Morning reader,
Kris Sayce is busy finishing up Australian Wealth Gameplan today. So, I thought I’d share a few words with you this morning.
Yes, he did make me assemble my own chair. And, surprisingly it hasn’t fallen apart – yet.
Kris will be back tomorrow, but in the meantime, grab a coffee and enjoy…
“The signs of recovery being seen around the world are due to huge stimulus packages, which will only prop up economies for another 12 to 18 months before they collapse again.”
Those aren’t my words. They’re the words of John R. Talbott.
Who’s he? Well, he was recently in Australia for the Brisbane Writers’ Festival
Call me uncultured if you like, but the Brisbane Writers’ Festival doesn’t sound like the type of event for a doomsday economist to pitch their tent. Especially not a former Wall Street investment banker.
But this is one banker, turned writer worth listening to.
His claim to fame is that he predicted the dot.com and US housing markets crash. However, his comments have generated almost no attention in Australia.
Why? Probably because he doesn’t share the “smile-and-pretend-the-Australian-economy-is-going-to-bounce-back-quicker-than-a-Hollywood-starlet’s-waistline-after-pregnancy” point of view.
But Talbott’s alarm about the next crash is valid. Yet it’s been ignored by the mainstream media and politicians. Probably because it’s depressing at best and at worst, it points to our economy falling in a saggy little heap.
So, why does Talbott have this bearish view? Simply because he believes China may have cooked the books.
That their economic recovery isn’t real.
If that’s true, it’s a frightening thought. Think about how much Australia relies on China. It’s one of the major supports to our export industries, especially the resources sector.
Yet the mainstream media continues to report that business and consumer spending will return as our commodities remain in hot demand. But what if it doesn’t? China will only demand our resources if other countries demand its manufactured goods.
Or if the Chinese begin consuming more of their own products.
The problem for China is that much of its exports are being propped up by stimulus handouts. It’s doubtful whether this can continue when the stimulus spending stops. And nor should it.
Unless, of course the banks go back to their bad old lending ways again. But that’s a different story.
Either way it results in more debt. One of the reasons we’re in this mess.
That’s why Talbott has been outspoken about using stimulus packages to save economies from recession. He’s pointed out that “Any positive number’s coming out of Australia, the US and China are the direct result of huge government spending”.
In other words, once the stimulus slows down, we’ll be faced with another sharp down turn.
And that means our commodity-driven recovery will be short lived. He considers this a ‘W-shaped’ recovery. And the next down-leg is waiting to happen.
Of course, if you believe what you read from the mainstream commentators it isn’t China that’s kept the economy going it’s been consumer spending…
Spending which has only been made possible by government handouts.
But what happens when government spending dries up?
Look, there are many factors to consider long term. Huge debt levels and retirement of the baby boomers will reduce individual spending and saving ability in the near future.
Crippling levels of national and personal debt and millions of retirees with inadequate savings means an increased cost to taxpayers.
It makes no sense to try and keep the Australian economy growing at its previous rate. Not when the growth is fuelled by borrowing from the future. History shows it hasn’t worked in the past and it won’t work now.
It’s always a short term solution. It’s like using sand bags to protect against a tsunami. It isn’t going to work despite the initial appearance of success.
So while governments, corporations and the media are flouting the return of the boom, it’s worth showing a lot of skepticism.
If Talbott is right, the second part of the W is coming and we’ll notice it more this time.
Other Stuff on the Markets
The S&P/ASX200 was yesterday to $4,831.10, while overnight on Wall Street the Dow Jones Industrial Average soared 1.47% to $10,015.86. In Europe the FTSE100 gained 1.98% and the CAC40 added 2.14%.
The price of gold in Australian dollars is trading at $1,161.08, while in US Dollars it is trading at $1,062.85. And the price of silver in Aussie dollars is $19.56 and in US Dollars it is $17.91.
The Aussie dollar gained versus the US dollar and Japanese Yen, trading at USD$0.9153 and JPY81.81
Crude oil closed overnight at USD$75.18
For the biggest movers on the market yesterday click here…
Shae Smith
Assistant Editor, Money Morning Australia
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“”"Better still, continually complain about every possible building defect (including the light globes) that your rental property has to the landlord/agent”"
if i had a tenant like that i would give them immeadiate eviction notice.out
etch – tenants have more rights than landlords. You have to go through a strict process to evict them. The rules are there to protect good tenants from bad landlords, but they don’t protect good landlords from bad tenants.
Yes, that, unfortunately, is a very good summary of what is going on.
one months notice ……out
Peter Fraser – That post was not made by Sean Reynolds, or any of the other GHPC aliases it has been spammed under. It was made by one of you weak morons. After doing a google.com.au search on “doom&gloomers” I found this post, and one on somersoft by a property investor by the name of Michael Whyte?
Deranged tactics indeed. Grow up and get a life mate.
Peter Fraser 10.20.09 at 7:41 am
etch – tenants have more rights than landlords. You have to go through a strict process to evict them. The rules are there to protect good tenants from bad landlords, but they don’t protect good landlords from bad tenants.
That’s most definitely not true, and shows a lack of knowledge of landlording and the various Tenancy Acts. Of course you have to go through a ‘strict process’, but it’s still quite easy – termination of contract on no grounds, 60 days notice. Falling 2 weeks behind in rent — instant eviction order from the Tribunal. Those are the known conditions under which someone chooses to become a landlord — if you don’t like the rules of the game, take your borrowed speculator’s money elsewhere.
There are *some* rules to protect good tenants from bad landlords, but it requires the tenant to keep going back to the Tribunal to avoid repeated attempst at vengeful eviction. There are also plenty of rules to protect good [sic] landlords from bad [sic] tenants, apart from the all the vetting PMs do in advance with references and database searches etc, as the Tenancy Acts were written mostly with influence from landlords’ lobbies like the REIs. Further, I’d suggest there are far more bad landlords than bad tenants out there.
And, no, I didn’t write the referenced remarks at the Business Spectator above, and I’ve corrected the record over there also.
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