Are we there yet?

Has the stockmarket and wider economy in New Zealand and abroad made a recovery as many commentators have pitched or are we in the middle of something that we don't really have any idea about what will happen?

Well, it depends on who you read, watch or listen to.

I am of the strong opinion that in New Zealand we are in a middle of a downturn that could go either way depending on the reactions to economic conditions.

So far that has included pumping large amounts of borrowed moola into financial institutions and other quasi Government diaspora in order to smooth out the financial bumps and "rescue" us from the worst parts of the recession - the opposite of what we should have done and what got us into the economic toilet in the first place.

This has kinda worked if one doesn't go deeper than a politician looking in the mirror but of course it really is a false economy because in order for a sustained crawl back into the black these "stimulus" packages need to continue and in order for that to happen we have the have the Chinese saver ready and willing to continue to have their savings plundered in order for our emperors keep their clothes.

Is that going to happen? clearly not and when we stop gorging off the hard work of the Asian region we have to eventually pay them back and that is when the hard part comes.

All our money going into paying back what we owe not on stimulating the economy, boy its a circular thing aint it?

Many will know that I am of the opinion that those that took the big risks (individuals and institutions) and made the big money should have been left to fail, for that is the natural order of things and of course teaches good life lessons along the way. If we had left things to collapse we would be on a sure upwards trend in terms of the economy and not the present shaky, socialist type unsureness that we currently find ourselves wallowing in.

Our bailouts, stimulus packages and taxpayer funded car and house purchasing is simply delaying the inevitable downturn. When that happens I do not know but it will and will make the current financial melee look like a walk in the park by comparison.

We will get to our destination in the end though, wherever that is.

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c Share Investor 2009

Letters from Bangkok: Business is Still Hot

Greetings from Bangkok, I am back here in this very busy city to do a bit of personal stuff and look at the way Thais do business as well.

I have to say from what I have seen so far, the global economic slowdown has yet to dampen the Thai's natural entrepreneurial spirit. Having said that there is political debate over a very large so-called "stimulus" package - you would have thought the Thais would have learnt from the failure of every country's respective bailouts that have thus far pumped trillions of borrowed money into failing economies.

Everything is constantly pumping and everywhere one looks, even in areas of abject poverty, people are selling things; whether it be rice, tyres, cars, rags or tummy tucks.

Bangkok really is a paradise for a healthy capitalist like myself!

The Thai Stock Exchange Index closed at 644.2 this last Friday, according to the Bangkok Post , up more than 50% over the last 6 months alone, and one could expect, like other world indexes, including our own NZX, this kind of market over-exuberance is not a sustainable one given the fragile nature of any perceived global economic recovery.

I am going to visit the heart of bureaucracy tomorrow, Embassy row (the Kiwi Embassy and red tape machine on the 15th floor of a very flash downtown building) in downtown Bangkok and plan on taking a look at the operation of their stockmarket as well.


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c Share Investor 2009

Get me a Mogadon already, I'm over-stimulated

I wasn't going to write anything else about the state of the economy, In April I was getting bored with the relentless bad news; stockmarket plunges, company collapses and endless Government "stimulation" plans to resurrect economies all around the world and I thought I would devote my writing to getting down to the day to day business of the operation of the stockmarket and company performance.

Oh how things have changed.

Gee, now that the economy is improving, I thought I would have another go at telling you what I think about our economic situation and the apparent green shoots that are now starting to turn into large bamboo poles.

All the signs are that a large number of global economies are improving, economic indicators are up, banks are doing better, company profits are consistent with forecasts, manufacturing looks like it might have reached bottom, more cars are being sold (mmm), all is rosy with the world and Elvis and Michael Jackson are recording a duet in a Burger King somewhere in Kentucky.

This may indeed all be happening, but if you ask yourself why, then you might find yourself uncovering more questions than you answer.

This apparent lazerous turnaround in our collective economic fortunes -it isn't even a very strong one but people are behaving like it is-is linked to one thing and one thing only, the shit load of money that Barrack Obama and his progressive mates the world over have dumped into their economies.

But that is a good thing and its real right?

Well, no is the answer to both of those questions.

I have pointed this out before but this money is being printed by various central banks worldwide and some of it is borrowed and eventually it is going to have to be paid back.

That means higher taxes for those that are working, the middle classes primarily, and more wealth used to service debt and less productivity, in other words another recession sometime in the future or a continuation of the current one.

Socialism doesn't work, borrowing money to give to people to buy cars, shoes, computers, purchase imaginary carbon credits and flat screen TVs may seem like a paradise that keeps the wheels of commerce greased but what it actually does is put off the inevitable.

I really hate to be a pessimistic little bastard but we should all be very skeptical of these signs of economic recovery because they hide the fact that it is based on a lie and is not sustainable in the long run.

I know we have been stimulated to the point of a straight jacketed stupor but we really should ditch the over-priced Starbucks, cigarettes and borrowed moola and wake up.

Dont get me wrong, economically things are going to get better and business is doing OK, we just have to "get on and do it". But its time for careful rethink when it comes to the signs that things are all rosy again.

They are not, and we should learn not to get carried away with it all as some of us are currently doing -the big bounce in global stockmarkets is evidence of that.

Cautious optimism is needed.

Back to stocks again tomorrow.


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c Share Investor 2009

Alan Bollard Speaks, but who is listening?

He was wrong about hiking interest rates and he took far too long to drop them again. Now he needs to start raising interest rates but still no sign of that. Last year Alan Bollard, Reserve Bank Governor, also said the recession was over.

How can we then take seriously Bollard's claim made today that:

"New Zealand is likely to begin recovering from the global financial crisis ahead of the pack".

NZ Herald 14/07/09

I am not sure what he is pointing as to evidence of this rather bold claim but his track record is littered with inaccuracies and bumbling wrong moves with a penchant to be somewhat Schizoid.

Is this supposed to inspire confidence for the average kiwi?

The stockmarket didn't believe a word of his pronouncement, rising only a handful of points when the large DOW movement up overnight indicated there should have been a good rise on the NZX today.

More astounding and confusing remarks today from the Gov given his decree last year that the recession was over:

"We appear to have avoided a repeat of the Great Depression. After the plummet in activity through to early 2009, production seems to be stabilising (Europe), to have stabilised (USA) or even turned around (some Asian economies)." NZ Herald - 14/7/09

But didn't he say late last year that the recession was over while we were at the height of the US banking collapse and hasn't the recession continued until the present day?

Well, yes he did and it has:

However, Bollard indicated at a press conference today that he thought the recession in this country was already over.

"If you want to be technical about it we believe the recession has ended and we have positive but very low growth for the next four quarters. It's only towards the second half of next year that one can be sure that we're getting solid growth," he said. "Those numbers in New Zealand can jump around and historically they tend to improve rather than getting worse.

Bollard said the recession was actually quite shallow and a lot shallower than in the past.
Stuff.co.nz - 4/12/08

What the...?!

So if you cant decide from day to day how things were, are, or are going to be Mr Bollard then how are we expected to decide? It kinda makes you wonder of the relevancy of a Reserve Bank Governor in the first place.

Why not let the market decide what interest rates it wants, it would at least be more accurate and reflect market conditions far more competently than a soothsayer.

Best leave the fortune telling for the Woman's Day.


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c Share Investor 2009