Hello dear readers and welcome to this week’s edition of
Markets Real Estate & SME.
We hope you have had a pleasant weekend so far and we look
forward to reading your responses to the article we bring you today from
Nick Hubble...
MARKETS
By Nick Hubble •
July 27th, 2013
So it looks like we’re back in a mind numbing surreality
when it comes to the stock market. Good old 5000 on the ASX 200.
We’ve only been here about a dozen times in the last seven years.
Unfortunately, your editor is also reading Brave New World, which is the
fictional version of the current reality you have to invest in.
In the book, the world went through a rough patch and came
out looking a lot worse. All the crosses got their tops lopped off, leaving us
worshiping Ford and his Model T instead of God. Production lines, consumerism
and eugenics are the ways of the world now.
Back in your reality, things don’t look so different.
Capitalism got its bottom lopped off, with no stock index allowed to fall, no
bank allowed to fail and no consumer allowed to save. We’re worshiping Federal
Reserve Chairman Bernanke and his bailouts and money printing.
The moral of the story and the lesson the real world will
learn the hard way is that life without risk, failure and pain is meaningless.
It’s an especially tough lesson to learn for characters in the book because
promiscuity has become a virtue. Getting laid is as easy as buying a pie.
Clothes are designed to come off easily. It doesn’t sound so bad at first...
The book is a criticism of Keynesianism, the ideology
we’re stuck with here in reality too. People’s hobbies are evaluated based on
how much equipment they use. Equipment needs to be made and that creates jobs.
New hobbies can’t be invented unless they use more equipment than the old
hobbies in case jobs are endangered. It’s just like Keynes’ old ‘pay people to
dig holes and fill them back up again’ idea.
Taking the concept full circle, people themselves are
produced. They’re made in factories to fill all these jobs that need to be
created. Why create people to fill jobs for the sake of filling jobs? We’ll let
you know if Huxley, the author, explains that bit. In the meantime, do you feel
like you live in this type of world already? As if you’re only around to
maximise consumption?
Daily Reckoning editor Bill Bonner pointed out a few
months ago that the more or less self-sufficient Greeks living on islands in
the Mediterranean suffer from a severe lack of GDP. They make their own wine,
grow their own olives and walk home if they can after an evening of the two.
None of this is registered economic activity. ‘Poor bastards’ wrote Bill.
In Australia we live in a paradise, comparatively speaking.
You can’t do a thing without contributing to GDP. If a tree falls in the forest
and nobody is around to hear it, it’s probably still counted in lumber
inventory by the Australian Bureau of Statistics. Even if you don’t want to
contribute, try living off the grid. The Australian Electoral Commission will
hunt you down.
In the book, people are conditioned into liking whatever it
is they are ordained to do at birth. People who will be sent to the tropics are
blasted with cold air while they still take up little more than the bottom of a
test tube. They’ll grow up wanting to live somewhere warm. Babies are given
electric shocks when they see flowers. Flowers aren’t labour intensive enough
to produce for them to be desirable.
Bernanke gives us his own electric shocks. All he needs to
do is talk about tapering off his money printing and all hell breaks loose in
stock markets. He reminds us how miserable a world without him is. Here in
Australia, our government does what it can to make the same message clear. Greg
Canavan sent this email over showing how the government can pick and choose
winners and losers at a whim:
‘If you want to get an idea of who will win the next election, keep an
eye on the share price of McMillan Shakespeare (MMS).
‘Its share price plummeted this week after emerging from a trading
halt, the reason for which was the government’s proposed changes to Fringe
Benefits Tax laws. In short, the government wants to make it much harder for
people to salary package a car. They reckon the changes will save them around
$1.8 billion in tax.
‘Where the government gets a win on taxes, the private sector loses,
and it’s the salary packaging companies who stand to lose out the most. Hence
MMS’ 50% price fall after the market digested changes to the tax.
‘But Tony Abbott has said he will overturn the changes if the Liberals
win the upcoming election. This turns MMS into an election barometer. If its
share price continues to gain ground in the lead up to the election, you’ll
know Abbott and the Liberals are looking good. If it heads south, you’ll know
Kevin has managed to sweet talk the electorate into giving Labor another crack.
