Australian Economic Analysis

[Glen48]

exam financial advisers should have to pass

What do you do when a client says he’s going to replace you with a new broker? Remind him he’s your son.
By Chuck Cohen | October 31, 2008 edition

A client asks you if the 400-point-an-hour loss in the stock market the past seven days should make him nervous. Your answer is:

A. “Did you watch Letterman last night?”
B. “Did you watch Leno last night?”
C. “Do you have any quarters for the meter?”
D. “You’re still talking to me?”

Answer: C. This shows you still have a car, which indicates your confidence in the market.

2. You are invited to a client’s house for dinner to discuss his shrunken retirement portfolio. Your reply is:

A. “Thank you, but I’ve given up food.”
B. “Your best years are ahead of you. Eighty is the new 60.”
C. “I never eat without my personal food taster.”
D. “Do I know you?”

Answer: D. Never admit to knowing anyone except Warren Buffett, who is always referred to as Uncle Warren.

3. Your client asks why he should buy more stock when the market has declined 40 percent in two weeks. Your answer is:

A. “You’d rather buy paper towels?”
B. “Stocks can’t go any lower. Can they?”
C. “Because the Indian casino is closed today.”
D. “I really need the commission.”

Answer: D. Creating empathy with your client is important. Always have pictures of your children on your desk, assuming you still have a desk.

4. Your client asks why he shouldn’t find another adviser to replace you. You should:

A. Tell him that you’ve been practicing and will definitely get better.
B. Tell him if he does find another adviser to give you the phone number.
C. Become hard of hearing.
D. Remind him you’re his son.

Answer: C. Try the time-honored, “I’m sorry, did you say ‘buy’ or ‘why?’ ”

5. You have a meeting with a potential new client. He asks your “financial strategy.” You answer:

A. In Korean.
B. “I generally move my queen to rook four and then yell ‘checkmate’ no matter what.”
C. “Strategy? We don’t need no stinking strategy.”
D. “I think Trollope said it best.”

Answer: D. As Al Roker likes to say, “When in doubt, quote Trollope.”

6. The SEC accuses you of insider trading. Your best defense is:

A. A missile shield.
B. “did it for the lovely wife and two gifted children I plan to acquire some day.”
C. “Do you have my phone number in Rio?”
D. “Can’t we all just get along?

 

[Ageo]

Thanks Dhukka for the info, keep it up as its very informative indeed

 

[dhukka]

A couple of data points yesterday. Building Approvals fell -7.2% in September and year over year are now down approximately -22%.

Also out the Performance of Services Index contracted for the seventh month in a row. In line with a lot of the statements by discretionary retailers at recent AGM's, retail sales from discretionary retailers fell sharply in October.

 

[dhukka]

The headline employment number of a rise of 34k jobs in October looked good until you take a closer look at the details. Full time employment fell -9.2k after a downwardly revised fall of -23.3k in September. Part time jobs grew by 43.5k during October.

A sharp divergence between part-time job growth and full-time job growth are shaded below in previous economic slowdowns. Even in the early 1990's recession, part-time employment continued to grow year over year whilst full-time employment contracted sharply. The shaded area on the far right of the graph, whilst hard to see, is starting to show that divergence again.

 

[dhukka]

Anyone catch NAB's monthly business survey today? From the shm.com.au

Business hopes collapse

Business confidence in Australia collapsed to a record low in October as fears of a global economic slowdown crushed optimism at home.

Companies' confidence has now slid for 10 months in a row. Last month's decline accelerated, though, with National Australia Bank's survey plunging 21 points to minus-29 from minus-8.4 in September. A negative reading indicates that pessimists outnumber optimists.

"Continuing volatility in global equity markets, emergency financial packages, falling commodity prices, and continuing talk of a global recession have finally broken business optimism and now fear reigns supreme," said NAB group chief economist Alan Oster in a statement.

