Forum Archive Index - July 2002

["Maria Smith" <smith@ps.gen.nz>]

Within the next 6 months war will have been declared against Iraq and this
will add to the present gloom. Doesn't look good for world markets.

Greg Smith



-----Original Message-----
From: Christopher Scott <christopher.scott@clear.net.nz>
To: 'sharechat@sharechat.co.nz' <sharechat@sharechat.co.nz>
Date: Wednesday, July 24, 2002 12:21 AM
Subject: [sharechat]


>Firstly a snippet from Allan Greenspan in 1996 when the DOW was under 7000
>- He warned of "irrational exuberance" in the market.
>
>Big question: Is it still there?
>
>My view: Absolutely !!!
>
>My Reasons:
>
>1. If indexes do reflect the "value" of a market (this is open to debate)
>then what's the difference between 1996 and now? Not much I feel except
>perhaps one very, very significant thing - There is serious distrust in all
>things reported. This distrust has now extended itself to the cornerstone
>of the markets - the big Life and Mutual insurers. You know the guys who
>own and manage the majority of stocks in the market and make individual
>claims like "400 billion dollars of assets under management". The question
>comes back to valuation - is this real value/worth or is it just on paper?
>
>2. The multiplier effect. When you deposit $1 in the bank, the bank is then
>able to lend, not just your dollar, but a multiple more based upon the
>"guess/prediction/bet" that you'll probably not need it for a while. The
>same can apply to corporations with over inflated share prices - they use
>the same principle - until the bubble bursts and their share price plummets
>(if they're lucky, if they're unlucky ? Enron, WorldCom, etc). Now what
>happens if large number of people have used their shares as asset backing
>to loans? A serious contraction of the money supply and continuing
>recession? Central bank response: lower interest rates. It was enough after
>9/11 but will it be enough now?
>
>3. Was it real growth between 96-2001? Or another way of looking at it is
>to ask the question: What has really been produced in the Dot Com era that
>was of real value? Billions of web pages built at highly inflated prices
>because of the severe shortage of trained secretaries! (No disrespect to
>secretaries intended it's just that with a couple of days training the vast
>majority of web sites could be developed and managed by secretaries).
>Static web pages are little more than brochures and should not be valued
>much more highly. No - the amount of real value created in the dot com era
>was actually quite small. Truly useful software takes a considerable time
>to develop and I'd argue that the entire process has been interrupted
>(slowed down) by the dot com era. Yea, yea, you can buy internet enabled
>software everywhere - problem is that it's underlying architecture is
>routed 7+ years ago and it (the software) doesn't even understand the
>complex relationships that can be enabled by the internet. In summary the
>question is: How many companies are valuing (or hiding) out-of-date,
>non-productive web investments as assets on their balance sheets?  Too many
>I'd suggest!
>
>4. The NZ Bourse: Is it really as immune as it appears to be? Nope - It's
>coming here too it's just that investors here are fooled by Telecom's
>apparent immunity to the forces that are affecting every other telco but
>Telecom dominates the NZSE40. My view is that Telecom needs to seriously
>write down its assets related to copper under the ground as it is seriously
>under threat from the airwaves. There doesn't appear to be pressure to do
>this. Why not? I'd argue that setting up a competing network based upon
>wireless technologies could be done very quickly and inexpensively
>(relative to "assets" that telecom thinks it has in it's copper network).
>Or phased another way: How much of the $5 billion TNZ reports as assets
>will need to be written off to reflect it's true value? In Summary: If many
>other companies are valuing assets like Telecom does, then their asset
>backing is overstated and they will be forced to right down these assets as
>Telecom will probably be forced to do.
>
>Enough raving . . . Time will tell where the markets will go and whether my
>(partial) analysis is correct.
>
>Anyone else got thoughts on where we'll be in 6 months time?
>
>NZ Bourse -  a correction coming? (Thank God we'll have Helen at the helm
>to deal with it - Bill can believe all he likes but I think he'd probably
>fall apart ;-)
>
>
>
>
>---------------------------------------------------------------------------
-
>To remove yourself from this list, please use the form at
>http://www.sharechat.co.nz/chat/forum/


----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/