Completely agree hobo... and others will keep thinking a recession is here or coming until one eventually happens...
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Is Australia facing the first recession in 20 years?
- Thread starter hobo-jo
- Start date
Don't forget human hardship.
I'm sure plenty of people will tell us all about it.
And some starving orphans in Somalia will be going "Jeeze, I'm glad I'm not a middle class investor in Australia. They do it real tough"
Amazing, what a difference 12days can make!
So many stocks starting to look very attractive....time to make some decisions.
Cheers,
Oracle.
Spot on. My local business has been suffering big time for well over 12 months now. Each and every month down to varying % (on previous year figures). Different factors come into play, but the biggest seems to be be people hesitant to spend.
Very similar stories all round from everywhere I hear.
I've got a friend who lives in Adelaide who reckons that the economy is slowing rapidly. Similarly, another in Melbourne has been mentioning the recession word a few times in recent months. It sounds like banking and retail are having a hard time there.
That said, I was swapping emails with an IT contractor in Sydney a week or two back. Things sound buoyant in that market, unlike in the UK where it's currently completely dead.
I don't know what's going to happen next. I wouldn't be surprised if there's a recession, but that's not the end of the world. Though there would probably be four or five slow years as the economy recovers.
I'd agree with the comments that the Australian government is in a good position, but households are much more stretched, and banks are vulnerable due to their dependence on foreign capital.
I don't know about recession, but many businesses/people already having a tough time, whether it be from general hesitation to spend, structural changes to industry etc.
On the bright side, business downturn led me to start another business which is growing phenomenally. What's that word.....crisatunity
People were saying that 2 weeks ago too.
Didn't do any buying since early Feb....as the market kept rising and I don't like to buy when bulls are in control...You tend to overpay. And since I am a buy and hold investor I don't buy to make a quick buck by riding the trend.
So it was a welcome relief when market dropped over 9% over the past 2 weeks. I can start shopping once again. The market can drop further and that is fine by me. I will keep buying until money runs out and will sit on the sidelines thereafter. You only lose money when you are forced to sell.
You might have a different philosophy to buying/selling shares than I do and that is fine by me.
Cheers,
Oracle.
Point was simply it's hard to see what's cheap sometimes and one could wait a very long time (and hopefully one day be right) by buying and thinking it's cheap.
Is, for example, ERA cheap at $6 when it used to be $12? What about $3? Or $2? It's now $1.30. Is that cheap? Or RIO? Used to be $170. Was $100 cheap? Or $70? Now it's $55. Is that cheap? Same with Telstra, ANZ, Myers, Wesfarmers. There's probably many examples for every industry given the state of the markets.
Is, for example, ERA cheap at $6 when it used to be $12? What about $3? Or $2? It's now $1.30. Is that cheap? Or RIO? Used to be $170. Was $100 cheap? Or $70? Now it's $55. Is that cheap? Same with Telstra, ANZ, Myers, Wesfarmers. There's probably many examples for every industry given the state of the markets.
Those prices mean nothing unless you know what multiple of earnings was being paid.
Is Amazon or Facebook worth 100 times earnings? We could come back in 10 years and Facebook would still be trading at $33 even if it is earning 10 times more than what it is earning today, because in 10yrs investors are only willing to pay 10 times earning for Facebook.
So you got to know what value you are getting for the price you pay today.
Most of the stock examples you gave are cyclical stocks whose economic performance is tied to commodity prices. So you first need to form a view on what future prices of those commodities are going to be before you invest in them. Although, ERA has lot more issues apart from just price of Uranium.
Telstra, well what can I say...industry is regulated by government to some extent, second whatever products or services it is selling today in future it will have to sell it even cheaper due to advancement in technology and competition (check you past internet, mobile, long distance telephone bills and compare what you paid to talk for 100mins then and what you pay now, for internet check download quotas), while we are at it they just have to keep investing billions in new technology (2G, 3G, 4G, fibre optics) just to stay competitive (I mean stay in business).
You get my point...when you invest for the long term you have to think about all these factors...you just have to accept certain industries are more economically blessed than others.
