It may just be misplaced Australian confidence built on our resilience to deal with floods and fires that leads us to believe we can get through this unscathed.
Feeding into that is the fact that a fair swag of the Australian population has not lived through a recession and has no idea what’s about to occur.
And there won’t be a mining boom this time around. China is not going to bail us out like it did during the global financial crisis or what Americans call The Great Recession.
The economic snapback once forecast by the federal government does not exist. It’s a myth. There will be a recovery in growth but Treasurer Josh Frydenberg pointed out this week that we have unemployment somewhere around 13% when all the people on JobSeeker are accounted for.
That is a giant hole in the economy.
A worrying report from Vesparum Capital this week showed that since March, Australian retail investors have pinned their ears back and thrown $9 billion into share investments.
At the same time, institutional investors have sold about $11 billion.
By way of explaining that, anyone with a bit of experience in the markets will tell you they are ruled by fear of missing out. Retail investors, the so-called mums and dads, experienced FOMO in March when stocks looked cheap and followed the herd into the market.
But stocks were cheap because institutional investors, the smart money, was experiencing fear and running for the exits.
This is no longer just a confidence blip. The markets have run amok.
A great example of this is Afterpay. It seems like a good company but it may also be a classic example of a speculative bubble.
Afterpay is currently valued at about $20 billion. Before the lockdowns its shares were around the $40 mark. Now its shares are above $70 each after falling to $8.90 when things went awry in March.
Even its founders, Anthony Eisen and Nick Molnar, have sold down their stake and why wouldn’t they?
Any smart money on Afterpay is there waiting for the suckers. Sure, speculation can be good, but this is not based on a sound investment strategy.
That’s not to say the company isn’t doing terrific things. It just means that it’s not worth anything near $20 billion.
History is littered with these examples right back to the tulip bubble in the 1600s. We never learn.
So when you hear your mates telling you that this is just a flu and you should throw everything at the market, walk away slowly, don’t make eye contact.
This article first appeared at InQueensland.
The “Market” has never been an indicator of the state of the world’s economies and societal wellbeing.
It’s even worse than you can imagine. The Stockmarket is now a schizophrenic, tantrum throwing juvenile. Anyone with money in it is taking risks much larger than they understand.
What’s worse is that it is propped up all this time by vast amounts of superannuation every fortnight in ‘default’ investment settings that are very high % Stockmarket.
If you have less than 5 years to your retirement you really should be considering your investment weightings. Last year I changed my investments to 100% bonds, partly because of inherent risks (pre-COVID) and partly because I intended to retire within 18 months. The share market was 6400 when I got out.
Now, having been forced into a slightly early retirement I was aghast at the recommended investment mix put forward by my superannuation adviser (paid plenty for terrible advice).
First they ignored my stated intention to have no exposure to the share market and then were surprised when a Myers/Briggs style questionnaire showed that my risk profile had reduced from 2 years earlier, then recommended 25% share market exposure. It was as dumb as it gets.
So super funds (an industry one at that) were pumping up share market exposure for everyone, even retirees who say they wanted none. This is now a vast ponzi scheme. A friend who retired late January, while the share market was irrationally exuberant and COVID was well on everyone’s radar was also recommended a high % of exposure to the market, in spite of the fact that a large market fall early in retirement is your worst case scenario.
All they would say to me is “you can’t time the market”. Such glib advice. Especially given the fact that so many have, including me a year earlier, and that all the institutional money is getting the hell out.
“what LAYS ahead of us”
Chooks? Brickies? Aah, stock-market bettors.
As I stated in reply to Kishor’s latest, functional literacy is not a prerequisite for a gig at Crikey.
It often seems to have been written by a badly programmed, knock-off Turing machine.
Last year the UK Telegraph (aka Torygraph) admitted that it had testing algorithm written items in its News in Brief columns.
This had been noted in Letters on & off for a year or so but was never acknowledged nor denied. Undaunted, the company announced that in future this system would be used to write full articles.
That’s a bit harsh, Audioio: it’s functional as as long as it can be understood and I did get there in the end.
I wonder if it will metastasize across new boundaries, “We knew he was laying because his lips were moving.”
Anyway, it is cause for celebration when any publication gets it right: Crikey, The Age, The Guardian, any USA outlet, it doesn’t seem to matter.
Don’t blindly follow the index but individual stocks and sectors, for the medium long term. If needed for short term (while keeping most powder dry), invest in value reflected by income, future earnings, debt/cash, health of sector/market, quality of management etc.; few and far between at present….. though ASX is not as overvalued compared with the US markets…..
“This article first appeared at InQueensland.”
Who owns InQueensland?
What is the difference between it and Crikey?
A very good question –
https://inqld.com.au/about-us/
It seems to be ex Morloch hacks & wannabe moguls.