I gotta confess the rebound in equity markets caught me a little off guard yesterday - it's a bit like the institutions are looking for ANY kind of good news to jump on.
A few more companies joined the jobs slashing story:
- STMicroelectronics to Cut 4,500 Jobs
- Rio Tinto 14000 (I think this was actually announced last week)
- Avery Dennison 10% of its workforce
- Target stores 9% of its head office workforce
I don't like harping on about this but the reason earnings will stall is because consumers don't have jobs AND don't have extra disposable income. We're looking at historical PE's and saying "Yip the market is cheap..."
And THAT brings me to my gripe for the day, because I've been listening to some of the verbal being spewed by retail investment managers encouraging people to get back into the market now.
I agree 100% that time in the market will probably do well for you in the longer term, but it irritates the hell out of me that they're talking about how attractive dividends and PE ratios are and this is why, this is asset class is the best.
The reality is that dividends in the developed world (particularly the US) are being slashed rapidly. In SA, our companies are a bit better managed so while they're probably going to get trimmed a bit, its probably not the end of the world...
Just be aware of these things when that slimy looking fundmanager type comes up to you with these as a reason for why equities look attractive...
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