"Indeed it is worth noting that confidence readings are worse than the bottom of the 1990s recession has more to do with fear of the unknown than actual current outcomes."

 

[Aussiejeff]

Anyone catch NAB's monthly business survey today? From the shm.com.au

As I mentioned in another thread, I have a feeling the promises by Gordon Brown, KRudd and their G20 ilk to apply a "Fiscal Stimulus" to the world financial markets (ie: SPEND, SPEND, SPEND) might actually have the reverse effect on investor's nerves.

Is THAT the best they can come up with? Like a game of snakes and ladders, slip down back to where this mess all started, with excessive money printing and SPENDING?

World leaders are in a total tizz ATM. Business confidence can sense it. Pollies back-slapping each other and making outlandish promises just exacerbates the problem over time. Like a massive tsunami, I have a bad feeling that a "second wave" is just over the horizon and the Captains are preparing to jump ship...

 

[Glen48]

History shows when this sort of bubble bursts it just snowballs and there is no cure yet they still keep trying by throwing money at it, look at our car industry no car yard or buyers soon yet they want to support the workers because 200K on the dole is not good for their image and with HQ in USA about to go under what the point?

 

[Aussiejeff]

Just finished watching a recording of SBS's last Insight program, which talked about the economic outlook for Australia and how it might affect business and consumers.

I was bemused by the overly optimistic assesment by AIG CEO Heather Ridout - essentially that she felt the plunge in the $AUS was "great for our export and tourist industries since more countries will want to buy our raw materials and come here for holidays" and as a result, Australia won't fall into recession.

Funny how many "economic optimists" in Oz seem to think the plunge in the Lil' Ozzie Bleeder is the best thing since sliced bread. They completely ignore the following substantial NEGATIVE outcomes:

(1) The cost of funding Australia's already massive international foreign debt skyrockets with a falling dollar.

(2) The cost of ALL imports must eventually go through the roof.

(3) The $AUS dollar becomes a Banana currency - at the whim of the money market gamblers and the first to be dumped in any "crisis".

(4) It sets us up for a massive crunch when the price of a barrel of oil suddenly resumes a rapid upward spiral. I figure one of the primary reasons oil is plunging right now is because hedge funds are selling out to cover their immediate cash flow problems. It has little to do with everyone suddenly parking their cars and walking to work (ie: the demand has not fallen off a cliff, but the hedgie punters have withdrawn some sorely needed cash to fund early retirement in the Bahamas!)

I comfortably predict in the near term the world will wake up to jolting news something along the lines of "Oil prices rebounded strongly overnight as new data shows reserves have depleted significantly due to unforeseen higher demand as well as the effect of significant cutbacks in oil exploration and production brought on by recent hedge fund selling".

If our BananaBuck is still languishing around the 50c-60c mark at that inevitable time when the oil price spiral takes off again, our by then battered economy better be prepared for a crash landing. Anyone care to guess what a litre of unleaded will cost with oil at, say, $140 a barrel and our BananaBuck at $USD 0.55?


Enjoy your flight in the meantime.



aj

 

[Glen48]

We all now have bit parts in Australia horror movie.
You know how some " The day the World iced over" type movie starts the Hubby is fighting with his wife and kids jumping up and down and in the back ground the TV saying this is the 3rd week in a row were we have had record snow falls, then the Hubby goes to work and see cars off the road and people complaining about the snow and ice and so it grows from there more bad news every few minutes...only He saves the World and we have Krudd etc to save us.

 

[gfresh]

If our BananaBuck is still languishing around the 50c-60c mark at that inevitable time when the oil price spiral takes off again, our by then battered economy better be prepared for a crash landing. Anyone care to guess what a litre of unleaded will cost with oil at, say, $140 a barrel and our BananaBuck at $USD 0.55?

Good thoughts.. I think there is heavy shock coming, and this is very much false confidence now that the "petrol shock" is off the front pages. The oilers are also starting to scale back production, they know how to keep the price where they like. This will eventually help stabilise, and raise the price back over $60/bbl.

