What does a five-year global forecast look like?
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.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
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Pam Totolos
:
Greg,
QE1, QE2 and QE3 are about pump primming the economy in Europe. The US FED has been printing cheap money, allowing in some cases companies to engineer buy back schemes. This props up companies share prices, and the interest on the borrowings may be tax deductible.
People who meddle in the market, for their own benefit are known as market manipulators. Australian company directors are only allowed to trade at certain times of the financial year. Their bed partners, who may induldge in abit of pillow talk may trade at any date. This has been discussed 10 years ago in the SMH Business Saturday section.
Kind regards,
Pam.
Roger Montgomery
:
Hi pam,
Not quite correct. Bed partners are regarded most frequently as “associates” and must also disclose. You are right that there are exceptions but they are more rare than frequent.
Greg McLennan
:
Actually, I meant to say ‘economy’ rather than ‘market’. In any case, only QE1 was to ‘pump prime’ the economy, after which the private sector was supposed to take off like a jet. Instead, the US has had the lamest recovery anyone who is not in their ninth decade of life has ever seen.
No-one talks about QE3 as being pump priming, now it’s about targeting employment….evidently, pump priming didn’t work and the masses won’t swallow the pump-priming label for 6 years.
I have a novel idea. To encourage the wealth generating part of the economy – ie. the non-government bit – to get on generating wealth, how about governments stop making things so difficult for it. Deregulate. Stop taxing it through the nose and discouraging people from working harder to earn more. Minimum wages are too high and penalty rates are stupidly high. Is it really twice as hard for a café employee to get out of bed and go to work making coffee on 26th January as 25th January? Governments don’t need to ‘help’ or ‘support’ or ‘pump prime’ the economy, they just need to get out of the way and let people get on with it because it is then in their interests to do so. I don’t expect that it will happen, though, and everyone will continue to be mystified as to why economies just won’t get going.
Pam
:
Dear Greg, in the State of The Union speech today, by the US President, that the the US is in pretty good state. Paid sick leave, paid maternity leave. The price for oil has fallen for to acceptable levels for the highest oil consumer in the world.
Kind regards,
Pam.
Pam Totolos
:
Dear David,
my son has noted from your commentry that “Japan has not gone anywhere in 20 years.” I note that in the the first 3 months of 2013, the Japanese market was up 30%. Abeeconomics was all about printing “cheap money”.
A solicitor from the south coast of NSW, that my son bumped into in his travels, wanted to open a financial services company , going direct with home loans, getting funding from mums and dads in Tokyo and sending it to Sydney for use to in the “overheated” home loan market. He could borrow at 2% in Tokyo and lend out to Sydney investors under 5%.
What ever happened to Boom Boom Bertusconi ??
Italy went into recession in the September quarter from memory.
My son studied Modern History, studying China, under Mao and Russia under Stalin. They had 5 years plans. They have now moving to a consumer society. They have a super rich ($16 million worth), with children going to Sydney Uni and driving Black BMW’s.
China borrowed cheap money from the USA to fund expansion. They will have to pay back that debt at a later date.
Price of oil has dropped from $115 US a barrell Brent Sea in July 2014 to less than $45 US barrell Brent Sea in the northern hemisphere winter in January 2015. Factors such as new plants and a warm winter are the causes of this.
Kind regards,
Pam.
Greg McLennan
:
I certainly don’t doubt point no 1. Let’s face it, QE everywhere has been an experiment, Japan was just coming off a much dodgier base.
I believe that when people meddle in the market to try to engineer a better outcome, they invariably make it worse. If no-one has claimed that for themselves, I’m calling it “Greg’s Law”.