Avoid these investment perils…and embrace these opportunities

Tuesday, 31 July 2018
Melbourne, Australia
By Bernd Struben

  • Nothing lasts forever…
  • Where does this leave us today?

It’s finally ready.

As you may be aware, on 19–20 April this year, Port Phillip Publishing hosted the ‘Paradox of Prosperity’ summit at the Grand Hyatt in Melbourne.

I had the pleasure of speaking to many of the attendees during the breaks. By all accounts it was a smashing success. I still find myself referring to the wealth of financial and economic insight I madly scribbled into a notebook over the two jam-packed days.

Our leading in-house editors presented their best ideas and offered their outlook for the year ahead. They were joined by five international keynote speakers, including the legendary Dr Marc Faber.

But odds are you were not able to attend.

That’s because this conference was unique.

You see, our previous events were open to all of our readers and even the general public…provided they forked over the not inconsiderable cost of a ticket. But this event was strictly VIP.

Only Alliance members could purchase a ticket to this summit. These are the people who have taken a lifetime subscription to all of our advisory services. They’re valuable partners in our business. And we wanted to ensure that every Alliance member who wished to attend could do so.

Unfortunately, that came at the cost of excluding tens of thousands of our other readers.

But fret not!

As I wrote to you shortly after the summit in April, we hired a professional film crew to record the entire event. Not just the keynote presentations. But the breakout sessions as well, where audience members were able to ask off the cuff questions.

The film crew also recorded all of the one-on-one interviews with the speakers, conducted by yours truly following their presentations. And I can tell you they revealed some fascinating insights to me that they didn’t cover in their presentations.

So, while you may not have been able to attend in person, you can now ‘virtually attend’.

Not only is this a lot cheaper than the cost of a ticket, but you can watch and listen to everything in the comfort of your own home or office. And you can do so at your own pace, pausing and rewinding as needed to ensure you don’t miss a thing.

It took some time to get these many hours of footage in order and ready for you to enjoy. But now it’s complete.

And while the ‘Paradox of Prosperity’ conference took place three months ago, the recommendations and insights the speakers shared are as relevant today — if not more so — as they were in April.

You can get all the details on the speakers and the event — including why this will be Port Phillip Publishing’s last major investment summit ever — here.

More after the markets.

Markets

Overnight the Dow Jones Industrial Average closed down 144.23 points, or 0.57%.

The S&P 500 lost 16.22 points, or 0.58%.

In Europe the Euro Stoxx 50 index finished down 14.87 points, or 0.42%. Meanwhile, the FTSE 100 fell 0.01%, and Germany’s DAX lost 62.20 points, or 0.48%.

In Asian markets, Japan’s Nikkei 225 is down 37.10 points, or 0.16%. China’s CSI 300 is down 0.21%.

In Australia, the S&P/ASX 200 is up 7.61 points, or 0.12%.

On the commodities markets, West Texas Intermediate crude oil is US$69.80 per barrel. Brent crude is US$74.56 per barrel.

Turning to gold, the yellow metal is trading for US$1,221.08 (AU$1,647.66) per troy ounce. Silver is US$15.48 (AU$20.89) per troy ounce.

One bitcoin is worth US$8,123.64.

The Aussie dollar is worth 74.11 US cents.

Nothing lasts forever…

Wealth preservation expert, Vern Gowdie, kicked off the ‘Paradox of Prosperity’ summit with an aptly titled speech, ‘Impermanence — Nothing Lasts Forever…Especially Artificially Created Wealth’.

I won’t go into the details of Vern’s presentation today. (You can find those here.)

But if you’re familiar with Vern’s newsletters, you’ll know his medium-term outlook for the Aussie housing and stock markets is rather gloomy, to say the least.

He highlighted two key factors essential to keeping the economy growing, as measured by GDP. The first is an ever-expanding population. The second is increased labour productivity.

Australia’s ballooning, and unsustainable, population growth has indeed seen GDP continue to tick higher. Yet sluggish improvements in productivity have seen real (inflation adjusted) wages remain almost flat for the past decade.

Now a lot of pundits point to technological innovations as our best hope to increase worker productivity. While this has held true in the past with innovations ranging from the steam engine to the internet, it may not hold true in the future.

As Vern points out, it’s quite likely that the technology of tomorrow won’t create as many new jobs as it destroys.

A steam engine, for example, needs a driver and crew, workers to lay and maintain the tracks, ticket and food vendors, and maintenance personnel…to name a few.

But how about a driverless train? One that runs on tracks laid and maintained by other machines needing little to no human oversight. A train that can duck into an automated repair facility when it needs a tune-up. And one that stops at stations where robots do the cleaning and chatbots answer customer queries.

If this sounds a little farfetched, think about how you might have responded to the idea of a smartphone back in the 1990s. A phone with more computing power than NASA’s space shuttles in your pocket? Right!

And the latest news from The Australian Financial Review’s Innovation Summit indicates Australian businesses are largely unprepared for the changes ahead. Though Jobs and Innovation Minister Michaelia Cash did her best to put a positive spin to it all.

From the AFR:

Jobs and Innovation Minister Michaelia Cash says Australia can manage the rise of automation and artificial intelligence without a spike in unemployment, despite concerns the local business sector is well behind foreign competitors in preparing for these trends.

Statistics suggest as many as 3.5 million jobs could be affected by AI by 2030, with research from the IMF suggesting the lowest-skilled workers will be hit hardest.

Data released at The Australian Financial Review Innovation Summit on Monday by MYOB chief executive Tim Reed, suggested 28 per cent of respondents felt “totally unprepared” for tech driven changes to the workforce.

Where does this leave us today?

Here’s the scary truth.

No one really knows the impact automation and artificial intelligence will have on your job and day to day life five years down the road…let alone by 2030.

Perhaps enough new jobs will be created to replace those taken over by smart machines. Or perhaps the average Aussie will work fewer hours at a higher pay rate. Or perhaps unemployment and inequality will rise in ways that are hard to envision today.

What’s not really in doubt is that many of the jobs today will no longer need humans to perform them tomorrow.

Gerard Minack was one of the keynote speakers at the ‘Paradox of Prosperity’. Before founding Minack Advisors, Gerard was the Head of Global Developed Markets at Morgan Stanley.

While Gerard is largely positive about where we are today in the economic and investment cycle, he highlighted a number of disinflationary forces. Forces that are working against wage growth in ways that will eventually end very badly for investors.

One of the bigger ones is…you guessed it…automation.

Below is one of the slides from Gerard’s presentation.



chart image

Source: McKinsey Global Institute
Click to enlarge

As you can see, workers in both good producing and service producing sectors are in jeopardy of being replaced.

Where does your job fall on that list? Or your family members’ jobs?

If it’s in the accommodation and food service industry, there almost a 75% chance that job could soon be automated. While this is based on US data, the numbers Down Under likely look very similar.

And no sector is completely insulated from the changes ahead. Not even media…darn it!

You can watch Gerard Minack’s full presentation and his post speech interview with me — along with every other presenter at the ‘Paradox of Prosperity’ summit — by clicking here.

Now before signing off, here’s the latest from The Australian Tribune:

‘Population Explosion Boosts Victoria’s Economy’

If you live in Victoria, CommSec’s latest quarterly State of the States economic report contains same good news…and some not so good news.

The good news is that the report, released Monday, named Victoria the nation’s best economy for the first time since the rankings began in 2009.

The not so good news is that the winning title was earned largely through its record level population growth…adding roughly 145,000 people in 2017 alone. This growth model has seen average wages remain almost flat while…

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another, then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd