Sunday, May 25, 2008

NZ Stockmarket set for discontent Winter and Summer

Pressure on the New Zealand stockmarket has been coming from the global credit squeeze and the subsequent fallout from that but negative influence from the local economy has also held sway.

We have seen over 10 finance companies collapse over the last 2 years and the local real estate bubble has started to deflate. A record number of people losing their jobs in the last quarter, negative consumer spending, the lowest ever business confidence index and pressure from ever higher food prices, sustained high mortgage rates, record oil prices and continued reckless government spending forecast in the 2008 Budget don't make for a pretty picture at all.

The New Zealand stockmarket has held up reasonably well to this news over recent months but these economic influences are going to impact on real company results come next reporting season.

We have already seen retailers report their latest profits for the March year and few did well, clearly things look even worse for these retailers come October.

Discretionary retail spending is one thing but impacts are going to be felt in every sector of the market; building, real estate,infrastructure and agriculture, but a few. The only listed companies unlikely to be affected at all are our electricity energy retailers and generators-we still need to heat our homes as we hunker down for this winter of discontent.

Long overdue tax cuts come October 1 are too small to stimulate our economy very much, and perhaps the only thing they will stimulate is inflation and therefore mortgage rates because the tax cuts don't come hand in hand with government cost cutting-very important when you have tight economic times.

I don't pick market bottoms, it is almost impossible to do and it can get awfully smelly if gotten wrong, but hopefully if you have picked your portfolio well and add to it as the bargains come then you will be well positioned when the upswing comes.

Mine is still around NZ$25,000.00 in the green but I'm still prepared to get into the red when the proverbial really hits the fan.

Lets hope the spray back doesn't hit a full blown gale!

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