A Victory for the ‘Virtue Signallers’

What a debacle of a weekend for the coalition government.

The Wentworth By-Election, a result of Malcolm Turnbull being dumped from the leadership and quitting politics (instead of hanging around) resulted in a disastrous swing against the government.

While the result still hangs in the balance, it’s likely that Independent candidate Kerryn Phelps will win the seat. Even if Liberal Dave Sharma miraculously holds on, the swing away from the formerly blue ribbon seat is foreboding.

It points to a Bill Shorten win in the upcoming 2019 general election. That was looking likely anyway, but Saturday’s result all but confirms it.

What will the stock market think about all this?

The futures market, which closed Saturday morning our time, suggests a fall of 12 points for the ASX 200. But I wouldn’t be surprised if the reaction is much worse, given the political situation.


Australia needs to ‘do more’

The looming loss of Wentworth means the government will lose its one seat majority. We’re back to a basket case form of government where nothing of substance gets done.

The killer for the coalition is the climate change issue. Clearly the community believes climate change is a major issue, especially the champagne socialists in Wentworth.

Despite Australia having huge growth in renewable energy sources in recent years, and research from Australian National University saying we are on track to meet the Paris Agreement targets, we still need to ‘do more’, apparently.

This is nothing more than ‘virtue signalling’. Everyone thinks that climate change is an issue in Wentworth because everyone thinks that climate change is an issue in Wentworth. If you don’t believe it, you’re a heartless wanker who cares little for the environment.

Better join the crowd then…

Labor is in the box seat to exploit this sentiment. Their Climate Change Action Plan calls for renewable energy to generate 50% of our electricity by 2030.

In contrast, the coalition doesn’t have a target beyond the Paris Agreement, which they (rightly) don’t even want to be in.

Labor’s energy policy will more than likely result in higher electricity costs and (depending on how the technology progresses) less stability of the energy grid. Yet they will probably win the upcoming election on this platform!

Population growth is booming — find out how you can make the most of a massive global infrastructure rush in this free report. Get access now.

Can Australia really make a difference to global warning?

It’s not that the Australian electorate is dumb (or not as dumb as the ‘highly educated’ folk from Wentworth). It’s that they’ve been hoodwinked into believing that we can make a difference to global warming.

If Australia shut down its economy tomorrow, the threat to global warming would not change. Not when China is spewing out 30% of the world’s carbon emissions, and reducing those emissions is subordinate to economic growth targets.

The virtue signallers of Wentworth should be protesting China’s horrendous pollution levels and threat to global warming. Instead, they persist in the delusion that Australia desperately needs to do something and that climate change depends on it.

The problem with the coalition is that it can’t make this narrative cut through all the emotional crap out there. They need to get out of the Paris Agreement AND come up with their own emissions reduction target. They need to explain to the electorate that they believe Australia should reduce emissions, but do so on our own terms, and not subcontract important national policy decisions out to global technocrats.

In short, it needs a leader to explain these things…a leader to explain that we have to balance emissions and electricity prices and its effect on the economy. The last thing we need is an ongoing tax increase in the form of structurally higher electricity prices.

Because all of this is happening at a time when Australia faces huge economic and foreign policy challenges.

Our economy has major structural flaws. For years we have relied on debt growth and rising house prices to fuel consumption and growth. That is now coming to an end.

Australia’s other growth engine, China, is also facing its biggest threat to growth in years. As the Wall Street Journal reported on Friday:

BEIJING—China’s economic expansion slowed to its weakest pace since the financial crisis, as top financial regulators launched an extraordinary coordinated effort to calm jittery investors.

The rate of growth in the third quarter dropped to 6.5%, falling short of market expectations, official statistics released Friday showed. Growth in industrial output and consumption weakened in the quarter, while exports held up despite the country’s bruising trade fight with the U.S.’

With the US taking a hardline approach to trade with China, this isn’t going to change anytime soon. And Australia is caught in the middle, between a long standing ally and a major trading partner.

This means we need an experienced hand operating foreign policy. But with a newbie in the job now, and a change of government likely within six months, we’re not going to get it.

With this backdrop, it’s hard to see how our market is going to recover from its recent losses. Sure it might rally from time to time, but a sustained rebound is unlikely given the various challenges ahead.

That means stock picking will be an even more important skill set for the DIY investor. Investing based on themes will be much harder. Buying ‘the banks’, or ‘resources’ will not cut it as a strategy.

Are you prepared for the tough market ahead?


Greg Canavan,
Editor, Crisis & Opportunity

PS: In this free report, economy expert reveals four ways you could cash in on the global infrastructure boom. Download now.

Greg Canavan is a Feature Editor at Money Morning and Head of Research at Fat Tail Investment Research.

He likes to promote a seemingly weird investment philosophy based on the old adage that ‘ignorance is bliss’.

That is, investing in the Information Age means you have all the information you need at your fingertips. But how useful is this information? Much of it is noise and serves to confuse, rather than inform, investors.

And, through the process of confirmation bias, you tend to read what you already agree with. As a result, you often only think you know that you know what is going on. But, the fact is, you really don’t know. No one does. The world is far too complex to understand.

When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases.

Greg puts this philosophy into action as the Editor of Crisis & Opportunity. As the name suggests, Greg sees opportunity in a crisis. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines traditional valuation techniques with charting analysis.

Read correctly, a chart contains all the information you need. It contains no opinions or emotion. Combine that with traditional stock analysis and you have a robust stock-selection strategy.

With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the basic, costly mistakes that most private investors do every time they buy a stock.

To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Money Morning here.

And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here.

Official websites and financial e-letters Greg writes for:

Money Morning Australia