Monday, February 4, 2008

New Zealand Stockmarket bull run: 2011

In a favourite movie of mine from 1987, Wall Street, staring Micheal Douglas as "Gordon Gekko" and Charlie Sheen as "Bud Fox", Gekko has a line in the film that goes something like, "money never sleeps", but you would have to add a rider to that, "except on the New Zealand stockmarket".



Gordon Gekko in Wall Street.


I am being a little bit mean because investors on the NZX have done well over recent years but while most overseas stockmarkets surpassed the giddy heights they reached in the 1980s and recovered after the 87 "crash" our market hasn't even got close to those halcyon days.

Well, apparently there is talk of resurrecting Gordo in a sequel to Wall Street and I believe while many foreign viewers may see the sequel with some sort of nostalgia most kiwis from around their mid 40s upwards will see will see the movie as some sort of horror flick, reminding them of past failure and lost fortunes.

I am constantly hearing from people in this age group when I broach the subject of investing, tell me that the stockmarket is "like a casino" "too risky" and full of criminals and charlatans. Well they maybe partly right on the last count but the sharemarket is a totally different story today.

Companies are largely valued on profit, prospects and management and those terms were mostly not applied to investing during the reign of the Gekkos in the 1980s.

I am 42 and wasn't invested in the sharemarket back then and my only real memory of it was talk around the Wall Street movie and the economy softening and that is where today's piece finally gets to its point.

Sorry about the verbal diarrhea!

While talking with my elders and, ask them what they do with their money(ironically those that lost money in '87 also seemed to have done their dough in finance company collapses, I see a pattern forming here) inevitably evokes the woes they faced with the sharemarket in 1987, I believe that this bogey is going to be laid to rest, given time.

People my own age are investing in companies listed on the NZX and those younger than I are doing similar. Those that were born the year Wall Street came out will only have knowledge of the market collapse from the same year in books or if they are interested specifically in the subject, so I believe the New Zealand stockmarket is in for an exceptionally good run when these younger investors come of age and start investing in the sharemarket as they hit their late 20s, early 30s.

The bull run could come even earlier should those of my own age stop listening to their parents advice and stop pouring dead money in home ownership.

Much of New Zealand's housing "boom" over the last 20 years has been fueled by those risk adverse baby boomers who got their wallets suctioned when they "invested" in companies back in the 1980s that didn't actually make any money, and we can still hear the collective moan from many of them today.

Like investing has always been, there is risk, but that risk is tempered by proper research into what you are buying and quite frankly those that invested in the "paper companies" around in the 1980s shouldn't blame the stockmarket. They should blame their own stupidity, greed, lack of research and understanding of what it is they were buying.

Those that remember Wall Street will also remember and maybe ponder its most famous monologue, when Gekko proclaims:

The point is, ladies and gentlemen, that: Greed, for lack of a better word, is good. Greed is right; greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, knowledge — has marked the upward surge of mankind and greed, you mark my words — will not only save Teldar Paper but that other malfunctioning corporation called the USA.

While there is nothing wrong with a little greed in our lives, those that harbour animosity to this day, to the Gordon Geckos that may have cost them a fortune, would do well to remember it was their own unbridled greed that led them along the path to financial disaster.

Just let it go and start investing in the stockmarket again and save us the lectures about '87.


Related Share Investor reading

"Intelligent Investor" Book review
Financial 101: Learn before you leap
Greed is bad: Geneva Finance folds
It was 20 years ago tomorrow
What happened to risk?
Research, research, research


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c Share Investor 2008