Category: Financial Advisor

The United States — the world’s dominant superpower — is actually lying on its deathbed.

For many years, the US was a good friend around the world. After the Second World War it opened up its arms to freedom. Former US President, Ronald Regan notoriously said to the world, ‘tear down this wall‘ from West Berlin.

Years later on, Germany was reunited. Communism failed and capitalism exploded.

US geopolitical, economic, monetary, and military power had been completely unchallenged. And it would stay that way for years.

Unfortunately, the times have changed.

The US economy is weakening. Its debt amounts are high. And its interest rates are hovering around historical lows.

Soon, within this decade, the united states will no longer hold the reserve forex status. And this means that substantial changes are on the horizon…

The first change will be geopolitical

It’s really unfortunate which US politicians don’t pay attention to their founding fathers. George Washington said in 1796 at his farewell speech:

‘The excellent rule of conduct for all of us in regard to foreign nations is within extending our commercial relations, to have with them as little political connection as possible. So far as we’ve already formed engagements, allow them to be fulfilled with perfect good faith. Here let us stop.‘

Of course, the politics religion of?US The president — and most of the?political course?– is that it’s America’s?ethical duty?to be involved in additional nations’ business.

Today, the US remains the planet’s leading military power. But its dominance is rapidly becoming chipped away. It’s ‘my method or the highway’ attitude has discouraged many nations. Especially nations in the Middle East…

Historically, US participation in the Middle East has ended within disaster. The past year has proven no different…

In the last 12 months, All of us forces have conducted over 7,000 airstrikes in Iraq and Syria. The official mission is to wipe out Islamic State (IS).

Awkwardly, this particular hasn’t happened.

Instead, US airstrikes possess caused more harm than good. With bombs and missiles flying everywhere, the actual Syrian refugee crisis was born — a situation that is gone from bad to worse.

Unfortunately, there’s been no official response to this humanitarian turmoil. Other than to keep bombing Syria, that is…

And no doubt, this action will lead to much more chaos.

Especially now that Russian warplanes are involved in Syria.

Russia started bombing Islamic State on 30 September. And while US authorities have accused Moscow of acting inappropriately, it only took the actual Russians 24 hours to do what they couldn’t. At least according to Euro Major General Igor Konashenkov, as reported by RT:

‘Our flight handling group over the past day offers destroyed two militant command centers, 29 field camps, 23 fortified facilities and several troop positions with military hardware.‘

There’s just one goal in Syria…

The US really wants to topple Syrian President Bashar Hafez al-Assad. This plan won’t change. The US wants to set up its own puppet politician in Syria. Other Western leaders have climbed aboard with this policy.

And — surprise — the actual mainstream media is backing the official political story. A tale that accuses Assad of attacking their own citizens with chemical weaponry.

That’s despite the fact that there’s no proof that this ever happened. The real proof points towards a terrorist attack. This is why Russia, a vital ally of Assad, along with The far east have opposed military intervention inside Syria.

With this barrier in place, Barrack Obama has had no choice but to enforce their ‘no boots on the ground’ policy. Of course, this policy goes against the wants of the US government — and Obama himself. In time, there’s no doubt in my mind that it will change.

In the actual meantime, there’s been no shortage of tough talk by Traditional western leaders. And to stir the pot, US officials happen to be forced to come up with other ideas. Such as spending nearly US$500 zillion training Syrian rebels to fight IS.

Unfortunately, this didn’t turn out as planned.

General Lloyd Austin, who leads the US military’utes Central Command, recently told the US Senate Armed Services Committee:?‘The [number of Syrian rebels] that are in the fight, we are talking four or five.’

What an absolute things up. For the price of fifty percent a billion US dollars, you will find ‘four or five‘ Syrian rebels fighting Islamic State.

Following the big amount of attention on this bad policy, and Russia’s effective army operation, the US recently hanging this program.

Instead, it will airdrop ammunition in the middle of the desert. And it simply dropped 50 tonnes associated with ammo out of the sky. (Which you hope gets in the hands of the right people.)

According to the Whitehouse, it was an effective mission. Anti-Islamic State coalition spokesman Colonel Steve Warren told the ABC:

‘[The airdrop reached] Syrian Arab-speaking groups whose leaders properly were vetted by the United States and have been fighting to get rid of ISIL‘.

Don’t blink an eye…

While I’m not sure what will happen next, one truth is guaranteed — this story isn’t over.

In fact, it’s likely that the actual worst is yet to come.

Times are changing. The old framework in the world — a system dominated by the federal government, US banks, and the All of us dollar — is coming to an end.

The All of us Empire and economy are declining. If history is actually reliable, their ‘leaders’ will do whatever needs doing to stay in power.

And typically, when an economy turns down politicians march their people off to war. I don’t want a world war to happen any more than you need to do, we’re talking about politicians that are detached from the modern day globe.

I’ll be talking about this story in more depth next week in Resource Speculator. There are fortunes to be made for those who understand these trends and therefore are able to get out in front of them. I’ll recommend one or two Aussie stocks that you can use to do just that. When this war takes a change for the worse, these companies ought to profit immensely.

If you want to know much more, you can start here.

Jason Stevenson,

Resources Analyst, Resource Speculator

From the main harbour Phillip Publishing Library

Special Report: If you want to get ahead in this world, it pays to have powerful friends in high places. With this new advisory, you’ll make 1. A portfolio manager at the West Shore Group, as well as adviser on international financial aspects and financial threats towards the US Department of Defense. Jim Rickards isn’t any ordinary financial newsletter writer.?And Strategic Intelligence is no ordinary newsletter… (more)

The last six months saw the double crash on the market.

Now there is a double bounce.

The double crash lasted longer than most people expected.

The question now is whether the double bounce will last so long too, or whether this is just a blip before the double accident resumes…

From the end of April right through to late September, the Aussie S&P/ASX 200 index fell from 5,982 points to 4,918.

Over exactly the same timeframe, the Aussie buck fell from 80 All of us cents to 69.Nine cents.

Since then, both have bounced. The stock index expires 7.4%, and the Aussie dollar is up 4.8%.

The good times are back, right?

Not so fast. It’s not so much because of something good that’s happened to the Aussie economic climate, it’s because of something that hasn’t happened to the US economy.

What performs this ‘double bounce’ mean?

Here’s a chart showing how the index and the forex have performed over the past 6 months.

Source: Bloomberg

You can see the slump and also the rebound.

There’s no difficulty knowing why. One of the biggest reasons is that for most of this year, marketplaces have assumed that the All of us Federal Reserve would raise rates of interest.

That put downward pressure on the Aussie dollar. That’s because the eye rate differential between the Aussie buck and the US dollar would have shrunk.

As for the stock market, slipping commodity prices and the anxiety about a recession pushed the Aussie market lower.

But since the finish of September, the Aussie market and Aussie dollar have reversed course. Both are up.

After worse-than-expected job numbers in the US, the markets started to downplay the chances of a US Federal Reserve interest rate rise this year.

For instance, bond futures markets now just factor in a 10% chance of the actual Fed raising rates this month. As recently as August, the markets had listed in a 50% chance.

As for the Fed’s December meeting, the chance of a rate rise has fallen to Thirty eight.8%. That’s down from a close to 50% chance as recently as July.

So, does this mean a US rate increase is off the credit cards?

Not so fast…

Do it!

As this statement from Bloomberg notes:

‘Federal Reserve Vice Chairman Stanley Fischer said the U.S. economy may be sufficiently strong to merit an interest-rate increase by year end, while cautioning that policy makers tend to be monitoring slower domestic job growth and international developments in deciding the precise time of liftoff.‘

What does that mean?

It means the actual Fed is ready (almost) to raise interest rates…perhaps!

And that’s simply it isn’t it?

Regardless of the scenario, whether the market is feeling bullish or bearish, confusion continues.

As Joyce Alter, global head of study at JPMorgan Chase & Co informed Bloomberg, the Fed ‘should get it more than with‘.

