OUR FUTURE WORLD….. - Hillross · Bail outs in Europe ... Caterpillar UK: GlaxoSmithKline ... •...
Transcript of OUR FUTURE WORLD….. - Hillross · Bail outs in Europe ... Caterpillar UK: GlaxoSmithKline ... •...
OUR FUTURE WORLD…..
GLOBAL OPPORTUNITIES
27 March 2014
Peter Leggett Managing Director
Arrow Wealth Managementwww.arrowwealth.com.au
AGENDA
• Global tensions & issues
• Recent happenings
• Things to know about
• Mega trends
• Current views
• Global changes
• Global opportunities
• New reality
• Recapping basic principles of investing
EXPECT
......... the unexpected
“Prediction is very difficult especially
if it is about the future Niels Bohr
GLOBAL TENSIONS
GEO POLITICAL WORLD
• Ukraine - “Black Swan” events
• Paris - Stockholm – Madrid – Istanbul – this is not Greece!
• Middle East – more to come
• China/Japan/India/US
• Get used to it!
• As much about resources (personal and economic)as it is about
“I don’t like you”
GLOBAL TENSIONS
• Bail outs in Europe
Spain and Slovenia - in trouble
Trouble on the streets
• Currency devaluations. Currency war again creeping back
• Minimal or zero interest rates – printing money – QE
• Russian recession
• China – slowing down, shadow banking/credit crunch
• The “age of entitlements” is gone! - Joe Hockey
ECONOMIC AND FINANCIAL
GLOBAL ISSUES
• Inflation - “the bull in the paddock”
• Commodities – Hard (Ind. & Prec.), Soft, Oil
• China
- Changing from property & infrastructure to domestic consumption,
personal services and technology
- The “decade of the Consumer”, away from the “decade of
Commodities”
- Shrinking (and expensive!) URBAN workforce has BIG implications
- “Lewis Turning Point” Rapidly aging population “looming demographic
changes are large, irreversible, and inevitable in the medium term” – (IMF Jan 2013)
- Labour shortage of 137M by 2030! (IMF)
ECONOMIC AND FINANCIAL
RECENT HAPPENINGS
• All time highs in US share market
• Energy Revolution – US Oil & Shale Gas revolution
• Currency fluctuations – Turkey, Brazil, US$,
• Gold & Silver and Oil prices
• Europe – healing is underway, inflation is weak and political
uncertainty remains
• Chinese “shadow banking” – some 2nd/3rd tier banks in trouble
• Australian business investing has “fallen off a cliff” (Schroders)
• Australian unemployment – highest in over 2 years & climbing
• Australian housing prices high driven by SMSF & Asian demand
THINGS TO KNOW ABOUT
• 2015 – US to become the world’s #1 Oil producing nation
• Japan’s population could halve by 2050….aging population
• European Unemployment – let’s hear some drastic numbers!
• Gold bubble has burst – biggest one day fall since Feb 1983 >14%
• US Housing starts – highest level since June 2008. YoY up 47%
• Chinese wages increase – 19%pa (2005-2010) - 3X Indonesia & Vietnam
• Asian real wages growth – 7%pa (2000-2008)
• Developed economies wages – 0.5% to 0.9% (2000-2008)
• US real wages growth – negative 2% (2005-2012)
FACTS, FIGURES, STATISTICS
THINGS TO KNOW ABOUT
• China - is our largest Export market – by a long way
• In 10 years it has increased by 860%
• Australia's largest export markets China 27% Japan 17%, South Korea 7%, India 6%
• 10 of our top 12 export markets are in Asia
• 50% of our total export to China are in just Iron Ore alone –RISK
• Impact on Australian jobs – moving from “exploration phase to
operation phase”
• Top 10 mining/resource projects – 11,770 jobs exploration to 3,050 in operation phase
FACTS, FIGURES, STATISTICS
WHY CHINA & ASIA?
GLOBAL PERSPECTIVES
• Broaden your investment horizons both globally and across
asset classes
• Understand the pace of change in technology, particularly mobile
TECHNOLOGY & DIGITAL
• “Software is eating the world” Marc Andreessen
• Google, Pinterest, Skype, Amazon, FB
• “Kickstarter” – see Pebble Watch $10.2m from 70k people. Obj. was $100k!
