Disclaimer

Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. I do make mistakes, but I try hard to do my analysis thoroughly, and to make sure my data are correct. Remember: the unexpected sometimes happens. The expected does too, but all too often it takes longer than you thought it would.

The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

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Wednesday, June 22, 2011

AMP sees shares as "very cheap"

Chinese IP, yoy % change

My mate Shane Oliver at AMP, who has a good record and is I think one of the better analysts around, reckons that Ozzie shares are "very cheap" right now.  I agree.  In fact, setting aside the GFC (which was exceptional), they haven't been this cheap for two decades.  Of course that doesn't mean that they'll go up in the next few weeks, but it does mean that on a longer-term, say 1 year perspective, the risks are all on the upside.

The US isn't that cheap, though, not unless you believe analysts' EPS projections.  Which I don't.

China PMI (net % positive)

The China outlook is key to the whole global recovery.  If China falls into recession, we are in very serious trouble.  Here's what Shane has to say about China:

First, thanks to slowing economic and money supply growth and a topping in food prices, inflation is likely to slow over the next six months allowing the authorities to take their foot off the monetary brake. Second, while excess housing is apparent in some cities and in some categories, overall China has not been building enough houses so fears of a property crash are way overdone. Third, China will likely support its banks should the investment loans associated with the 2008-09 stimulus go wrong. Finally, given the risk of social unrest Chinese authorities will do all they can to avoid a hard landing. And in a semi-command economy with very low public debt and huge foreign exchange reserves, they have plenty of fire power to do just that. So far while growth indicators have cooled, there is no sign of a hard landing.
 In another piece in The Age, another analyst suggests the commodity (and therefore our own Ozzie) boom will continue for at least a decade.  Well, maybe.  I've heard these sorts of long-term predictions before.  They've usually been wrong.


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