Whining about the Swine

A couple in Mexico City Photo: The Guardian (UK)

A couple in Mexico City Photo: The Guardian (UK)

The media has been going crazy with week with reports that the Swine Flu has hit Australia. The “pandemic” has been front page news of the Sydney Morning Herald two days in a row, as well as international papers. While it is no doubt that the flu has been very lethal in Mexico, with over 90 deaths, I don’t think it has quite reached the “pandemic” status in Australia that media representations are implying.

I read an article in the Sydney Morning Herald yesterday that said the Swine Flu was going to further push the economy into recession.  The SMH reported that Crude Oil stocks had fallen alot this week from the concern that the flu breakout would curtain air travel. It is a possibility that the Swine flu could affect the economy but I think it is a bit too soon for the media to be making these predicitons – it only creates more worry and concern for us!

An article in Time made me feel a lot more confident when they agreed that the media was overexaggerating the effects of the swine flu on the economy.

The odds that tens of thousands of people will die from the flu are low. Advances in medicine and public health policy have made a big difference in the ability to monitor emerging serious illnesses. The fact that the new disease seems not to be terribly virulent outside of Mexico is another factor that supports the opinion that this will not be a major epidemic. However, in the minds of some analysts, the world can still look forward to trillions of dollars in financial losses and an economic depression.

Yep another trillion dollars down the drain. I understand it is the media responsibility to report on the outbreak of the Swine flu – which has had one or two confirmed cases in Australia – but I think at this stage our economy will remain in relatively the same situation based on other factors.

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Published in: on April 28, 2009 at 9:56 am  Comments (1)  

Is Margin Lending still a safe bet?

I read a great article in the IFA – Magazine for Independant Financial Advisors – Has Margin Lending Gone too Far?

The article discusses how margin lending works and the pros and cons of it as a true wealth building strategy. At this point in time, with the economy and shares in recession, it’s probably not a great idea to add margin lending to your financial portfolio, however there are benefits of it if it is handled properly and monitoring closely by yourself and your financial advisors. This article gives varied opinions from financial advisors on the risks of margin lending, including interviews with Suncorp and the Professional Investment Services directors. 

Take a look at this article before you totally throw away the idea of margin lending after the Storm Financial fiasco. But ensure you recieve advise from a totally trustworthy source and you are aware of the risks it involves.

You can find this article in the March 02-08 / 2009 issue, or if you are a member of IFA you can access it online at www.ifa.com.au

Published in: on April 22, 2009 at 9:37 am  Leave a Comment  

Hold onto your jobs – here comes more cutbacks

Financial Services company AXA has announced they will be slashing up to 120 jobs this month, in an effort to cut down on costs as the meltdown in global markets continue to affect their wealth management industry. The Age said that mostly operational roles were expected to be cut and the cuts are most likely to be made in Melbourne where the company’s head office is located.

The planned shake-up, understood to have been announced to staff this morning, follows around 90 positions – mostly among contractors – lost across AXA’s Australian operations late last year.

In Feburary AXA Chief Executive warned shareholders to brace themelves for another tough year as more than $700 million was wiped from it’s investment portfolio.

All we seem to keep hearing is numbers upon numbers of money. I find it hard to actually comprehend how much $700 million dollars is.

PMP also announced it will cut 67 permanent jobs at it’s printing centre in Melbourne as the recession slows the demand for printing. The Sydney Morning Herald said the announcement comes only 2 months after the company closed 2 presses in Adelaide and Brisbane to eliminate 76 jobs and remove some of it’s middle management.

But the company also warned its operating earnings would come in worse than previously forecast and fall below the $33.5 million reached in the first half, which means it is heading for a full-year slump in operating earnings of more than 21%.

With the unemployment rate getting higher and higher, and companies laying off workers left, right and centre, it’s any wonder how they can afford all these redundancy payments? The media has been critical of companies such as Qantas for making job cutbacks but who isn’t making necessary cutbacks these days? It seems most businesses are needing to, which is why the unemployment rate is so high, but why are these companies taking all the flack?