She’s right. But it goes to show just how nervous the Fed would be to do anything. It wants a lower market, so it has the reason to restart its bond-buying as well as money-printing program.

However, after witnessing the crashing markets over the past couple weeks, the Fed may now be less eager to engineer an accident. If that move was the market’s reaction without an rate of interest rise, what could the marketplace do if the Fed increases rates?

The Fed wants a lower market, but it doesn’t want it to go too low.

As for what this means for the Aussie market, well, it’s anyone’s guess. We’re certainly not about to give up on the ‘crash protection’ strategy.

In fact, with doubt and instability set to carry on through to at least the end of the year, now is exactly the time when you think clearly about protecting your investment portfolio.

The Aussie market offers bounced nicely. It would be great if it continued higher. But some thing tells us that investors should not get too excited about a brand new bull market yet.

Bottom line: stay invested, but stay cautious.

Cheers,

Kris.

PS: You can find out the details of our ‘crash protection’ strategy here.

Well it’s official. Global growth is slowing down. That’s the latest from the Worldwide Monetary Fund’s (IMF) World Economic Perspective anyway.

The IMF — once again — downgraded it’s forecast for global development in 2015 from 3.5% to 3.1%. With under three months left in the year, the actual Fund’s perpetually optimistic economists were running short on time to get their numbers straight.

And while they were in internet marketing they offered a rather demure forecast for China too. According to the report, China’s growth will be at 6.8% in 2015, as well as average 6.3% over the subsequent five years.

Now when I read this forecast I had two thoughts. First, that’s quite an driven time horizon to be predicting growth in one of the world’s quickest changing and most opaque financial systems. You have to wonder what exactly these boffins do and did not include in their modelling for the regional geopolitical scenario in 2019.

But as our aged buddy Dan Denning writes over at Capital & Conflict from our affiliate office in the united kingdom, ‘I suppose if you’re an economist at the IMF, you have to do something for a living. You might as well make a guess about Chinese GDP growth.’

My second believed was that 6.3% annual growth is nothing to sneezing at. Sure it’s nicely below China’s 10.82% average rate of growth from 1989-2015, as cited through Trading Economics. But you have to take into account that this growth is coming off a much larger foundation.

Using IMF data and factoring rising cost of living into the mix, China’s current Gross domestic product is approximately 22 times larger than it was in 1989.

You may think of that as a go up. If a small balloon, say with a volume of one cubic metre, develops 10%, the new volume is 1.1 cubic metres. In this case you have added 0.1 of the cubic metre to your…err…economy.

Now if you start with a balloon that is 22 times larger — Twenty two cubic metres — and it grows by only 6%, the new volume is 23.3 cubic metres. Or perhaps an extra 1.3 cubic metre distances. That represents 13 times more real growth than you have with the faster-growing, smaller balloon.

Targeting the right Asian markets

I point this out for a reason. Even though China’s development is slowing on a relative level, as it must, there’s still an enormous amount of new wealth that will be created over the subsequent five years.

And investors who know how to target that growth stand to do quite well.

Take Treasury Wine Properties [ASX:TWE] for example. The stock hit a new high last week at $6.70. (Currently it’s trading at $6.65.) Have a look at the chart below. It exhibits the share price movement forever of August.

Source: Yahoo Finance

You’ve got to admit, that’s a nice looking chart. Especially when you compare it to the performance of the ASX Two hundred over the same period.

Source: Google Finance

Treasury Wine’s shares move in almost reflection image to the falling ASX Index. What’s their secret? Largely a growing demand for their product from Asia.

As reported through Business Day, ‘Asia growth lifts Treasury Wine shares’:

‘Treasury gives hit a record on Tuesday, despite wobbles in global marketplaces that have caused the larger Australian share market to shed more than 13 per cent previously six months. Treasury shares, trading around $6.70, have moved beyond the buoyant levels of $6.47 in May 2013.‘

According to Chief executive Mike Clarke, ‘The accelerated momentum in our business continues to be delivered across all regions, most notably Asia.‘

Of course this came because no surprise to our emerging marketplace expert, Ken Wangdong. Here’s what he wrote last week to subscribers associated with his premium investment service, New Frontier Investor:

‘The truth is, we know 2015 growth is going to be lower. China has been slowing for some time now. This is old news!

‘What this recycled information has succeeded in doing is actually driving asset prices lower in most emerging markets. The far east in particular is very cheap at today’s prices. Right now china market appears to have reached the bottom. Some stocks are already starting to regain their worth.

‘Not according to many in the mainstream media, of course. But the press will always distort information… However i can’t blame those who have not really spent time in China to have a hard time distinguishing facts through media hype. How can they?

‘For example, how can you know how Apple [NASDAQ:APPL] is doing in China if you don’t know how conspicuous Chinese consumers are over Apple products? Or that most Chinese use Didi instead of Ultra.

‘It doesn’t matter if China develops at 7% or 6.5%. Apple will do well, Apple Music will do reasonably well, as well as Didi will do well. Yum Brands [NYSE:YUM] (which own KFC, Pizza Hut, and more) derives over fifty percent of its revenue from The far east, and it is becoming under-valued.

‘But if you depend on the mainstream financial press for your investment news, you would never know this. You need to be familiar with China to know it.’

That’s, of course, where Ken comes in. Not only is he a skilled investment analyst, however he knows the ins and outs of Chinese language culture, allowing him to identify breaking trends. And he moves back to China from their home in Sydney regularly to meet with local connections. That allows him to keep their finger on the proverbial heartbeat.

This week he’s recommending two new stocks to their readers, taking advantage of sectors which should handily outpace any average development figures. You can find out more about Ken’s function here.

Oh… cash!

Back here in Australia it seems that cash is headed for exactly the same fate as the cheque book. At least if my current interaction with a Myers’ clerk is anything to go by.

You see, I bought a few shirts at the nearby Cheltenham outlet last week. Nothing extravagant. The total came to $225. But when I counted out the bills in cash it felt like I was paying with dinosaur eggs.

The young woman behind the counter hesitated before uttering, ‘Oh…money!‘

To which your editor wittily responded, ‘Umm…yup.’

Her eyes were wide because she took the book paper bills from me. Her unfamiliarity with hard forex was clear in the length of time it took to safely shop my five $50 notes within the ‘cash register’ and return the proper change.

It was obvious that almost all associated with her customers pay digitally. A trend that — enjoy it or not — is sweeping the world. The Age ran an article now reporting on how more and more local and international companies are operating cash free businesses.

‘…in Denmark, they are considering becoming the first country to stop using notes as well as coins from 2016. Norway’s central financial institution estimates Scandinavians use cash to cover less than 6 per cent of transactions…’

The article goes on to say that according to the latest research findings by Westpac, ‘The bank’s Cash Free Statement recently predicted Australia’s dependence on mobile phones will see it cash-free by 2020.’

Now I’m not sure that 2020 is a realistic target date. But I do know that with ever more money transacted via mobile phones, hackers will go to excellent lengths to break in and help themselves. And as technologies gets more sophisticated, so do internet criminals.

That’s one of the reasons our in-house tech guru, Sam Volkering, has been examining and hunting down the best listed companies involved in defeating these hackers. Sam’s been on top of this particular trend for years. And he’s recommended a group of companies to subscribers of Revolutionary Tech Investor that he calls the ‘Defenders’. Despite the hit that the wider tech field has taken in the markets lately, the Defenders are still up typically 21.8%.

You can find out more about Sam’s function here.

Regards,

Bernd Struben,

Managing Editor, Money Morning

From the Port Phillip Posting Library

Special Report: The End of Australia Vern Gowdie’s new book is called The End of Sydney: The Real Story Behind Australia’s Financial Collapse and What You Can do to outlive It. We are mailing free copies of the book to anyone who demands one online. It does not make for cheerful reading. But the idea is that you’ll be safer (and much wealthier) in 10 years’ time from receiving a more sober and realistic analysis of what’s going on…what happens next…and what you should be doing about it right now… (more)

I borrowed $2.2 million once.

