Forum Archive Index - June 2002

["Richard Hooper" <hoop@ihug.co.nz>]

Doom!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

I mentioned on sharechat a couple of months ago that the DOW with an av of PE 40 was above the PE average of the last 50 yrs of PE av 8!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  Not much of a response then as the shareprices were rising after the initial fall. However the sitituation MUST CORRECT itself .....and attention to the problem always seem to occur when it is TOO LATE.     The DOW  seems to be PE20 with the latest stockprices at present.( 2 years into the correction phase) 

 

Remember that to av PE8 it must get to below 8..........Several ways that can happen

1 .....crab market......index prices stay the same for many years and the increase in profits decrease PE figures.

2......bear market...... Gradual fall in shareprice over a lengthy period to decrease PE figures

3......neither ...continuing shareprice increase combined with a much more increase in profits.

4.......CRASH   ....get it all over done with in a hurry.

 

Remember that with a bear market many stocks will increase in value (  Re:-Buffet late 60's-early 80's)

 

NZSE  PE av not sure.. but there are many growth stocks below 10 .....Therefore this latest drop in NZSE prices is due to stampede behaviour . The Dow has a long way to go to reach bottom ..maybe 10 years if prices don't fall ..maybe 1year if there is a 1928 wall st crash  9100 to 2300  ..PE 20 to PE 5. or some remedy in between.  

 

Remember corporate profits are falling in USA which adds to the correction problem. 

 

Effects on New Zealand??........... NZ never recovered from 1987 so we have not got the hyperpriced stocks like the USA had... NZ never reached the upside so it  can never match the downside of that of the USA ...therefore combined with NZ corporate increase in profits above the rest of the world ..forcing our PE figures downwards + increasing $NZ ( 0.25% int rate incr to come)...we are looking like an increasing attractive investment haven, even more so now with the shareprice correction.

 

Prophecy.......?????.... ( self fullfilled)...  TA  investors and Brokers alike  are in selling mode pushing down prices triggering stop losses...unjustifiably so, as we do not have an over priced market ( more-likely an unpriced market) 

 

I like this .....as a long term investor using FA rather than TA in this type of situation, it is a time to buy  ..

 

I said on sharechat  last year  2002 would be the year of the tree  I bought the out of favour CAH at $1.50 ..I did not get any replies to my post as sharechatters were too interested in spending their time & money on the likes of CER SPE FFS ITC ....... So they will probably not listen this time neither.

 

Now it seems sharechatters are selling out due to the inefficiencies of using TA as their only tool ( hence self fullfilling prophecy)........This is a sorry situation and I hope that we investors do not lose out .( don't get me wrong TA is an useful tool when used properly).

 

As for me ...I am drinking champagne..... I have  never followed  the herd in a stampede.... I always pick up the pieces after it  using both TA & FA analysis as tools of the trade.

 

 

Happy landings

HOOP