4 reasons why ASX is worth 4500 points
The Australian stock market has been stuck in the 4500 band on the major stock indices for the last week. Mainly on the back of the Greek crisis.
Investors in index funds of Australian stocks, and superannuation must be asking how things can get better?
4,500 points is about right…
For the last 3 years, I’ve been saying to anyone who would listen, including readers that the true value of Australian stock indices is around 4,500 points assuming a recession.
It dropped below that last year, and is now back in sub-4,500 territory from highs in November 2007.
The reality is the Australian stock market is trading in a band around 4,500 points based on fundamentals.
Why?
Australia lives in strange economic times, as there are both deflationary and inflationary pressures. Coupled with an over-inflated property market, it seems that Australia is awash on the tide of money flows from rocks and resources.
And there’s a whopper of an asset inflation bubble. House prices should sit around 8 or 9 times salary. Land banking and stocks of empty passively held apartments are rife.
This in what 2thinknow identify as hollowed out job market of mainly blue-collar jobs, with a lot of white collar unemployment means some fundamentals look like the U.S. except for those gazillion metric tons of resources.
Add to that some stimulus ending, and the fact aggregate numbers disguise trends, and you have a problem.
It’s the market, not the stock.
Individual stocks will change and have changed – e.g. Australia’s big bank CBA dipped below $30 and has been well above $50. But falls in some, make up in gains for the others.
So stock pickers, and the smart money, can make money.
As to the indices — I noted* to readers here on October 2007, that “I would sell any shares I had that were not ‘low-risk’ prior to April… I would sell them now.” So that turned out 1 month before the peak.
But the innovation, the next state change, is a case of probabilities. Neither resemble a flood of money into average investors hands.
The only way this will change, is if the fundamentals change…
Keep innovating,
Christopher Hire
* P.S. Please note: I DO NOT OR CANNOT GIVE FINANCIAL ADVICE. This is a general opinion on trends and state change as part of innovation analysis. I am an innovation expert, NOT a financial planner. But then you knew all of that!
Author: 2thinknow (74 Articles)
2thinknow is an innovation agency providing usable insight to cities, start-ups, government and creatives.