A low dollar could also lead to the twin evil of higher interest rates. Overseas lenders are reluctant to lend their dollars to Aussie lenders due to several factors -

a) if the locals (us) have to work harder and harder to service the loans in the lenders currency

b) they have less money to lend with less exotic leverage on leverage available

c) they don't trust the Oz housing market will not implode like their own. On the outside looking in they just see what their market was like 12-18 months ago and see Risk with a capital R.

If so, interest rates may have to return to higher levels, and petrol prices were to go sky-high, we are really in big trouble. The situation we were at 12 months ago "when everybody was hurting" but *without* a strongly growing economy to keep things in check.

 

[Wysiwyg]

Anyone care to guess what a litre of unleaded will cost with oil at, say, $140 a barrel and our BananaBuck at $USD 0.55?

The p.o.o. will only spiral up if world economic growth increases to the pace of the 2003-2007 years.That is unless you believe the peak oil story which seems to have faded with less demand for the crude.

My charts below show the correlation between currencies and crude oil which suggests any rise in crude will be accompanied by a rise in the AUD/USD , EUR/USD.

Firstly the EUR/USD correlation chart and then the AUD/USD to compare.

 

[dhukka]

Paul Keating once remarked that the 1990's recession was "the recession we had to have", I'm calling this one, the recession we couldn't avoid. A couple of recent data points. ANZ job ads fell the most ever in November. NAB business survey also plunged in November, NAB now sees a recession at least in the non-farm economy. The manufacturing sector has been contracting for 6 months, the services sector for 8 and the construction industry 9 months. Welcome to the recession we couldn't avoid.

 

[Aussiejeff]

Paul Keating once remarked that the 1990's recession was "the recession we had to have", I'm calling this one, the recession we couldn't avoid. A couple of recent data points. ANZ job ads fell the most ever in November. NAB business survey also plunged in November, NAB now sees a recession at least in the non-farm economy. The manufacturing sector has been contracting for 6 months, the services sector for 8 and the construction industry 9 months. Welcome to the recession we couldn't avoid.

Uh-uh!

Metinks this is officially "The Recession We Won't EVER Admit To".

KRudd, Swannie & trusty sidekick Little Stevie will have to be dragged kicking and screaming to the stocks and pelted with logic by the hoi poloi until they turn blue with embarrassment before they stammeringly admit to the unmentionable existence of a "R-r-r-r-r-r-r-r....."

They have given their (sic: "our") all in their efforts to keep our (sic: "their") Li'l 'conomy's head above the poo...

*sniff*

"Oooh. That foul stench seems to be getting worse.... "

 

[Aussiejeff]

Seriously, this article today by Bloomberg paints a rather disturbing outlook for China that IF and WHEN it comes to pass would have pretty horrendous implications for the Oz economy.

-------------------------

[size=+1]China Boomtown Withers as Buyers Push Worker Rights [/size]

Dec. 9 (Bloomberg)

-- Li Wencheng chain smokes in the office of his candy factory in China’s southern manufacturing belt and frets over diminishing returns.

“The U.S. is really putting us into a dilemma,” says Li, who employs 100 people at his plant in Dongguan, Guangdong province, which makes candy versions of Winnie the Pooh and other Walt Disney Co. characters. “Clients talk about high-quality products and human rights in one breath, and in the next they’re telling us we have to cut prices.”

Chinese exporters are the latest victims of the global recession as sales slow and buyers in the U.S., Europe and Japan drive prices lower. At the same time, employee wages and benefit costs are rising following demands from customers, including Wal- Mart Stores Inc., that they enforce new labor laws.

The crunch may close a fifth of Guangdong’s factories and leave 6 million migrants without work next year, according to the Institute of Contemporary Observation, a labor rights group in the province. That would further slow the world economy because Guangdong accounts for 12 percent of the nation’s gross domestic product and China is the biggest driver of international growth.

