Investment Bubbles/Busts, Cycles

Company insolvency rate highest in 40 years, but we’re not even in recession. Things are about to get worse!

The business failure rate is currently running well above pre-Covid levels, and even above the deep and painful early-1990s recession. The problem is that business conditions are NOT even at crisis levels. Far from it. The overall economy is ticking along nicely – growing at more than 2% above inflation. Interest rates are not high, relative to history and relative to inflation. The RBA should, and now probably will raise rates further (as it should have done in 2025) Unemployment also not high, and still inflationary / expansionary. But things are about to get a lot worse, as the housing market and construction industry in particular are coming under increasing pressure from rising interest rates, rising costs of labour and materials, and government tax attacks.

Reason #2 for ASX’s 17-year Lag behind global share markets = chronically LOW RETURNS ON EQUITY

The right chart shows current aggregate ROEs for ASX companies versus major world share markets. The US has highest ROEs (even better than its historical average ROE) despite massive ‘ai’ capex spending. Australia has near lowest ROEs. The right chart shows the longer-term picture: aggregate ROEs in Australia versus the US since 1960. ASX aggregate ROEs have averaged nearly 4% LOWER than the US, which is a very large difference. American company ROEs are HIGHER than their cost of equity capital, so shareholders let them RETAIN most of their earnings to invest in future GROWTH. Australian company ROEs are LOWER than the cost of capital, so shareholders demand high dividend payouts rather than let management squander it. I look at reasons, implications, and whether this problem is temporary or more entrenched.

Well into 4th year of global share boom. NOT just the US, it’s everywhere (except Australia)

We are well into the fourth year of a global share boom despite wars, inflation, fuel crises, political fracturing, social unrest, plus increasingly astronomical pricing. Although US stocks hog the media headlines, the US share market is actually LAGGING most share markets again this year (as it did last year). It’s not just a US boom. It’s global. Dozens of share markets are beating the US S&P500 this year. AUATRALIA is once again LAGGING the US and the rest of the world by a big margin for a fourth straight year. I outline several reasons for this. Pricing is currently very expensive – not just US tech stocks but everywhere including and especially Australia. Four-year booms are not unusual. There have been plenty of longer booms before a crash. Over-priced booms can keep running up into even more over-priced ter

The Myth of rising Oil prices being bad for Share markets

Most years of RISING oil prices (even severe oil price spikes like 1979) were GOOD years for shares. Out of all four segments on the chart, the sector with the most years by far is the upper right segment ‘B’ which was when oil prices and shares were both UP. Many of the BEST years for Australian shares were when oil prices were RISING including 1978, 1979, 1985, 1989,  1995, 1996, 1999,  2003, 2004, 2005, 2007, 2009, 2013,  2019, and 2021. Conversely, some of the WORST years for shares were when oil prices were also FALLING (segment ‘C’ ), but these had little to do with oil - like 1930 (Great Depression) and 2008 (GFC). At most, oil prices have been a relatively minor contributing factor in share boom-bu

Visual snapshot of 60+ share markets over 35 years. 2025 = third year into broad global boom

2025 was the third straight year of good returns on most share markets. Although the US had another above-average year, most other countries did even better than the US in 2025, busting the common myth that this is a narrow US-led boom. Australia lagged the US by a big margin again for a third year running. I outline the reasons why. Three-year booms are not unusual. There have been plenty of examples of longer booms before a bust. The higher and longer the boom, the deeper and longer the bust. The US is beating Australia in the current boom, but will suffer worse in the bust to follow. Pricing is currently very expensive – not just US tech stocks but everywhere including and especially Australia. Share markets do not collapse because or when they become expensive. Over-priced booms can keep running

100 years of boom-bust cycles on the US share market – where are we now?

This is the US version of my recent story on 100 years of boom-bust cycles on the Australian share market. It is clear that the current US boom has been rather LOW, MILD and SHORT compared to most prior US booms. The US has had virtually the same boom-bust cycles as Australia because the ASX follows US cycles very closely. But the extent of booms and busts varies based on "who's turn is it to have the bigger boom and bust". In the current tech/ai boom the US is leading, but the bust will also be bigger. It is not a question of pricing or valuations. Booms don't end because or when markets are over-priced. Over-priced booms can run up for many years before the final trigger for the bust.

