After the US falls, the local market started lower, and continues. The local fear index has shot up to levels not see since February 2018.
The ASX financials index is the lowest its been since March 2016, when it fell briefly to 5,466. The financials continue to under-perform the market. Perhaps today’s bank CEO evidence did not help!
The ASX 100 is down 2.37% at the moment, still well above the 4,040 level it reached in February 2016.
The Aussie is up a little.
The Gold spot to Aussie is up.
Mr. North,
– I want to post a comment in response to your recent video with Mr. Harry Dent. I still haven’t figured out how to post a comment on your YouTube channel.
– Demographic developments are a VERY powerful force driving an economy. See the work of Harry Dent. But Dent is too eager to squeeze all economic developments into his demographic model. A good example is Japan. In the 2nd half of the 1980s Japan saw economic growth of 3, 4, 5 (and 6 ??) %. And Japan had a housing bubble. To keep housing/mortgages affordable for japanese families (japanese) banks started to issue 90 year mortgages. Truly insane.
– Japanese companies thought that the japanese economy would continue to show high growth numbers deep into the 1990s and had positioned themselves appropriately (read: lots of leverage) that they were able to benefit from these high growth rates. But instead, 2 large customers (Europe and North America) went into a recession in the early 1990s. In reality, the japanese economy grew about 1% per year during the 1990s. The combination of these 3 things (1% growth, leverage and recessions) meant that profitability of japanese companies collapsed starting in say 1990 and 1991. It triggered a recession in Japan as well. (Mr. Steve Keen published some very interesting charts on the topic “debt in Japan”. Perhaps you can do another video interview with him ?)
-Dent predicted in the 2nd half of the 1980s that – based on demographic developments – the japanese economy would weaken in/around 1994/1995/1996. Now Dent tried to fit/squeeze the japanese recession of 1990/1991 into his demographic model.
– Based on the story above I draw the conclusion that, yes, demographic developments are very powerful. But demographic developments are subordinate to financial developments. Australia may have (very) favourable demographic fundamentals (says Dent) but if the australian economy goes “down the drain” as a result of too much debt then (detrimental) financial developments will be MUCH more powerful than (beneficial) demographic developments on the trajectory of the australian economy. Just look what happened to Japan (See story above).
– On the topic of the sellof of Wednesday: looking at (US) interest rates (from Wednesday) I draw the conclusion that investors are still in a “buy the dip” mood. What thursday and friday will bring could be a different story.
Thanks – good point – I believe the debt bomb is a bigger risk than the demographic bomb. Good debate.