Monthly Archives: January 2016

Geld Zug: THE PROBLEMS FACING COMMODITY-EXPORTING COUNTRIES LIKE AUSTRALIA

A common question from Australian investors in recent years is “Why hasn’t the Australian stock market done as well as the US stock market?” Since the GFC bottomed out in March 2009, the S&P500 Index (excluding dividends) has tripled from 676 then to 2043 now, setting new records, whereas the S&P/ASX200 is only up 50% in that time, and is still a long way short of its pre-GFC peak of 6828 in November 2007. The short answer is that the US is not only the world’s largest economy, accounting for 22.5% of world GDP; it is also the world’s most advanced economy, in the sense [...]

2016-01-18T21:17:16+00:00January 18th, 2016|

Geld Zug: EMERGING PROBLEMS IN EMERGING MARKETS

Last month we addressed investor concerns about slowing growth in China. This month we look at how trends in other emerging markets might affect Australian investors. The core of the problem is that growth in emerging markets, which has been strong for a decade, is now slowing down, mostly because of the way that the China slowdown and falling commodity prices depress the value of commodity exports from low income countries. Although GDP growth in the developed economies remains stable (albeit uninspiring) at 1.6% pa in aggregate, growth in emerging markets has been falling steadily for the last three years. [...]

2016-01-18T20:57:49+00:00January 18th, 2016|

Geld Zug: STORM WARNINGS FOR GLOBAL BOND MARKETS

Most Australian investors have watched the recent gyrations in US and European bond markets with a feeling of relief that all this excitement doesn’t affect them, because they don’t own any US or European bonds. They have been watching the Grexit turmoil with similar emotions, because they don’t own any Greek bonds or shares. It is true that the immediate effects on Australian investors are modest, but we believe that these types of wild market moves are symptomatic of major underlying problems which will lead to further trouble in future. US Treasuries and German government bonds are among the world’s [...]

2016-01-18T20:54:03+00:00January 18th, 2016|

Geld Zug: “HISTORY DOESN’T REPEAT ITSELF, BUT IT DOES RHYME.”

We were reminded of Mark Twain’s assertion when we read that the Chinese insurance group Anbang (安邦) had bought the Waldorf-Astoria hotel in New York city (Financial Times 06 Oct 2014), making it the most expensive single hotel transaction ever. Anbang has paid USD 1.95 billion to buy the historic 1,413-room hotel, which was built in 1931 and covers an entire city block. The sale price is equivalent to USD 1.4 million per room or 33x the hotel’s historic EBITDA. The seller was the Hilton hotel group (HLT:NYQ), which will retain management rights for the next hundred years. Why did [...]

2016-01-18T20:50:45+00:00January 18th, 2016|

Geld Zug: WHEN CHINA SNEEZES, AUSTRALIA GETS PNEUMONIA

Recent official statements indicate China’s GDP growth rate in CY14 will be about 7.5%. This figure is way above growth rates in the rest of the world, but nonetheless it marks another step down from China’s peak rate of 14.2% in 2007. The long term factors behind slower growth include: Ageing population: more retirees, less workers. Rising real wages, as regional and sectoral labour shortages enhance employees’ bargaining power. Over-capacity in many industries, as a long term consequence of policies that have favoured investment ahead of consumption. Visible pollution of air, water, soil, food: resistance from consumers and residents increases, [...]

2016-01-18T20:44:44+00:00January 18th, 2016|