Cheers,
Oracle.
It's not me who is wrong; I'm simply reporting what I get told by others who are experiencing stuff.
Can they all be wrong?
What about places like Retravision, Harvey Norman and the like; they are all reporting less sales (Retravision has just reported some very bad news since your post), and there haven't been too many retail sectors like electronics, white goods etc which have enjoyed (for the customer) such a dramatic drop in prices as these. Despite the drop in prices, their sales are down.
With regards to our own industry, again it's not just me I refer to. All the anecdotal info I post is from the industry people; tyre reps, parts reps, the wholesalers themselves etc.
I am not silly enough to think it is only my one workshop that has suffered a slow down and then cry about it as a nation-wide phenomenon.
Across the board our industry is down whether you talk about a Lexus or a 1992 Conformadore about to blow up.
You contradicted yourself in your own post; it may be true that the volume of sales hasn't dropped (I would suggest it has) - if everyone is reverting to buying cheap clothes on Ebay, or budget clothes from Target etc, or budget car services, letting their tyres run down to the steel belts, letting the services go 20k, 30k overdue...what does that say about the state of play? It means they are tightening the belt, spending it on more necessary items, saving money or they haven't got any.
Incidentally; we don't lose too many customers to budget establishments for services. I don't even try to compete with their product because I would get creamed if I did. I don't have the ability to advertise so comprehensively and nationally to get the volume of customers to make their system work for me.
A $99 service is going to get you almost exactly what you pay for; a quick oil and filter change, quick "safety check" and push the car out the door. Spending only $99 on a service is only putting off what needs to be done to a later time, and often becomes more expensive because the car breaks down when things get neglected. What customers don't realise either is that their staff are instructed to try and sell other repair work over and above this to cover the cost of the service.
It is physically impossible to do a service for $99 and make a profit. The labour alone for the mechanic is $20p/hour (or more unless you can fill the workshop with apprentices - but someone has to supervise them). The oil is at least 4 litres for a small car and an oil filter - no change out of $50 for the cheap stuff. Then there is advertising, rent, worksafe insurance, insurance, equipment, consumables and on and on. So, the profit has to come from somehere.
It is "loss leader" selling. Advertise the cheap product at a reduced price, and up-sell from there when the customer comes in to get them to spend more money that visit..some tyre places do it every day with tyres - "Tyres for small cars from $55". Key word being "from".
The reality it is a 155/75/13 which no-one has sold in about 5 years and they have 1 in stock. And so on.
Certain repairs are reported as being needed to be addressed when a car comes in at a certain mileage and/or age - whether it is needed or not. Shock absorbers is a common one.
What we do instead is offer truthful reporting and no hard-selling, and this is the reason why our customers come back to our place, and pay more. Often times we will tell folk their car needs attention on something at the next service, or sometime in the not-too-distant future. This is what brings customers back - and they do come back.
Mind you; if I could acquire 5 or 6 of these hi profile hi turnover franchise workshops I would. Bugger working for a living.
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We work in same industry and I don't see a huge difference now from 5 years ago. Many have always complained how tough it is and many continue to grow. We have had very strong sales growth in the last three years and expect it to continue.
Interesting.
One of my anecdotes was from our biggest tyre wholesaler, who stated that the first half of this Fin Year is the worst they've had since trading.
Servicing and repairs is different of course - our figures show a bit of a drop, but not the same % as tyres, and our tyre sales are more at the lower end of the scale - a lot like the retail levels that Belbo was talking of.
It's amazing how many folk come in with a car that is 3-4 years old, and they are due for their first tyre replacement. The OE's on the car are top-end usually, and they get a shock when they hear what these tyres cost, and settle for the budget versions almost every time.
We find we are starting out pricing with Michelins/Goodyears etc (already on the car), and end up with yer Gung-Lungs or maybe slightly above - even the prestige car sector.
Quite funny to see a BMW with a set of Nankangs on it.
