Ogden Nash once said “I do not like to get the news, because there has never been an era when so many things were going so right for so many of the wrong persons.”
Bridgecorp’s directors are being chased (but are not being caught) by receivers seeking to claw back payments made to them just before the company was placed into receivership.However, just as Petrecevic and Roest were last week forbidden from managing a company for five years, the former director of Blue Chip, Mark Bryers, has moved operations across the Tasman to ply his trade after being given a lifeline following a failed liquidation proceeding.
Our banks (or are they Australia’s banks?) are being harpooned by politicians for not passing on interest rate cuts to farming, business and residential borrowers, yet they are still making handsome profits, seemingly at the expense of the rest of the economy.The politicians to come out of this debate a bit shinier than before and the banks are “doing very well, thank you.”
Things seem to be going right for people who we could justifiably think were "the wrong persons."
The risk of thinking like this is that it is only one step away from saying “so many things are going wrong for so many of the right persons – like me!”Investing has been like this for too long.The last two years has been an era where Mum and Dad investors, the “right people”, have had things go terribly wrong for them.
The New Zealand Dollar remains above the USD$0.60 level, defying both gravity and many commentators; even confounding Alan Bollard.His comment in the OCR announcement and the MPS last week was that “(T)he recent rise in the New Zealand dollar creates an unhelpful tension with our projections” which I think you could read as “we think this might happen in the future, but with the dollar where it is and where it seems to be staying, we don’t really know.”
If New Zealand is going to export its way out of a recession, led by the rural sector, this “unhelpful tension” is like a young man meeting his girlfriend’s father for the first time – a great willingness to impress (or export) being met by an equally great willingness to throttle (or to strangle the value of those exports due to a high currency).
It is this “unhelpful tension” that may threaten the “green shoots” that are hitting the headlines.Are these green shoots the beginning of the good news, or just the beginning of the end of the bad news?
Bollard inclined to the green shoots theory when he said “for the first time in some months we can also identify some clear upside opportunities for activity."You can see why he’s an economist and not an English teacher!
Bollard is saying that it appears the economy is improving - the light at the end of the tunnel may not be a locomotive towing a lot of “bad news carriages.”However, as all good economists do, he tempered his euphoria (if that is a possible economic emotion) by preceding the positive comment with “There remain material downside-risks to activity and inflation.”Typical, a “bob-each-way”!
Optimism and pessimism in one announcement means there is still a lot of confusion.
However, one thing appears certain – interest rates are set to remain low through until 2010 at least.This is one area that all the experts to agree upon.If this is going to be the environment in which we are investing, then investing needs to be different, or perhaps smarter, than it has been.“If we always do what we have always done – we will always get what we have always got”
Two areas that experts also seem to agree upon are;
that staying safe in fixed interest now is not a good long-term option, and
that several asset classes are undervalued – perhaps Bollards “upside opportunities”.
A portfolio that looks beyond fixed interest as a means of generating income is a sensible investment option.If this can be achieved, perhaps Ogden Nash would have been more comfortable reading the news.It may be “an era when so many things go so right for so many of the right persons.”
Identifying these “upside opportunities” is something investors should explore.
Peter Curnow is an Adviser with Searells Financial Services Limited. A copy of his Disclosure Document is available and free of charge upon request and can be viewed at www.searells.co.nz. This article is general in nature and should not be regarded as specific investment advice.
