Previously on Sharpfokus
The GDP mathematics of Sharpfokus Saham 🔢 Sharpfokus90
May 8th, 2019
⏰ 2 minute read
⏰ 2 minute read
Average match up
1Q GDP seems to have disappointed a lot of people. Not us. Its no surprise our economy hasn’t done well for a while, & there’s a couple of bright positives. 1Q growth in $s is 4%, up from recently negative & an average 2% the last 4 quarters (US is 5.5%...). Also, 4% finally matches (& will soon cross) the 8 year average, After a decade of slowdown, we are finally turning around!
The slowdown
Slowdown
Why the slowdown is coming to an end is clear & simple. First a look at just how big a slowdown it has been. 10 years ago the 8 year average growth in $s was over 20%. The 2000s was one of the great economic booms. By 2012 we reached $1tn & then stalled. Our average growth declined mercilessly to now just 4%.
Private
One of the best ways you can see this slowdown is through private household consumption, which is the mainstay of an economy, albeit the swing factor is often investment. Up to the mid 2000s consumption was close to 70% of GDP,. By 2015 it had fallen to just 57%. But it has now stabilized & imprved slightly.
Government
The flip side of a lower share of private consumption is a much higher share of government consumption. This was 7% of GDP & then increased to 10%. As government doesn’t make money or create much value, this dragged down GDP. Happily this has reversed to 8.9% over the last 4 quarters. This change is what’s helping GDP growth to start to recover.
Beating Apple
Winner
Here’s another sign of how things are changing. If you’re a regular reader you know the Apple v Indonesia story. During the 2000s as Apple grabbed the headlines, the Indonesian economy out performed & was first to get close to $1tn. In 2012, Indonesia with its 20% a year growth rate was 3X bigger than Apple market value.
Loser
At that exact time, Apple decided it wanted to make big investments into Indonesia. The government said no thank you, Apple pulled out & we couldn’t even get the latest iPhones for a couple of years. Indonesia’s economy stalled & Apple shares soared to above $1tn, overtaking our whole economy...
Sell tech
But this is satarting to reverse, Apple is now struggling with their own hubris & the market value has fallen back to $900bn. Our economy has edged higher above $1tn. It’s now time to get out of the best performing tech stocks & get into real assets like the Indonesian stock market, possibly now the world’s cheapest.
1Q GDP seems to have disappointed a lot of people. Not us. Its no surprise our economy hasn’t done well for a while, & there’s a couple of bright positives. 1Q growth in $s is 4%, up from recently negative & an average 2% the last 4 quarters (US is 5.5%...). Also, 4% finally matches (& will soon cross) the 8 year average, After a decade of slowdown, we are finally turning around!
The slowdown
Slowdown
Why the slowdown is coming to an end is clear & simple. First a look at just how big a slowdown it has been. 10 years ago the 8 year average growth in $s was over 20%. The 2000s was one of the great economic booms. By 2012 we reached $1tn & then stalled. Our average growth declined mercilessly to now just 4%.
Private
One of the best ways you can see this slowdown is through private household consumption, which is the mainstay of an economy, albeit the swing factor is often investment. Up to the mid 2000s consumption was close to 70% of GDP,. By 2015 it had fallen to just 57%. But it has now stabilized & imprved slightly.
Government
The flip side of a lower share of private consumption is a much higher share of government consumption. This was 7% of GDP & then increased to 10%. As government doesn’t make money or create much value, this dragged down GDP. Happily this has reversed to 8.9% over the last 4 quarters. This change is what’s helping GDP growth to start to recover.
Beating Apple
Winner
Here’s another sign of how things are changing. If you’re a regular reader you know the Apple v Indonesia story. During the 2000s as Apple grabbed the headlines, the Indonesian economy out performed & was first to get close to $1tn. In 2012, Indonesia with its 20% a year growth rate was 3X bigger than Apple market value.
Loser
At that exact time, Apple decided it wanted to make big investments into Indonesia. The government said no thank you, Apple pulled out & we couldn’t even get the latest iPhones for a couple of years. Indonesia’s economy stalled & Apple shares soared to above $1tn, overtaking our whole economy...
Sell tech
But this is satarting to reverse, Apple is now struggling with their own hubris & the market value has fallen back to $900bn. Our economy has edged higher above $1tn. It’s now time to get out of the best performing tech stocks & get into real assets like the Indonesian stock market, possibly now the world’s cheapest.
The cheapest market
Target 16k
The main way we value the stock market is using nominal GDP. You have to be chose a base & ours is 1996, now an amazing 23 years ago. While GDP has seasonally declined from its peak in the 3Q last year...if the JCI index had followed GDP since 1996, it should be at 15,800, or 2.5X from where it is today.
47% of GDP
If that sounds extreme, here’s a way to make it more believable. GDP reflects the sales value of the economy. Most markets like the US are trading up towards 150% of GDP. Imagine the economy had a 10% profit margin & was valued at 15X profits & this makes sense. Indonesian stocks are just 47% of GDP!
98:23
Making this already extremely cheap situation even more extreme is that the top 10 stocks in the index or only about 1.5% of all the listed companies, accounts for almost 50% of the total value. In the US the top 10 is about 20% of the total. This means 98.5% of our shares account for only 23.5% of GDP!
Saham GDP math
So that gives us the following math for Sharpfokus Saham. If we cover as many of the 98.5% as possible, there should be amazing opportunities. If the market was 150% of GDP & the top 10 only 20%, rhe other 98.5% would become 120% of GDP. Without any growth that’s a 6X return. Plus we now expect the economy to grow faster too!
Target 16k
The main way we value the stock market is using nominal GDP. You have to be chose a base & ours is 1996, now an amazing 23 years ago. While GDP has seasonally declined from its peak in the 3Q last year...if the JCI index had followed GDP since 1996, it should be at 15,800, or 2.5X from where it is today.
47% of GDP
If that sounds extreme, here’s a way to make it more believable. GDP reflects the sales value of the economy. Most markets like the US are trading up towards 150% of GDP. Imagine the economy had a 10% profit margin & was valued at 15X profits & this makes sense. Indonesian stocks are just 47% of GDP!
98:23
Making this already extremely cheap situation even more extreme is that the top 10 stocks in the index or only about 1.5% of all the listed companies, accounts for almost 50% of the total value. In the US the top 10 is about 20% of the total. This means 98.5% of our shares account for only 23.5% of GDP!
Saham GDP math
So that gives us the following math for Sharpfokus Saham. If we cover as many of the 98.5% as possible, there should be amazing opportunities. If the market was 150% of GDP & the top 10 only 20%, rhe other 98.5% would become 120% of GDP. Without any growth that’s a 6X return. Plus we now expect the economy to grow faster too!
Sharpfokus Saham is 💯 stocks in your pocket. Online research, data, financial models & calculators to help discover the hidden future gems. All for less than a small bottle of water per day, Rp500k for 6 months access. Sign up below.
