Tougher Times Ahead

[Kimberley Scott]

March will be a black mounth, that is for sure. The rasoning behind this is that in Feb all companies disclose their profit/losses. The facts not the PR will emerge. It will get worse, much worse before it gets better. I wish everyone the best.

Scotty

[Dillz]

Totally agree with Dags (hopefully he doesn't see this)

Not pointing the finger at anyone in this thread in particular, but there is a difference between being cautious and running around screaming "we're all gonna die". The hysteria is just fueling the fire.

Unfortunately

When interest rates are at 17% and unemployment at 15% I might show concern.

Yeah its mainly building something which in today's market we could burn $200k easily on by the time its built, and that's in today's market, by the time it was done by years end it will most likely be even worse. When we bought the land it was a dream block for us and we marched full steam ahead into building, this was June 08. By October l started to feel uneasy about it all. My wife had been watching established homes and we noticed they stopped selling and the downward price pressure. Established homes are now much better value even taking into account the outrageous stamp duty payable.

There is a house we looked at yesterday that we would dearly love to buy but we need to sell the land first. It has been reduced 400k from what it listed at only months ago. The builder has over capitalised and completely missed the market trend. We couldn't build anything close to it for the money, so building is out of the question until the builders become more realistic, which they will as the order books thin.

House prices in this country are completely out of control and the Ponzi scheme as its dubbed by some, is starting to unravel.

GL in Perth mate, l think that place is going to face some real hard times and social problems in the coming years.

Cheers,

mondie

3 of our 4 sales last week sold above the top of the range one 15k above the top of the range...

[Mondie]

You can be as positive as you like but reality is reality. If you said Lehman was going to tip over 6 months ago you would have been lughed out of the room. All the positive thinking in the world won't fix this one. Governments need to take back control of the money supply and all that starting a toxic bank like they are talking about doing is bankrupt the goverments as they bail the grubby bankers out. I wonder if they would give me a few million if my business went down the gurgler from lies and bad management. I guess not.

Too right Doc, capitalism on the way up and socialism on the way down You and l wont get bailed out, we will just get to be part of the next generation of tax payers slugged to repay the losses of those bailed out by the government for being too greedy. market forces should be allowed to take their course not artificial pumping up by bailing out to keep prices high. Load of sh*t.

Hey, Mondie! Another Perth resident here. Just wondering, can you tell us what you think will happen to/in Perth in a bit more detail? I'm guessing with the mining boom being over, that you mean there will be a pretty high unemployment rate in Perth... Do you think the oil companies here will weather the recession?

Edit: Is anyone else having difficulties with the link that Mondie posted?

Hi rapid,

l think that forum link is down, they must not have paid their bill. ironic in a way Perth went up hard on the back of the boom and high paying jobs which are now disappearing, how bad it will be who can say other than it seems to get worse on a daily basis. The company l work for has a minor involvement in mining in Kalgoorlie and its amazing how hard and quickly that market has slowed, it was inconceivable not so long ago to those (such as myself) that were not really too focused on the bigger picture. You can go on the GHPC forum and search old posts and see the predictions of those who understood the fundamentals, they expected it. Smarter than l.

Apache in Perth have pulled back hard, the others have not changed their plans much (yet) but if Oil sinks then its inevitable.

what im unsure about Zap and can;t seem to find any decent info to back it up either way is how big the regression in the miner sector is going to be.

I have been in the mining game since 1997 and in 2000 it took me four months to find a job. The industry was very slow at the time. Are we going back to that or are we going beyond that? Every body is talking %'s of reduction in production and output but nobody seems to be comparing to pre boom level only levels from last year or the year before.

I personally stepped out of mining as the boom took off as I wasn't happy working with people with little or no experience. Since returning to mining (yes I must be stupid, I went back to mining AFTER the bubble had burst) I have noticed that now the boom is over the experienced people are slowly coming back and there is alot of jobs (I counted 120 adds on various job search site on the weekend, most where for multiple positions) avaliable for the right people now, not just the first person that fronts up.

What this all means I don't know, what I dont know is I have enough $'s saved up to pay my mortgage for quite awhile so all I can do I sit back and enjoy the ride.

l am finding the same in the Oil Industry, the guys with 1 years experience who have resumes longer than mine are the first laid off, as in all markets there is a flight to quality in a downturn and the labour market is no different. These people will find it very hard to stay in the Industry as they essentially have little expert skill to offer. So back they go to their pre boom average paying jobs, its possibly still not enough to support the lifestyle they thought would go on and on, so they start selling up some of their stuff....