Whitlam, Nixon, the 1973-4 crash, and how the 1970s inflation crisis changed the world

The 1973-4 share market crashes in Australia and the US featured major political crises – Nixon/Watergate in the US and the Whitlam dismissal in Australia. But the main causes of the crashes were the battle against inflation, started in the mid-1960s but worsened under Nixon and Whitlam. The 1970s inflation crisis triggered three seismic policy shifts: 1) monetary policy; 2) central bank independence / inflation targeting; and 3) the shift to a whole new economic orthodoxy which delivered four decades of declining inflation and interest rates, plus high returns. That post-1970s golden era of declining inflation & interest rates, globalisation, free-trade and hands-off government are over. Now we are into a new era – with the return of inflation, big government, protectionism. Today we have several similarities with the 1970s. <

1987 Crash Part 3: How it shaped my investment philosophy

How I ended up on the right side of both the mid-1980s share market boom and the October 1987 crash. How I came across and put to work the 4 Rules that work in all market cycles. How the real world is the exact opposite of what academic finance theory teaches. How one-off extreme ‘outlier’ events like the 1987 crash are ignored by finance theory, but they are what define our lives, and determine our future wealth. This is the story of my experiences before, during, and after the Crash

‘Price/Earnings’ ratios are meaningless – Exhibit A: the 1987 crash

The 1987 crash was a prime example of how the most widely used measure of pricing for shares and share markets – the ‘price/earnings’ ratio - can give investors a false sense of security, and fail to warn of massive levels of hidden over-pricing. At the top of the market before the 1987 crash the Australian share market had a lower (cheaper) p/e ratio than the US, but our crash turned out to be much sharper & deeper, and took 5 times as long to recover.  The low p/e ratios for companies, and for the whole market, masked enormous underlying problems because much of the reported 'profits' were due to accounting trickery, fudged valuations, related-party deals, circular transactions, and straight-out fraud.  It is the same in every boom - and we are seeing increasing evidence of this in the current ai/ data centre / private credit boom.

Share Market Pricing per Country – how does your country rate?

Here’s an update on share market pricing around the world, based on the two most widely used measures -  price/earnings ratios and dividend yields. USA and India are way out in 'expensive' territory. Are these justified? Australia appears less expensive – but still over-priced given its market structure and sector mix. At the 'cheap' end are Italy, Brazil, Hong Kong, and Saudi Arabia – does ‘cheap’ mean ‘good value’? Is global share market over-pricing a problem? Is a crash imminent? Why have I remained reasonably bullish on global/US shares despite increasingly expensive pricing?

'Time-in-the-Market' -v- 'Timing the Market'. Which is better? US share market outcomes

Share market returns over all holding periods - even up to 10, 20, and 30 years - are little more than a coin toss. 'Time in the Market' only works if you get the Timing right, which is mostly luck. Finance textbooks and retirement calculators are based on nice, smooth, theoretical curves that assume constant 'median' returns over long periods. But in the real world, only ONE person in the population gets the median. Half will get MORE (sometimes a lot more), and half will get LESS (sometimes a lot less). There have been decade+ periods of zero or even negative real returns. By the time you realise you're in the unlucky wrong half, it may be too late to adjust your strategy.

US Shares: ambitious multiples on ambitious accelerating profit outlooks. But powering on regardless

In the March qtr reporting season, S&P500 companies posted good earnings growth of +13% for the past 12 months, after decent +9% growth in the prior 12 months.  Consensus forecasts for the next two years have been cut over the past month (tariff impact fears) but they are still forecasting an acceleration of earnings to +15% growth in calendar 2025, plus a further +15% growth in 2026. That's still incredibly ambitious! Current pricing is also a very bullish 28 times trailing earnings, and 25 times the next year's forecast earnings. These are very optimistic multiples on very optimistic accelerating earnings outlooks - a double layer of over-confidence - and highly vulnerable to negative shocks.  But investors have shrugged off Trump's tariffs, negative GDP, and Moody's credit downgrade. So far so good!