I couldn’t pay it back.

But it wasn’t my fault.

It was the coloured family down the road. They had borrowed $40,000, and couldn’t pay that back.

They ruined it for everyone. Not me.

OK. That’s not a true story. Not in the way I have told it. But there’s an even more unbelievable version. Trouble is, this particular story is true. And it’s set to have dire consequences…

Let’s place some numbers in framework.

By 2013, total world debt was US$223.3 trillion.

That had been 313% of world GDP.

Of which, US$157 trillion was Western financial debt. US$66.3 trillion was rising market debt.

Keep those numbers in mind as you take in this comment from the International Financial Fund (IMF), as reported in the Age:

‘Governments and central banks risk sparking a fresh global financial crisis, the actual International Monetary Fund has said, as it called time on a corporate debt binge in the developing world.

‘Emerging market companies have over-borrowed by an estimated $US3 trillion ($4.Two trillion) in the last decade, threatening to trigger a sharp capital crunch and capital outflows in economies that have already been hit hard by low item prices, the fund cautioned on Wednesday in its latest Global Financial Stability Statement.‘

It’s typical of a Western institution. On one hand, it’s saying Traditional western nations should go further in to debt. At the same time, it places blame the developing world for the worldwide debt binge.

It’s a new take on blaming ‘foreigners’ for everything that goes completely wrong. It’s like a bad 1970s sitcom…blame the ‘darkies’ for stealing all the jobs! In this instance, it’s blaming them with regard to incurring all the debt.

In actuality, just as immigrants don’t take all of the jobs, the emerging markets haven’t incurred all the financial debt either.

IMF tries to shift the actual blame

But relative to the size of the Traditional western world’s debt, the ‘over-borrowing’ through emerging market companies is the equivalent to them borrowing an extra $40,000 while the West binges upon $2.2 million of debt.

And bear in mind the IMF has this to say of the actions of the US Federal Reserve, once again from the Age:

‘“Monetary policies in crucial advanced economies must remain accommodative and responsive,” the IMF said.

‘The report called around the US Federal Reserve to hold away on its first rate of interest hike in nine many for the authorities in the eurozone as well as Japan to continue with unparalleled stimulus measures.‘

The word ‘hypocrite’ comes to mind.

So let’s get this straight: rising market companies have borrowed $4.1 trillion more than they ought to have (according to the IMF). The IMF wants them to stop borrowing.

At the same time frame, the IMF says Western government authorities should keep pumping out debt, and Western central banks should keep buying it.

Something isn’t right.

It’s a clown show

This whole story has a certain ring into it.

Think back to the 2008 crisis. What or whom did the mainstream media as well as Wall Street blame for that crash?

They blamed subprime mortgage borrowers. Many of whom lived paycheque to paycheque. But the banks told them they could afford multi-hundred thousand-dollar mortgages.

It wasn’t the borrowers who were to blame. It had been those in government, at the main banks, retail banks, and investment banks who come up with conditions for the subprime meltdown.

Subprime debtors couldn’t get into such a mess on their own. They needed the facilitator. The facilitator had been Wall Street.

Subprime borrowers had been the victims of the last turmoil. Emerging market companies will be the victims of the next turmoil. But they’ll still policeman the blame.

In truth, blaming emerging market companies for the coming financial crisis is akin to accusing a rape victim to be attacked, or blaming a patient for a doctor’s malpractice, or native Africans for the barbarity of the servant trade.

The IMF is a clown show. And people running it are the greatest Bozos you’ll find within any government or financial institution.

But the latest report from the IMF confirms one thing that people already know: a major financial crash is coming, and the IMF is powerless to stop it.

In fact, it’s thanks to the IMF that the next turmoil is certain to happen.

Cheers,

Kris

‘The two enemies of the people tend to be criminals and government, so let us tie the second down with the chains of the Metabolic rate so the second will not become the legalized version of the first.’

Thomas Jefferson

If you’re a long time Money Morning reader, you’ll know that our publishers aren’t exactly government cheerleaders. Actually, the idea that ‘the best government is the fact that which governs least’, is a concept every one of our editors shares…to varying degrees.

I state ‘to varying degrees’ for a reason. I’ve always been a supporter of little government. One that taxes much less, spends less, and lives within its means. And i have always believed that you should be able to perform as you choose, so long as that doesn’t directly harm anyone else.

For most of my life this view was considered fairly extremist by my friends and former colleagues. That is until I signed on as the managing editor of Port Phillip Publishing two years ago. Then my libertarian ideas all of a sudden bordered on mainstream.

Last 12 months I found myself in a discussion with our publisher, Kris Sayce. And I was at the odd position associated with arguing that of course we do need ‘some’ government, including a small police force to handle real offences. Not Nanny State offences mind you, but criminal measures that directly harm others.

Now Kris didn’t come out in support of murderers and thieves. But he did stick to his weapons, insisting that any and each time government becomes involved it only makes things even worse. Whatever the government can do, the free market can do better. This is a bold statement. But it’s one that is hard to refute.

Until last week, that is. At least if you live in Victoria.

I’m talking, of course, about the AFL Grand Last Long Weekend…or Footy Friday. The extra holiday — Victoria’s 13th annual day off — was one of Leading Daniel Andrews’ promises. And one he really came through on.

Now I’ve heard various figures tossed around about how much this will have cost the economy — as much as $1.5 billion apparently. And I don’t have to tell you that Australia’s economy has seen better days. But you should take these kinds of estimates with a healthy dose of scepticism.

Remember who’s putting them together. Company groups who don’t want to spend penalty rates. Some of them actually closed up shop…as well as enjoyed this brand new government shipped holiday.

No holiday for aircraft pilots…yet

One profession that didn’t enjoy a relaxing Footy Friday off was pilots. In fact they struggled to get any time off around the three day weekend. Here’s this particular headline from ABC News: ‘AFL grand final: West Coast Eagles fans race to find tickets, fly via Asian countries to reach MCG’.

The article goes on to state:

‘Virgin has added an extra 6,500 seats on it’s existing flight schedule between Perth and Melbourne.

‘Qantas will offer one more A330 service while its spending budget arm, Jetstar, will put on bigger aircraft for its four planned flights between the two capital cities, improving its combined passenger figures by 2,500.

‘Despite the extra services, Darren Wright from booking broker Flight Centre said fans would pay a premium of more than $1,000 just to fly there one-way direct…

‘Others willing to cough up much more cash can choose to fly via Asian cities, and there is even anecdotal evidence a few are flying via London.‘

That’s a lot of extra passengers, meaning procuring pilots in the air.

And according to Boeing, the actual demand for pilots is set to undergo the roof. The company estimates which 558,000 new pilots will be needed inside the next 2 decades. As you can see in the graphic beneath, courtesy of the Wall Street Journal, Asia makes up the biggest share of this new demand.

Looking at these numbers, you’d think becoming an airline pilot would provide you with tremendous job security for life. Not too fast.

As Sam Volkering, our citizen tech guru, likes to remind us, the pace of technologies are advancing at an exponential price. That means that over the coming years we could see technology progress further than it has in the past hundreds of years.

Check out this recent article about pilotless planes in Business Day:

‘Google has trialled driverless cars and Singapore has driverless locomotives. Now the airline industry is tinkering with the idea of pilotless passenger planes…

‘On an industrial flight these days, whether an hour-long hop between Sydney and Melbourne or a 14-hour flight over the Pacific, it is possible a pilot will expend as little as one minute touching the control stick…

‘Back in the Nineteen fifties, commercial aircraft typically experienced five cockpit crew people: a captain, first officer, flight engineer, navigator as well as radio operator. But by the 1980s, the numbers needed on the flight deck had been decreased to two because computers could fulfil many of the tasks formerly done by humans…

‘The second, much more dramatic scenario is moving to fully autonomous aircraft procedures. In the nearer future, it is more probably in the freight market compared to passengers… [Qantas Captain Richard] de Crespigny, who’s deeply interested in technology as well as systems, believes sentient machines duplicating human consciousness and conjecture could be developed by 2025, paving the way in which for pilotless aircraft to be in production about 2040.’

