Sunday 20 August 2017 The one stop source for free breaking news, expert analysis, and videos on AIM and LSE listed shares


Malcolm Stacey talking bollocks: ShareProphets Translation Service

By Tom Winnifrith | Sunday 30 April 2017


 


Malcolm Stacey yesterday offered up a bank holiday sermon on why shares are heading higher and on economics. Sadly old Getafix operates in a post-fact era; you can read his original article HERE. However, since my co-poisoner here in Greece is "feeling unwell" after a late night, I have the time to offer up a translation. My comments are in bold.

Hello Share Squinters. With another boring bank holiday on our plate, when the stock market can provide us with no daily thrills, it’s an opportunity to look at the macro world of share shifting. And despite the many voices who say that shares are overbought and cruising for a bruising, I add a word of caution about selling too soon.

You never went bust banking a profit.

Yes, world debt is horrendous, wages are disgracefully low and the Tories, soon to be re-elected for another five years, are still bent on austerity. We also have the terrible threat of war with North Korea and the uncertainties of Brexit to worry about.

Where to start. Global debt is horrendous. Most Western nations have debt to GDP ratios which are "passed the point of no return", corporates have geared up not to invest but to engage in share buybacks and the level of consumer debt in the UK is at alarming levels. Do not dismiss this so lightly. How does Malcolm think this debt will be serviced as interest rates rise? By the Great Money Tree he worships?

Wages have risen far faster than output in the UK for many years. That is to say they are not being paid for with increased productivity. The big hikes have been in the public sector, the unproductive sector, where pay rates now exceed those in the wealth-creating sector. And that brings us to Austerity. Absolute horseshit Malcolm. The useless Tories have increased Government spending in real and absolute terms year on year. The deficit is vast and as a result this country now spends more servicing its national debt than it does on, say, defence. Public sector wages have raced passed those in the private sector. There is no austerity.

Re Brexit: Better uncertainties outside of prison than the certainty of a life sentence surely?

When the world is uncertain and facing catastrophe, the path of shares will soon point down. And down, And down.
But if we had all heeded the warnings which began at least two years ago, we would have not taken advantage of a huge boost in share prices. And if we all go to cash now, the same fate may await us.

Or it may not. Yes shares have been lifted but we are still - in the UK - not far above where we were in 2001. QE and low interest rates have created asset bubbles around the world. Some of those (notably real estate) are starting to pop. Bubbles never slowly deflate they burst and so it will be with shares.

Looking at US markets, because when the US sneezes we all catch a cold, valuations have zoomed but corporate revenues are exactly where they were five years ago. So valuations have just got stretched in an economy which is now growing at a snails pace. PE ratios in the US (and in the UK) discount massive corporate earnings growth but that is not what we are seeing at this part of the cycle. It is a recovery PE for a mature market. That is lunacy and something will have to crack. And it it won't be the E!

Nearly all the famous bears I heard from at this month’s UK Investor Show admitted to losing money since the last event. This is because the bull market rages on.

No they said it was tough making money as a bear. It is because the market is frothy. It shrugs off bad news from corporates. But as events at HCG in Canada showed this week, when the market is insane there are great opportunities for bears if you get it bang on.

The best saying of them all - and this will upset the contrarians among us - is ‘the trend is your friend’. This makes the buying of shares in terrible companies sometimes justified. There are enough mug punters in this glorious game of ours to bury heads in sands and keep buying shares in the many shaky outfits which are eventually doomed to failure.

Or put another way, go with the bigger fool theory. But trends can change. They will change.

It’s been part of my strategy for a long time to leap on bandwagons. If a share rises on Monday, I expect it to do so on Tuesday and Wednesday. And I might sell on Thursday. Obviously, this ploy is not foolproof, but it sometimes works enough to keep me in dolly mixtures.

You’ll read some truly learned experts on this titillating website. They pick over past figures, present assets, debts and obligations and often come to the conclusion that the shares should be ditched. I cannot argue with their reasoning and eventually I always sell shares which come under their fire. But there are many more companies which are soundly based and they are the ones worth leaving money in.

Generally speaking, all boats rise with the tide and I think that tide is still coming in. If you want to go into cash now, I cannot blame you. You’re just as likely to be right as I am. But I don’t happen to think the crash will come at least until the end of the year.

The market may well continue to rise, but I am not as clever as Malcolm so can't call its top. It is overvalued and so it will crack at some stage and it will happen so quickly you cannot finesse the trade. On that basis I am taking money off the table as the market rises, that is to say I am selling shares. I can't say that there is another asset class that really grabs me, in a way shares are the least worst bet but for now top-slicing, banking some gains even as Malcolm fills his boots looks to be the prudent strategy.


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