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MARKETS
Once again Mr Canavan hits the nail on the head...
The Warning Signs for Australia’s Economy - View the original article here...
By Greg Cananvan • May 21st, 2013 +Daily Reckoning Australia
Now’s not the time to buy, but it’s certainly a time to do
your research and work out who will continue to perform well in a more subdued
spending environment. The question is though, just how subdued will the
spending environment become as the China rebalancing story plays out over the
next few years?
Well, Ross Garnaut, Australia’s well-known China watcher, is
vying with your editor to be the biggest China bear. He reckons mining
investment as a percentage of GDP in Australia's economy will fall
from the current 8% all the way back to 2%. And if that happens without
consumption or housing or business investment taking up the slack, come 2014
Australia could be looking at its first recession in 23 years…
We’ve been making the same argument. We’ve been saying this
recent rally in shares and house prices is a trap…a trap to make you think
everything is as it’s always been.
But the point of our (and Garnaut’s) warnings is that Australia's
economic future will be very much unlike its past. Our largest trading
partner is undergoing a dangerous economic rebalancing which will mean much
less demand for our raw materials.
The profit warnings from all the mining services companies
are simply a warning for Australia's economy. Times are changing!
But if the action from the mining services sector portends a
different, more austere future for Australia's economy, no one is telling
Commonwealth Bank investors. Yesterday, the stock hit an all-time high. On a
price-to-book value basis, it’s the most expensive bank stock in the world,
according to analysis from UBS.
‘Price-to-book’ simply tells you how much of a premium a
company’s share price has to its equity, or ‘book’ value. According to UBS,
Comm Bank trades at 3.6x its tangible equity value. That’s high, and reflects
the banks’ very strong competitive positioning and high return on equity.
But you would have to question how long Comm Bank, and Australian
banks in general, can maintain world-beating levels of return on equity as
the economy faces a mining induced slowdown. Don’t forget, banks are highly
leveraged entities. They do very well in good times due to this leverage. But
as the Australian economy slows and unemployment picks up, the
leverage works the other way.
The recent reporting period for the banks showed profit
growth on the back of cost cutting and lower bad debt levels. Top line growth
was flat at best. And as the Australian economy slows, you would expect to see
bad debt levels pick up again. This is not an environment that appears to
justify record high share prices for the sector.
If Australia’s outlook is changing, then the banks are yet
to admit it…
Regards,
REAL ESTATE
South Korea shows rising interest in Aust property sector
The sale of GPT Group Ltd's half-stake in the $800
million Erina Fair shopping centre in NSW to South Korea's National Pension
Service (NPS) is expected to set off a flurry of activity as South Korean
groups eye Australian real estate, according to The Australian.
Up to $1 billion worth of Australian real estate could ...continue reading
No plans for Labor or
Coalition governments to abolish negative gearing
The Coalition currently has no plans to remove negative
gearing tax breaks used by a third of Australian property investors if it wins
power in September.
Even if removing negative gearing were recommended as part
of a broader White Paper tax review, it would only seek a mandate to change tax
rules as part of a second term election campaign.
A story on thewest.com.au claiming shadow treasurer Joe
Hockey would review negative gearing tax breaks for property investors as part
of an incoming Coalition government tax review, has been rubbished by ...continue reading
Lend Lease receives
industry acclaim at prestigious Property Council of Australia Awards
Lend Lease has been recognised as one of Australia's leading
property companies, receiving seven awards at the 2013 Property Council of
Australia (PCA)/Rider Levett Bucknall (RLB) Innovation and Excellence Awards.
The Awards, presented at a gala dinner in Sydney on Saturday
18 May, celebrate innovation and leading practice within Australia's property
development and investment industries.
Competing against the country's premier development
projects, the $500m Darling Quarter and Commonwealth Bank Place precinct in
Sydney received ...continue reading
SME
Small business warns
unemployment will rise if the ACTU's wage claim succeed
Unions and the small business lobby are at loggerheads over
a pay rise for the country's lowest paid workers.
The Australian Council of Unions (ACTU) says a $30.00 per
week increase in the minimum wage is necessary to prevent the country's lowest
paid workers from falling further behind.
The ACTU's Ged Kearney says those most at risk work in ...continue reading
Number of businesses
in Australia continues to stagnate: ABS
The number of businesses in Australia remains static and has
failed to increase according to data released today by the Australian Bureau of
Statistics.
The ABS figures show less new businesses are starting up in
Australia, but the number of businesses shutting up shop has also decreased
slightly.
For the 2011–12 financial year, the entry rate of businesses
at 13.5% was higher than the exit rate at 13.1%, resulting in an incremental
increase in the number of overall businesses.
This means the number of actively trading businesses in
Australia has ...continue reading
Angel investors at
the table
Imagine ten of Australia's hottest technology start-ups
champing at the bit to demonstrate their wiles in front of four wealthy,
"angel" investors. At stake isn't the usual $50,000 to $100,000
"seed" money, but a chance to take the business pitch to Singapore
and meet an array of cash-rich south-east-Asian investors.
At e27's Echelon Ignite conference in Sydney on 8 May, ten
pitched but only one ...continue reading
Try not to do this when you pitch for capital...
That's it for today dear readers, thank you for the messages we have received, your feedback is of immense importance! Have a fantastic week! Until the next time...
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