Thanks for your views.
Recessions don't have to be feared - Ross Gittins
- Thread starter andrew_de_a
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Thanks for your views.
I know of one contract that was terminated with a mining contractor that got quite a bit of press recently, the terms of that contract were actually very much in favour of the contractor (had them over a barrel)
sorry i dont understand this comment. So you are saying that the contractor benefited from the termination?.
I understood the contract had been written in such a way that the contractor had quite a bit less work performance requirements compared to industry standard. It was therefore in the mining companies interests to reconsider that contract.
It became more common in the last few years to reduce the weeks employees worked away and increase leave across the Fly In Fly Out mining industry, especially to retain good staff. So instead of four weeks work, one week off, this changed to two weeks work, one week off. For those on two weeks work, one week off, many positions changed to one week on, one week off. So these trends have been reversing, by changes weeks on/weeks off can give managers flexibilty to manage staff and costs depending on their site and company situation.
In WA (excluding iron ore) contractors are much more common in the mining industry. Contractors could be used at start ups or for extra fill and to some extent it would depend on how they performed as to how they stayed on a site. Some sites have a high number of contractors (70%+) but these contractors are industry professionals or may have worked on that site for years, not just truck drivers from the city looking for bucks. At the moment contractors are probably on shorter contracts that can be rolled over to give clients flexibilty. As the contract companies drop staff, they will maintain their experienced workers. Contract companies will usually provide their own mining equipment (truckers, diggers, drill rigs etc) so are useful to reduce capital costs to the mining companies during these times too.
sorry i dont understand this comment. So you are saying that the contractor benefited from the termination?.
I understood the contract had been written in such a way that the contractor had quite a bit less work performance requirements compared to industry standard. It was therefore in the mining companies interests to reconsider that contract.
It became more common in the last few years to reduce the weeks employees worked away and increase leave across the Fly In Fly Out mining industry, especially to retain good staff. So instead of four weeks work, one week off, this changed to two weeks work, one week off. For those on two weeks work, one week off, many positions changed to one week on, one week off. So these trends have been reversing, by changes weeks on/weeks off can give managers flexibilty to manage staff and costs depending on their site and company situation.
In WA (excluding iron ore) contractors are much more common in the mining industry. Contractors could be used at start ups or for extra fill and to some extent it would depend on how they performed as to how they stayed on a site. Some sites have a high number of contractors (70%+) but these contractors are industry professionals or may have worked on that site for years, not just truck drivers from the city looking for bucks. At the moment contractors are probably on shorter contracts that can be rolled over to give clients flexibilty. As the contract companies drop staff, they will maintain their experienced workers. Contract companies will usually provide their own mining equipment (truckers, diggers, drill rigs etc) so are useful to reduce capital costs to the mining companies during these times too.
This being my first 'recession' or close enough to it Im really finding it to be fantastic, everythings cheap and my wage stays the same so my after tax dollar is worth much more, especially with low interest rates, its a dream come true, as long as youre secure in your job then I think its fantastic and a truly great opportunity for the brave or anyone with some time to invest ahead of them.
Damn straight!
I have to put in a me too here. I've actually renewed my contract for another year this month with a higher rate and now with everything else becoming cheaper it is quickly making this a great start to the year.
Of course not. Every recession we had seems to be followed by a property boom, so what's there to fear ?
Thats not the half of it. China has much much worse than subprime. Most large corporations (every single one of which is State owned) have been technically insolvent for at least 10 years. Every major bank (also State owned) is also under water. To say that places like Shanghai and Beijing have property bubbles on top of that is really adding nothing.
The whole system is incredibly corrupt and they also arent particularly sophisticated when interfacing with large complex Western businesses - for example they dont really understand how to use professional advisors.
To say that China has a subprime problem doesn't begin to tackle the problem.
