Secure Offshore Investment Fundamentals
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Written by tolumi
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Friday, 05 December 2008 15:42 |
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Secure Offshore Investment Fundamentals
Whichever way you look at it, the stock market fundamentalists have had a lousy couple of years, and the markets are asking them how they could possibly have got it so wrong. America’s economy is now moving into record territory with an unbroken 107-month run of growth that beats the last record (106 months, from February 1961 to December 1969). The Dow has very nearly doubled since that historic day in December 1996 when Federal Reserve chairman, Alan Greenspan, first told the world that Wall Street was trading on “irrational exuberance”, and that the next move ought to be down. The cyclical global economic slowdown of 1998-99 simply failed to materialise, even though the Russians, the Latin Americans and the East Asians all did their best to help spoil the party. Secure Offshore Investment Fundamentals - Appetite For BondsAnd still there isn’t any appetite for bonds. Average worldwide yields have risen by more than 1.7 percentage points in the last 12 months (and by more than 2 percentage points in the USA). The bond/equities yield ratio (a comparative measure of popularity between bonds and equities) is getting on for double its traditional average, with a staggering 3.5 figure, which tells us that investors are more stock-crazy and less safety-minded than they’ve been at any time since the months just before the 1987 stock market crash. The current price-earnings ratio on the Standard & Poor’s 500 is nudging 40 - compared with 27 just before the 1927 crash. Tokyo’s p/e is on 80, almost the same as it was in late 1989 before the Tokyo crash. So why aren’t the alarm bells ringing now? Secure Offshore Investment Fundamentals - MarketsWell maybe they are, but maybe nobody’s listening. Then again, maybe that’s because the markets intuitively know that the world has changed its shape since the last time we had a crisis, and that the best thing we can do is to throw away all our investment textbooks and start again. Whisper it quietly: perhaps the present state of lunacy is sanity in disguise. But that’s a bit of a big statement to make this early in the day, and we’d be falling down on the job if we didn’t at least try to substantiate it. So let’s run through some of the things that seem to make today’s investment situation so different from the way things used to be. You never know, we might learn something useful. 
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Last Updated on Tuesday, 06 January 2009 13:44 |
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