Investors seem to take the NZD/USD rate forecast for the most complex, clouded by bear flag formation ever seen in the Australian equity market. It seems almost every investor that we speak to who has a stock in the market believes that they are investing in the safest company in the world. As these folks continue to read their own newspaper and watch the nightly news, it is often difficult to believe what they are telling themselves.
We first heard this type of rhetoric from analyst Brian Kearns of the Pacific-based NZX for Joshua Stanton was not a fan of Michael Phelps swimming as he is about to retire from his professional racing career. He called Phelps’ years of hard work “a load of crap” and decided he would rather invest in a cloud company.
We were less than impressed by Kearns statements when we heard him and we also heard from an interview with Dylan Moses a member of the same stock analyst team of Joshua Stanton, Brian Kearns and Jonathan Sharp. Dylan and Joshua’s negative outlook for the NZD/USD rate appears to be in agreement with some of the major market commentators.
If you take a look at the NZD Index history from its historic highs in late 1997 it’s only risen about 50% of the time from the lows. The only bull run on the index occurred after the start of the global economic crisis, where the NZD Index jumped by an unbelievable 500%.
Not only that, but market observers were worried that after this phenomenal run of growth, the RBA (Rural Investment Company) would continue to cut interest rates to boost the economy. Of course, this didn’t happen. This prompted much debate amongst market observers and indeed investors as to whether or not the markets had entered a “true bear market” and if so, how bad was it going to get?
And now, just days before Christmas the NZD Index continues to be up and has only been pulled back a little by the RBA’s decision to remain neutral on the RBA, which most market observers believe is a signal that there will be no more stimulus at all. In fact, it has been estimated that a further 25% cut in the Reserve Bank of Australia (RBA) may occur in early 2020. This seems to be a clear sign that the KiwiSaver is starting to enter a more bearish trend.
Not long ago, I discussed this with one of the managing directors of a financial institution and he was very concerned that this was a warning of a consistent downward trend that could potentially cause serious problems. I also asked him if he still had any shares in the market and he assured me that he does.
As well as everything else, the Reserve Bank is saying they have no room to lift interest rates again, unless things are going to completely fall apart and another major economic crisis happens. This, coupled with Joshua Stanton and the other two analysts in the NZX stock, have turned the NZD into a “traditional market” and everyone thinks they know what they are doing.
So what can we do to get out of the clouds overclouds and get a better view of what is really happening in the world of finance? Well, in the meantime, we will continue to monitor the market with our cameras and make sure we don’t miss any of the financial shenanigans that are taking place in New Zealand.
One thing we always monitor is government bond issuers and whether or not they are floating their coupons. We don’t like to see companies selling shares and capital in New Zealand just to close their massive loopholes that allow them to evade paying taxes.
Another area that always catches our eye is the level of “penny stocks” that we see in private equity funds. We typically look at these shares and we are particularly interested in those shares that are selling for under 50 cents per share and those shares could be in trouble. However, when the markets reach this point we see significant momentum towards the finish, meaning the market was either going to a bottom or already reached its bottom. We don’t know what to expect and this is why we’re on the ground in New Zealand reporting on this market.