February 2011
The New Year is always a page turner in global equity and other markets.
Investors look at past year’s decisions and then next years.
In equity markets this is aligned with end-of-year bonuses for investment bankers, most of whom are paid after the USA fiscal year end (December).
So I thought I would revisit the topics I covered last year (in case anybody is thinking of paying me a bonus).
In my first article I highlighted the volatility of the Baltic Dry Index, and suggested that it indicates that equity markets could “range trade” for some time to come.
This forecast turned out to be accurate, as the Aussie share market returned exactly zero (ex div) by the end of the year.
Should have left your money in the bank.
As you read this the BDI is again heading down, suggesting that global economies are still doing it tough, and share markets could continue to range trade.
Another article was about food security, and how this secular theme would continue to be the most influential long term investment trend.
Who knew that just around the corner, much of Australia’s food basins would be wiped out by flooding and multi decade dictator governments toppled in the Middle East by starving populace.
We will see more governments topple, and investing in food security will remain the most important long term investment.
Have you updated your prosperity page, the subject of another article?
January, with its New Year resolutions, is a good time to do so.
Finally, I considered the implications for property values in Australia as the baby boomers started popping off the perch.
You may recall that I reported that over the next 15 years, in the Illawarra region (that’s us), the increase in intergenerational transfer of property assets in percentage terms is 104% compared to the whole of NSW at 88%.
That’s $8.3 billion and it ranks third in the top ten of all regions around Australia behind the Gold Coast region and the Hunter region. Things look dire for our property prices.
Recently the Japanese central banker published a study on collapsing property values and economies.
He showed that when measuring an inverse “Dependency Ratio” compared to property prices, it can accurately forecast a property collapse.
Think Japan, and more recently USA as examples.
This ratio shows how many people of working age it takes to provide for one dependent person. This refers to the aging population, and especially the baby boomers who will increasingly become dependent on fewer and fewer Australian workers.
Once this reaches a threshold of about 50%, you can expect growth prospects to decline, GDP to fall and property values to crash. Australia is currently at 45-50% according to Wikipedia. Not good.
However to end on a high note, a high profile property forecaster has chosen the Illawarra region as the best property value creation in 2011 of all Australian regions.
He attributes this to the new mines being developed, energy infrastructure, and burgeoning food security.
So here we have two different views on property values, both factually based.
And that is called a “market”.
Have a great new year fellow investors.
Disclaimer: This is not advice. I am not licensed to give advice of any kind.
Advice can be understood as individual advice to a person about their particular financial circumstances, or general advice about investing.
So you cannot, and should not, rely on anything written here.
You should only rely on advice from a licensed advisor.
If this article has sparked interest please seek out a licensed advisor.