Lot of M’s – the collective fault within

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!

Mendacity – a policy choice, not the economy

Mendacity is an interesting word. “Are you aware, my lord, that mendacity is an organized body, a kind of association of those who have nothing against those who have everything; an association in …” www.thefreedictionary.com .

So what is the agenda for our government practicing mendacity, or at least willingly portraying itself as such? Take for instance being told we are part of a budget emergency, and the sky if falling. Attempting to instil fear into the population. Then outside bodies tell us, in financial terms Australia is reported to be one of only 6 countries in the world with an AAA reporting agency rating. The rating is enduring from the previous Government. What parallels can we make with other countries? Are the same issues facing them and how do or did they handle the financial pressures verses social responsibility?

In wanting to determine our story we only had to look across the ditch – the ditch is a colloquial term used by New Zealand to describe the body of water separating Australia and New Zealand. The recent federal budgets of the two countries draws a line on the difference in government style and puts forward that very similar conditions underline what is facing each country. Yet, the fiscal responses are different for each. It gets even more interesting when you consider the two governments’ are regarded as conservative – it gets truly bazaar.

What is different about New Zealand? Maybe it is all covered in the story “New Zealand forecasts 2014-15 surplus in budget that bears striking difference to Australia’s”. By New Zealand correspondent Dominique Schwartz :

In Australia we have been asked to go through pain. Whereas in New Zealand has been “served up one of the rarest of economic dishes: a forecast budget surplus of $NZ372 million ($340 million) in 2014-15, after a $NZ2.4 billion ($2.2 billion) deficit this financial year. Also on the menu were election year sweeteners including extended parental leave, and free doctor’s visits and prescriptions for children up to 13 years old.

By contrast, Federal Treasurer Joe Hockey delivered a hard-to-swallow $50 billion deficit accompanied by a collection of bitter pills, among them, co-payments for GP visits and cuts to welfare, family benefits and the public service.”

So as to balance the viewpoints, it is worth taking note of PricewaterhouseCoopers (PwC) New Zealand partner and corporate tax leader Geof Nightingale. From the Schwartz story it was said:

“I don’t think it’s a tale of two different economies, I think it’s a tale of two different policy choices,”

“The fundamentals of each country are quite similar. Australia’s forecasting economic growth of 2.5 to 3 per cent. New Zealand is much the same.

“Australia is forecasting to get unemployment down to about 4 per cent, New Zealand’s much the same.

“Australian politicians have ridden the mineral boom and failed to address the country’s deficits. What’s happened is corporate tax revenue has fallen off but structural spending has increased and so the deficit got wider”

Noting what the New Zealand prime minister John Key says: “His government has kept spending at about the same levels for five or six years as the country claws its way back from the global financial crisis and the Christchurch earthquakes.

We’ll be racking up $NZ7.5 billion worth of surpluses in the next three or four years; Australia will have amassed about $100 billion in debt.”

Mr Key continued that “the Australian economy is still reasonably robust and is not in crisis, but he warns the economy could face a crisis of confidence.”

Co2Land Org takes particular note of the issue being described as of a crisis of confidence.

Two important indicators are showing a genuine movement away from Australian:

A growing number of New Zealanders living in Australia are choosing to return to the greener pastures of home, and fewer are crossing the Tasman in the first place. The drift over the ditch has fallen from around 3,000 New Zealanders moving to Australia a few years ago to less than 350 now.

Mr Key says: “So what people are responding to is that they see a strong growing economy in New Zealand.”

According to Johnny Weiss, the founder of the Trans-Tasman Business Circle, reported Business is also making the move:

“We’ve seen quite a bit of relocation of Australian business to New Zealand.

As New Zealand maintains a competitive edge [regarding] pricing, costing and scalability it will be a very attractive place.

Business confidence is much stronger here than in Australia, so companies that want to move quickly find in New Zealand very good talent and quick decision making.”

Another difference is the Key government has not lifted the retirement age, nor are you subject to a means test your pension.

Nor does New Zealand budget to pay down net government debt, which is expected to peak at $NZ66 billion ($57 billion) in 2016-17, or 26 per cent of gross domestic product (GDP). Why do they not worry? Because they understand that: “The net debt gets smaller as a percentage of GDP [only] as the economy grows past it.

Why worry about Australia: Australia is one of New Zealand’s major trading partners, accounting for 40 per cent of all Kiwi exports.

So no matter how much Mr Key enjoys talking up New Zealand’s rockstar economy at the expense of Australia, he knows his nation’s fortunes will rise or fall along with those across the Tasman.

And Mr Key says he sees no storm clouds on the horizon. But we read into this that more confidence in Australia would be helpful for all of us. And, we need to add in New Zealand they raised the GST a few years back without affecting welfare of its citizens. Can we assume the agenda in Australia is to raise the GST to 15%, but they are so addicted to being fear raises they did not know how to be nice!