Saturday, March 28. 2009An Ever Growing Consensus Insists......John Linton ......that times will get very tough in Australia over the coming months: http://business.smh.com.au/business/difficult-times-ahead-warns-cba-chief-20090327-9e50.html and any hope for Australia of a "China lead recovery" is dispelled by almost every economist within or outside that country with this 'info piece': http://online.wsj.com/article/SB123810562770552071.html indicating that our 'government's' claims of export orders to the PRC "protecting Australia" are almost certainly as nonsensical as their other stupid statements..... ......but Exetel's order intakes in March are already at record levels and are amost 40% up on a very good January and more than 30% up on an even better February....so there are very mixed signals.......perhaps we are still in the "phony recession" with the real impact still somewhere in the future? I have absolutely no knowledge or even remotely enough intellectual ability to properly undersand what is reported in the more sensible and thoughtful sections of the international financial press - except that there are no 'good news' stories from either the USA or the EU - at least none that I can find. The Australian business and financial press is, as far as I can see, almost worthless in general understanding of the future financial situation in this country and their 'reporting' of even current 'facts' appears to almost always be distorted to the point that actual events aren't actually reported factually followed by sensible analysis of the FACTS but are always twisted to follow some unseen political or other agenda. So Exetel is still following the view that business life is going to become very hard 'real soon now' and that caution and conservatism are the only ways to make current and future decisions. What continues to puzzle me is that there is absolutely no evidence of that in our minute by minute, daily, weekly, monthly and now quarterly 'figures'. I must be missing something but, for the life of me, I can't figure out what is happening that seems to be 'denying' the overall consensus of what we should be seeing. Maybe we have our own 'personal Chinese economy' equivalent that really is protecting us from the general world wide business down turn? I keep reading into what 'people who know' appear to be really 'biting their tongue' about not saying which appears to be that the current economic trends are pointing to a 'depression' rather than a 'deep recession' and that all the talk about 'reforming the world's financial systems' is just obfuscation for no-one having a clue what went wrong and certainly less than no clue about how to recover from whatever deep financial trouble the developed world is now in. Problems of this magnitude don't end with 'financial troubles' though, because lack of income brings far more serious problems than some companies ceasing to exist and the 'sociall' consequences of not being able to legitimately keep yourself and those for whom you are responsible fed and clothed and schooled leads to truly dire consequences. The crass stupidity of "the bike gang wars" and the even more stupid "Lebanese immigrant drug wars" that have dominated Sydney's media for the past 10 or so days are far more frightening than the financial press. The concepts of the acceptance by the NSW Police, the NSW Government (and even the NSW Public) that its "OK" for criminals to act in the ways they do to "control the drug traffic in NSW" is astonishing. Perhaps the UK press is correct and it isn't the financial system that is broken but the financial problems now being experienced are simply an aspect of the break down of 'civilised western societies' where disregard for the laws and respect for other people's lives, health and property are a quaint old fashioned notion of the past. http://www.timesonline.co.uk/tol/news/uk/crime/article5988491.ece I have some personal experiences of the last three Australian 'recessions' and they were extremely unpleasant and the scars (mental rather than physical) the early 1990s inflicted on me personally haven't given any indication of fading with the passage of time. The 2001/2 dot.com bust was mild by comparison though many people I knew then and still keep in touch with today never recovered their desire to continue taking the risks of running their own businesses and they are very different people today than they were up to that time. I'm sure that many other people who lost their incomes and perhaps their homes in previous recessions were equally emotionally affected and may well also have never returned to being the people they could have been. It's going to be a difficult weekend, for me, as there are so many 'directional decisions' we need to make to be able to form a clear view so that we can make a range of subsequent decisions across the breadth of our operations that have real ramifications on how we conduct our small business for the balance of this calendar year and neither endanger ourselves nor any of the entities and people that depend, in some greater or lesser ways, on those decisions being made correctly. Perhaps some 'head buried in the sand' attitudes will be a preferred way of not looking at anything for too long or in too great a depth? Trackbacks
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It's clear to most people that the economy is going to get worse over the coming year. It's also clear it's happening very slowly, just like in the USA (they have been going backwards for nearing 2 years).
