John Linton
I am, at worst, a phlegmatic sort of person in the face of depressing predictions still retaining some vestiges of over confidence/arrogance that irrespective of what happens I will be able to find a way through whatever mess engulfs everyone else around me but I have to say when the "D" word is used by a relatively conservative and competent commentator as in this statement about the real state of the US economy:
"We are seeing the deepest housing deflation since the
Great Depression and a massive unwind of the largest credit binge ever, and fiscal and monetary policies are more limited in their ability to respond than earlier this decade. Not good news for the economy or the equity market,"
I nearly spilled my coffee. The article can be found here:
http://news.smh.com.au/shares-us-dollar-tumble-on-economy-woes/20080304-1wo6.html
Now I am not so stupid as to believe that I have any kind of economic grasp on either world's or Australia's economic movements or directions (I have little enough grasp on our household's economics most of the time) but I can get a general impression by reading quite widely and testing what I read against my quite significant previous experiences.
Among the many positive implications of the March 1st bill run was one quite significant negative - that was the level of credit card defaults which set a new record and were almost 30% higher than in the February bill run which itself was a new 'record'. One of the very first indications of 'economic problems' is people running out of credit with credit card defaults on what, for many people are quite important monthly expenditures, being the earliest warning sign. I will be looking at the defaults on payments via direct debit which won't be known until today to see if that trend is continued - direct debit payments have a much lower level of default than credit card payments by a factor of 5.
As I said - I'm not an 'alarmist' (in any sense of that word) neither am I a person who accepts what he reads with anything but a very wary eye for exaggeration or polemics. It's getting hard to escape the feeling that things, economically, for a significant number of people in Australia aren't going to be as good in 2008 as they were in 2007.
Worse, we have a totally inexperienced government whose contribution to addressing that situation (if in fact there is anything an Australian government can do) is, on current indications, going to make things worse with absolutely no positive moves or contributions and, based on the ridiculous statements by Crazy Kev and Dopey Swan to date will be content to sit back and take their fat salaries and continue to say "it's all the previous government's fault - what can we do or be responsible for?".
(someone should tell them "You're the government - stupid - you're expected to deal with whatever eventuates - not try and explain why you can't).
Leaving that aside - the 'micro signal' (the record credit card defaults) have to be 'listened to' even if the senior Merrill Lynch economist can be ignored as an alarmist quoted by a newspaper who wanted to be the first to have a meaningful use of the "D" word now that the "R" word is so passe.
Exetel have been reducing our financial exposures from the morning after Australia became saddled with a Labor government and my view was things would become very difficult very quickly. Irrespective of what now happens I believe small companies like Exetel are going to find it extremely difficult over the coming 12 - 18 months and I'm unsure how to deal with many of the decisions that need to be made.
Obviously the easiest, and now clearly absolutely correct, decision was to abandon any massive infrastructure investment which we did, formally, at the beginning of last month. I would hate to have that burden right now.
It makes the decision to invest nearly $A3 million in buying office space a difficult call - it's a sensible medium term financial decision that will reduce data centre costs within two years but it's a major financial 'unknown' in terms of "never buy real estate at the top of the market" - my completely uninformed view is that CBD property prices are, right now, as high as they are going to go for a long while to come.
There has to be a better way to start the day.