Australia’s Future Is a Tightrope Walk


What would a declining US mean for your investments?

How will our economy change as China’s power grows? Not just China’s economic power, but also political. And even military.

What would Aussie trade look like in a China-dominated Pacific?

The Federal Government’s foreign policy White Paper arrived this week. This document will define Australia’s trade and international relations for years to come. Or so they tell us.

But the Department of Foreign Affairs is in a tough position. Uncertainty and potential for danger are on the rise in the Pacific. Australia has to step cautiously. Not least in a publicly available document like this.

Sure enough, the paper hedges its bets at every turn. For every opportunity, there’s a danger. For everything we must do, there’s a counterpoint.

Despite that caution, the paper quickly drew criticism from our Chinese neighbours. Which is already spilling over into the markets.

The White Paper argues that free trade is crucial to Australia’s success. We are an export nation. That won’t change.

But economic protectionism is on the rise in Europe and the US. How can we rely on trade, if our trade partners are withdrawing?

The rise in US isolationism and nationalism, means less focus from them on the Pacific. Australia can’t rely as much as they used to on our long-time ally and trade partner.

But the US alliance remains crucial to Australia’s security and position. It should be strengthened, but the paper doesn’t supply much information on how this should be done. Perhaps we can reverse the direction of US foreign policy if we wish hard enough?

The White Paper states that China’s rise in wealth and power will inevitably lead to ‘friction’. Australia and China have ‘different interests, values and political and legal systems’. Likely true. And the authors insist that Australia must work harder to engage with democracies in Asia and the Pacific.

That could include the Philippines, currently clashing with China over China’s territorial claims near Philippines’ shores. 

But the White Paper also claims we must strengthen and deepen ties with China, as well. How can we strengthen our ties with China, while also standing by the smaller nations whose sovereignty China is violating?

That last point is the one drawing criticism. China’s government fired back quickly after the publication of the White Paper. The paper calls for China to uphold a ‘rules based order’, likely a reference to China’s choosing to ignore an international court ruling last year against its island building program in the South China Sea.

The Chinese Foreign Ministry’s spokesman Lu Kang said, ‘Australia is not a party to the South China Sea issue,’ and that, ‘Australia has claimed many times it does not take sides on the sovereignty issue of the South China Sea, so we urge Australia to keep its promise.

The Global Times, a Chinese Communist Party-owned newspaper, went much further. They called Australia ‘ungrateful’ for its stance, accused us of becoming an anti-China propaganda outlet, and speculated that China ‘could relegate ties with Australia to the back of the line, and ignore its immature outburst’.

By Friday morning, diplomats and politicians were busy smoothing ruffled feathers. Plenty of mentions of ‘respect’ and positive meetings from Foreign Minister Julie Bishop. But that wasn’t enough to stop the ASX All Ordinaries from dropping sharply when it opened Friday. In just under the first hour of trading, it fell from 6067.6 to 6035.3. From there it recovered partially, to finish the day slightly down.

Our government and that of our largest trade partner are trading criticisms. The US, our biggest ally, is withdrawing from the region. With so much uncertainty in the halls of government, where are investors to turn?

As you’ll read below, your Money Morning editor Ryan Dinse sees a way. Because even while the governments of the world bare their teeth at one another, some sectors of the market are booming. Cryptocurrencies and the blockchain technology behind them, just keep rising.

What’s driving them to rise so fast, even in the face of global tensions? You can read Ryan’s latest research, here, to find out for yourself.

He believes this new wave of technology could see incredible returns, even as governments create chaos. Not least because of the alternatives cryptocurrency provide to national currencies. But it’s not just about an alternative financial system. Some of the biggest gains could be in tech stocks looking at whole new ways to use blockchain tech. Check out Ryan’s research to see why he’s so excited about this tech revolution.

This week in Money Morning

Markets around the world continue to boom. As experts hotly debate where they’ll head next, Ryan argued on Monday that prices don’t lie. They’re the one indicator you can rely on, whatever everyone is saying. And prices around the world are telling Ryan to be bullish. On shares, commodities and most of all, on cryptocurrencies.

That doesn’t mean that things are perfect. In fact, there are plenty of dangers to markets, and reason they could fall. But it could take years for those falls to come. Ryan argued that you have to take the world as it is, and invest…with an escape hatch ready. To read how, check out Monday’s Money Morning here.

Ryan expanded on Monday’s theme on Tuesday. He looked at one of those looming threats to Australia’s economy, and discussed when the bubble might finally pop. In the process, he discussed some uncomfortable truths about the Aussie economy.

This may not be the easiest read. Especially if you’ve personally benefited from this bubble. But good investing isn’t about hearing just what we want to hear. Which is why you should read Ryan’s warning here.

One of the current criticisms of cryptocurrencies and blockchain is that, despite all the hype and promise, so far it’s all about the future. Very few retailers accept bitcoin today. And there are even fewer real-world applications for other, newer cryptos. While it may be true that blockchain will soon change the world, it hasn’t yet.

Meaning that high and rising valuations are based on potential, not reality.

In at least one case, that could be about to change. In Wednesday’s Money Morning, Ryan looked at an Australian city trialling a blockchain-based revolution in how electricity is distributed. If it works as expected, this could change the entire electricity industry. Australia wide — or even globally. And it could go some way towards moving blockchain out of the realm of theory and into the real world. To read what that could mean for investors, click here.

Theoretic economics are another field that often feels  detached from reality. Thursday’s Money Morning looked at how economics often break down when applied to real human decisions. But there is one field of economic theory where this isn’t true. To read what it is, and what it can tell us about Australia’s economy, read the article here.

On Friday Ryan closed out the week with a look at how he would construct his ‘perfect blockchain portfolio’. You may be surprised to know that it’s not just cryptocurrencies. But Ryan explained that some stocks involved with blockchain could have as much or more potential than many cryptocurrencies.

To see blockchain technology’s full potential, Ryan argues you have to look beyond just bitcoin. To read why, you can find Friday’s article here.

Until next week,

Tyler Jefferson,
Editor, Money Weekend

Publisher’s Pick: Exponential Stock Investor. Think the recent boom in cryptocurrencies was breathtaking? Wait until you see the explosion in the technology behind cryptocurrencies in 2018. According to Ryan Dinse, it’s going to send the valuation levels of a clutch of unknown stocks soaring…In fact, these stock performances could match…or even OUTPACE…the very best technology stocks born in the 1960s and 1970s…[more]

Aussie Dollar to US Dollar: 0.7625

Gold: US$1,293.06 (AU$1,695.66) per troy ounce

Silver: US$17.15 (AU$22.49) per troy ounce

Bitcoin: US$8,053.20 (AU$10,564.35)

West Texas Intermediate Crude Oil: US$58.02 per barrel (AU$76.09)

ASX 200: 5,980.90

Tyler Jefferson joined Fat Tail Investment Research in 2012. With a background in publishing, he started out as part of the team working behind the scenes with your Editors to bring you Money Morning each day.

When he joined, Tyler was Fat Tail Investment Research’s 12th employee. Today that number has grown to over 50, as more and more readers turn to Money Morning as their source for independent financial analysis and ideas.

Today as Managing Editor, Tyler still edits the articles you read each day. Along with that, he occasionally contributes to Money Morning with his own irreverent take on the most interesting news and opportunities for you.

Money Morning Australia