Reset the clocks

Markets, the dollar, oil and gold – they’re all rising as Australia enters a new phase. It’s not good news for SMEs.

Reset the clocks

In a recent blog I predicted that September 20 would be the first of two turning points for Australian small and medium businesses and would spell the beginning of a major reconstruction of Australia’s place in the world. Today is that day.

But gold is selling at record prices, oil is heading in the same direction and the ASX and the Dow Jones are rocketing to their highest level for four years.

The carry trade will have a field day buying and selling currencies at the same time as the Reserve Bank is hoping to avoid yet another interest rate rise here before the inevitably delayed election date has even been released by the PM.

At the same time, small and medium enterprises that have just begun to gain confidence in their capacity to manufacture and export from Australia are going to face increasing price and cost barriers to market entry and Australian dollars will bring in a flood of cheaper goods to make their position even harder to address.

Well, we’re at Terminus One. The dollar jumped nearly US3¢ overnight, the big end of town popped its corks and the outgoing head of Coles is looking at picking up a cool $30 million when investors approve its takeover by Wesfarmers.

Let me be specific: we are at the end of the boom times for the people who make nothing, sell money and know how to buy stocks so that they can make wealth out of other people’s misery when they buy long and sell us short.

Jim Rogers, who co-founded the Quantum Hedge Fund with George Soros in the 1970s who predicted the start of the global commodities rally in 1999, advises investors to sell US dollars and bonds. He says he’s short-selling shares of investment banks and expects them to fall further.

Marc Faber, publisher of the Gloom, Boom and Doom Report — https://www.gloomboomdoom.com/portalgbd/homegbd.cfm — told investors to bail out of US stocks a week before the 1987 Black Monday crash, according to his website. He also told investors to buy gold in 2001, before it more than doubled and says he is now into buying more gold as a hedge against inflation.

Faber says the interest rate cuts by Federal Reserve chairman Ben Bernanke will spur inflation, cause the US dollar to collapse and push the world’s largest economy into recession, investors. Faber regards the cut as “suicidal”.

If you go to Marshall Place Associates Consumer Confidence Monitor, you will see that there are very contradictory expectations from both consumers and business around the globe at present, if the reports of rises and falls in consumer and business confidence are to be believed.

The better than 80% track record between confidence levels and subsequent spending patterns over two decades lends credence to the view that Asia is booming. European business and consumer confidence probably fell for a second month in July as the euros appreciation and higher oil prices threatened to curb economic growth, a survey of economists shows.

Australia is at its peak and Bernanke is bailing out the US with considerable variation between its states’ levels of consumer and business confidence.

A survey of economists published in Murdoch’s Wall Street Journal, (which may decide to give up $40 million in revenue to get people to take up free subscriptions) before the Fed intervention put the risks of a US recession at 36% up from 28% a month earlier.

They are worried that the credit crunch set off by the housing finance crisis, will hold back consumer spending, business investment and corporate profits for those who actually make things and don’t just expect the Fed to bail out the losers.

Which brings us to Terminus Two: The mid-October Chinese reconstruction to slow down its growth prior to the 2008 Olympics to improve is domestic environment and address long-term growth issues.

We can expect that there will be quite dramatic shifts in the average age of the Chinese leadership and the bringing into central government of a large number of very competent younger regional administrators who will be less inclined to bail out the ailing US economy.

Watch that space and keep up the hunt for overseas markets that need your drive and enthusiasm in the face of all this.

To read more Colin Benjamin blogs, click here.