The ASX S&P 200 appears to be moving sideways, the U.S. economy is a mess and overseas tourists are not flocking “Down Under” like they once did. What does all this mean and will Australia win the Ashes series?
There are two “crazy” seasons when it comes to the financial markets. One is around the end of the year when fund managers, investors etc. try to lock in profits,write off losses or polish up their portfolios so their calendar year performance figures look good, the other is during the transition from one financial year to another when the same sort of performance massaging occurs.
Therefore as I mentioned in A technical look at ASX All Ordinaries Index the stock market can tend to be pretty flat this time of year and so far this seems to be the case this year.
It might seem a lot is happening but if you look at the chart for the S&P/ASX 200 we have been moving basically sideways for a few weeks in the range of about 3800 – 4000. I would guess it will be another few weeks before we work out if another rally will take shape or if we could possibly test the lows of March. I tend to think the market will rally again but then again who really knows?
S&P/ASX 200 Closing Prices Chart
Recently our market has been suppressed by the falls on Wall Street and the continued stream of pretty poor U.S. economic data. But at some point people will become comfortable with the fact that the U.S. is not the only nation on the planet with an economy and that there are a lot of consumers outside the U.S.
The U.S economy has been over hyped for years and the U.S. consumer has been over spending buoyed by the belief that America was somehow a cut above every other nation. It isn’t, it has just had a lot of luck and good fortune.
In The U.S. auto industry bailout and some inconvenient truths. I highlighted how the United States pretty much got a decade or so head start over most major economies after World War 2. While other nations were rebuilding devastated cities and economies, Americans were enjoying a post war economic boom and using ex-Nazi scientists to develop rockets for moon missions.
President Obama is now doing a good job of trying to keep Americans convinced that the best years for the nation lie ahead them, but they probably don’t. What lies ahead for the U.S. is a big pile of debt that needs to be paid off and some painful lifestyle adjustments. Government services will be cut, taxes raised and slowly but surely the U.S. will have to start cutting back on military spending. Maybe time to stop blowing things up and then rebuilding them?
But life across the rest of the world will go on. A weaker U.S. will probably mean a stronger Europe, a more confident Russia and an Asia where more focus is put on nations working together as opposed to relying on U.S. leadership. The world is a big place, much bigger than the U.S. and so just because the U.S. economy is a basket case does not mean the rest of the world will be dragged down over the long term. Eventually the economies across the world will adjust to this new reality.
On a slight different topic I was bemused to read how various officials and economists explain the plunge in the number of tourists visiting Australia. The economists focused on the stronger Australian dollar and said Australia was becoming expensive for tourists while tourism officials suggested the decline in the global economy meant people has less money to spend on trips, or that swine flu has stopped travellers in their tracks.
All good reasons but they overlook one simple truth – Australia as a tourist destination is boring and does not always leave visitors with a favourable impression of the nation.
Years ago I transited through Cairns Airport and watched as dozens of Japanese tourists were subjected to some of the rudest customer service I have ever seen. Instead of a friendly smile and some appreciation that many Japanese may not be masters of English, I witnessed staff at a snack bar openly be quite rude and hostile towards the Japanese simply because of some language difficulties.
After I arrived in Sydney I thought about the whole Australian experience as if I were a visitor from another country. If Cairns left a bad impression on the Japanese than Sydney would have convinced them that Australia is somewhere you visit once, see the beach, hold a koala and never visit again.
The taxi rank at the international terminal sums up the city…it functions…barely, but on the global scale things it is not something you want to experience again. Yes I know all cities in Australia are not like Sydney but think about; is there anything terribly exciting about moving between Australian cities when you could travel the same distances in Europe and move between Rome and say Budapest?
I won’t even mention what a debacle it is trying to get through customs and quarantine at Sydney Airport…it all just makes me fear flying back to visit family and friends.
So what is my point? Well it is that Australian’s are becoming complacent and think that just because our nation is blessed with natural resources, unique animals and great beaches that this somehow makes us winners. Actually it doesn’t, it just makes us lucky and we are really pushing our luck recently.
Of course just like the U.S. our leaders want to convince everyone that all is going to be okay. Worried about billions of dollars in government debt? No problems they tell us, that will all be paid off in no time thanks to commodities exports. China will save us so there is not need for the nation to be innovative, work harder or create new industries.
Maybe I am being a little harsh, but I wonder how often we look at our our nation using the same critical eye as we cast over other countries. Are Australia’s best years yet to come? Or like the United State have we perhaps already peaked?
As for the Ashes series against England all I can say is I am worried with Binger and Stuart Clark both out of the Australian side for the First Test. Stock market routs I can handle, losing the cricket to the English would be too much to bear!