But Sir R, didn't previous bubbles have some linkage to gold standards? The measuring stick of the $ was a more stable thing. Now, it's a free-floating thing whose length is a function of unlimited credit creation by the Federal Reserve. In a technologically and demographically deflationary environment, they can do a lot of $ diluting without having to contend with the bogeyman of inflation.
So, those numbers you arrived at will not have much meaning. They'll need to be adjusted for all the credit creation.
What matters is earnings per share compared with alternative earnings per dollar, with guesses as to what those various earnings will be in 5 and 10 years.
At present I get 1.6% for my US$. I get 6% for my Kiwi$. I get 3% proforma for my Q. I get zilch for my Aztec [which I don't actually own yet]. I get 8% from lending on mortgage [in NZ].
So, right now, I'm best to lend to the house buyers in NZ. But, there's the exchange risk as the NZ government continues their decades-old erosion of currency holders' value at about 2% per year compared with the US$. 30 years ago, the US$ was not as valuable as the Kiwi$, but now it's over twice as valuable. We also get stung 33% or 39% income tax on our interest receipts [depending on income level].
If money movement was friction-free, it would pay to move into the Kiwi$ and into mortgages. But I think QUALCOMM growth rate prospects are the best bet. But current Q price is out of kilter with US$ given the exigencies faced by hordes of US and other investors in US markets [such as repatriating Saudis and Japanese].
Oh, my head hurts...
The outcome is that while the US sharemarkets will likely slip away for another year or two, they might not because there is powerful magic in the Maestro's monetary brew and QUALCOMM's phragmented photon BREW.
So, I'll figure it out manana.
Now, a nice cup of tea would be good.
Mqurice |
