WELLINGTON NEWS
C API TALI STIC CONFIDENCE
(Special Correspondent)
WELLINGTON, Nov. 4
Confidence is essential to every m lket whether it be money market, share market, or any other market, and apparently there are different degrees of confidence. The wool textile manufacturers require uumistaka.bie cvri deuce before they will show confidence, but on tlie share market the psychology trend lias a great deal to do with making or marring confidence. If the pysychology trend is towards confidence the investor in Stock Exchange securities immediately capitalises that by buying up shares which to him look like being cheap at the moment and likely to rise because of the confidence trend.
It is marvellous to the mass opinion held by investors both when the market is going up and down. When tne market is advancing there is an engei rush on the part of the “get-rich-quickly” investors to buy in, and this mass movement in one direction causes the pendulum to swing too high, on the other hand when the ■ market is trending downwards, there is an abstention from dealing by the mass, and the unlucky indi\ idual who is forced to sell has to accept a price much lower than is warranted by the intrinsic merits of the stock or shares. . There does not appear to be any means of checking tills mass .Aov'.ment Which invariably results in extremely high prices or excessivelow prices. The inere fact . that everyone is buying forces, up the price and those who venture into the market late genera 1 y pay too high a price and are lucky if they get out without a loss. There are small Stock Exchange professional operators apart from brokers. It cannot he said that there are nyuiy such individuals in New Zealand. for the business done here is too restricted, but in larger centrals there are many of them, and they manage to make money, and some to amass a fortune.
These professionals, from long ex- | perience, have developed certain i guiding rules, the chief ot which is “Watch the crowd, but go the other '• way”, or in other words “Do exactly j the opposite to what the crowd is doI jug”. A mass movement generally I develops mass insanity. Investors , tumble over one another to buy with- ! out regard to the merit of the shares j they are buying or the price they pay I or the returns upon investment. They buy because others are buying, i it is tlie fashion of the moment and I they become the victims of fashion., | Last week there was an excellent demonstration of mass movement to- ! wards capitalising confidence. The enenormous and unparalleled success achieved at the election by the National Government was interpreted by investors as meaning an early return of confidence, and they hoped to benefit by anticipating the capitalisation of that enfidenee, l and .so bank shares, which are the gilt-edged of our local exchanges, received prompt attention. There was quite a boom, and last Friday the sales' reported were extraordinarily numerous and easily a record for the past two years. Prices soared, and the gains on some of the shares were remarkable. It was obvious that the only consideration on the part of the investors! was to secure tlije shares. , The result was that on some Bank ! share the return works out at less | than 5 per cent, on the price paid. I This is absurd, for its assumes that ! (the price of money will fall to about ! that rate. Bank dividends which I have been reduced’ (Except in the case of the Bank of New Zealand) are not | likely to he increased for four or five years, and not even then unless the depression lifts. The Banks have suffered like all others and they have all to provide for “had a.nd doubtful,” and unfortunately those which were doubtful yesterday are bad to-day. Cleaning up bad debts, which is done out of profits, means less for shareholders.
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Hokitika Guardian, 5 November 1931, Page 6
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660WELLINGTON NEWS Hokitika Guardian, 5 November 1931, Page 6
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