I’m not sure how comfortable I’d feel flying by having an empty cockpit. You might feel the same way. But the reality is, regardless of how we feel about it, the future is coming. And pilotless planes will be a part of that.

One thing that will be incredibly important in the future is cyber security. The pilotless planes of tomorrow will need iron clad internet defences to ensure hackers can’t go ahead and take controls. And the revolutionary companies pioneering these defences today stand to make huge gains out of this ever growing trend.

This trend hasn’t been lost on Sam Volkering. Sam’s investigated every listed company in this field. And he’s recommended the very best of these stocks to his subscribers over at Revolutionary Tech Investor. He or she calls them ‘Cyber Defenders’. You can find out more here.

Surviving the transition

Vern Gowdie, our wealth preservation specialist, has been following a rapid pace of technological change as well. You’re likely familiar with Vern. Among other feathers in his cap, he’s the actual editor of The Gowdie Letter and the author of The End of Australia.

If you haven’t read it yet, I urge you to do so. You can order your free paperback copy online here. But don’t wait too long. We’ve given away 15,752 copies so far. And that’s out of an overall total print run of 17,000.

Despite the title, it is not all doom as well as gloom. Vern offers you a number of strategies to protect your wealth from the coming meltdown. And, as he authored in a recent Gowdie Letter update, one thing to get ready for is how the technological trend is going to impact employment.

‘In accessory for a change in the world power base and the domino effect this has around the global economy, we have a technological revolution that is going to significantly affect the employment landscape.

‘The Committee with regard to Economic Development of Australia (CEDA) launched a report in June 2105 entitled “Australia’s Future Workforce?”

‘This is an extract from the foreword written by CEDA CEO Professor Stephen Martin (emphasis is mine):

“Technological alter over the last two decades has been extremely fast and that is likely to continue. This means that a significant portion of Australian work that exist today will no longer appear in 20 years’ time.

“In fact, modelling in this report has found that almost five million Australian jobs – around 40 per cent from the workforce – face the high probability of being replaced by computer systems in the next 10 to 15 years.“

‘I probably have that in time we’ll adjust to all the upheaval that the next day brings…we always have.

‘But the actual resilience of the human race is not the issue. It’s about surviving the time of transition. The debt-fuelled success of yesterday was made feasible by conditions that were vastly different to the ones we face tomorrow.‘

To learn more about how you and your family can survive the period of transition, you can order your totally free copy of Vern’s book right here.

Regards,

Bernd Struben,

Managing Editor, Money Morning

From the Port Phillip Publishing Library

Special Report: The End of Australia Vern Gowdie’s new book is called The End of Australia: The actual Story Behind Australia’s Economic Collapse and What You Can do to Survive It. We are mailing free copies of this book to anyone who requests 1 online. It does not make for cheerful reading. But the idea is the fact that you’ll be safer (and much richer) in 10 years’ time from receiving a more sober as well as realistic analysis of what’s happening…what happens next…and what you should be doing about it now… (more)

Where are we?

The ‘bombing’ has passed, but the occasional sounds of machineguns and explosions tend to be continuing.

Today’s stock market is a warzone. Investors are shell-shocked and afraid.

Stuck in the trench we’ve dug for ourselves, we’ve no choice but to carry onto dear life as the bullets fly over us. No one dares to stick their head up right now.

Markets are down as well as news is grim. A boost in interest rate from the Federal Reserve is extremely likely. Will it be the start of an even more severe crisis?

It seems, the actual worst of our nightmares is yet to come.

And we are trapped here, in no man’s land.

We are bound through our instincts

Falling Chinese industrial profits, and a beaten-up Glencore.

Some years ago, I was having dinner with Glencore traders within Beijing. Things were bad back then, and now they’re branded the ‘Lehman’ of the mining industry.

It’s funny how the world can turn on you so quickly. However is everything the media says true?

The market is driven by economic indicators for example industrial profits and Purchasing Managers Index (PMI).

Despite the obvious trouble with data accuracy, markets usually take these numbers too much. They overreact to them as if these were prophecies from the Bible.

What’s unfamiliar person is the market reacts in order to past information as if it was new. The collective storage is exceptionally poor.

But because fear takes a firm hold of people’s sanity, the market can create a story of its own, like a madman.

The market believes it, and thus makes it a self-fulfilling prophesy.

And here we are, in the trenches of a headache that we’ve created for ourselves.

In many ways, stock investing is extremely simple. After all, you only have three dimensions to think about – up, lower and time. Is that so difficult? You buy low, hold onto this, and you sell high. Issue solved.

But it is not that simple, could it be? If it was, everybody would be a genius investor. The problem is determining if something is low in the present relative to its future price.

For example, if I said China is very cheap right now, would you believe me? I wager your innate fear would keep you away from what seems to be a trouble spot around the globe.

That’s the problem. We can never be sure of the future. Our primal instinct performs tricks on us and retains us away from reason.

This is the basic dilemma between feeling and reason. It is not financial theories and mathematical models that drive decisions, it’s emotion.

How long will we end up being stuck here?

For those who incorrectly believe a falling emerging market is somehow good for developed markets, here is a reminder.

Markets fall together, especially during a turmoil. So this is not a zero-sum game between world markets.

But how long will we be stuck here in no man’s land before markets bottom and rebound?

I have done some calculations on the timing of a bottom. But as with anything to do with the future, there is no definitive answer. Rather, a range of possibilities.

I have compared the Hang Seng’s current downturn to past crises.

In recent years, the two worst downturns were the 1997 Asian Financial Crisis and the 2008 Global financial trouble. The two were similar in destructive power. In fact, the actual Asian Financial Crisis saw a more severe downturn on the Suspend Seng than the GFC.

We have also seen numerous less severe downturns through the years. The downturns associated with 1989 and 2012 were similar in scope as to the has happened now. The 1994-1995 crash and 2001 crash were more severe.

Source: Port Philip Posting Research

So what we have to decide now is the scope for the current downturn.

In recent weeks, we’ve gone through what seems to be a bottom in the Chinese as well as Asian markets. But is this the bottom? If it truly is, then we’ll see a come back as early as two months from right now.

However, if we’re in the early phases of a mid-level crisis, then we are headed for another six months associated with weakness.

And a full-blown crisis on the magnitude of the Asian Financial Crisis or the GFC will see us go through a year of weakness.

So which will it be?

My bet is that the marketplace will bottom now, however it will flirt with the bottom for a few months. Then we will have a rebound.

Why am I so optimistic? Because I don’t see an excessive amount of systemic risk right now. The actual falls have mostly already been based on past information; The far east, commodities, currencies and so on.

How certain am I? Well, the fact that I can not see systemic risks now doesn’t mean there are absolutely not one. They can develop in time. And when they do, they’ll be revealed over time.

For you, the question is whether to buy now, or a little bit later on.

If you still doubt that rising markets and commodities are cheap, then you are really lacking the point. There’s no doubt that these markets are cheap. The question is when to buy.

My advice is to get ready to get out of the trench. The time is coming soon!

Regards,

Ken Wangdong,

Emerging Markets Analyst, New Frontier Investor

From the Port Phillip Publishing Library

Special Report: The End of Australia Vern Gowdie’s new guide is called The End of Australia: The Real Story Behind Australia’s Financial Collapse and What You Can do to outlive It. We are mailing free copies of this book to anyone who requests one online. It does not alllow for cheerful reading. But the concept is that you’ll be safer (and much wealthier) in 10 years’ time from receiving a more alcohol free and realistic analysis of what’s going on…what happens next…and just what you should be doing about it right now… (more)

Stock markets sent mixed signals yesterday…

The Shanghai Composite closed up 0.86%.

Yet, the Japanese Nikkei closed lower 2.25%.

