Share Market Performance

I have long been under the impression that the bastions of capitalism have outperformed the far flung and small-scale dominions, but new research reported in today's Australian Financial Review suggests that the place to put your money over the long term is here in Australia. The long term is the last 110 years from the start of the twentieth century, a period taking in the great depression, two world wars and sundry other jolts to long-run economic performance like the GFC.

After adjusting for inflation and currency movements, Australian stock markets returned an average 7.5% per annum compound for that 110 year period, just slightly ahead of South Africa! That was over 2% per annum faster than the UK, and 1.6% ahead of the US. Perhaps having a resource economy rather than relying on manufacturing is the key to this performance. Note that Italy, one of the PIIGS, only managed 1% and even France and Germany managed only 2%. The graph accompanies this post.

By the way, I saw some forecasts today for currency movements, with the Australian dollar possibly reaching US$1.50 in 5 years compared with the current 91 US cents, and maybe > 1 Euro and almost 1 GBP. In a way that's scary for agricultural exporters and due solely to the current minerals and energy boom linked into China and the rest of south and southeast Asia. Meanwhile the population boom continues apace despite the GFC and population expanded at about 2% last year. Even the domestic birth has been propelled upwards close to replacement rate (2.1 live births per 1000 women of child-bearing age). No wonder consumer and business sentiment is back to pre-GFC levels and the Reserve Bank is ratcheting up interest rates towards previous levels. It's business as usual.

AS

Flood

I reported in these pages 16 months ago about the terrible bush-fires in Victoria and other places and about the massive dust storms affecting south-east Australia. I have just watched a television program featuring our head of Division, Professor Martin Thoms, reporting on an amazing transformation of western NSW and Queensland. They're in transition from a devastating 1 in 100 year drought to a 1 in 100 year flood. But this is a flood of incomprehensible proportions for my European readers.

The area that has just gone under water is estimated at half the size of Europe. Yes, Europe! Something like 9 or 10 major tributaries of the Darling river have simultaneously flooded after persistent heavy rain over a 3 month period, including the Paroo, Narran, Birrie, Culgoa, Warrego, Condamine, Balonne and Maranoa. I have been fortunate to see many of these rivers during my travels in southern Queensland over the years, but mostly they were little trickles, not sheets of water. And floods are not fast moving in this part of the world. Some of these river systems have been in flood for the last two months and they will still contain flood waters in three months time as the water moves downstream to the Darling and on to the junction with Murray and then to the Southern Ocean by June or July. The flood peak moves downstream at a regular speed and some farmers know two months or more in advance of when they will be inundated.

It gets even stranger. Australia's ecosystems are tailor-made for long drought and periodic major floods. The far west bush springs to life after heavy rain and organisms buried in hard-baked can spring to life after 'sleeping' for up to 50 years. Trees and bushes suddenly grow at prodigious speed, as do the grasslands. Water birds migrate in from coastal zones maybe 500 or 1000 km away - these are humongously large river systems in areal extent! Birds and animals (including iconic Kangaroos and Emus) mate and have lots of young fast. Farms, which may be isolated by flood waters for several months on end, suddenly become hugely profitable and livestock prices soar, and no doubt national economic growth, already strong, will add another 1% on top. And all goods and services have to be brought in by helicopter. The TV program actually showed sheep being hoisted aloft from flooded paddocks and deposited kilometers away on rare patches of high ground.

I attach some borrowed photos of flooding around St George. For UK readers, such a place exists and I've even been there. Look it up on a map. It's at the confluence of the Balonne and Condamine river systems mentioned earlier.

AS

Intermediate Bridge

I gave my first Intermediate Bridge Lesson for 2010 today. It lasted three hours in the morning and there was a great roll-up of eager players wanting to learn about Cue Bidding and Trump Management. I try to give two topics each time, one on bidding and the other on card-play, and today was no exception.

Altogether, 28 people turned up to pay their $5 for the occasion and, incidentally, the money goes to the club, not me! Like the last time, I started by giving the players some deals to play, and much of the time they failed to arrive in the right contract (suit and level). This is because my specially constructed deals contained void suits that the usual slam bidding systems (Blackwood and Gerber for the initiated) cannot handle. Cue bidding, on the other hand, was able to handle the deals well. After half time, the play focused on when declarer should not draw trumps. Again, for the initiated, we covered things like cross-ruffing, dummy reversal, side suit establishment, maintaining communications between declarer and dummy's hands.

It took me a whole week to construct the powerpoint presentation seen on the wall on one of the two attached photos. The Armidale Bridge Club is very well set up for lessons, with a good data projector, a couple of computers, a commercial grade (and very fast) printer, and a dealing machine. The club is really humming at the moment with enthusiastic players, beginners, and club members willing to serve it in all sorts of capacities.

