Economics

A couple of weeks ago at the World Economic Forum in Davos, Switzerland, Ray Dalio spoke with CNBC.  Prominent economic thinkers in Davos believe the U.S. economy is strong, but its ability to deal with the next crisis is in doubt. “The U.S. is growing and I think that’s a non-debatable fact,” Gary Cohn, president of Goldman Sachs, said Thursday at the World Economic Forum in Switzerland. “What I am concerned about is the actual ability of the U.S. to raise rates with what’s going on with the rest of the world.”  Below, we summarise the outtakes.

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by Roger Montgomery Posted in Economics, Insightful Insights.

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John Mauldin from Mauldin Economics has just penned “A Five-Year Global Financial Forecast” and as investors I thought some of those points, which I have summarised below, should certainly be kept in mind.

1. The Japanese experiment with Quantitative Easing is getting dangerous; they are exporting deflation to trade competitors like Germany, China and South Korea.

2. A European crisis at least as severe as 2012 is likely. Italy and France will struggle as the structural flaws in the design of the Euro become apparent.

3. China is “approaching a day of reckoning as it tries to reduce its dependence on debt in its bid for growth, while creating a consumer society.”

4. Emerging markets which have taken on more dollar denominated debt in recent years will suffer as their currencies decline against a strongly rising US dollar.

For a copy John’s full report please click here.

And on other news:

Japanese 5 year Government Bonds hit nil percent earlier this week; and the UK inflation rate in December 2014 hit its lowest level since May 2000.UK Chancellor George Osborne said the drop in the Consumer Price Index (to 0.5 per cent) was “almost entirely driven by external factors such as the oil price” which has more than halved since June, and is “much more welcome than in the eurozone”, where inflation has fallen to negative 0.2 per cent.

by David Buckland Posted in Economics, Insightful Insights.

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With 2014 behind us, let’s take a look at the year that was, and consider what could be in store for 2015.  continue…

by David Buckland Posted in Economics, Foreign Currency.

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Australia is now facing a commodity bust and the outlook is for lower growth and pressure on public finances with the budget deficit for Fiscal 2015 blowing out to $40 billion. Meanwhile, the Australian Dollar has declined from US$1.05 to $0.82 in the past twenty months and a low of US$0.75 is on the cards. continue…

by David Buckland Posted in Economics, Energy / Resources, Insightful Insights.

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No doubt you’re starting to thinking about puddings for Christmas Day, last minute gift buying, present wrapping and packing for the annual holiday.  But spare a thought for the plunging price of oil. There’s a couple of things you need to know, beyond giving the petrol station attendant a smile because fuel is only costing $1.20/litre.

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by Roger Montgomery Posted in Economics, Insightful Insights.

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In the past few months, we have noted that retailing – among other sectors that make up the Australian economy – slowed dramatically in the June quarter of 2014. The September quarter reports from many companies over AGM season saw a continuation of that trend.

Further to our recent observations, Australia GDP just printed at 0.3 per cent for the September quarter. By contrast, 0.5 per cent for the June quarter 2014, confirms that economic growth is waning in Australia and the RBA might be forced to cut rates further. continue…

by Russell Muldoon Posted in Economics, Energy / Resources, Insightful Insights, Investing Education.

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We have made much of the turnaround in markets that began with President of the European Central Bank, Mario Draghi’s ‘what ever it takes’ speech. Those famous words have been cited by many – including us – as marking the bottom for financial markets and the beginning of a recovery for Europe.

But former US Treasury Secretary Tim Geithner made some surprising revelations about Draghi, as well as the stupidity of Europe’s elected leaders as they faced their financial crisis, in his memoirs Stress Test: Reflections on Financial Crises. continue…

by Roger Montgomery Posted in Economics, Insightful Insights, Value.able.

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Is the chest beating and plumage preening about and over the Free Trade Agreement a bit of a joke?

Parliamentary Secretary to the Prime Minister, Josh Frydenberg, said the deal to be signed today with China could be worth (note the word ‘could’) up to $18 billion to the Australian economy over the next few years.  I think he actually said 10 years.  If that’s the case, it’s worth $1.8 billion per year.

Let’s put that into context.  Our total annual iron ore exports are 600 million tonnes.  At US$80/tonne, the total value is A$56 billion.  The total value of the FTA could be wiped out by a US$2.79/tonne move in the iron ore price.

The full terms of the deal are expected to be signed this afternoon and the details released then also. Stay tuned.

by Roger Montgomery Posted in Economics, Insightful Insights, Market commentary.

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It doesn’t seem that long ago, but the Global Financial Crisis-inspired rout in the stock market began in late 2007 and even though it bottomed in March of 2009, the symptoms that triggered the collapse, are even worse today.

But before you go jumping at shadows keep in mind that while interest rates remain low, the status quo is very likely to be maintained. Indeed low or lower rates could trigger an equity bubble before any correction is experienced. continue…

by Roger Montgomery Posted in Economics, Insightful Insights, Investing Education, Property, Value.able.

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It’s a bloody disgrace! It’s un-Australian and it’s nothing more than stealing from your own neighbour.

Finally, The Australian Financial Review, who received 28,000 pages of leaked tax information, forwarded it to ATO Commissioner Chris Jordan. The information reveals how 343 local and foreign companies used accounting firm PwC to slash their tax bills through total swap returns, royalty payments, hybrid debt structures and secret deals with tax havens like Luxembourg. continue…

by Roger Montgomery Posted in Economics, Insightful Insights.

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