‘Neither scenario sounds good. It just goes to show that running a
business (or investing in one) that
depends almost entirely on government tax policy is a nightmare scenario.
Especially in an age of deficit holes that need to be patched up in any way
they can.’
In the fictional and real worlds both, it’s dangerous to
object to the status quo. Enforced happiness still feels good. Higher stock
prices still make you feel rich. Questioning the two is depressing.
Apparently the sceptic character in the book ends up
committing suicide. Your editor is often asked by Daily Reckoning readers
when we’ll do the same.
But Huxley later wrote he regretted giving the sceptic a
false choice in the plot. At the end of the book he has to choose between a
harsh reality, a village in India, and a faux paradise in London. (No wonder he
commits suicide.) Huxley’s third option he considered adding years later
would’ve been a place where economic decisions were decentralised, where
politics was anarchist, and science and religion served humanity instead of the
other way around.
Sounds like there’s hope.
Regards,
Here is an interesting video posted by the +Daily Reckoning two weeks ago on their Youtube channel. I am all for buying Gold as a long term investment and buying through the highs and the lows.
REAL ESTATE
House prices picking
up
Australian house prices reached three-year highs in the June
quarter and look set to keep climbing.
National median house prices rose by 2.8 per cent in the
June quarter - and 5.4 per cent in the year to June - a level of growth not
seen since March 2010, the Australian Property Monitors quarterly housing
report shows.
It was the third consecutive quarterly rise for national
house prices.
Unlike the price boom of 2009 and 2010, buying hasn't ...continue
reading
Key steps to property
success
IT hasn't been a fruitful winter for Australian sports on
the global stage.
No joy in the tennis, the golf or the Tour De France. And
let's not mention that horrible c-word - cricket.
However ...continue
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Investor magazines'
2011 unit hotspots are more misses than hits two years on
The Queensland mining towns of Gladstone, Toowoomba and Chinchilla
account for three of the five locations that have delivered median unit growth
above inflation (around 5% over two years) when measured by both RP Data and
Australian Property Monitors (APM) – the two information providers used
by Your Investment Property and Australian Property Investor in
compiling their Top 100 lists.
In line with Property Observer’s analysis earlier this
week of the 21 collective detached housing hotspots which appeared in
both magazines 100 'best buy' suburbs of two year's ago, analysis of
collective unit hotspots also reveal that very few have delivered any ...continue
reading
SME
Abbott pitches to SMEs
A coalition government will place small business concerns at
the heart of its economic decision-making rather than looking at them like
"animals in a zoo", Opposition Leader Tony Abbott says.
He has pledged to make the small business minister part of
cabinet and put policy decisions under the Treasury portfolio.
But Mr Abbott also announced that he would install people
with small business experience on the Board of Taxation, the Australian
Competition and Consumer Commission and the Fair Work Commission.
"We want small business concerns, small business
interests to be at the ...continue
reading
Lack of credit hurts
SME sector
SMALL to medium sized businesses in Australia are badly
hampered by their inability to access finance to replace existing facilities
that are not being renewed, says Andrew Robb, shadow minister for finance,
deregulation and debt reduction.
Speaking at the first webinar in the GE Capital Gains
series, Mr Robb made it clear that the SME sector has been particularly
disadvantaged by the ...continue
reading
Government to
strengthen $130 billion franchising sector
The Australian Government today moved to strengthen and
improve Australia's $130 billion Franchising Sector by responding to the 2013
Independent Review of the Franchising Code of Conduct.
Releasing the Government's response, the Minister for Small Business Gary Gray said the Code would deliver better outcomes and provide certainty for franchisors and franchisees.
"The government will move to introduce ...continue reading
Releasing the Government's response, the Minister for Small Business Gary Gray said the Code would deliver better outcomes and provide certainty for franchisors and franchisees.
"The government will move to introduce ...continue reading
Until the next time dear readers...