Of course it isn't a myth, but I could be fooled into thinking this if I had to go on the deafening lack of response, by kumbaya South Africans, to the current decline.
This isn't a posting about, woe is me, it is about the levels of apathy that prevail in our society. Not only are we sinking politically and economically but we delude ourselves by putting our heads in the sand and thinking everything will be okay. Newsflash folks.
Hope Isn't A Strategy
Recently I posted an article about the Global economic decline into hell. I made the claim that the Dow may settle somewhere between 2,550 and 5,270. This projection was made in October and I want to revise this position based on new information.
To make the projection I will use the method of tinkering with the PE Ratio. Markets are essentially driven by earnings over the longer term but the trick is to ignore past earnings and to accurately predict future earnings. Mmmm, a bit like reading tea leaves, but here goes.
There seems to be analyst consensus that the Dow can expect earnings to decline by 15.5% from current levels, so using that let's crunch the numbers.
Let's assume two PE ratios, the average for the last 50 odd years of 16.50 and the PE ratio that seemed to prevail throughout the bear market of the 1970's of approximately 8.
If we adjust earnings downward and we use the PE ratio of 16.50, we arrive at a Dow of 8,564 or an increase of 29.75%, ummm I don't think so. For this to happen would require an improvement in sentiment. The current trailing PE ratio is 11.50 by the way.
If we do the same thing but we use the PE ratio of 8, in other words sentiment continues to decline, we arrive at a Dow of 4,152 or a further decline of about -37.00%.
So perhaps my original projection was too pessimistic but actually none of us really know where earnings or sentiment will settle. The revised outlook looks like anywhere between 4,152 and 8,564. Now here is a titbit for nothing. Over long periods of time various phenomena revert to a long term average, markets display this phenomenon and it is known as Mean Reversion. If we assume that the long term average PE ratio for the Dow is approximately 16.5 then at projected levels of 13.60 this may display slight undervaluation, but for me not compelling enough. So I don't think we have gone far enough yet to re-enter the market. For those of us that have ridden it down, well perhaps there isn't that much further to go.
Finally, what is the significance of the Dow? The USA is the global economic driver, not Tshwane, so it goes without saying that whatever happens to the US market impacts on the JSE.
3 Opinion(s):
If you are lucky enough to get a buyer for your house for the asking price, expect hassles from the municipality before you can get your money out: the municipalities are demanding an inflated advance of an "estimate" of 4 times your average electricity and water consumption before they will allow transfer to take place. And I mean INFLATED; the figure I was slammed with looks more like 6 months consumption. This is sheer rent seeking, earning interest on YOUR money when transfer usually takes no longer than 2 months once all the documents have been signed and submitted to the conveyancing attorney.
Be prepared to have lots of money in the bank if you want to sell your property. I wonder how long it will take to get the balance of the money back after the last metre reading has been done and the buyer can move in. Over my dead body does the buyer move in before the full amount for the house has been paid across of course.
1. Do NOT buy gold!
Those who own the gold have more than enough wealth and you'll only increase their wealth!
2. Do NOT put your money into a major bank!
Those who own the central banks are the very same who own the gold reserves and now, thanks to the "free banks" all folding, also own any surviving major bank.
3. Create smaller "community banks" and put your money in those!
4. Create your own "local currency" which can only be used in your community - this will save you from the international depression!
5. Unfortunately, in order for no. 4 above to work, your taxes need to be spent locally only, benefitting only your own community. Don't allow other communities into your area.
6. Do NOT listen to the likes of Brown who so fear what they term "protectionism"! Protectionism will look after you and yours while anything else will only look after the very same people mentioned in 1 and 2 above!
Avoid this advice at your peril!
"One-world" is over! They went for the Jackpot just a little too soon, and now it's payback! Every little community on their own, and those who consider themselves mightier than the Almighty are finished.
Dachshund, bloody good point. That is something I am still angry about. A couple of years ago I had to lodge the usual deposits with Johannesburg City Power. Of course one of the properties had been a rental, and was in arrears. I first had to pay the arrears, and then make the deposit. Needless to say between the rental property and my primary home I paid out R15k. Then you have the struggle of queueing up in Braamfontein to fight to get your money back. In the end it is basically a tax. You have very little liklihood of seeing the money again.
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