How to Profit from Australia’s Political Instability

Investment opportunities during political instability

I’ve been living out of Australia for five years now. But due to the nature of my work I regularly fly home. I’ll do a few weeks at a time back on Aussie shores.

Typically this will be in and out of Melbourne — where I’m from and where our Port Phillip Publishing offices are.

And in five years I’ve noticed something about Australia.

We may be the most politically risky country in the world.

In AON’s 2018 risk map they look at risks such as political interference, inability of government to provide stimulus, political violence risk and country risk.

They list countries all over Africa, South America and Asia. You’ll find that Libya, Bolivia, Cambodia, Venezuela and Russia are all featured.

But you don’t find Australia on any of their risk assessments.

Funnily enough Russia is more politically stable than Australia has been for a decade.

Just take a look at the last five years…

Australian political shambles

In 2013 President Putin was a year into his second stint as president. He’d previously had an eight year 128 day stint from 1999 to 2008.

He’s now been president since 2012 for around six years and 111 days.

How’s that for continuity!

Meanwhile…

In 2013 Australia started the year with Prime Minister Gillard. By the end of June it was Prime Minister Rudd. Another leadership spill had given Rudd the top job in the lead up to a Federal election.

Then by September it was Prime Minister Abbott.

Three prime ministers in the space of a few months.

Then of course Prime Minister Abbott became Prime Minister Turnbull in 2015. And while Turnbull won the 2016 election, just last week we ended up with Prime Minister Morrison.

Five years, five Prime Ministers. Certainly nothing stable there. And should things play out the way we expect there’s a very good chance in 2019 we’ll end up with Prime Minister Shorten.

Perhaps it’s not fair to compare Australia to Russia in terms of political stability.

What about a very similar country like the UK? This is a country that’s really in political shambles at the moment too. Trying to edge their way out of the European Union is akin to a baby foal trying to stand on ice.

Even with all the hoopla in the UK they’ve still only had two prime ministers in the last eight years.

That’s multiple times more stable than Australia.

Heck even the US is more politically stable than Australia.

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How investors can profit during political instability

Let’s be very clear about one thing. Every time the so-called leaders of our great country knife each other in the back, the whole country suffers. It means that growth, development and the future for our country are put on hold a little longer.

Without stability there can be no real planning. You can’t have a long-term vision if your sole vision is to survive the circling sharks.

For mine, there’s been a striking lack of competency in Canberra for too long.

In fact the best description of Australian politics over the last few decades is a ‘kakistocracy’.

You may not know of that term but the Merriam-Webster dictionary defines it as, ‘Government by the worst people’.

That sums up Australia’s political situation perfectly. And it doesn’t seem to be in any rush to change.

Unfortunately that means that Australia is going to be an increasingly tricky place to invest. Without some kind of political stability the country becomes unpredictable.

That makes international investment think twice about coming in. It makes domestic business think twice about investing in growth. It makes local investors think twice about how they distribute their capital.

Or at least, it should make investors think twice.

Investors really should be assessing the suitability of the Aussie market for their investment options. We know that the bulk of Australian investors will solely invest in domestic options.

That means Aussie property, Aussie cash, Aussie stocks.

But all of these asset classes feel the impact of political instability. Do you think it’s any coincidence the Aussie markets have barely been able to notch up single digit growth year on year?

Meanwhile we see markets like the NASDAQ more than double over the same period. And other global market indices delivering more than double the kind of gains we see in Australia.

This boils down to a simple theory of ours. When you identify political instability — which is pretty easy to do — look to other markets to seek profits.

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Avoid the instability

Simple, right?

When a country is unable to create a plan for the future then how can you expect to invest for the future?

Of course that doesn’t mean there won’t be great opportunities. Every market in every situation has huge winners if you know how to find them. But when looking at the broader opportunities, the easy path is to find stability.

It doesn’t even need to necessarily be a regime you agree with. You might find a leader like Trump or Putin repulsive. But if they can deliver some kind of constant — a plan they follow through with — that makes it easier to weed out the potential long-term big winners.

Just because you live in Australia doesn’t mean you only have to invest here. The smart money sees the problems that this political merry-go-round brings and then takes their money elsewhere.

If applied in the right way, this strategy can help investors potentially profit big by simply looking offshore. And thanks to the ease in which investors can now reach global markets, it’s a strategy we think everyone should be looking at.

Regards,

Sam Volkering,
Editor, Secret Crypto Network

Sam Volkering

Sam Volkering is Editor for Money Morning and its small-cap, cryptocurrency and technology expert. Find out what he has to say here with all his latest articles.

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