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Irrational exuberance?; How to value shares; NZ Super's super big returns; Best money books; The irony of goodwill work

Posted in Personal Finance

By Amanda Morrall

A colleague told me yesterday's column was too heavy so it's all business today folks.

1) Irrational exuberance?

Shareholders yesterday were warned to pull in their heads, or at least curb their enthusiasm amid signs of an overheating stock market. The warning, delivered by Tower Investments at its first media briefing for 2013, was on the basis of that flagging interest in fixed-interest (dogged by a lower for longer interest rate environment) was artificially driving up share prices in turn compounded by an ensuing herd effect.

CEO Sam Stubbs told reporters that investors needed to be cautious not to confuse high prices for higher quality offerings. For that reason, Stubbs said Tower had begun increasing its exposure to the Australian sharemarket.

For more on the news briefing, see this report from Radio NZ.

2) How to value shares

So what are the metrics for judging whether share prices are overvalued? Two standard measurements are absolute valuations and relative valuations. Here's an excellent piece explaining the process at length from the U.K. investment blogger Monevator.

3) NZ Superannuation

Whether the NZ Super fund is growing on the back of an ever expanding bubble is debatable. Last year's returns (close to 20%) are undeniably juicy by anyone's count. In the 12 months to Dec.31, 2012, the NZ$20 billion pension fund returned 19.17%. The fund's allocation of New Zealand equities is 5% of total assets. Other New Zealand assets include holdings in forests, farmland, commercial property and private companies.

A complete report on the NZSF performance can be viewed here. Page eight has a complete break down of asset allocation.

See also this report from TVNZ for more highlights.

4) Best money books

Looking to build your personal finance library? Here's the top picks as chosen by financial bloggers from around the globe. My own contribution is expected to hit the bookshelf at the end of this month.

5) Low impact jobs?

A regular reader with a passion for conservation and the environment sent me the following blog contemplating a range of interesting and thorny issues including the residual carbon foot printing of goodwill work. The argument being that people in a position to donate money or time to good causes did so on the back on jobs that mainly extracted a high price from Mother Earth. Interesting food for thought and well written. Enjoy.

To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall or at www.amandamorrall.com

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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3 Comments

Too heavy - DLBDS (didn't

Too heavy - DLBDS (didn't laugh but did smile).
 
We don't live in an age of quality thinking do we. People think a statement is an argument and use words like logical when they really mean rational. You'd think the most important questions in life were the ones people were interested in.  Instead opinion is everything and conspiracy theories the top of the pops.
 
Reminds me of an old saying; 'Tell a man what he already knows and he'll thank you for it, tell a man what he doesn't know and he'll curse you for it."

One of Greenspans lovely

One of Greenspans lovely ironies was this statement "irrational exuberance".  Because of course, he was from the economic school that rested their lack of market intervention on the premise that market efficiency was real and because people acted in their own best intertests the market must be self regulating.
 
I have wondered if, when he used the phrase, he did it out of frustration in trying to explain what was so clearly irrational or he knew all along and was teasing us all.

Stupid and greedy.... "Up to

Stupid and greedy....
"Up to 900 dolphins have been killed by villagers in the Solomon Islands, who claim it was an act of retaliation for not being paid money they were promised."
http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=10861279
"People from the village of Fanalei, on the island of Malaita, claim that the institute had made a deal to pay up to S$2.4 million ($400,000) to stop the killing of dolphins. However only S$700,000 had been received, villagers say."
The Americans were STUPID to offer the money. They must share the blame for the greed that resulted and the butchery of the Dolphins