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Next Investment Wave NIW Take outs 02.09.2015

NIW take outs 02-09-2015:

China - Youth Unemployment - US - RBA interest rates - Australian dollar - Domestic Property - Property Bubble - Australian equities - International equities - Inflation charts

Dear investment surfers, thank you for attending the NIW discussion and for sharing your insights and viewpoints.

We look forward to see you again to surf the Next Investment Wave which we intend to run in abouts a month’s time.

I have summarised below some of my take outs which are a reflection of our discussions.

  • China: Is to continue experiencing high volatility which could trigger contagion across global markets and push the global economy into deeper troubles. The World Bank estimates that a 1 percentage-point decline in China’s growth shaves a half percentage-point off global growth.

  • Youth Unemployment: Remains to pose substantial risks to the Eurozone and globally. Spain 49.99%, Greece 49.7 %, Croatia 43.6%, Italy 42.7%, Portugal 32.6 % as at March 2015.

  • US: The Federal Open Market Committee is leaving open the possibility of raising the federal funds rate at its next meeting on Sept. 16-17, despite inflation that’s been running below the Fed’s target since April 2012.

  • RBA Interest rates: While it is likely for there to be the usual basis point increases and decreases here and there I gathered that most expectations were for rates to remain low in the foreseeable future meaning a few years ahead.

  • Australian dollar: Recapping my discussions it seemed that most of us expected for the dollar to stay around 0.70 before December end and were finding it very hard to predict its direction throughout 2016.

  • Domestic Property: There seems to be a significant amount of development initiatives underway which from a supply standpoint could reduce capital growth potential in specific areas yet population growth and Australia’s high living standards make it a very desirable living destination worldwide requiring global demand to be factored in and assessed when gauging the demand and supply impact over capita growth return opportunities.

  • Property Bubble: My impression was that due to the above factors a property bubble type of scenario was something that most of us did not consider to be the current state of the property market.

  • Australian equities: There seems to be appetite for high dividend yield paying stocks and while attractive dividends sound good in paper great caution is to be exercised as the competitive landscape and other fundamentals should not be disregarded.

  • International equities: Dividends from international equities would have gained from the Australian dollar depreciation through out 2015 yet an investment selection based on the potential decline of the Australian dollar by itself could make for a poor investment decision where a forex play on its own could be more appropriate.

Interesting information

The World Bank estimates that a 1 percentage-point decline in China’s growth shaves a half percentage-point off global growth.

That means if forecasters such as Lombard Street Research, whose projection for the year is more than 3 percentage points below Beijing’s official rate of 7%, are right, a Chinese nosedive would ax 1.5 percentage points off global growth.

With the IMF estimating global growth of 3.5% this year, the world economy can ill afford such a decline.

Inflation charts worth reviewing and great food for thought

We sincerely value your participation and would welcome your feedback and ideas. If there are any initiatives that you would like us to consider or contribute towards please get in touch.

You are most welcome to share your insights and take outs via the comment box below.

We look forward to see you at the Next Investment Wave.

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Carlos Mauleon

#ChinaYouthUnemploymentUSRBAinterestrat #NextInvestmentWave

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