New Zealand forestry: a visit to a Gypsy fortune-teller’s colourful caravan

Authors: John Walker
Publication: New Zealand Journal of Forestry, Volume N.Z.J.For. 2008, Issue N.Z.J.For. 53(2) 2008, pp 35-42, Aug 2008
Publisher: New Zealand Institute of Forestry

Abstract: The Economist magazine published a leader “Drowning in Oil” on 8th March 1999 when crude was around $10/barrel. Further at year-end 1999 The Economist updated its long-running commodity index (Figure a) that again highlighted the impression of resource abundance. While commodity prices declined between 1980 and 2000, concurrently the NASDAQ began its long climb from a price-to-earnings ratio (P/E) of 13 at its beginnings to a triple digit multiple of around 350 at its peak in March 2000 - after adjusting for the cost of insider stock options. Parenthetically, most of the 25-fold capital gain from technology stocks came not from great earnings but from multiple upward revisions of P/Es. In contrast, in the current decade commodity prices are on the rise (Figure 1b) whereas valuations in the broad market are in decline (lower P/Es) led by a deleveraging of finance. Commodities are countercyclical to the broad market.
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