The ASX 200 climbed 1.5% higher. That was good to observe. Even better was seeing the most recent Resource Speculator stock recommendation jumping 40%. If you wish to know more, click here.

In other marketplaces, Europe had another violent session. And the Dow Jones recovered somewhat from sharp early losses, closing 0.48% lower.

Stock markets are living up to their commitment of volatility.

As investors, this action doesn’t make our job easy. And unfortunately, the tough times have only just started.

Greece’s nightmare just started

As you’re likely aware, Syriza received the Greek election final Sunday. It was by no means an excellent win for the political party.

45% of the country didn’t bother turning up to the polling booths. A signal which hope is gone. And further evidence that politicians act in their own individual interests — not their country’s.

Looking forward, after signing a good euro 85 billion bailout bundle in July, the first Greek ‘bail-out review’ is set for mid-October. According to the Guardian:

‘”The new government has no time to squander on trials and tests. The third memorandum [bailout accord] leaves no space,” warned the actual leftwing daily Efimerida Twn Syntaktwn.

‘”Within three months, 56.4% of the measures, or 127 actions, have to be taken, of which Fifteen have to be enforced in October.”

‘In the coming weeks the hugely sensitive issues of pensions cuts, tax increases on farmers, recapitalisation associated with banks, privatisation of state property and liberalisation of closed markets must all be tackled.

‘The steps, expected to spell further difficulty for the long-suffering middle class, have to be enacted before international inspectors conduct a review of the economy – key not only to unlocking dinar 3bn in badly needed help, but also to addressing the crucial issue of debt relief.‘?

Greek Prime Minister Alexis Tsipras has a tough road ahead.

The other major question dangling over the country is the banking system.?The European Central Bank (ECB) calculates that euro 25 billion will be needed to recapitalise the banks.

This isn’t going to be easy… Athens banks are suffering from a significant lack of deposits. Also they are riddled with bad loans on their own balance sheets.

The clock is ticking.?As it stands, this is likely to turn out an absolute disaster…

Ashoka Mody, the IMF’s former bail-out chief, stated?‘achieving the programme objectives will require a miracle’.

No doubt, Tsipras’ team will need a herculean effort to pass the ambitious reforms the following month. Already, Europe?has cautioned that there’s no second opportunity for Athens — a Grexit will ensue if commitments aren’t achieved.

Nevertheless, Syriza had been employed to do a job — a job that means more austerity. Although, ironically, Syriza came to power in the first place using the anti-austerity policy. And many of its party members remain opposed to strict austerity. Meaning that there’s risk that Syriza won’t get the job done in time. And that the world may be looking at the Grexit in October.

Although I’ve long argued that a Grexit is inevitable, I expect these reforms should pass.

Of course, only time will tell…

Now, with market volatility as well as uncertainty assured on the Ancient greek front, let’s turn to issues arising in the US.

The US government going to shut down…again

Do you remember the US debt ceiling crisis in 2013?

Looking back, the US government endured a 16-day long shutdown which year. It ended having a bill that extended your debt limit until February 2014. Our elected representatives then approved the most recent expansion, which expired this past 03.

Unsurprisingly the can was kicked down the road. That is, until now.

Officially, the federal government will run out of money in mid-November in order to early December.

There are now developing concerns that Capitol Hill will shut down on 1 Oct — the same date it closed down in 2013.

Again, US government must raise the debt limit that currently stands at around US$18.One trillion. A figure which should blow out to US$21.7 trillion by the end of this year.

This is just another financial debt problem that many US politicians don’t take seriously enough — they seem to believe that money grows upon trees.

It doesn’t.

And no doubt, while arguing whether money will grow on trees, an american government shutdown seems likely. This is, of course, extremely bad management.

With the shutdown looming, many ‘leaders’ worry that buyer sentiment could change rapidly. Epically if such episodes turn out to be routine.

But perhaps, they’ve currently become routine…

Governments will never change

Every federal government is dead broke.

At the moment, they’ll do whatever it takes to keep the lights on as well as party running. This includes visiting you asking for help (we.e. more taxes) and borrowing more money (i.e. issuing bonds). And it will continue until the public says sufficient is enough.

Indeed, eventually these lighting will turn off…

And the world will see a sovereign financial debt crisis like never before. Governments may outright default or delay capital payments on their relationship commitments. Meaning you’ll possibly lose everything or — within the best case scenario — you will be unable to access your funds for years to come and end up taking major capital losses on your bond portfolio.

Fortunately we have a year or two to organize before this happens.

That said, with the combination of Greece’s nightmare and a Government shut down next month, the smart punters will start to wake up for this financial crisis.

This minority will start considering: ‘why am I investing in debt? It can make absolutely no sense’.

But because no one wants a crash in the bond marketplace, the majority will panic and sell stocks.

Get ready for another stock exchange correction

Studying the charts, the actual Dow Jones fell about 750 points during the October The year 2013 US government shutdown. However, factoring in Greece’s issues, the modification could well exceed this number next month.

Especially considering the uncertainty surrounding the All of us Fed interest rate decision. I’ve long said that the US Fed would look to raise rates for the first time this or next month. Having a second raise in Dec. In this case, you have another month to prepare for the first All of us Fed rate hike.

And what this means is one thing: expect another roller coaster ride in the stock market next month. It’s more likely that we’re going to see a deeper correction in the stock market before the crash in the relationship market.

Over at Resource Speculator, I’ve been guiding readers through these turbulent times. They now understand that this stock exchange correction isn’t the real turmoil ahead — it’s the sovereign debt crisis. If you want survive and prosper during these times, click here.

Regards,

Jason Stevenson

Resources Expert, Resource Speculator

From the Port Phillip Publishing Library

Special Statement: The End of Australia Vern Gowdie’s new book is called The End of Australia: The Real Story Behind Australia’s Economic Collapse and What You Can do to Survive It. We’re mailing free copies of this guide to anyone who requests 1 online. It does not make for pleasant reading. But the idea is that you’ll be safer (and much wealthier) in 10 years’ time through receiving a more sober as well as realistic analysis of what’s going on…what happens next…and what you ought to be doing about it now… (more)

It won’t be news to you that Australia is in a spot of trouble.

You can clearly see things are tough. The economy is struggling. The markets are in a mess. And the government…well best leave that one on your own.

But the simple fact is we’re no longer aggressive on a global scale. We forgot to play the long game. We got stuck celebrating an easy goal, and forgot about scoring more.

Our simple goal was the goods boom. But the long game is making Australia competitive again. It’s just that’s a hard game to play because we’ve got to work for it.

It depends on whether we can shift our thinking from a commodity economy to some tech economy.

A slippery slip down the table

Each year the World Economic Forum (WEF) puts out The Global Competition Report. It’s the most comprehensive competitors study of how 144 countries position against each other.

The ranking is dependant on 12 pillars. And each anchor has sub categories. All of these add up to provide overall competitiveness.

In 2005 Australia ranked quantity 18 overall in the world. Within 2006 it was number Nineteen. In 2008-09 it was number Eighteen. And by 2009-10 Australia had managed to sit up at a lofty number 15.

The spider chart beneath shows the pillars associated with competition. This chart is the current ranking for Australia.

Source: WEF

We’re not as competitive as we had been a few years ago. We’re now 22 on the list. New Zealand is now above us. So are Malaysia, Qatar and Belgium.

The trend here is down. Australia is becoming less competitive. The large question is where will it quit? How far down the list can we fall?

When you dig much deeper into the figures it’s easy to observe what’s causing the fall. The country has become inefficient.

There are a few groups (and sub-categories) Australia ranks amongst the best in the world.

We rank;

• 3rd: Soundness associated with banks (financial market improvement)
• 9th: Quality of scientific research institutions (innovation)
• 4th: Active special broadband subscriptions (technological readiness)
• 7th: Available airlines seat kilometres (infrastructure).

The categories where we’re near the bottom of the list are really telling.

