Billion-dollar investor Warren Buffett is rumoured to be preparing for a US Stock Market crash, as is predicted by a number of pundits. Also expected is that a number of options could be open to investors to either alleviate or survive the down time period. What is predicted is a 50 % reduction or plunge in markets. Having lived the 2008 Global Financial Crisis a number of issues cross our mind. Such as the government policies to handle the situation will they be reactive or proactive? What will happen to the reserve bank policy? Where will you go to protect your wealth position? Will the need for welfare increase substantially?
On the latter the current Australian Government preferred budget policy says we must do it tough to get a surplus. All measure of expenditure will be cut ‘for our own good’. The difficulty here is that the expectation is there is an alternative to welfare. For example: A favourable market. Therefore a 50% plunge in the market will be a crisis with long-term damage to physical and economic circumstances. Ask around now and the evidence is there with small business indicators saying ‘we are stuffed’, ‘do they expect blood from a stone’, and then the irony of comments of we expect you to ‘do more with less’ and policies like the Clean Energy Legislation (Repeal) Bill 2013, also known as the Carbon Tax repeal, will save in the order of 4 to 6% of business costs and be replaced with short term (promised) measures that increases cost through other fees, levies, charges and taxes (even John Howard has said of the current budget before the parliament call it what it is ‘a tax’) increasing costs by around 17%. If you need references to the carbon price repeal go to www.environment.gov.au.
It beggars (pun intended) belief that we will be reduced to just that a nation of begging. Looking for a suitable term – mendicare (a Latin word for to beg). We would evolve the word mendicity to be the practice or habit of begging. Source www.answers.com/topic/mendacity. If you did not know, mendacity is derived as a synonym from Latin mendax and lying, and means habitual lying or deceiving.
On the subject of small business impacts in a recent DOE tender a Multi-use list (MUL) was written as part of the tender documents. Its purpose was said:
“Environment Quality Multi-Use List
1. To promote business opportunities for Small Businesses the Department intends establishing a Environment Quality Multi-Use List (MUL) for service providers that are small businesses. The MUL is expected to be open for registration from 1 July 2014 to coincide with the establishment of the Panel.
2. The MUL will contain the same scope of services as the Environment Quality Panel described in this RFT. Registration under the MUL will be restricted to Small Businesses employing fewer than twenty people. Registrants under the MUL will be required to provide services at rates that do not exceed the Standard Rates described in Part x, Volume x, Section x of this RFT.
3. Small Businesses may tender for this Panel and apply for registration under the Environment Quality MUL. “
Than on 28 May 2014 an Addendum was issued and as part of it said: “In the Request for Tender document under Part 1 – Section A, paragraphs 2.1 to 2.3 must be disregarded by potential tenderers. Any potential tenderer should respond to this RFT as the departments intention to establish an MUL will not go ahead at this time.” A sign of what is to come?
In preparing for the impending 2014 stock market plunge, even as a precautionary step, should our government adopt a better system of indicators – go beyond vitriol with the purpose to spread the blame, and for them to look seriously at the “Warren Buffett Indicator,” also known as the “Total-Market-Cap to GDP Ratio,” to have a tools that is capable of alerting what is breaching sell-alert status and a collapse that may happen at any moment? Source of the indicator story is http://www.moneynews.com/MKTNewsIntl/Stock-market-recession-alert/2014/02/10/id/551985/?promo_code=166D4-1&utm_source=taboola&utm_medium=referral
Being positive we can change our polies policies, what would we recommend?
a) Do what the budget or ideology wants you to do: Sell off all your stocks and assets and stuff the money under the proverbial mattress.
b) Risk everything and ride out the storm.
It is more a case of being sensible – whoops, too obvious!
If we look closely, we ourselves collectively are what are at fault. We allow ourselves to be complacent, and that is why we are allowing ideologues to blind us to the facts. The fact we need a multifaceted recourses and revenue base that involves a multiplicity of product offerings. The US has for instance learn’t that their greatness comes from innovation and small growing to big is part of their happiness index. Universally there are specific sectors of the market that are all but guaranteed to perform well. Some may struggle and it is cyclic. We need to think in 10 year terms and short term solutions that are blinkered could be costly.
Just as important are to accept the indicators over the historic sphere are markets rally to new highs despite any massive write-downs. This has nothing to do with luck. It has everything to do with using the tools correctly. In more correct terms being proactive in predictions and being reactive to the historic needs. Tools like a Crash Alert System, actually!