The NZSE10 for instance is valued at 21 times forecast earnings (mean of 
forecast earnings taken from datex). Big expectations built in to these 
prices? - maybe so on Hugh's economic summary. If the NZSE reverted to 
historical valuation levels a fall of 30-50% from current levels would not 
be surprising.

Suppose all we can do is live in hope - but individually manage our own 
position from a risk perspective.

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