It's going to be pretty interesting to see where growth was for Q1 (6th June we find out). My suspicion is lower than Q4 2011, perhaps not negative yet, but wouldn't surprised me to see it below.
http://www.macrobusiness.com.au/2012/05/we-are-ill-prepared-for-a-shock/
http://www.macrobusiness.com.au/2012/05/we-are-ill-prepared-for-a-shock/
Ireland Minister for Finance in 2008
Sounds like some of the users in this thread.
http://www.independent.ie/national-news/cuts-on-the-way-to-plug-3bn-tax-black-hole-1425967.html
Sounds like some of the users in this thread.
So? So??? There are two construction jobs on the mines at least for every single job lost in the cities, paying twice the wages, and offering just about any roster imaginable to permit workers to continue having their families live in Melb and Sydney while they FIFO at the company's expense.
Look, the only thing that kept the south-eastern construction sector alive since the GFC has been government capital works spending, which has now stopped, and all we are seeing here now is the inevitable results. And no one wants to see the government spend up forever and put us on the path to a European fiasco, do they?
The other option is of course that the RBA could savagely cut interest rates to kick start the south-eastern economies, but it knows the ensuing inflation breakout would likely wipe the country off the face of the developed world in under a decade. No-one wants that either.
So, back to the laid-off construction workers. Are they victims? Yes and no. If they lie down and cry, yes. If they take an absolutely massive wage increase for a bit of hard yakka in warmer weather, no (and, if they do what we do, they could be retired living like kings in 5 to 10 years max, all of them)!
Now, do you think for a single, solitary, itsy-bitsy moment that the 'uncomfortable relocation' of construction labour from southern cities to northern mining towns is happening without RBA-Treasury-Government intent? No: it's all part of the master plan, and it's unfolding on schedule very nicely from their point of view, thank you very much. Sorry that no-one's giving a rats about your discomfort (although Tony Abbott will promise you he'll do you differently to Julia Gillard, somehow).
So no, this ain't a business cycle that government could spend us out of. It's structural economic change on a world-historical scale. And lucky you has a front row seat. Now stop wimpering and start enjoying the show!
As I stated previously; my "discomfort" is a non-issue. You seem to think that because I talk about a downturn across all industries (other than mining) it is all in my own head and only in my shop.
You're in denial, mate.
While there may be a nice old vavoom goin' on at the mines right now, it only makes up a poofteenth of our workforce and everyday economy.
My BIL works at the mines in SA currently. The rosters are not that "just about any imaginable. The mines tell you the hours, and you abide, or ship out. He currently is on 14 on, 7 off. FIFO. One of our customers at the shop is starting a new job in the mines in QLD on Mon. 3 weeks on, one week off; 10 hours days. Sounds great....ask his wife.
If it is so great, then why isn't everyone doing it? Hell, I'd ship out tomorrow for $140k. But I like to see my family, and I don't have a worry with job loss and loss of income.
The reality is, even though the dollars are attractive, the change in lifestyle, family upheaval etc is not for everyone, and someone needs to stay home and make your lattes down at the cafe.
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Recieved our second letter from insolvency solicitors yesterday, demanding we pay back money that was paid to us within the 6 month period prior to a building company going into liquidation - apparently we are preferential creditors and we need to pay it back, so it can be distributed 'fairly'.
I won't name this company but I know for a fact, dozens are owed money - many, much more than us.
We can wear this, but how many get pushed over the edge in a slowdown? Friends owned a long running successful timber yard and lost that in 2008, because of debts of around 200K that were never paid to them by companies/individuals going under.
Fortunately for them, they kept the yard, but they did have to sell the business and downgrade PPOR. Business downturn + people who are slow paying or not paying at all + continued outgoings = strife.
These small business owners can't just up and go to the mines.
I won't name this company but I know for a fact, dozens are owed money - many, much more than us.
We can wear this, but how many get pushed over the edge in a slowdown? Friends owned a long running successful timber yard and lost that in 2008, because of debts of around 200K that were never paid to them by companies/individuals going under.
Fortunately for them, they kept the yard, but they did have to sell the business and downgrade PPOR. Business downturn + people who are slow paying or not paying at all + continued outgoings = strife.
These small business owners can't just up and go to the mines
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