Cheers,

mondie

[ronburgundy]

I work in accounting where we've had over the last few years a lack of quality labour. As a result there are people with jobs that quite frankly, have no business having those jobs!

In a boom there is a need for 'mediocre' people because basically there's more work than we can handle.

I don't think, where I work, there will be 'redundancies' per se, but I do think this state of play will perhaps provide the partners with the impetus they need to get rid of the lower performers shall we say.

[Mat]

GL in Perth mate, l think that place is going to face some real hard times and social problems in the coming years.

Ohh noes, Perth will get even more boring, quiet and the cities "entertainment" area's will be infested with morons... LOL

All I know is that this January has been our strongest January in 4 years (semi retail environment) and we are all due for a 4-6% payrise in the next week or two.

Gotta tighten the reigns on a few issues but nothing that good business management wont fix.

Its great for me though. Last year (maybe 12months back) I had a job or 2 on Seek. Had one girl come along who was useless (goodness knows how but she is now completed acadamy trainin with the cops) and another who was a crazy crazy girl who I fired after a couple of weeks.

In January one of our other locations had 2 or 3 jobs on seek after I pinched staff and they had over 100 ap's in less than 2 weeks. Now we can start sifting through the crap rather than "giving them a chance"

[hypnodoc]

WA WA Land will feel the pinch when the collapsed boom catches up and trickles down. You can value anything at what you like and ask any price but at the end of the day things are only worth as much as what somebody with money is prepared to pay for them. The Aus economy was artifically propped up a little, pre xmas, by mr Rudds $1000 per child gesture. Now when the PM goes on to say that things are going to get really tough, in real termsd that means really really really bloody fcuking tough. Our consumer economy is completely swamped by credit so it has been debt driven like the USA and UK. Now reality has come knocking at the door and things may still seem honky dory, but wait till March. The difference between this fall and the one in the 80s was they propped it up in the 80s with loads of artificial and borrowed money. Now there isn't any more to borrow cause most of the banks are bust. This came through today. I don't subscribe to this newsletter but I found it interesting. The world isn't going to end, but the party is on fire and the Govt and pundits are just turning up the music. Smart people are moving towards the fire exits.

U.S. recession knows no borders

by Tony Sagami

President Obama and the Democrat-controlled Congress are on a multi-trillion dollar spending spree to keep our economy from slowing even further.

Whether all that spending will revive our economy is yet to be seen. However, one thing is very clear —

Our recession is spreading across the Pacific Ocean to the booming Asian economies.

The United States has become a nation of consumers. And countries that make all the doodads, toys, clothes, and other consumer goods we can't seem to go without are seeing their economies slow to a snail's pace as we buy less and less.

The Chinese National Bureau of Statistics released their GDP data for 2008. And it turns out that the Chinese economy expanded by 6.8% in the last quarter of 2008 — the weakest quarterly year-over-year growth rate in seven years!

And for the year as a whole, the Chinese economy grew only 9%, way down from the 13% growth rate in 2007.

The reason for the slowdown is simple: Exports are way down ...

China's exports tumbled 2.8% in December, the most in nearly a decade. To put that in perspective, China enjoyed a 21.7% increase in exports during the fourth quarter of 2007. And for all of 2008, exports were up by just 17.2%, a huge drop from 25.7% in 2007.

I also pay a lot of attention to electrical output. That's because this statistic is an extremely accurate indicator of overall economic growth (or lack thereof). And in the fourth quarter China's electrical output was 6% below the same period in 2007.

Now, you may be telling yourself that a 6.8% economic growth rate is nothing to sneeze at. You're right — we'd do cartwheels for that type of economic growth in the U.S. — but the circumstances in China are very different.

You see, a population of 1.3 billion means that tens of millions of new workers are entering the workforce every year, especially as migrants from the poor interior cities move to the coastal cities looking for factory and construction jobs.

Internal Sponsorship

So while 6.8% growth would be great in the U.S., a growth rate of 6.8% is almost like a recession to China.

On top of that, China is also facing pressure from President Obama to allow the yuan to rise in value. Timothy Geithner, Obama's pick for Treasury Secretary, said that "China is manipulating its currency."

Nevertheless, the last thing China can afford is to allow its currency to rise and make its exports more expensive. So I foresee that the currency-valuation issue will probably turn into some sort of political battle down the road, threatening to make things worse for both the U.S. and China.