Slides from my session at the Australian Shareholders' Association seminar on 7 May 2025, Sydney

Here are the slides from my session at the Australian Shareholders' Accociation seminar on 7 May 2025, Sydney. Highlights: 4 things about the future we can predict with certainty. 4 things about the future we can be reasonably certain about. Plus we cover - human nature - investor behaviour - bubbles & busts - inflation - longevity - what's behind Trump's agenda, and will it work?

How the ‘Magnificent-7’ stack up – 8 key charts

Just 7 companies make up 19% of the combined value of the entire 15,000 companies listed on world share markets, but they produce just 12% of total world profits, and just 3% of world dividends. They are over-priced on just about every measure, but are they worth it? What justified their astronomical pricing? There is a fairly obvious odd-one-out here - which is it? I have been bullish on US/global shares in portfolios - will this change?  

Bring on the Trump ‘volatility’! - My Volatility Spike Index separates the calm from the storm

Trump's first term was certainly entertaining, but was it volatile for financial markets? Let's look at facts, not mindless media chatter warning of  'more Trump volatility!', or 'another bumby ride!'. My Volatility Spike Index highlights and compares all volatility spikes since 1970.  

Quarter-century review: Asset class winners & losers, how things change (and how I got through it)!

How things can change, radically and quickly Booms collapse into busts, winners turn into losers, and prior losers arise from the ashes into new booms My personal journey through it all

We're half-way through the 2020s decade! Here's the half-time score check on Aussie shares

The decade half-time score check for the Aussie share market is not that good: Aussie shares are having a below-average decade so far (and below other markets eg the US). It has been below average all decade – after a poor start with the 2020 Covid lockdowns. But all is not lost – some past decades also started out slow but ended up with good full decade returns. There is plenty of time left this decade for the next big speculative boom to lift the share market – history is on our side!    

‘Worst’ days on the ASX? (" . . . THAT’s a knife!”)

After my story on Monday pointing out that the -3.8% fall on the ASX was relatively minor and there have been dozens of worse days on the ASX - many people asked me what those 'big' down days  were, so here they are. What were the really bad days on the Australian share market? What caused them? How do they compare to the worst days on Wall Street? Are share markets really 'random' like finance theory claims?  

Not all world share markets are hitting new highs. Here are the Pretty Good, the Bad, and the Ugly

Most world share markets are hitting new highs this year, but some are not Here they are - the Pretty Good, the Bad, and the Ugly How does your country rate?

Dozens of world share markets are hitting new highs - the myth of the Magnificent-7

It's not just the 'Magnificent-7' US tech giants, and it's not just US shares. There are dozens of share markets hitting new highs all over the world. Want proof? Here they are!

Case Study 1969-70 Nickel boom-bust

In 2021 and 2022, when the prices of nickel and nickel explorers/miners were soaring, my inbox was flooded with emails asking which nickel stock(s) to jump into.  Since all mining booms follow a familiar pattern, and end the same way for the same reasons, I responded by referring to my story about the mother of all nickel boom-busts – Poseidon, involving the very same nickel mines.   How’s a one-year gain of 46,000% sound?

124 Reasons NOT to invest! - This time is different - or is it?

Every year there are ‘End of the world’, or ‘End of life as we know it’ crises and threats that scare investors into waiting and watching from the sidelines, but share markets have always seemed to power through them. Are the current batch of threats and fears different this time?

Why do share markets crash? – Part B: Update on Australia

The simple answer is that the Australian share market crashes (and rebounds) because, and when, the US market does. The US is the largest and most influential market that affects all global markets, asset classes, and investors. What happens on our local market is almost always driven by what happens on Wall Street (with rare exceptions like 1907 and 1951), regardless of local conditions, events, or pricing.

Australia v US share markets – it’s our turn next!

Australia and the US have had the best share markets in the world for the past 100+ years, but: Why? Which market has generated higher returns? Which has had the bigger booms and busts? Who’s turn is it next?  

Warren Buffett: world’s greatest investor, but even he lost it 20 years ago.

Many readers wanted me to back up by bold claim that even the best investor in the world – Warren Buffet – suffered from the same disease that plagues every other successful fund manager in the world - fading out-performance over time.

ASX reporting season in 4 charts - $40b wiped off profits! - where did it go, and why?

August is the main full-year reporting season for Australian listed companies, as most companies have June reporting years. For ASX100 companies that reported their June full-year results in August, total profits fell by one third from $116b to $76b.