Untangling the noise
He is a respected economic consultant and commentator who lived in the Middle East for 15 years, and now lives in Australia. He travels widely and often, and is of the opinion that the global economy is firing on all 8 cylinders. He expects this trend to continue, particularly in China where he sees a growth of 6.5%.
Jonathan also believes that the Saudis want to drive oil price so low that the US will stop producing it, keeping them reliant on Saudi oil. Their objective? To make sure the US 7th fleet remains in the Middle East, maintaining some regional stability and keeping the Chinese and others out of the Hormuz Straits.
Dr Robert Gay – ex US Federal reserve
The world still has a lot of post 2009 GFC troubles and Robert expects that it will take another 20 years to rebalance.
He reports that many countries are holding their interest rates as low as possible, to help stimulate growth and keep their exchange rates low too. These policies, though well- intended, create bubbles and distortions in asset prices with nasty side effects e.g. property bubbles in London and Auckland.
He reminded investors to remember the 2009 GFC, and not pursue high yielding investments or high interest lending.
Sam Churchill – Magellan
Sam is a fund manager who is convinced that China has a massive over supply of new buildings. When building stops, he predicts a crash in their economy.
But Jonathan Pain disagrees. He says the Chinese have learnt from property mess in the USA in 2009, and will cope well if there is a problem. At worst he believes it will only knock 1.5% off their growth.
Seven threats to the global economy posed by retired Danish NATO Chief
1. What if an isolated Russia attacks Europe?
2. What if the madness in the Middle East somehow forces the closure of the Suez Canal? (20% of the world’s trade passes through it)
3. What happens if The Straits of Hormuz get blocked?
4. How would the world cope if China’s disputes over Islands in The Malacca Straits cause them to close? (30% of the world’s trade goes through them)
5. Or if Iran gets a nuclear weapon?
6. Or if Isis gets control of all Iraq?
7. What part will the Sunni vs Shia war play in the already turbulent Middle East?
David Fisher PIMCO – a huge US bond fund manager
David believes that the US will increase interest rates this year by about 0.5%, not very much, but enough to strengthen the USD.
Tim Farrelly an Australian portfolio construction consultant
According to Tim, worldwide low interest rates are not a temporary phenomenon, but here to stay, and investors must adapt accordingly.
Michael Reddell - ex RBNZ
Auckland’s precarious house prices are the result of successive government’s weak policies, RMA’s restrictions on land, and relaxed immigration. However he didn’t seem to have any answers (but other countries seem to, and are acting on them).
Is this a case of politicians thinking “meddle with property, lose elections?”
What about Oil Prices?
Lower oil prices will add 1% to world growth, rather like a global tax cut.
And Iran will soon kowtow to the world on its nuclear policy (whilst making huge efforts to save face) and start exporting oil again soon – more oil, lower prices.
Is NZ a rock star economy ?
Two economists discussed NZ and our mediocre growth rate, and concluded we are not.
How do I untangle all this “noise? ”
I go home and I mull it all over ( I do every day anyway);
Do the asset allocations we buy from Morningstar make sense? Yes.
Do the funds we use have the right corporate culture? A hard one to quantify, but for the most part, yes.
“If in doubt, do half” – works well in so many ways, so are we using it? Yes.
Are we diversifying widely? Yes.
Are we letting the “noise” distract us? No.
Are we remaining disciplined and rebalancing whenever necessary? Yes.
Supplied by Alan Clarke, AFA 26532, financial & retirement adviser, & author.
His second book “The Great NZ Work, Money & Retirement Puzzle” is now available