No doubt, China's slowdown is going to affect more than just its own economy. And the steepness of this slowdown is likely to have a significant impact on much of the rest of Asia, which relies heavily on demand from China.

In fact, it is already causing ...

Slumps in Three Major Markets:

Slump #1 — Japan ...

The Japanese Finance Ministry reported that Japanese exports plunged by a faint-inducing 35% in December from the year before. For an export-dependent country like Japan, that is a kiss of corporate profit death.

Sony, for example, reported its first annual loss in 14 years last week. It also announced 8,000 layoffs and the closure of 10% of its manufacturing plants around the world.

Slump #2 —

South Korea's economy contracted a painful 5.6% last quarter — twice as bad as had been expected. The problem? China is South Korea's biggest export market. And exports to China are nose diving.

Case in point: Korean electronics giant Samsung reported its first ever quarterly loss. The $674 million loss was a whopping two times larger than the Wall Street crowd was expecting.

The big problem, by the way, was cell phone sales. Furthermore, Samsung warned that it expected the cell phone market to drop by another 5% or 10% in 2009. So if you're a Motorola or Nokia shareholder, you might want to re-think the wisdom of holding on to a company in a shrinking industry.

Slump #3 — Australia ...

Australian Prime Minister Kevin Rudd warned last week that the slowdown in China will chop $3.3 billion of business from the Australian economy.

He went on to say, "And that means a massive five billion dollar fall immediately in Australian exports, just because of China alone, and with a consequential impact on Australian jobs."

In fact, Australian mining giant BHP Billiton is closing a nickel mine and cutting 6,000 jobs around the globe because of weaker demand from China, the world's No. 1 consumer of metals.

I could go on:

Singapore, Taiwan, India, Malaysia, Indonesia, and China's other Asian neighbors are all feeling the same economic pinch.

What's important is that things are going to get worse before they get better. I'm not just talking about the U.S., either.

What You Should Be Doing Now ...

As the U.S. recession sends a financial tsunami from sea to shining sea, there are five moves you might consider to protect your wealth and profit from the chaos ahead ...

1. Use any rallies to sell stocks and reduce your exposure to equities. Raise cash!

2. I think U.S. dollar-denominated assets will get clobbered the most. I expect U.S. stocks and U.S. bonds to be among the worst performing assets in the world. I would avoid them like the plague!

3. Our politicians are spending money like there's no tomorrow. And that means a whole lot of inflation is in our future. So make sure your portfolio includes some inflation hedges, such as gold and timber.

4. If you're very aggressive and have some speculative money you can afford to put at risk, take a look at either long-term put options (also known as LEAPs). Or consider inverse exchange traded funds, such as the ProFunds Ultrashort FTSE/Xinhau China 25 (NYSE:FXP). This ETF is designed to move twice the inverse of the daily performance of the FTSE/Xinhua China 25 index. In other words, for every 10% the index drops, the ETF is meant to go up 20%. Of course, the opposite can happen: If the index rises 10%, the ETF could drop 20%.

5. Get ready to become a big, big buyer. The economic picture will get uglier. But the best time to buy is when nobody wants to! And don't forget that stock markets historically bottom 6-12 months before the economy does.

[RapidF6]

Hmm. That's pretty bad news.

Cheers for the response, Mondie. A couple of the guys at work (I work for a little engineering company in West Perth) have heard that some work will be coming back into Perth later this year. Hopefully oil doesn't tank before then, hey?

[ronburgundy]

Just saw an article on ninemsn where it's tipped that the official cash rate will fall from the current 4.25% to as low as 2.5%. They also said this:

Meanwhile, car audio retailer Strathfield has become the latest victim of the economic downturn. The company, which has 100 stores across Australia, has been placed into voluntary administration after weak Christmas trading.

It is believed the company will now look to pursue a franchising business model in a bid to survive.

[tmac450]

It wouldn't be the first time Strathfield was in financial difficulties. They don't have the cleanest of reputations.

[dule]

I guess car audio is the last thing people opt to buy in situations like this.

And I too believe media is making this whole situation worse then it needs to be. I mean this was long in the making and there is no easy way out, banks were lending money they never had and all was sweet until people started asking for their money.

We would be in this sh*t regardless but when people hear on the news "we're all doomed" they get scared and start selling stocks, pulling their money out etc. and this fuels the bad situation even more.