Business News

Do I deserve a bagging?

| More

by Peter Switzer

Do I deserve to be bagged? This was the gritting question I had to ask myself when a reader/viewer called Dave gave me a right bollocking after yesterday’s blog entitled “I Just Could Be Right!”

He reckoned I have recently introduced the word ‘could’ into my blogs, which quite startled me because I have always agonised over my lack of confidence in boldly predicting that we will keep heading up on the stock market. I have nearly always argued that I’m cautiously positive about stocks because I believe in the muddle through thesis, but I’m aware we have had obstacles that prevent me arguing the worst is behind us.

A number of concerns

Nowadays, they are the EU, with the likes of Spain and Greece a worry as well as China’s slowdown and how bad is it? And then we have the US election and the fiscal cliff.

Before that there were concerns over the US Congress sorting out debt and deficit issues, whether the European Central Bank (ECB) extends the euro money supply, and of course there were questions over QE1, QE2, QE3 as well as the TARP program.

There has been an endless procession of challenges, which to date we have muddled through and I suspect we could keep on doing so.

The economist and financial planner

Last night on my Switzer program on the Sky News Business Channel I referred to Dave’s bagging of me and I had to straighten him out. As an economist and a financial planner who looks after my clients’ wealth, I have to be cautious. So if clients are not risk takers, we take a very conservative approach, but if they are balanced investors, I have argued that a portfolio driven by dividend-paying stocks can be a good strategy. If you can take your capital going up and down while your dividends remain fairly stable to support your life, then you can live with stock market volatility.

I’m never super confident about markets, though whether Dave likes it or not, my optimism on stocks after Lehman Brothers failed and China stepped in to stimulate the economy in late 2008 has been proved right.

And if an American were reading my stuff, he or she would be nearly back to where they were before the crash.

I was so annoyed at the biased reporting on the US economy after the crash I started a daily good news column on www.switzer.com.au just to show that there was actually some good news out there.

A tough game

One day I will step up confidently and say the worst is behind us and that’s when I will be strongly optimistic about stocks, but until then I remain cautiously positive.

By the way, Dave is apparently worried about the excessive increase in the money supply and its impact on the real value of money. This is a fair call and I believe the problems of this will come back to bite us, but we have had three and a half years of stocks going up and I think there should be a few more, though I could change my mind.

That’s my job — read the economic tea leaves and make suggestions. So I have been right but I don’t overrate myself because this is a tough game.

I just like what has happened and what I think could happen. In terms of investment, I know stock markets go up and down and that’s why I buy great companies I want to hold and that pay good dividends. It doesn’t shoot the lights out, though CBA has made a return over 200 per cent since it was $18.84 on January 23, 2009.

If I was wrong, I could deserve a bagging but I haven’t been — luckily — and so I think the bollocking is over-the-top, but I can cop it.

Dave, I have always believed in the value of listening to criticism and the poet William Blake suggested — without controversy there is no progress.

On Wall Street

By the way, Wall Street was just positive overnight, US housing starts rocketed up 15 per cent in September — the best rate since 2008 — Moody’s did not downgrade Spain, and European stock markets were up strongly with the French as well as the UK markets up over 0.6 per cent.

Love that good news.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published on: Thursday, October 18, 2012

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Ignore stupid recession headlines

So what happens this week?

Suddenly, Wall Street went positive – what just happened?

Be warned – things will get better!

News, news, news: the good, the great and the unimportant