Economic experts are making us nervous
by Peter Switzer
After a disappointing consumer confidence stat, I recommend we round up all of the negative media commentators and we name and shame them like our politicians have been doing lately. Well, maybe I have gone too far, but at least let’s poke fun at them.
Anyone doubting that we Aussies don’t need another interest rate cut before Christmas only needs to look at Wednesday’s read on consumer sentiment. After an overdue but surprise 0.25 per cent cut, the consumer reaction was a weak one per cent rise in October and it remains in negative territory at 99.2. If the number were over 100, then we would say consumers are now positive.
And you wonder why consumers find it hard to register a good result on the monthly Westpac survey of consumers. There not only has been a serious GFC crash of stocks that has hurt super balances, which are a source of our feelings about our wealth, but house prices have been down for the year, though they rose around four per cent on the latest capital city reading. That’s a good sign but consumers and business owners have been weighed down by bad tidings delivered by negatively-inclined commentators.
Bubble scare story
Take a look at a speech from the Deputy Governor of the Reserve Bank, Phil Lowe. Now the media took his warning, which I think was unnecessary, about a potential housing bubble. Give us a break Phil, we’re just trying to see house prices rise and you’re stressing about a bubble.
That clown Jeremy Grantham has been peddling his 40 per cent fall in Aussie house prices for at least two years and Professor Steve Keen has been on a similar bandwagon.
Even Phil pointed out that there have been fewer loan approvals and low property prices recently but the media wanted to get on the bubble scare story.
As the old saying goes in the media: “If it bleeds, it leads!”
On my Sky News Business channel program, the experts who I like to listen to all tipped a good year for stocks this year and they were right. They all tipped stocks would go up between June and September and they are now expecting a consolidation or pullback but nothing too serious. I call it a buying opportunity and they all think there will be a December rally rolling into 2013.
Of course, experts can be wrong and few really tipped the GFC, though Keen was warning about debt problems before the event.
However, if you listened to the negative ‘experts’ out there and went to cash, you have missed out on the 42.8 per cent recovery of stock prices since 6 March 2009. Divide this by 3.5 years and that’s a capital gain of 12.21 per cent a year. If you had dividends of say five per cent, you have made 17.21 per cent and if you were a retiree with a self-managed super fund, then you would not pay tax and would be about two per cent better off via franking credits and a tax refund.
That’s nearly a 20 per cent per year penalty for accepting the negative news from experts.
And if you had selected the four big banks, Telstra and a few other great dividend payers as a safety strategy, you would be even better off!
Look to history
History is on the side of stocks and positivity — don’t let the regularly wrong experts lead you astray.
(By the way, Wall Street was down overnight with the Dow off 0.95 per cent and the S&P 500 giving up 0.62 per cent, but who cares, it will be up sooner rather than later!)
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Published on: Thursday, October 11, 2012
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