Here’s something that won’t surprise you.
Or rather, it shouldn’t surprise you.
If it does surprise you then you really haven’t been paying attention.
What’s the big non-surprise?
Stock markets are risky. And yet it seems as though some of the smartest people around are only just starting to figure that out…
It’s funny how different people react to the Australian share market.
We’ve warned for well over three years now that the stock market is risky.
But we also warned that despite the risks of investing, it was a bigger risk not to invest.
With interest rates at record lows it’s quite frankly almost impossible to get a decent return without using leverage on any investment except stocks.
And this risk in the Australian Stock Market isn’t about to end anytime soon, even though the central banks would have you believe that interest rates will rise within two years. That’s hogwash.
Interest rates aren’t likely to go up within the next five years. And they may not even go up in your lifetime. That’s why we’ve made a bold call for the S&P/ASX 200 index to hit 15,000 points – more than triple where it is today .
Did they miss the past six years?
And yet a bunch of commentators still can’t seem to grasp the idea that this is and has been a risky market.
It’s as though they’ve lived in a bubble for the past six years, totally unaware of everything that has happened.
Take this op-ed in the Financial Times from Mohamed El-Erian, the chair of President Barack Obama’s Global Development Council, and a former big shot at PIMCO, the world’s biggest bond fund:
‘Markets have been sanguine about geopolitical risk for several years now, a phenomenon illustrated by the relaxed approach they have taken to Ukraine’s crisis. There are understandable reasons for this, but contrary to a popular saying, this could well be a case where the trend is not necessarily the markets’ friend.
‘After just one day of extreme nervousness, global markets had little problem digesting a major change in the map of eastern Europe. And Crimea’s annexation is not the only notable development in a crisis that has repeatedly surprised quite a few experts.‘
We have to say it. Is Mr El-Erian kidding?
He says share markets have been ‘sanguine‘ about geopolitical risk. In other words, he’s saying that markets have been happy or satisfied about the risk in the world.
He’s got to be kidding. Didn’t he notice the hullaballoo and ruckus about Libya, Syria, Ukraine, North Korea, China, and any other number of crises that have reared up since 2008?
We listed 19 such problems just a few weeks back. Granted, they weren’t all geopolitical events, but let’s be honest, there’s a superfine line between geopolitical and economic risks. One has a nasty habit of turning into the other.
And yet, so far nothing has happened. 19 crises and counting since 2008, and the result? Most stock markets worldwide have gone up. One exception…one big exception is China.
From the Port Phillip Publishing Library
Special Report: ASX: 15,000
