Author: ryan

From an economic standpoint, it certainly seems we are headed in the right direction. We are getting the upper hand in living with the virus, international borders are reopening, and Australia is once again welcoming tourists, students, and migrants. The RBA has modelled that unemployment is at 4.25% and heading to sub-4%, the lowest we have experienced for decades – with GDP growth forecasts recently revised upwards to 4.25%.

Despite the economy recovering strongly enough to support the tapering of fiscal and monetary policies, the prospect of this happening has sent the market into a tailspin due to fears of immediate interest rate increases and inflation getting out of control.

The end of 2021 brings an appreciation that we are in the middle of a bull market across most asset classes whilst still dealing with the pandemic. It is a general consensus amongst the economists that we could have experienced a recession as significant as the Great Depression if the governments and reserve banks did not act accordingly.

To illuminate, the scale of financial support provided by the Australian government to the economy was roughly seven times greater than what was provided during the GFC.

The question to ask now is what does the future hold and what can we expect in 2022 once this extraordinary sugar hit, the tapering of bond-buying programs and special Covid-19 disaster payments begin to fade.

Australia has been blessed over its economic history, weaving and dodging through major financial crises relatively unscathed. It entered the COVID-19 pandemic, which has caused the most severe global economic shock since the Great Depression, from a position of extreme strength: the budget was in balance for the first time in 11 years, workforce participation at a record high and welfare dependency at its lowest in a generation.

Australia was bathing in the glory of the most prolonged uninterrupted GDP growth worldwide in 30 years. Australians also have emerged post-COVID as the wealthiest people per capita globally. Australia’s economy is the most robust according to OECD as per below.

Evergrande, one of the world’s largest property developers/builders operating in the 2nd largest economy in the world (China), is the most indebted company globally, with approximately $416billion (AUD) in debt. It is presently defaulting on its loan repayments and is on the verge of collapse. It operates within China’s most critical and most significant sector being property and construction, an industry which contributes between 25% to 29% of their national GDP. The significance of these events is not just related to one company; they have the potential to have far-reaching consequences globally.

As we attempt to peel off layers of this incredibly significant event, we believe it certainly has the potential to be a catalyst of a deep and enduring crisis that might take years to resolve and will impact Australians’ wealth portfolios.

To understand how this will impact Australian investors, we will explore the Chinese property market, history, drivers and compare them to the Australian property market fundamentals.

In this modern-day world, we are living through a hightech, ever-increasing fast-paced, and ever-changing world. Investors are undoubtedly faced with much more pressure, decisions, choices, and information than ever before.

Many years ago, investor semi-gods, such as Warren Buffet, at the start of their careers, sent out handwritten letters to listed companies requesting financials and prospectuses, which took weeks to receive. They would proceed to seek investment opportunities and invest at remarkably low share prices (Price-earnings ratios of 2 as opposed to 14- 30 today) where a little bit of discipline, hard work, and dedication would enable them to amass fortunes over time.

In today’s efficient markets, where we all have equal access to an abundance of information at our fingertips, new information is instantly distributed and analysed virtually instantaneously by all market participants, thus making it near impossible to gain an advantage over the market.

What techniques are investors turning to today to gain meaningful peeks into the future with the hope of investing more confidently and enjoying the thrills of making superior returns?