AS

Possum Damage

One of Australia's cutest animals is the Brushtailed Possum (Trichosurus vulpecula, or furry tailed little fox). However, it is definitely not a fox and someone must have named it after having a bad experience. See the following web-site for a general introduction: http://www.australian-wildlife.com/Possum-information.html. We have long known that we have possums around, as we can regularly hear them thumping around on the roof. However, they're nocturnal, so, by the time we race outside to see where they are, they've gone into hiding. The first two pictures show what they're like.

Anyway, Dot came back from a Tennis meeting the other night and saw a large possum in the book-leaf cypress (Thuja orientalis) adorning our front garden - also pictured. Moreover, she saw it eating the tree's seeds, which have just matured given that we're in mid-Autumn. These are also pictured. We had noticed bits of seed-pod and leaf littering the ground around the base of the conical tree and I wondered about the explanation. Now we know! The possums have been using our front garden as a fast-food restaurant and leaving the debris (pictured) hanging around. Perhaps that explains the freakish behaviour of our cat, Honey. Mind you, they're too big to capture for a meal; rather they represent competition.

AS

Parade II Ethnic Mix

The ethnic groups taking part in the Parade included Bangla Desh, China (PRC), India, Indonesia, Japan, Korea, Nepal, and - surprisingly - Saudi Arabia. I had no idea that Armidale had such a large Saudi community - mainly, I guess, attached to the University. Several of my workplace colleagues, who I see every day, were marching through town from places like India, Nepal, and Korea and they appear in the attached photos.

When I reflect on it, Armidale has an astonishing range of nationalities living together with a high degree of harmony

AS

Parade I

This is the penultimate of four successive posts dealing with our Autumn Festival - for fear that I am boring the pants off my readers. We might only have 25,000 residents, but Armidale can sure stage a parade. Today's was several km long and took perhaps 45 minutes to pass by the large crowd lining the route snaking through the CBD. Displays included lots of pipe bands - it seemed for a while that there were more here than in the whole of Scotland, all dressed up appropriately. There were vintage cars like the one shown; people on various forms of wheels - bikes (pedalled in the case shown by a giraffe), a monocycle, wheelchairs; floats from all Armidale's multitudinous schools; displays from the University of New England (including the School of Rural Medicine pictured); heaps of displays mounted by community groups - including police and emergency services; and lots of people representing various ethnic groups who received strong applause.

AS

Art Sale

After the breakfast in the part we headed to the Town Hall where there was a sale of several hundred (!) pre-loved art-works, mainly pictures. It was a charity function to which residents donated pictures no longer needed for their walls. Items were valued and then displayed for immediate sale and some walked out of the door as fast as they came in. Others, like those shown here, moved more slowly, and others were unloved! Those remaining by late this afternoon will be sold at auction - probably for a song, with the proceeds going to the local hospital.

Dot and I cruised up and down the aisles, but there was nothing that attracted attention except for a lovely piece of Aboriginal art priced at about $500.00 (or 300GBP). So we left without buying anything save our $4 gold-coin admission donation.

AS

Breakfast in the Park

Armidale holds a three-day Autumn Festival each year and it takes place this weekend (19-21 March 2010). One of the great attractions is 'breakfast in the park' held down on the creek-lands and designed to raise money for the Armidale City Band. Lots of people attend not just to receive a nice breakfast prepared by Lions volunteers, but to be serenaded by the band itself, whose smartly attired members range in age from about 12 to well over 60. They performed very well again today, helped by brilliantly sunny autumn weather. Although it is mid-March here and almost the Equinox, the daytime temperatures still hover around 25 degrees C. This is not the kind of weather one would receive in Britain in mid September!

The pictures show the band, the 'dining area', and the chefs preparing the pancakes - which were served with maple syrup and a blueberry sauce together with ham and eggs. It was very nice!

AS

Rainbow Lorikeets

I've noted in these pages that we have magnificent bird life where we live. And recently we have added another species to the collection - the Rainbow Lorikeet. This is a truly beautiful bird as the pictures show, with bright plumage ranging across the primary colours adorning quite a sizable creature. The birds shown are now almost daily visitors to the garden and we see them frequently.

They're probably one of the reasons why we are now going through more than 5 kg of bird-seed in a week, which makes them more expensive to maintain than Honey, our cat. Perhaps, however, we shouldn't rule out that we're fattening birds that Honey eats, which would modify the cost equation. That said, Honey is the laziest cat we've had and she seems to spend most of the daylight hours asleep. Our ample provision of food, which also disappears fast, coupled with other evidence like the repeated presence of our feathery friends, suggests however that Honey really doesn't need a supplementary diet and doesn't use the opportunities available.

AS

Bridge Weekend

I have just survived playing 16 hours of contract bridge this weekend. One of the sessions started at 10am yesterday and finished at nearly 7pm after a half-hour break for lunch. Believe me, it was a trial playing for something like 9 hours on end and after all that we were placed third in the competition. That's not bad given that some 58 pairs were playing and, by the way, that was a record for the last 20 years. The event was held out at the university, not in the club, and the playing conditions, not to mention the catering, were superb.

Well, today, we reassembled for another marathon - the 7 hour finals. Because of the good performance on Saturday, we were in the 7 table championship final. There were also separate competitions for the plate, and two consolation events. We had a lousy morning, but the afternoon brightened considerably. So, my partner, Barbara Gates, and I ended up fifth overall, and we beat 9 other pairs in the Championship. My friend, Bruce Tier, was second and turned up this morning in purple wig - as the picture shows. The other picture show the assembled players awaiting the starting bell this morning!

AS

Economic Miracle?

While Europe and North America wallow in recession, some stunning economic results appeared down-under today. Official statistics revealed today that Australia's economy grew overall by 2.7% in 2009, the fastest in the OECD, and industrial investment is soaring. Coupled with heavy downpours of rain over much of rural NSW and Queensland, which should dramatically increase agricultural output, we can now expect GDP to rise well above the 3% long-term growth rate in 2010 - perhaps reaching 4%.

And the mineral and energy sector is once again booming. The $50+ billion investment in a single project - the Gorgon natural gas field - is a case in point. When in production, it will have the single largest gas output of any project in the world, and it will equal a whopping 8% of current world gas production. Australia's status as a gas producer might then equal Saudi Arabia's in oil production.

A further up-side to all this is that the A$ today soared above UK 60p. Earlier in the naughties, it was valued at just 36p. The currency has also suddenly risen against the Euro reaching 66 cents. Just a year ago, at the height of the GFC, it plunged to about 55 cents. The up-side is most likely to be felt by those travelling overseas, or shoppers buying cheap manufactured goods. A high valued currency trims the income of mining companies and farmers, which isn't so good.

Then, of course, there is another down-side. A booming economy attracts higher interest rates, and yesterday the Reserve Bank Board raised them by a further 25 basis points (or 0.25%) to 4%. This is the fourth such increase in the last 6 months, a solo run among the OECD countries whose interest rates are mostly bumping along near zero. The latest rise was partly inspired by the need to rein in rises in real estate prices, which are now also rising fast.

Rising interest rates have yet, however, to dim consumer confidence which is running at a high level, that buoyed by falling unemployment which is now trending towards 5%, about half that in Europe and North America. That's just as well because another benefit is cutting in. Government tax receipts are rising strongly, helping governments to regain their annual fiscal surpluses and eliminate public sector debt. And, whereas most OECD countries record debt to GDP ratios in the range of 80% to 120%, Australia's is forecast to peak at only about 12% next year - a fantstic position to be in.

Perhaps my overseas readers might press for their governments to import Ken Henry, Treasury Secretary, Glen Stevens - Boss of the Reserve Bank, and Gary Banks of the Productivity Commission to explain how this was all done and advise appropriate strategies. I've been discussing precisely these themes with a despondent Greek colleague, angry at national mismanagement.

And, on top of everything I've just said, immigration is rising sharply, thereby retarding the ageing of society - a problem that increasingly bedevils much of Europe and North Asia. That's another long-term plus. Young migrants will be employed for a long time and they, in turn, will start families. The nation's population is tipped to rise 55% over the next 40 years! Not only that, but our export markets are increasingly focusing on Asia. Consider also this. The world's population is now about 6.6 billion people. Of these 2.7 billion lie immediately to our north, and many of the nations involved (especially China, India, Vietnam, Indonesia, Thailand, and Malaysia) have experienced rapid economic growth even through the GFC. Huge opportunities are looming as quarry, farm, holdiday destination, and education provider for the wealthy masses of our region. Even if only 40% of the region's population attain comfortable middle class status, we're looking at a market of > 1 billion people for all these goods and services, or double the size of the European Union or 3 times the population of North America.

The 21st century will be the Asian (or Western Pacific) century and I'm beginning to see more clearly the ebbing of power and influence of the North Atlantic region and the relative dynamism of our back-yard. This is mirrored, too, in the Heritage Foundation's Index of Global Economic Freedom. The first four nations are: Hong Kong, Singapore, Australia and New Zealand!! Many European nations are well down the list with, for example, Greece coming in at about 75th. Can European social democracy be fixed or does it have terminal problems?

I hope this lengthy posting gives you food for thought, and I'd welcome comments on any of the issues I've raised.

AS