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GDP -O.6%

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Bigfish
Occasional Contributor
The SA GDP contracted 0.6% quarter-on-quarter in the first three months of this year, its first quarterly contraction since a 2009 recession.Economists polled by Reuters had expected a quarter-on-quarter contraction of 0.1%. Despite the above our ALSI is still at an ALL-TIME HIGH. Is it just me or does this not add up? What is going on????
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41 REPLIES 41
Not applicable
be careful of trading economic views on the ALSI, they take a long time to take effect, on the other hand they also take a long time to play out. (look at how our momentum shares have been running for years now).
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Preston
Super Contributor
Here goes our currency.
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kwagga
Super Contributor
The shares that are driving the ALSI aren't relying on our GDP
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Preston
Super Contributor
Kwagga, The AlSI can be seen as a wealth creating machine. So if you buy a share for R10 and sell that same share for R30, you make a profit of R20. That profit is then used to buy food, clothing and in the process increase the money supply in the economy. Now, there is a dichotomy where the ALSI does not mirror the true state of the economy...so ALSI need to adjust.... (OMO)
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Not applicable
to create wealth in the market - the best way is convince all your friends to buy more cause share outperform any other asset class out there, the more they buy the higher it goes, then the trick is to take it out before it all collapses....oh wait sorry that was my definition for a ponzi scheme :P
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Bouwer
Super Contributor
@Preston, there is always to ends to the story.. The other guy that that buys your share now has R 30 less to spend on his wife or car or food etc..
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Not applicable
stock purchases do not contribute to GDP - they are viewed as savings. So no reason there for correlation. Nor do stock profits (as Preston would suggest) increase money supply. The relationship between stock market gains and money supply is far more complex - a simple model would be - you make profit, you put it in the bank (don't spend it) and the bank now has a greater capital base to lend from - therefore increased money supply thanks to fractional reserve system. In answer to the original question though - why the market is up when the economy is down - that is by and large thanks to a massive increase in money supply - and there is more than enough empirical evidence out there to prove that money supply is the real driver of stock market prices.
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Not applicable
stock purchases do not contribute to GDP - they are viewed as savings. So no reason there for correlation. Nor do stock profits (as Preston would suggest) increase money supply. The relationship between stock market gains and money supply is far more complex - a simple model would be - you make profit, you put it in the bank (don't spend it) and the bank now has a greater capital base to lend from - therefore increased money supply thanks to fractional reserve system. In answer to the original question though - why the market is up when the economy is down - that is by and large thanks to a massive increase in money supply - and there is more than enough empirical evidence out there to prove that money supply is the real driver of stock market prices.
0 Kudos
Not applicable
stock purchases do not contribute to GDP - they are viewed as savings. So no reason there for correlation. Nor do stock profits (as Preston would suggest) increase money supply. The relationship between stock market gains and money supply is far more complex - a simple model would be - you make profit, you put it in the bank (don't spend it) and the bank now has a greater capital base to lend from - therefore increased money supply thanks to fractional reserve system. In answer to the original question though - why the market is up when the economy is down - that is by and large thanks to a massive increase in money supply - and there is more than enough empirical evidence out there to prove that money supply is the real driver of stock market prices.
0 Kudos
Not applicable
stock purchases do not contribute to GDP - they are viewed as savings. So no reason there for correlation. Nor do stock profits (as Preston would suggest) increase money supply. The relationship between stock market gains and money supply is far more complex - a simple model would be - you make profit, you put it in the bank (don't spend it) and the bank now has a greater capital base to lend from - therefore increased money supply thanks to fractional reserve system. In answer to the original question though - why the market is up when the economy is down - that is by and large thanks to a massive increase in money supply - and there is more than enough empirical evidence out there to prove that money supply is the real driver of stock market prices.
0 Kudos
Not applicable
stock purchases do not contribute to GDP - they are viewed as savings. So no reason there for correlation. Nor do stock profits (as Preston would suggest) increase money supply. The relationship between stock market gains and money supply is far more complex - a simple model would be - you make profit, you put it in the bank (don't spend it) and the bank now has a greater capital base to lend from - therefore increased money supply thanks to fractional reserve system. In answer to the original question though - why the market is up when the economy is down - that is by and large thanks to a massive increase in money supply - and there is more than enough empirical evidence out there to prove that money supply is the real driver of stock market prices.
0 Kudos
Not applicable
stock purchases do not contribute to GDP - they are viewed as savings. So no reason there for correlation. Nor do stock profits (as Preston would suggest) increase money supply. The relationship between stock market gains and money supply is far more complex - a simple model would be - you make profit, you put it in the bank (don't spend it) and the bank now has a greater capital base to lend from - therefore increased money supply thanks to fractional reserve system. In answer to the original question though - why the market is up when the economy is down - that is by and large thanks to a massive increase in money supply - and there is more than enough empirical evidence out there to prove that money supply is the real driver of stock market prices.
0 Kudos
Not applicable
stock purchases do not contribute to GDP - they are viewed as savings. So no reason there for correlation. Nor do stock profits (as Preston would suggest) increase money supply. The relationship between stock market gains and money supply is far more complex - a simple model would be - you make profit, you put it in the bank (don't spend it) and the bank now has a greater capital base to lend from - therefore increased money supply thanks to fractional reserve system. In answer to the original question though - why the market is up when the economy is down - that is by and large thanks to a massive increase in money supply - and there is more than enough empirical evidence out there to prove that money supply is the real driver of stock market prices.
0 Kudos
Not applicable
stock purchases do not contribute to GDP - they are viewed as savings. So no reason there for correlation. Nor do stock profits (as Preston would suggest) increase money supply. The relationship between stock market gains and money supply is far more complex - a simple model would be - you make profit, you put it in the bank (don't spend it) and the bank now has a greater capital base to lend from - therefore increased money supply thanks to fractional reserve system. In answer to the original question though - why the market is up when the economy is down - that is by and large thanks to a massive increase in money supply - and there is more than enough empirical evidence out there to prove that money supply is the real driver of stock market prices.
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Preston
Super Contributor
@skaaptjie, Too much emotions in that posting. Please post yourrationale to the CFA institute , as your posting violate the essence on which many module was written. No need to debate with you . Good luck , please posting CFA institute response.
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Preston
Super Contributor
@skaaptjie, Too much emotions in that posting. Please post your rationale to the CFA institute , as your posting violate the essence on which many module was written. No need to debate with you . Good luck , please posting CFA institute response.
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Preston
Super Contributor
@skaaptjie, Too much emotions in that posting. Please post your rationale to the CFA institute , as your posting violate the essence on which many modules was written. No need to debate with you . Good luck , please posting CFA institute response.
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Not applicable
No emotion - just fact. SA measures GDP by expenditure (if I am not mistaken). That is total consumption + total investment (specifically excluding financial instruments) + government spending + exports minus imports. Now as for money supply. If I buy a stock at R10 I have taken money and bought an asset. If that asset increases in value - it is because someone else is willing to pay more for it than me. That person is willing, because he or she has more. If the market cap of the JSE was x in year 1, and x+y in year 2 - then sure, the earnings have increased, as has the PE, but the JSE didn't create the y, the y was necessary for the JSE to even have the x+y market cap. Cause and effect straightened out QeD
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Preston
Super Contributor
@skaap, your first factual error, is that there are 2 way of determining GDP , The first one is the income approach and the second one is the expenditure approach. You are focusing on only the expenditure approach........Do you want me to go on???
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