We rank;

• 124th: burden of presidency regulation (institutions)
• 114th: labour marketplace flexibility (labour market efficiency)
• 125th: pay and productivity (work market efficiency)
• 136th: hiring and firing practices (labour marketplace efficiency).

There is a clear trend. Overall Australia ranks 56th in the world when it comes to Labour Market Efficiency.

It’s easy to see the problem in Australia.

Red tape and government intervention are dragging the country down. They generate an inefficient labour marketplace and a less competitive economic climate.

And when you don’t have an efficient labour market, the whole country begins to fall behind. Those that are experienced look elsewhere for better conditions.

There really is only one way forward. It’s to shift to some high knowledge, high ability workforce. I spoke relating to this briefly in Saturday’s Money Morning, talking about the automated future of work. We have to help reskill the workforce to adjust to a high tech future.

But right now that is just not happening.

The brain deplete is on

Atlassian is an Aussie achievement story. Mike Cannon-Brookes and Scott Farquhar started the company in 2002. Past due last year they completed another round of funding. It gave Atlassian a valuation close to $3.3 billion.

They’re an Foreign company through and through. However their patriotism comes with its problems.

Speaking on ABC’s Lateline, Farquhar said:

‘We do a lot for the local industry here. We have about 75 graduates coming in next year to Atlassian. But we just can’t find the older talent that we need in Australia. And so we recruit all of them from all around the world to come and work in Sydney…. Developers, item managers, designers, people in we’ve got the technology industry with five and 10 years’ experience — we don’t have them in Sydney in the figures that we need. Mostly we obtain people from Silicon Area, from Europe, and bring these to Sydney.‘

Founder/CEO of Freelancer Ltd [ASX:FLN], Matt Barrie also brought this point upward. Speaking to Business Insider, Barrie said,

‘At the government level not only is nothing being done to boost the technology industry — because [Atlassian co-founder] Mike Cannon Brookes said: “They seem to be actively avoiding it”.’

‘I’ve lost technical engineers to Facebook, I’ve misplaced them to Uber, I’ve misplaced them to Amazon. I’ve lost them to Silicon Valley startups. I’ve lost them to east coast tech companies. Silicon Area is teeming with Australians now, we were a uniqueness back in the late 90s. Now the brain drain is in full force.‘

A ‘brain drain’ is bad news. It’s a problem that has to change. We must maintain skilled workers in Australia. We should have vision to help the likes of Atlassian and Freelancer. Encourage start-ups. Promote innovation. Build a tech-strong Australia for future years.

That starts with a vision to turn Australia into a country for the future. And it continues through the education program and into tertiary education. It’s a long game, but it’s the only real game we’ve got left to play.

Regards,

Sam

As it turns out, the decision by the Federal Reserve in the US not to raise rates last week was a pretty close call. Over the weekend, four of the 10 voting members that make up the Federal Open Market Committee (FOMC) said they still expect the cash rate to rise before the end of the year.

Chair Janet Yellen gave 2 main reasons for the delay within ‘liftoff’, as they’re calling it right now. Firstly, the massive market volatility that hit global markets in August. And next, the potential impact on the US through the slowdown in the Chinese economic climate.

How these two factors flow in to growth in the US economy, and the inflation rate, will determine what the Fed will do from here.

We witnessed much of this market volatility in the huge daily swings within the Chinese stock market over the last month or two. This affected all the major search engine spiders worldwide.

Similar to the role that the RBA plays here in Australia, the Federal Reserve seeks full employment as one of its primary goals. The unemployment rate in america is currently 5.1% — a level that the Fed considers close to complete employment.

This satisfies one of the requirements for lifting rates back to more ‘normalised’ levels.

By the way, if you are wondering what the ‘normalised’ interest rate level is, officials at the Given put it at 3.75%. Even though Yellen is softening the market up by saying that it might take ‘several years’ to reach this goal.

Another primary goal of the Fed is to acquire a desired inflation target around 2% per annum. Again much like the RBA within Australia. Currently this sits at around 0.3% in the US — well below their target degree.

Typically central banks lower the cash rate to spur development in the economy. This can may also increase inflation as extra money bids up the costs of goods as well as services. To curb extreme growth and inflation, main banks do the opposite and increase the cash rate.

Increasing rates right now in the US seems to go against this particular economic theory. It could further dampen inflation just as they need it to get back to their focus on level.

However, the four dissenting members of the FOMC see the labour market because the biggest contributor to fixing the inflation problem.

The cost of labour impacts all goods and services throughout an economy. While joblessness is high there is little in the way of wages growth that will drive up these costs. The employee offers little bargaining power.

With full employment, though, this balance starts to move back into their own favour. With a tight work market, employers need to pay more to stop staff leaving with regard to better paying jobs.

It’s this rationale that those governors in favour of raising rates this year are financial on. That is, an increase in labour costs should help pump the inflation rate back up to the desired 2% level.

Of course, any downturn in the labour marketplace puts a hole in the theory. That’s why, according to Bloomberg, the commodity market only points to the 20% probability that they’ll raise rates in October.

This number increase to just under 50% for the December meeting. Although, this is the exact same number who thought they might raise the cash rate last week.

In the meantime, the US offers plenty of others giving them free advice. Among them, the IMF and the World Bank.

They’re worried that the increase in US rates may drag yield hungry funds out of emerging markets and back into the US. This will further exacerbate the huge sell-offs that have smashed these markets and will pull the world economy down additional.

Regardless, I still think they will raise rates. Maybe not by October. Maybe it will be in December or early the coming year.

Again though, I won’t believe it till I see it.

The problem is this particular. If they didn’t raise the money rate will full work and the markets trading continually highs, how will they raise rates if the markets still tumble or unemployment starts ticking up?

Maybe they’ve missed their chance.

One thing the markets loathe is uncertainty. Jesse Yellen is scheduled to speak within Massachusetts on 24 Sept. Needless to say, the markets all over again will be hanging off the woman’s every word. So we’ve got that to look forward to.

Chinese investors don’t want to play

While Janet Yellen and her posse of Federal Reserve officials try to guess what’s happening in China, it seems even those on the ground there are still trying to work out what’s going on.

The Chinese language government has been very active in trying to stem the rout that hit their markets after they peaked in June. You can see the run up within the following chart:

Shanghai Composite Index

Source: Google finance

The government is desperately attempting to avoid the huge swings and volatility from the stock market flowing into the rest of the economy. It’s been pumping what seems like an endless way to obtain money into the market to originate the flows.

The problem right now, though, is that nobody seems to have any idea how much the market is being propped up by the federal government, or how much comes from real demand from long term investors.

The measures undertaken by the federal government were designed to lower volatility and restore liquidity to the market. However, it might now be getting the opposite effect as traders’ time frames become even shorter.

There appears to be one trade in town the most nimble investors are trying to profit from. It’s trying to guess a level where the Chinese government purchasing will enter the market, and slip in ahead of all of them.

As the buying might only last a day or two, of course, short term traders try to jump away before the buying stops. It might be a vicious circle, and all it will is scare more traders away from the market.

Bloomberg puts the entire trading volume in gives down by a staggering 75% over the last four months. At the same time, volatility offers more than doubled. And the quantity of new investors entering the marketplace has dropped by over 80%.

The government has also intervened in the futures marketplace, just about bringing it to a stop. Short selling as well as margin lending have been severely restricted as authorities search out those deemed accountable for bringing the market to its legs.

30 day volatility chart from the major markets

Source: Bloomberg

The above 30 day volatility chart highlights just how crazy the ride has been in China. It’s certainly quite serious when you compare it to our experience here. I’m not too sure I’d have the stomach to be wading into their market in the near future.

When will it all settle down? That’s what Yellen and her officials is going to be trying to work out. While speculators may dominate a market temporarily, the weight of real money — money focussing on the fundamentals — will determine once the market has bottomed.

Right now, still it seems like it has further to go.

Regards

Matt Hibbard,

Editor, Total Income

Editor’s note: The above article is definitely an edited extract from Complete Income. To find out more about Matt’s strategy for income investing in a low-interest rate world, click here.