• 81% of users of Top 10 sites are ex USA
• 8% YoY users growth – driven by EM’s
• Smart Phone/Tablet vs. Desktop
• World Population - 7.13B, Internet Users – 2.4B (34% only)
OPPORTUNITIES –
THINGS ARE CHANGINGMicrosoft
“We are no longer a software company but a devices and services company that
develops its own “end to end” experiences for consumers” Steve Ballmer (CFO)
• “Onshoring” is a good example of how companies in developed economies are
keeping themselves relevant by adapting to competitive shifts and tapping into the
potential that technological innovation, automation, changes to energy markets (shale
gas revolution) and superior branding can offer. eg: USA: Apple, GE, Google,
Caterpillar UK: GlaxoSmithKline
• “87% of economic growth is driven by technical change over time”
• This includes invention, innovation, final use of new products
• “Creative destruction” – old products and firms replaced by new eg: Music
• Going Robotic rather than cheaper labour – automation set to boom
What is Google doing?
Some winners – Siemens, GE, Mitsubishi Electric, BASF, Dassault Systems
CURRENT VIEWS
Global macro conditions are favourable for equities. Central
banks are STILL printing a significant amount of money, this
is being invested in risk assets
In Australia we believe that the following will support equity
prices for at least the shorter term: But be very careful L/T!• Low interest rates
• Lowish unemployment
• Relatively stable residential property prices
There remains the risk of a global shock that could derail this
view. “Black Swan events”
Investors with a low risk tolerance should look at protection
strategies if capital preservation is important
t.
CURRENT VIEWS - AUSTRALIA
Australian economy is undergoing radical change
Believe that the following will support the economy for a while• Consumption story – 2/3rds of our GDP
• Population Growth – one of fastest in the world. 4x OECD in next 12 years
• Interest rates cuts - have and will spur on spending
• Income from mining sector to hold up ok - low cost producer
We would be hampered IF the world economy experienced
another economic shock – eg debt crisis in Europe or “Black Swan” event
The recent lower currency will help miners, tourism & other
exporters but work against imports
t.
NEW REALITY GLOBAL ECONOMY
• Growth will largely be driven by EM’s & consumption story
• Major Economies will remain subdued for some time
longer – possibly US the exception?
• Solid investment returns in the “NR” will come from
companies not postcodes
• Identify Industries & companies within that will benefit
from trends & themes and DE & EM growth regardless of
location
• Watch for the US Large Company Balance Sheet affect
NEW REALITY GLOBAL ECONOMY
• Economic Trends – the world is rapidly changing
• Energy
• Health concerns
• Environmental challenges – global warming
• Global food issues
• New technologies
• Infrastructure development
• Identifying and understanding these challenges provide
investment opportunities
• Simply following trends can be dangerous
• Identify industries & companies to benefit, not just the trend
itself
RECAP
- Invest for the future, not the past
- Diversification does work
- Past way of investing will not work in
the future – be very clear about that!
- Look for income and total returns
- Global opportunities everywhere
you look
- Global trends and themes
COMPLEXITY
Simple to understand ...hard to define
“Advice is delivered to clients who are not where they
want to be financially, and are not too sure
what they need to do to get there”
Financial Freedom is the objective ...
Peace of Mind the outcome
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ADVICE & SERVICE
HELPING YOU …..
align your financial choices with your most important goals and
deeply held values
GIVING YOU …..
a level of confidence that no matter what happens in the
markets, the economy or world, you will achieve your goals
TAKING CARE …..
of your investments so you can enjoy life without fear or worry
YOUR FINANCIAL FREEDOM …..
…Peace of Mind
DISCLAIMER
This information has been prepared without taking into account your particular
financial situation. Before making an investment decision based on this
advice, you should assess your own position, and if appropriate, seek the
assistance of any of our financial advisers. This presentation does not contain
and is not to be taken as containing any securities advice or securities
recommendation. Furthermore, it is not intended that it be relied on by
recipients for the purpose of making investment decisions. Arrow Wealth
Management does not give any warranty as to the accuracy, reliability or
completeness of information which is contained in this presentation. Except
in so far as liability under any statute cannot be excluded, Arrow Wealth
Management and its directors, employees and consultants do not accept any
liability for any error or omission in this presentation or for any resulting loss
or damage suffered by the recipient or any other person.
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