Topics in this week’s Sound Money. Sound Investments Report include:
Seeing the Wood for the Trees
Sometimes you need to stand back and see the wood for the trees. Such a need is
especially important in the aftermath of a credit bubble bust. More than ever, you
need to take into account the macroeconomic backdrop when making investment
decisions. We are constantly amazed by the number of analysts and commentators
who dismiss events such as the Greek crisis (and the Dubai World default before it)
as isolated events. They are not. They reflect an unstable monetary system labouring
under the burden of too much debt.
Poor Value at any Price: How the “Rivers of Gold” have dried up for Fairfax
The economics of traditional media have deteriorated considerably over the past
decade. In the case of newspapers, the industry structure has gone from
monopoly/duopoly to something far more fragmented. In the past, newspapers
(whether metropolitan, regional or community focussed) with dominant readership
and circulation benefitted from being THE marketplace for their community or area. If
people wanted to sell their house or car, or if employers wanted to hire labour, they
paid money and made their pitch in the newspaper. This classified advertising
revenue used to be referred to as the ‘Rivers of Gold’
Toll Holdings
The reporting season hasn’t thrown up too many nasty surprises, at least not from
the large blue chips. But last week Toll Holdings (TOL) shocked the market with a
weak result for the six months to 31 December. Given it moves a decent portion of
Australia’s goods around, Toll is a very important economic barometer and therefore
provides an insight into the strength of the Australian economy. Last week’s numbers
from Toll suggests real economic activity might not be as strong as many people
think.
ANZ and Westpac Bank
In direct contrast to the Toll Holdings result, trading updates from both ANZ and
Westpac illustrate that the financial sector is not facing the same headwinds being
felt by participants in the real economy. Moving paper around appears to be far more
profitable than moving goods from producer to consumer. We’ll leave the comments
about what this actually means for the underlying heath of the economy to one side
for the moment, although suffice to say that paper shuffling and debt growth does not
create lasting economic wealth.
If you would like any more information on these stories or a copy of the
report in full, please contact Greg Canavan:
greg.canavan@soundmoneysoundinvestments.com.au
Mob: 0431957056
Ph: 02 9552 6440
About Greg Canavan:
Greg is the Managing Director and Editor and of the Sound Money. Sound
Investments Report. (The Report). Prior establishing the business, Greg spent four
years at Fat Prophets, and was Head of Research for 3 years, during which time a
wide range of media including Bloomberg, CNBC, the Sydney Morning Herald and
Money magazine regularly sought his views. Greg has been in the industry for 12
years, previously working as an equity analyst and in economic research with
NAB/MLC.
Greg believes a unique set of challenges face investors in the coming decade,
saying, “The global economy is operating on an unsound footing and this foundation
will only grow weaker as governments around the world seek simple Keynesian
solutions to deep-seated structural problems. These actions will lead to heightened
market volatility. But by focussing on a sound investment framework, such volatility
will create many opportunities for the informed investor”.
About Sound Money. Sound Investments:
The Sound Money. Sound Investments Report is not just another tip sheet. Fully
independent, its aim is to encourage investors to think differently about how they
manage their wealth. The post credit bubble bust environment will be very different to
the one that preceded it. The Report does this by addressing global and domestic
macroeconomic issues, and by transparently analysing a selection of Australian
listed companies in each issue - without fear or favour, and without being influenced
by the herd.
The Report is published weekly, 48 weeks per year, on subscription for $399 pa. A
free, four week trial period is offered to potential subscribers. For more information,
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