Game the System by Doing What They Don’t Expect

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On 23 December 2018, my esteemed colleague from Agora Financial Australia, Shae Russell tweeted the following:

The Prime Minister of Australia has urged Aussies to get out there & ‘spend’ before Christmas. That’s not normal. Alarm bells are ringing… My guess is consumer consumption data is looking worse and worse each month. Recession in 2019 or 2020?

In the tweet, Shae posted a link to an article from The Age. According to the article:

Sluggish household consumption figures have been the dumbbell weighing down Australia’s economic growth over the past year, as consumers shut their wallets thanks to the triple threat of low wage growth, falling house prices and rising energy costs.

As such our ‘astute’ Prime Minister, Scott Morrison encouraged people to get out there and spend over Christmas. After all, if people spend more the government’s growth figures might get a little boost. Spend less and those figures don’t look so pretty, and no government wants to be the one that (finally) leads Australia into a recession.

Free report: Aussie stock picker, Sam Volkering (with gains as high as 1,431% in the last 18 months) reveals what he believes are his next four big potential winners.

After reading the article (thanks to Shae’s tweet) I had a bit of a think about where I see the Aussie economy heading. And I decided to reply to Shae with the following:

Won’t be a ‘technical recession’ but it’ll be alternate quarters of neg growth. 2019.

Therein began a little wager that Shae suggested her and I take on:

Ooohhhh…I feel a beer bet coming on. I’m going for 2 back to negative quarters from either Q3 or Q4 2019. Name your stakes Mr Volkering 😏’

Game on.

My view was that Australia was going to see negative growth this year. It probably wouldn’t be much and would teeter on the brink of no growth and negative growth.

That said, the first quarter I thought might be okay. After all, it’s summer in the southern hemisphere and a good summer typically means greater propensity to spend on recreation. Just enough to keep the country’s head above water.

But come Q2 that would be wearing off heading towards winter and the country will dip into the red. The third quarter might see growth flat, or marginally above zero. Just enough to stave off the definition of a technical recession (which is two consecutive quarters of negative growth).

But then I don’t see economic conditions improving. And the potential for a Labor government will get fresher in people’s minds towards the end of the year. That’s going to make people clench the cheeks (so to speak) and likely push growth back into the red.

A yo-yo of little to no growth and negative growth throughout the year.

That’s my view, and that’s what I decided to further reply to Shae with:

Q2 & Q4 neg growth, Q3 to scrape by roughly the length of a 🐝🍆 Stakes: the only Aussie currency there is. No, not crypto…a slab

Well as it turns out this little wager has already got nice and interesting.

By the 5 February the economy was already on shaky ground. As I made note to Shae:

RBA downgrade growth estimates… Leaves rates alone. If growth is less than they expect does that count? 😂’

And as she rightly pointed out:

Retail trade dropped 0.4% for December. Inflation ‘stuck’ at 1.75%. I’m fearing it’s even worse then [sic] I thought 😂’

Add to the mix the continuing issues around falling house prices, particularly in Sydney and Melbourne, and quite suddenly those negative growth estimates looked like they could be on our hands even earlier than we both expected.

Then, this week it looked like we’d both be out of the running with our little wager. Again in an article from The Age:

…figures released on Wednesday show that without migrants fuelling consumption, Australia’s economic growth would be going backwards.

The Australian Bureau of Statistics data shows the economy grew by 2.3 per cent over the year and 0.2 per cent in the December quarter – below market expectations and well short of Reserve Bank forecasts of 0.6 per cent.

The problem lies in governance

Well if the economy sinks into negative territory in the first quarter then both Shae and I will be wrong — and no one gets a slab! C’mon people, spend a little will you?

The problem isn’t necessarily people however. The problem here really lies in governance. We struggle to find a period in Australia’s history where there’s been such a stretch of incompetent and feeble government.

The current modus operandi of any political party is to form government from populist, short-term policy. They try to pander to both sides of the political divide and ultimately fall short on both counts.

The latest policy is determined by who’s kicking off in the media most about whatever is pissing them off. Oh its immigrants is it? Well without immigrants Australia would be in recession — so isolation isn’t the answer.

When you try to be a jack of all trades, you end up as a master of none. And that’s what it feels like from both parties. There’s no outcome in the next federal election that’s going to benefit Australia where it needs it most — in the economy.

Sorry to be the bearer of bad news folks, but Australia is set for a tough year, and a tougher next year thanks to ongoing political ineptitude.

We also don’t have the panacea for this problem. We’d say abstain from voting for either of the clowns, but you can’t because voting is compulsory in the authoritarian Australian electoral system.

There is a little upside though. Amidst the slow wage growth, falling property prices, weakening jobs markets and negative growth, there is a shining light.

Stocks and investing. It’s a little cliché from us, we know. But the truth is that if you’re growing your wealth through stocks and investment in other alternative classes (like crypto for instance), then ultimately you’ll be doing a ‘work around’ on irrelevant government.

Regards,

Sam Volkering,
Editor, Secret Crypto Network

Free Guide: How to Buy and Sell Shares. Download now.

About Sam Volkering

Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’…

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