However this recession is different from any other and no one really has a clue in the outcome. Like you John I work on the basis it will get worse but keep planing for better times. After all we are along way from being in a depression. Comment (1)
I have a crazy theory that goes like this:
In the first few months of 2008, the price of oil went sky high $150 per barrel. So people cut down on their transport, and food prices increased (since oil is used in the production, fertilisation and transportation of food). My personal observation is that this explains why caltex did not make a huge profit, i.e: no one wanted to pay a $1.50 per litre at the pump and did everything possible to reduce that figure. The end result is that every asset except for gold had to fall in value for the price of oil to fall. Peak oil, i think we are in the middle of it. Now, John, your part of the solution to this problem, people are started to need to use the internet, rather than simply wanting to use the internet. Since you provide cheaper internet than everyone else, and people that normally would not want the internet are now forced to use broadband to survive, your in the sweet spot for these new customers that need the best value internet. I think i lost my message in the end, sorry. Comment (1)
I haven't experienced any recessions, but I keep telling myself that I'm in a relatively stable enough job that I'm extending myself to put myself into more debt to battle-ax my property.
Now reading that you believe a depression is around the corner isn't good. But you keep saying you don't know anything Here in WA I don't see signs that the economy is seriously suffering. The resturants, coffee houses, and retail shops are still pretty busy. My friend in the Treasury dept keeps telling me every time they do the revenue estimates, it is always going down. Of course, not as bad as NSW, QLD, or VIC which are all if reports are to be believed in the poo. Are there any trends from which states your growth is mainly coming from? From my personal perspective, it's a backwards recession, interest rates so low and builders apparently twiddling their thumbs. Seems like a golden time to take out a construction mortgage and build an investment home. What puzzles me is that Australians in the last year have decided that saving is the new black. That's great and all, but interest rates are low so it's hardly worth it unless you have a debt to pay. When I studied economics it was said that recession lead to high interest rates, people reduce over consumption and debt. But this time the interest rates are backwards. I don't understand, but it seems to be a benefit to me. Anyway, maybe I should start my own blog instead of commenting on yours. Comments (2)
The shops in Sydney are pretty empty and the better restaurants (the few I go to) have very few people in them.
The few people I know who run their own businesses (or manage multi-national companies) say business is down and are laying of personnel. You're right - if you are sure (and I mean certain) that your job future is safe then today's very low interest rates and low building pricing is an opportunity (we bought an office floor for those reasons). I am very worried about that 'gamble' though. Comments (2)
I think I can provide a theory that can explain why Exetel seems to be defying the recession woes. As you might’ve heard when the downturn first began to really bite (ie when Lehman Brothers went belly up) there were news reports that showed that McDonalds and Pizza Hut were practically booming as people were cutting down on more expensive eating out habits and simply going with the cheaper alternatives. This is one good example that demonstrates the fact that not every business suffers in a recession/downturn. In a recession there is a reduction in the ‘aggregate demand’ but this does not, by any means, imply that demand goes down by the same amount or percentage across every sector/business. My little knowledge tells me that almost without fail there are winners during recessions, even depressions although overall the economy might be hurting. Also during harder economic times people tend to have more interest in their spending choices, therefore make more conservative and sometimes cleverer or better informed decisions. Anyone who simply takes a few minutes to search and compare the internet prices would find out that they can easily do better than surrendering to Telstra’s monopolistic traps (prices + contracts). Furthermore, people go through their spending items (bills etc) and try to find better deals which would naturally increase interest in the companies that offer better value products. In summary, people start spending smarter because they feel the need. Exetel being a better value provider could be benefiting from this trend.
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