FYI | Dec 23 2015
By Peter Switzer, Switzer Super Report
One of the greatest characteristics of the media worldwide is that it has a pretty ordinary sense of history. And many big media directors — particularly in news — surprisingly don’t have a great memory!
While this is something I know after working in the media now for over 30 years, it never ceases to amaze me when I see experts, such as Niall Ferguson, still getting columns in newspapers such as London’s The Sunday Times. Not that he is an intellectual dud being the Laurence A. Tisch professor of history at Harvard and a senior fellow of the Hoover Institution at Stanford.
He is smart and when the GFC hit he was everywhere, on the ABC with a scary documentary, at conferences where he would have been paid thousands to tell us a whole pile of crap that would have cost anyone who listened to him and failed to invest in the stock market in 2009, 2010, 2011, 2012, 2013 etc.
Sure, the last two years have been ordinary but given where term deposits rates have been, the dividends and the small capital gain over the last two years has meant the doomsday merchants, who were predicting everything from the Great Depression Mk II, to rampant inflation from QE to economic Armageddon, have been wrong.
Since March 2009, our local stock market has delivered capital gain of 65% and with dividends for seven years. You might be up 100% since the 50% stock market fall associated with the GFC. Of course, it depends on how good or bad your portfolio of stocks is.
As I sit in Paris, intent at looking at some “outrageous predictions” for next year from the chief economist at Saxo Bank, Steen Jakobsen, I was distracted by The Times piece by Prof. Ferguson entitled “The Fed awakens but Jedi Janet has no idea whether the dark side is defeated.”
Like all experts, they like to think they know better than the people they bag — hey, I might be accused of doing the same thing! — but in this case, I’m taking sides with an economist in Janet Yellen against a historian in Niall Ferguson. Why? Well, I think what the Fed did with interest rates was an economic thing. And, given where the likes of Ferguson was predicting economies were heading seven years ago and what actually has happened (largely due to the kinds of monetary policies that the Fed and our RBA have introduced to avoid a Great Depression), he really should shut up.
Sure, there might have been a better way but no one knows what it was. And it did bring a 200% rebound of the US stock market and unemployment is heading down. And those, like me, who backed what the Fed did have seen their followers do pretty well out of being a believer that stayed long stocks.
I have always felt for those who lost 50% of their portfolio’s value in 2008 and then went to term deposits after listening to these negative scaremongers and missed the early bounce of the stock market!
I’m not happy with this year’s effort for stock markets but these tough years can happen in a bull market and I’m betting 2016 turns out to be better than 2015.
The Saxo Bank chief economist puts out these outrageous forecasts each year and many of them are pure rubbish. Last year, he predicted the ECB’s (European Central Bank) Mario Draghi would resign but Steen is not an economic nincompoop. He’s an economist, not a historian like Niall, and I do like some of his calls for next year, which should help our stock market, if he’s right!
Here are the ones I like that are supported by other respectable forecasters:
• The race to the bottom has gone full circle, meaning we’re back to a weaker US dollar again as the direct outcome of US interest rates policy and Steen thinks the euro rises. This weaker greenback will help raise commodity prices, which will help our big miners and our S&/ASX 200 index. This weaker US dollar in 2016 view is supported by Morgan’s chief economist, Michael Knox
and other serious greenback watchers and I hope they’re right!;
• OPEC turmoil takes the oil price back up to $US100 a barrel, which you’d think would be bad for the world economy. However, given the negative effects of the lower oil price, anyone wishing for higher stock prices has to want higher oil prices; and
• The rouble goes 20% higher (which I couldn’t generally give a toss about but it would be on the back of a higher oil price, so I will root for that!)
The other seven outrageous calls from Steen are either silly or of limited consequence for stock prices, so I’ll ignore them!
Let’s be frank, we started 2014 at 5352.2 and we then started 2015 at 5411. So, as we started today at 5106, we’ve had two ordinary years. We could add a couple of hundred points over the next week but it would only be a bit of nice window dressing.
The news hasn’t been great for stocks but we nearly hit 6,000 earlier this year. If we can get some better economic data, followed by better earnings data, we just might see a better year for stocks.
The US presidential year is historically good for stocks and despite the ordinary work by prophets of doom, I’ve found that the ‘muddle through’ thesis has a better record than experts like Niall Ferguson and media commentators.
These people have little skin in the game and are theorists and, generally, are better ignored.
Let’s keep our fingers crossed for 2016. I assure you I have skin in the game and I’ll be adding more as the year goes along.
Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.
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