The World Bank last week slashed its forecast for China’s economic expansion next year to 7.5 percent, the lowest in almost two decades, citing reduced overseas demand. China has averaged 9.9 percent annual growth for the past 30 years.

Exports Fell

Two-thirds of China’s small toy exporters closed in the first nine months of 2008, according to government statistics. Exports in November fell for the first time in more than seven years, Fan Gang, an adviser to China’s central bank, said at a forum in Beijing today.

“The bankruptcy of small and medium-sized exporters is going to have a huge effect on China’s economy,” says Guan Anping, a former trade official who is now managing partner at the law firm Anjin & Partners in Beijing.

Some 95 percent of exporters with assets of less than 40 million yuan ($29 million) may fail in the next three years, Guan estimates. China’s 42 million businesses of that size provide three-quarters of China’s urban jobs and 60 percent of GDP, according to the government.

Growth in Guangdong slid to 10.4 percent in the first three quarters, 4.3 percentage points less than the same period last year. Signs of the squeeze are littered across Dongguan, which is dotted with factories sitting empty behind padlocked gates.

----------------------

Cheezus! So, up to 60% of GDP could be lost within 3 years. OUCH!!!

**Abandon ship!!!!** (Oh! There's no-where to hide... )

Full article - http://www.bloomberg.com/apps/news?pid=20601109&refer=home&sid=aPWSbqzzJlG4

Chiz,

aj

 

[Sean K]

Australian economy must be in great shape...


Rudd offers Indonesia $1bn loan

December 10, 2008
Article from: Australian Associated Press

AUSTRALIA will provide $1 billion to Indonesia as a stand-by loan to help tackle the global financial crisis if it's needed.

Prime Minister Kevin Rudd's bilateral talks with his Indonesian counterpart Susilo Bambang Yudhoyono in Bali have included discussions on a facility for a stand-by loan if needed by Indonesia.

Indonesia is also seeking potential assistance from Japan, the European Union, the Asia Development Bank and the World Bank.

"The scope ... of our proposed participation is in the vicinity of $1 billion," Mr Rudd said in Bali.

 

[chops_a_must]

On what will it be spent on?

State of the art Russian fighters that piss all over ours? Lol...

Can't believe it's not attached to them reducing military spending.

 

[Aussiejeff]

On what will it be spent on?

State of the art Russian fighters that piss all over ours? Lol...

Can't believe it's not attached to them reducing military spending.

Might be attached to them reducing the output of boat people.

 

[Aussiejeff]

Australian economy must be in great shape...


Rudd offers Indonesia $1bn loan

December 10, 2008
Article from: Australian Associated Press

AUSTRALIA will provide $1 billion to Indonesia as a stand-by loan to help tackle the global financial crisis if it's needed.

Prime Minister Kevin Rudd's bilateral talks with his Indonesian counterpart Susilo Bambang Yudhoyono in Bali have included discussions on a facility for a stand-by loan if needed by Indonesia.

Indonesia is also seeking potential assistance from Japan, the European Union, the Asia Development Bank and the World Bank.

"The scope ... of our proposed participation is in the vicinity of $1 billion," Mr Rudd said in Bali.

Of course, Mr KRudd will seek permission from his voters before committing OUR hard earned to prop up a failing despo.... errr ... democracy, won't he?

Or not.....

 

[Sean K]

Thinking bigger picture, the well learned government must believe that propping up our neighbours will ultimately result in our economy, and probably more importantly - our security, will be enhanced. That is probably the strategic reason for the assistance. Just like all the money we've flushed down PNG, Solomans, Bougainville, East Timor, New Zealand and South Australia. Without stable economies around us, there is no security. Just think what would happen if Indonesia falls completely in the Poo right now, with their Islamic Extremists, tripletted with Malaysia and South Phillipines.

Maybe I'm just clutching at straws...

 

[Julia]

Umm, Kennas, what funds have we flushed down New Zealand?