Economics

It has always amused us that China, with 1.34 billion people (19 per cent of the world’s population of 7 billion) and with an economy of US$8.5 trillion (12 per cent of the world’s GDP of US$70 trillion), can produce their GDP growth rate within days of the quarter end.
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by David Buckland Posted in Economics, Insightful Insights.

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As you know, we have been barking loudly about a deterioration in China for two years. For investors however, it is often less important that fundamentals are deteriorating, and more important that sentiment isn’t. But sentiment does appear to be deteriorating too.
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by Roger Montgomery Posted in Economics, Insightful Insights.

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In these hightlights from the Switzer Report, Roger gives his views on the situation for Australian mining share prices in light of pressure coming from China as their economy slows down and their foreign exchange reserves decline. Watch here.

by Roger Montgomery Posted in Economics, Energy / Resources, TV Appearances.

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Is it a socialist philosophical legacy in our public education system that is thwarting Australia’s future?

If you have your kids in a public primary school, you might have observed that unless the school has the resources for a gifted/talented/enrichment program, everyone needs to wait until the slower students have ‘caught up’. I have heard many stories of the smartest and brightest kids being sent on errands for the teacher because they have already completed their work. In this, whether intended or not, there is an element of the socialist philosophy in the response and possibly the outcome.
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by Roger Montgomery Posted in Economics, Insightful Insights.

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As the US share market hits all-time highs, we are often asked why the Chinese share market, as measured by the Shanghai Composite Index, is 64 per cent below its October 2007 peak.
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by David Buckland Posted in Economics, Insightful Insights, Market Valuation.

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Recently I have been ramping up the discussion about a serious fix we need for our business. The business of Australia requires motivated staff, great products and services, and a lid to be kept on costs.

Looking at our balance of payments however, you can see that we are a profligate country, spending more than we earn and selling off assets to pay for it. Keep going and eventually all our assets will be owned by foreigners from whom we will rent the properties, sending our income offshore at an even faster rate.
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by Roger Montgomery Posted in Economics, Insightful Insights.

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For the 30 seconds before the Reserve Bank’s decision flashes across the RBATCTR page of trader’s Bloomberg terminals, silence descends on dealing room floors around the country. Someone then cries out; “up 25bips” or “no change” and mayhem ensues. As a young graduate in a dealing room it all seems very exciting and front line. But as a more seasoned observer and participant, one does wonder what all the fuss is about.

Investors can do much better investing in ‘businesses’ rather than trying to use interest rate changes as a predictor of stock prices. In any case, once you have predicted correctly whether interest rates will rise or fall, you then have to predict what the reaction will be by investors in each individual stock. And generally it is worth being reminded of the fact that economists have had a mixed track record over the long run at predicting rates in the first place.
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by Roger Montgomery Posted in Economics, Insightful Insights.

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Last week, The Australian Financial Review’s Angus Grigg and Jamie Feed wrote a neat summary of the growing cries of concerns around China’s economy.

We summarise as follows:

– Dong Tao, Chief Regional Economist at Credit Suisse says there is “no good news to report on China…the Chinese economy is struggling”
– Greg Lilleyman, RIO’s President of Pilbara Iron Ore Operations says “additional exports and a slowing in steel demand growth would hurt the price in tens second half of the year”
– Andy Xie says “This is not good news for Australia” and “the Australian housing market and dollar were vulnerable to slowing growth in CHina, which could fall as low as 5 per cent in coming years”
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by Roger Montgomery Posted in Economics, Energy / Resources, Insightful Insights.

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Jeremy Grantham is a Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo also known as (GMO). He has 44 years experience and is also the founder of one of the first index funds in the 1970’s. With about US $100 billion in funds under management, he is also the founder of one of the world’s biggest if not the biggest managers.
He is a contrarian and just last week was quoted as saying: “I bought more long-term Treasuries in the last month than I’ve bought in four years. I am a fan of Treasuries now. I wasn’t a fan of Treasuries in July.”

He believes in and indeed coined the term, The New Normal – lower rates of growth for the US permanently.
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by Roger Montgomery Posted in Economics, Insightful Insights.

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Cyprus’s parliament rejected an unprecedented levy on bank deposits, dealing a blow to European plans to force depositors to shoulder part of the Country’s rescue in a standoff that risks renewed tumult in the Euro area. The deal sought to raise E5.8b by drawing funds from Cyprus bank accounts (known as a deposit tax) in return for E10b in external aid.

Of the 17 countries in the Euro, the Cypress economy with GDP of E16b, ranks number 15, ahead of Estonia (E13b) and Malta (E5b) and accounts for less than 0.2 per cent of the Euro E9.4 trillion economy.
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by David Buckland Posted in Economics, Insightful Insights.

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