Published in: on April 21, 2009 at 8:19 am  Leave a Comment  

RBA Governor confirms Australia is in Recession

In a very predictable announcement today the Reserve Bank formally decalred that Australia has joined it’s global peers in an economic recession. The Australian said the candid admission by RBA Governor Glenn Stevens matched a similar message from Kevin Rudd and Treasurer Wayne Swan who both signalled this week that Australia was on track for it’s first recession since the early 1990s.

“Whether or not the next GDP (gross domestic product) statistic, due in early June, shows another decline, I think the reasonable person, looking at all the information available now, would come to the conclusion that the Australian economy, too, is in recession,” Mr Stevens said.

This article was only printed by The Australian today, although The Age reported on the admission at the beginning of April. The Age gave a much gloomier review of Treasurer Wayne Swan’s speech, saying that Australia had taken the first of two quarters of negative growth commonly taken to define a recession at the end of last year.

Treasurer Wayne Swan said the forecasts underlined “just how severe this global recession has become”. 

“The world economy is in the midst of its deepest and most severe recession in our lifetimes, and Australia will feel the consequences,” he said.

The Reserve Bank had been predicting a positive growth up until Feburary this year so this is the first announcement of recession from any RBA official.

The Sydney Morning Herald also reported today that Australian shares suffered their biggest fall in six weeks after US stocks plummeted: a result of the Bank of America’s earning reports. The Age confirmed this yesterday describing NAB’s estimation that the big four banks would be unable to refinance $190 billion dollars of commercial property debt without the help of the state-created “RuddBank.”

From all the other media attention I kind of figured we were already in an economic recession – but perhaps the RBA governer didn’t want to worry everyone until it was fully confirmed.

Published in: on April 21, 2009 at 7:59 am  Leave a Comment  

Bill O’Reilly and the American Economy

I think you might find this video clip quite interesting.

Bill O’Reilly conducted this interview in September 2008, and he looks at one reason why the American Economy has fallen into recession. It’s a very debateable reason but I think it does need to be considered – are our overextended bank loans and credit card debts responsible ? O’Reilly has a habit of really laying into his interviewees and this is no different. While he may cross a few lines his argument is justifiable and worth our attention.

Let me know what you think of O’Reilly’s video.

Published in: on April 20, 2009 at 6:41 am  Leave a Comment  

Watch out for the Storm!

Storm Financial Office Photo: ABC

Storm Financial Office Photo: ABC

The one thing I’m grateful for this year: not getting advise from Storm Financial.

With the biggest financial collapse in Australian history Storm Financial have suffered a collective loss of $3 billion! Yes that’s correct – 3  billion dollars! I know the economic recession is affecting financial instituions around the world but I don’t think that’s the real reason this company went under so easily.

The Townsville Bulliten reported that fraud and criminal behaviour could be uncovered in an investigation into Storm Financial with failures occuring not only with Storm’s financial model but with also with their regulation and behaviour. Out of 130 staff only 10 are FPA members! And now several of the firm’s advisors are back in business employed by Infocus money management. Storm’s founder, Emmanuel Cassimatis’ employment history is even more interesting. The Sydney Morning Herald reports:

And while it’s been regularly mentioned that Cassimatis’ worked for MLC before setting up Storm, what’s not reported is that MLC parted ways with him after having trouble with Cassimatis over-gearing clients who could not reasonably be expected to be able to service their loans. Other advisers dumped by MLC ended up in the Storm stable.  

SMH also says that Storm was ripping ridiculous fees out of gullible clients, giving dangerous advise and double-dipping on comissions. So who is really to blame? As SMH puts it – the inexperienced and financially uneducated clients? Or the manipulative advisors?

The ABC News gives us a little insight into how the clients are feeling at the moment. One couple has been left high and dry owing $370,000 on their house and another $10,000 on a margin loan.

