fair enough.
To many what ifs when trying to do anything approaching macro style long term investing. I could never satisfactorily position myself in any sort of macro position with a decent margin of safety. At the start of 2007, I thought that the Norweigan Krona would do the best of any currency because of Norway's rock solid economy, but I lacked the conviction to actually stump up the cash. That about sums up any sort of macro forecast I make.
The only macro theme I continue to believe in is that the world will not come crashing down and good companies will keep making money. If I ever needed proof of that, the GFC provided it.
As long as that constant remains constant, then it's far more rewarding (and easier) to pick individual investments bottom up, than top down.
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The only macro theme I continue to believe in is that the world will not come crashing down and good companies will keep making money. If I ever needed proof of that, the GFC provided it.
As long as that constant remains constant, then it's far more rewarding (and easier) to pick individual investments bottom up, than top down.
Agree..and well said.
the vast overwhelming bulk of the worlds stock markets average higher and higher over the long term...its a constant, its inevitable, and its ridiculously easy to take advantage of that.
......overwhelming bulk of the worlds stock markets average higher and higher over the long term...
as long as you do not confuse stock market and stocks: I agree with you if you for example invest in an asx200 index, but not in the 200 individual stocks:
on a long term companies disappear and others raise; the stock market reflects the current selection of the successful ones (very broadly speaking)
Agreed. One of the reasons for starting this thread is to think about the situations where this doesn't hold and why. Stock markets, in their current form have only been around for ~100 yrs. I for one am hesitant to make such generalisations. This doesn't mean I am hesitant to make money from them.
The Japanese stock market is one such market. From Wikipedia:
....
Japan is an Outlier.
Agreed. One of the reasons for starting this thread is to think about the situations where this doesn't hold and why. Stock markets, in their current form have only been around for ~100 yrs. I for one am hesitant to make such generalisations. This doesn't mean I am hesitant to make money from them.
The Japanese stock market is one such market. From Wikipedia:
"The Nikkei average has deviated sharply from the textbook model of stock averages which grow at a steady exponential rate" from wikipedia.
If some of the theories for this are to be believed, this may happen to many more countries.
Edit: Grammar
The stock market is a product of the industrial revolution. Before that there weren't the large corporations to sustain a market for equity. If you think about it, the dominant theory of world trade pre-20th century was state or quasi-state owned mercantilism. The whole concept of limited liability, as we know it today, is a relatively new idea. The stock market is really just a function of GDP (if you adjust the All Ords for inflation it hasn't really moved in 40+ years). As long as the economies keep bopping along, the stock market will continue.
Have a read about Japan. It's an outlier in more than just it's market performance, the inbred nature of the Keiretsus of which the Japanese banks sat at the top, crushed their economy when property prices crashed. The banks had to use healthy companies to prop up the bad loans they had written. And their property crash was of historic proportions. At its peak, the square kilometre that the Imperial Palace occupies in Tokyo was worth more than all the land in California.
Now GDP ( Growth and inflation are linked ) has been going up and providing growth due to the increasing number of people entering working age (the baby boom), this causes demand for resources. In Japan at the time their asset bubble deflated, the proportion/number of people in the working age group starting dropping.
Recently this has been recognised as an ageing problem in Japan but this started circa 1990. I had a graph of japans population vs nikkei/house prices somewhere, I'll upload if I can find it.
If you're going where I think you are (house prices/baby boomer link) then I do agree with you. That's my theory on house prices too.
You think the population will actually start to decline once the boomers all start passing away??
Could it be possible?
Agreed.
Would like to add a few points for discussion:
GDP in the general form is the function of productivity/person x times number of working people + effects such as natural resources and their exploitation for profit; correct?
Now GDP ( Growth and inflation are linked ) has been going up and providing growth due to the increasing number of people entering working age (the baby boom), this causes demand for resources. In Japan at the time their asset bubble deflated, the proportion/number of people in the working age group starting dropping.
Recently this has been recognised as an ageing problem in Japan but this started circa 1990. I had a graph of japans population vs nikkei/house prices somewhere, I'll upload if I can find it.
Immigration to Japan is severely limited as well (as far as i know) only people who can prove some Japanese ancestry are allowed to immigrate...so with a falling birth rate and little to no immigration there is very restricted domestic growth etc.
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