From the Port Phillip Publishing Library

Special Report: The End of Australia Vern Gowdie’s new book is known as The End of Australia: The actual Story Behind Australia’s Economic Collapse and What You Can do to Survive It. We are mailing free copies of this book to anyone who requests one online. It does not make for pleasant reading. But the idea is the fact that you’ll be safer (and much richer) in 10 years’ time through receiving a more sober as well as realistic analysis of what’s happening…what happens next…and what you should be doing about it now… (more)

Here we go again.

It seems like only last week that A holiday in greece was in the headlines regarding elections and its debt problem.

Now it is back.

Alexis Tsipras is back as Greece’s prime minister.

What will happen this time? It’s something otherwise for investors to worry about. But in truth, it’s just a sideshow. The real worry for Aussie investors is right here… in Australia.

And there’s no sign it will get better anytime soon…

From a report within the Age:

‘Foreign investors have turned especially bearish on the Australian economy, with one describing it as “toast”, the National Australia Bank statement says.

‘Chief economist Ivan Colhoun said a recent trip to clients in Britain, continental Europe and the Middle East revealed “uniformly negative view on Australia’s prospects”.‘

This is why all of us took the controversial decision to publish Vern Gowdie’s new book, The End of Australia.

You can find out how to get hold of a copy here.

Cue the next recession

Now, although we see bad news ahead for the Aussie economy, seeing the actual mainstream take the same view gives us pause for thought.

But not for too long.

It’s true that the mainstream usually arrives late on the scene with things like this particular.

But it’s not true to say that the actual mainstream is a counter sign.

Typically, the mainstream will grab hold of a story once the impact is already underway.

Then, as the message (positive or negative) filters through to the actual mass public, you’ll understand the biggest reaction in the market.

That’s because, until that point, the mainstream is either ignorant of what’s going on, or hasn’t taken it seriously.

That’s where we are with the Aussie economy right now.

Remember, it is a long time since the last Foreign recession. It’s a shame May well Hockey won’t be around to see the next one…

Source: Bloomberg

Also remember that foreign investors still see Australia as a resources economy. Foreign traders also see the Aussie buck as a commodities currency.

When the actual commodities sector was strong, the Aussie dollar had been strong. When commodities destabilized, so did the Aussie dollar.

An undeniable link

Today, the metal ore price is US$57.30 per tonne.

That’s an extended fall from the giddy heights above US$180 per tonne in 2011.

Here, we’ll show you another chart. If you need much more evidence of the link between the value of the Aussie dollar and also the price of commodities, this is it.

Below is really a chart of the Aussie dollar (yellow line) against the cost of iron ore (white line):

Source: Bloomberg

You don’t have to be Columbo to interpret which chart.

Of course, some will state that the Aussie economy is changing. Mr Colhoun, from National Sydney Bank, told Bloomberg:

‘At the present period, the improvement in the non-mining economy is much more than outweighing the drag through mining, particularly in an employment feeling.‘

That may be true. But what about in an ‘export sense’?

That doesn’t seem so clear. Look, we’re not saying that the Aussie economy is just good for digging things out of the ground and selling them to China.

As someone who has followed small-cap and microcap stocks on the Aussie market for more than a decade, we know there’s plenty of innovation in Australia.

But digging up resources and promoting them to China is different in order to innovating in technology and selling that technology to the world.

The world doesn’t need Australia for this ‘resource’

When it comes to resources, Australia is one of the world’s leaders. If China wants iron ore, it has two options — Australia or Brazil.

But when China (or any other nation) wants a different kind of source — technology — Australia isn’t the first place that springs to mind.

China has a home-grown technology industry. If it cannot get what it wants at home, it can get it from the US, Singapore, Hong Kong, Europe…and elsewhere.

For many years investors, commentators, and economic experts worried if China might adjust its economy towards the future. They may well possess a cause for concern. But here in Australia, folks need to worry about Australia’s ability to adjust.

It may do so. But even if it does, it will take quite a long time. It’s why we recommend investors get hold of Vern Gowdie’s new book right now.

It has the details on how issues will pan out for the Aussie economy, and what traders (and non-investors) can do to prepare for this. Go here for details.

Cheers,

Kris

If fear and greed are the dominant emotions in markets, hope reigns supreme in the field of politics.

Less than a week following Malcolm Turnbull’s coup to win the Prime Ministership, the country is infused with hope. That’s not terribly astonishing given what we’ve just been through.

Tony Abbott’s conservative reign all of a sudden seems like something out of the Ancient. His economic ignorance had been his downfall. For me, that will be forever captured in his reaction to a question about the risk to Australia from China’s economic downturn. According to Abbott, the Grocery Signal of Conduct would protect us.

No wonder we’re optimistic. Turnbull at least recognises the economic challenges Australia faces. That’s why Abbott as well as Hockey, the Treasurer, are both eliminated. Australia’s former economic team was a disaster.

Still, Scott Morrison, the new Treasurer, has a huge task in front of him. The reality of the situation may be plain to see, but the politics of producing change and reform will be very difficult.

The other shining light in Turnbull’s cabinet restructure over the past weekend is the handing over associated with defence responsibilities. Marise Payne is the very first women to ever hold the job of defence minister. Good on her. I’m responsible for succumbing to hope and gender prejudice here, but I’d much rather a women within the defence portfolio than a traditional male.

Once the enormity of the political coup settles lower though, the big question is, may Turnbull bring the electorate together with him. This will be the big challenge. Australia has had it good for a long time. The current house price boom in the face of economic decline just confirms for many people that there isn’t a problem.

Although RBA boss Glenn Stevens does not seem to think we’re in this bad state either. In his semi-annual testimony to the senate upon Friday, he was relatively sanguine about the prospects of the Foreign economy.

Keep in mind one of their roles is that of confidence maintainer. Whenever growth is fragile, you can’t have the boss of the RBA displaying signs of concern. In Friday’s Q&The session following his talk, a school student asked the way the economy will achieve 3% growth by 2017. Steven’s answer is, well, simply hopeful.

‘Growth of over three per cent is wanting to be achieved through 2017, according to the overview of the RBA. However with fewer mining projects on-going, falling commodity prices as well as deteriorating terms of trade, how do you predict this growth will be achieved?

‘Mr Stevens: It has to come from other parts of the economy than mining. The big question, of course, is really as mining slows down does the non-mining pick up? It is picking up–it is picking up a little bit more slowly than I would have liked but it is, I believe, picking up. We need that to help keep happening and strengthen further over the next several years. I think there are reasonable grounds to consider that it will do that, and the policy settings are certainly made to accommodate that and encourage it. What are those non-mining things?

‘We build houses, we build things other than mines, consumers do okay and so on, and hopefully a few of the export industries like travel and leisure, education, business services, actually some parts of manufacturing grow faster as they get help from the low exchange rate. I think all those things are starting to happen. However it is just a forecast, so we have to wait and seehow it turns out. I believe there are reasonable prospects we’ll get those outcomes.‘

As I said in the monthly issue associated with Crisis & Opportunity ?last week, this pick up in the non-mining part of the economy is very fragile indeed. The message from the stock market is that these non-mining industries point to a slowdown ahead.

I showed two crucial charts that hold the key to the Aussie economy. If they break beneath their support levels, we’re staring at our first recession in nearly a quarter of a century.

That’s the other challenge that Turnbull faces. Bringing about tough reforms in a changing market environment will make things more difficult. Global markets are in the process of changing from the bullish to a bearish mood.

For example, the US Federal Reserve left interest rates on hold last week. The decision resulted in a sell-off. What used to be bullish news is now bearish.

I stated on Friday how buying and selling volumes fell as the All of us market attempted to rally from its previous steep falls. That was a sign of unwillingness to buy from higher prices. And you know what? Volumes picked up again in Friday’s trading session in the US, because prices fell heavily. That points to a desire to sell the actual rallies, and a lack of buying enthusiasm.