The bank’s blaming Storm and Storm is blaming the banks and somebody is not telling the truth and hopefully ASIC [the Australian Securities and Investments Commission] will find out the truth.

 The fact that the ASIC is conducting the inquiry doesn’t inspire much confidence – considering they investigated Storm last year and found nothing wrong! How very ironic.

Published in: on April 20, 2009 at 6:18 am  Leave a Comment  

Union’s Steel Plan: closure of Port Kembla’s steel mill

Port Kembla's Steel Mill

Port Kembla's Steel Mill Photo: Illawarra Mercury

The head of the Australian workers mill has warned that steel mills across the globe may be closed down, including the mill located at Port Kembla. The Illawarra Mercury described the unions 21st century steel plan as a federal intervention which highlighted the serious position the steel industry is in.

“Australia needs to urgently adopt a 21st century Steel Plan. We need a stratagem to save a key industry in the face of the global economic crisis,” [AWU National Secretary Paul Howes] said.

Earlier this month BlueScope chief executive Noel Cornish said the viability of the Port Kembla steelworks – along with the 12,000 jobs it supports – would be under threat if the scheme took effect in its present form.

Despite Howes’ comments, the Mercury also reported that the announcement was a just presumption and that no final decision was going to be made any time soon. I just heard the 12,000 workers take a sigh of relief.

Published in: on April 15, 2009 at 10:50 am  Leave a Comment  

Malaysia Airlines – 80% discount off fares

Qantas is clearly not the only airline suffering reduced travel sales – suffering a 71% decline in profit since 2008!

The Australian reported that the airline will be slashing up to 80% off selected ticket prices in a hope to boost domestic and international passenger traffic. Managing director Idris Jala said radical action was needed to survive in the current economic climate.

“I am very convinced that must be the way to survive in this environment – to tailor (the products) based on the size of the customers’ wallet.”

All airlines across the globe are being severly affected by the travel drought with some of the lowest prices available for passengers in a long time. Despite the lowerest costs ,I seriously doubt the average person can afford to travel right now, let alone take a holiday from their jobs!

Published in: on April 15, 2009 at 10:36 am  Leave a Comment  

Tourist influx good for local economy

Dubbo has a suprising busy weekend over Easter, as tourists travelled into the city rewarding businesses with increased trading. The Daily Liberal reported strong attendance numbers at the Western Plains zoo, with ticket sales up to 30% more than the previous year.

Dubbo City Tourism Association noted “most motels” were full across Friday, Saturday and into Sunday, and that this Easter was a good time for “employers and employees alike” with increased patronage requiring additional labour.

Rain in the area over the weekend was also good for farmers, who have been suffering under the central west drought for the past few years.

Published in: on April 14, 2009 at 4:00 am  Leave a Comment  

Qantas slashes 1750 jobs

Alan Joyce Photo: SMH

Alan Joyce

We knew it was coming!

Qantas has formally announced that they will be cutting 1750 jobs, grounding 10 aircrafts and defering the delivery of jumbo A380 aircrafts. The Sydney Morning Herald reported on the announcement, saying that the Qantas airline was suffering the most of all Australian airlines, reducing fares by up to 50%

“Market conditions have deteriorated, especially in our international business,” [Alan Joyce] said today. “We are experiencing significantly lower demand, particularly in premium classes, and considerable price pressures with extensive sales and discounting by all carriers.”

The Australian Financial Review also reported that Qantas would be reviewing their 2008/2009 full year profit which is likely to be downward from $500 million to $200 or $100 million.

I kind of feel for the airline at the moment; I hope Joyce is able to pull the airline out of the hole the recession is pushing them into. They have been receiving quite  a lot of negative media attention over the past year and while it is unfortunate that they will be making all these cutbacks I think the media needs to remind the public that a majority of companies are making these sorts of necessary cutbacks. Qantas just seems to be in the line of fire.

Published in: on April 14, 2009 at 3:44 am  Leave a Comment