Global Financial Crisis
April 2nd, 2009This Commentary is not advice.
Just like everyone else, the GFC has come to my attention. Nothing special going on there.
Two things that both amused and alarmed me seem worth the mention. The first is that one of the major financial advisory groups that I am familiar with has decided to rewrite history. On their Home Page they placed a very snazzy presentation that ‘implies’ they saw the GFC coming in 2007. Now, that’s interesting, because, armed with this foresight they still managed to underperform other fund managers and presently are still going backwards. Perhaps a case of a little knowledge being a dangerous thing?
The other aspect that has come to my attention is that no financial advisor I have come across this year has had anything to suggest other than ‘ she’ll be right in the long run’. Really impressive idea that - assuming you actually manage to keep a portfolio long enough after they take out their ongoing fees (which oddly do not seem to be related to performance).
I am not complaining. Anyone who expects a Government Regulated financial system to deliver valuable outcomes for private individuals is possibly an Alien from another planet or Socialist. Of the two, you are better off being an Alien - at least you have the chance to get off the planet when it doesn’t work out.
So what about the rest of us who have money tied up in Superannuation? Well the best advice I have been able to get is that my Super money will continue to decline for the remainder of this year. And, possibly longer. The interesting thing about that is that we like to get information that confirms what we personally feel. And I personally feel that the Aussie Share market is in for another dip this year. I have asked those around me what they think. Not surprisingly the responses fall into 3 camps -those who are trying not to think of it at all (a large number); those who point to the recent Bear Rally as a sign of recovery; and, those that agree with me that more downside is to come. Interestingly, no-one who is under the Regulatory Prudential controls is prepared to go for option 3 ‘on the record’. Why, because it is almost illegal to advise clients that they should be concerned with short term volatility. Pity about that 15 - 20% you could have rescued.
Australia has been cushioned from the GFC through sheer luck. That’s right, we ARE the lucky country. Who would have thought that nearly strangling the economy through interest rate rises over 4 years would prove to be a good thing? The RBA overcooked interest rates and so we were able to cut costs rapidly across the broad economy. That has kept our heads above water. That run of luck is coming to an end sometime soon and the Australian Sharemarket seems set for another fall as I see it. Possible triggers are: China has finished picking off our prime mining assets; or news that China has cooked the books and that their GDP is closer to 2%, or worse still, negative.; or, the US Fiscal Stimulus leads to the inevitable before the rest of the world recovers. Have you noticed the slight disconnect between our market and the US in recent months? It is worth asking, why?
Most days recently, a well informed associate of mine takes glee in pointing out the rise in the All Ordinaries. You see, I have been in Cash for a long time now. He thinks I just got lucky. I don’t take the bait. The few remaining Market Linked super funds I have are still losing money despite the rise in the AORDs. Curious that, and reminds me again of what a marvellous thing Market Regulation is. It no doubt was invented to confuse Aliens and socialists as to how things really work. It certainly did the trick for Superannuants - most thought until recently that the advice they got was perfectly sound and almost Government Guaranteed. Even John Lennon did not Imagine that.
What really frightens me is when I see our PM and that odd bloke from the UK yelling (from the pulpit !!!) that profit is immoral and they are going to legislate to make sure we never see money made like that again. Luckily for the free world Germany does not agree because, oddly, they did not get suckered so badly. What is really upsetting these guys is that the making of vast sums of money from out of nowhere is supposed to be the sole domain of Government. They call it Quantitative Easing. (Quantative would have done.) QE is the process by which Governments steal your asset values by printing money and so devaluing everything you own in REAL TERMS.
You do what you have to. Me, I am staying in Cash until I see just who made it to the lifeboats and who gets washed up on shore. BTW, I have made sure that my Cash is in real money, not that other stuff that some Super Funds use as a substitute. I don’t think that I will need to revisit this strategy anytime soon. And my ‘watch this space’ is: India.
If I am wrong? Well, I will just move on and seek fresh opportunity. That’s the true role of a free market - assuming that the Rudd-ites don’t get to destroy it first. And if that happens, well there ain’t a hole big enough in Cisco Texas to save us all.
Cheers.