This is how sentiment changes. It’s flowing through to the Aussie market this morning. At the open, the ASX 200 is lower 100 points, or almost 2%. The important support level of 5,000 points remains intact for now, but gravity seems to be getting the better of Aussie stocks.

Alas, there is no hope-fuelled Turnbull bounce this morning. Greed is giving method to fear amongst stock market traders. Is this the end of Australia’s ?economic golden run?

Cheers,

Greg

Dear Reader,

‘Meet the new boss/same as the old boss’

The Who, ‘Won’t Get Fooled Again’

And so — FINALLY — change comes to Australia.

Great, capturing change.

Politicians are weird, aren’t they? They argue simultaneously for change and stability. What we need is something different. But what we really need is for things to stay the same.

And that’s exactly what happens in Australia. We change the prime minister here as often as I used to change girlfriends in high school (and, from what I can gather, for equally lightweight reasons).

But — weirdly — things always stay the same. They argue with regard to change but campaign upon stability. The pack is shuffled. The suits are all still there, just in a different order. Occasionally hearts are closer to the top; other times clubs.

Yet all of the municipal systems that preside over our lives are still in place. We’re all nevertheless plugged in to them — regardless of who is sitting in the big office. I wish Malcolm Turnbull well…I suppose…but I doubt very much that he gives any more of the rat’s ass about your escape strategy than Tony Abbott did.

And so on we go. To change!

Of program, you and I both know that in order to affect real change in your life, you need to be the one doing all the changing. Wait for a politician to help you and all you’ll hear are more arguments for ‘stability’ and ‘security’. They only want ‘change’ when they’re in opposition (even inside their own party!).

In any case, exactly how secure can you feel — really — while you are still shackled to these big establishments and organisations? Not just government…but the stock market…the banks…and corporate Sydney? How stable is a federal government that changes its innovator every five minutes?

How safe is a stock market that loses 15% of their value in five several weeks — chiefly because leveraged traders looking for short-term returns are easily spooked through political rumour?

Meanwhile, what are YOU doing? Sitting at the office thinking: ‘Why am I here?‘ Struggling to make money, live well and be at liberty?

We exist to illuminate escape routes to better living. But most people who give the idea a break only ever escape so far — still within the confines of the ‘system’ or ‘grid’. It’s kind of like Stephen King’s Under the Dome. An invisible barrier is all around us. We can do (virtually) what we want inside it. But we can’t escape it.

That does not stop some Australians attempting, though. In the last few weeks I’ve been inspired by these Aussies. I’ve been reading their stories…chewing over their ideas…and providing more thought to the idea of off-grid living.

This is quite a polarising topic. So let me clear about what off-grid living means to me personally. I’m not talking about setting up a non-urban commune, living 100% off the land, harvesting rainwater and all that gubbins. Even though that life sounds satisfying on many levels, and there are definitely some useful applications you and I could adopt within our urbanised lives — but as a lifestyle, it’s not really for me.

I’m not talking about prepping for the apocalypse either. You won’t find gold or grain if you dig up my back yard. Just possum poo.

Although I must acknowledge I met a couple of hardcore preppers at a conference in Melbourne a couple of years ago and found them utterly credible and persuading — not to mention charming. These guys aren’t all zealots. They’re deadly, comfortably serious.

They are certain the end of civilised society is nigh…and that failure to prepare for what comes next is really a gross dereliction of duty.

To me personally, they’re jumping ahead *a little* too much of the curve. It’s fascinating, and exciting (yes, thrilling) to talk to survivalists. But I’m not in love with the fundamentals of their argument…yet.

Still, all of us sense something isn’t very right — with the country…and the stock market. What I’m saying is, our lives needn’t be tied to their fate. We are able to affect change — subtle, however useful — that reduces the influence of these structures on our lives…but still allows us to live the type of life we want.

So what Shall we be held talking about?

Off-grid living, to me, is more about financial freedom than anything else. Yes, there’s a philosophical argument to be made for the ‘sovereign individual’, living completely independently of the state. Additionally, there are an ecological argument to be made for reducing our footprint on the land. I’m genuinely interested in both of these arguments.

But right now I want to explore the PRACTICAL applications (and financial benefits) of reducing the influence big establishments have on your life.

How would you reside a simpler, freer life? Can you cut costs, and be more self-sufficient, without having to hunt your own lunch? Are there any risks to creeping yourself from the grid? Can you still reside a rich, happy, healthy existence outside of the system?

Those aren’t rhetorical concerns, by the way. I’m keen to hear your ideas. The dial marked ‘recession’ is being notched-up in the media. I feel this is something we should talk more about.

How can Team Esky help? Exactly what simple, practical suggestions are we able to make to help you save money and live more freely?

Are you interested in this kind of thing?

Email me personally: letters@moneymorning.com.au and type ‘letter to Esky’ in the subject line.

Some earlier thoughts I had on this subject…to get your cogs whirring…

Ideas, help and encouragement to begin your own business: (somewhat obvious — however this is the only way to truly link your hard work to prosperity and financial security).

Solar energy: is it worth it? How much can you actually save? Can you REALLY make your own panels?

LPG: what are the long-term benefits of sticking an enormous gas tank in the boot of your Falcon?

Cheap diesel generators: can they provide you with energy security? What are the benefits and risks? Are they as well noisy?

Biodiesel: can anyone make it? Is it safe? Will it ruin your engine? Where are you able to buy it? Is it legal? How much money can you save over regular diesel?

Rainwater harvesting: can you really do it in Australia with success? Exactly how good (and expensive) are water filtering systems? Is there enough rain to provide the water a household needs? If you’re living ‘off-mains’ how expensive is it to have your own waste management system?

Grow your personal vegetables: what are the best, cheapest, most proven ways to grow your own produce? What seasonal considerations do you need to keep in mind when growing? Can you sell your create if you have a bumper crop?

Keep chickens in your garden: is it really worth this from a financial point of view? Does it pay off? Or are they just too noisy/messy?

Bitcoin: is it practical? Where do you need it? Why would you use it? Do you know the risks?

Protect yourself online: can you ‘go dark’ on the internet and limit the government’s (and rogue entities) ability to monitor and hack you? That should you be wary of online? And can technology actually HELP you become freer?

Physical gold: We joked about it earlier…but should you hold some? How much? Where and how should you store it?

Personal security: how do you protect your home, and your self, from others? Should you be concerned? Are there any simple self-defence techniques you can now learn to quickly immobilise intruders?

Owning your personal home: should it be your priority to pay for down home loan debt? Or should you be borrowing while money is cheap to build a profile of investment properties? What’s more important to the off-grid life: becoming debt free or having a income source?

Bartering: are there any simple but fundamentally useful skills you can learn to trade for cash, food or accommodation?

Fishing 101: can the ocean (or local river) provide your family with all the meals you’ll ever need? How do you catch, gut and prepare fish without killing your family?

Reduce your tax burden: another obvious one. The less you pay the government, the less on the hook you are.

There are loads more ideas where that came from. My personal head is buzzing together, in fact. But I’ll stop there because I think you catch my drift.

I’m not looking for answers to the specific questions I’ve posed in this list. Only a broad yes or no to this question:

Is living with less reliance on the federal government, banks and corporations — off-grid living — something want to know more about?

Please email me here and let me know: letters@moneymorning.com.dans and remember to type ‘letter to Esky’ in the subject line.

Ciao for the time being,

Simon Munton

Contributing Editor, Money Morning

Ed Note: The above article first appeared in Escapologist

From the main harbour Phillip Publishing Library

Special Report: The End of Australia Vern Gowdie’s new book is called The End of Australia: The Real Story Behind Australia’s Economic Collapse and What You Can do to Survive It. We are mailing free duplicates of this book to anybody who requests one online. It does not make for cheerful reading. But the idea is that you’ll be less dangerous (and much wealthier) in Ten years’ time from receiving a more sober and realistic evaluation of what’s going on…what happens next…and what you should be doing about it now… (more)