The Chinese A market has no connection to reality whatsoever. I always laugh when serious looking suits on television ads talk about emerging Asian markets and mention the A market. The A market is entirely artificial. For starters most of the listed entities arent even the parent companies - the listed entities are subsidiaries of a larger unlisted state owned corporation. This means there is a severe problem with listed company funds being tunneled back to the state owner.
Although to be strictly acurrate - every company on the A market is state owned. Every state owned corporation has a policy board made up of Communist Party members. The CEO and CFO dont run the company, the policy board does. All state owned companies are run in the best interests of the state (which generally means the best interests of the local political leader). Shareholders are just collateral damage.
The reason the A market is so big is because Chinese have a lot of savings and are prohibited from investing anywhere except in the bank and the A market. If they are local residents they can also invest in property - but someone from Urumqi, Xinjiang can't just buy a 'foreign grade' Shanghai apartment to rent to the laowai at $4000 US per month.
The whole A market runs entirely on rumour - what government department is going to favour which company with a plump contract to make its earning surge. Dont be fooled by market heroes like Huawei or Haier - they are government funded loss leaders to get brand China out into the global marketplace and to try to demonstrate that they can create quality products if they really put their mind to it.
The finance and capital systems at the macro level are so different from our Western systems that any comparisons are pointless. Of course if the USA keeps up the good work and nationalises the S&P500 then comparisons may make more sense
Of course - the fact that 90% of their corporations and banks have been insolvent for at least the past decade has not stopped them having a massive boom. Go figure.
Thanks for your views Boomtown, I find that all very interesting.
My first recession also, and it is just fascinating that global economies run so differently from our own can still have such an effect on us. My understanding is admittedly limited but I get the big picture.
Regards JO
And this is a country moving into the 21st century??
I saw a spirit once...then I drank it.
Michael,
Ken Gerbino is talking about a coming high inflation period which governments will rein in with higher interest rates. This action will set scene for the next "horrible recession" in 3-4 years time.
This view is similar to other economists like Harry Dent who predicts a depression beyond 2012 when the baby boomers enter retirement.
Given this common view, I agree your suggestion of "debt is good, hard assets like residential property is good, cash is bad, gold hedge" is a sensible guideline to what little investor guys like us can do.
In the near term (3-4 years) possibly resi property can track inflation but will not perform well, due to governments raising IR to fight off high inflation.
Gold is the best performing asset when other assets like cash and share losing values.
Kenster,
Here's a little bit more food for thought. Yet another article examining the likely direction of residential property in Australia, but this time from the very bearish businessspectator.com.au website. Surprisingly, this analysis suggests prices to remain largely flat due to all the reasons we already know. He lists the positive and negative influences on price and concludes the positives outweigh the negatives.
He also has a nice little analysis of the demographia study and argues against its validity. That in the link at the beginning of this article.
Why house prices will hold
Good point... He also then tackles the "but shares lead property" misnomer argument.
Cheers,
Michael
Here's a little bit more food for thought. Yet another article examining the likely direction of residential property in Australia, but this time from the very bearish businessspectator.com.au website. Surprisingly, this analysis suggests prices to remain largely flat due to all the reasons we already know. He lists the positive and negative influences on price and concludes the positives outweigh the negatives.
He also has a nice little analysis of the demographia study and argues against its validity. That in the link at the beginning of this article.
Why house prices will hold
Christopher Joye said:
Good point... He also then tackles the "but shares lead property" misnomer argument.
Cheers,
Michael
Yes, but the article is by the very bullish Chris Joye, whose company offers shared equity finance mortgages. He can only make money if:
1. House prices go up (his company's equity stake gets a cut)
2. People fear house prices going up and use his EFM to get on the ladder before it's "too late".
Fairly large vested interest there.
He was also behind getting the government to buy RMBS via the Aussie Mac idea. Australia's version of Fannie and Freddie. Just what we need!
If you put it that way then Keen, and his new found buddy Karl Marx, has just sold his property and now that he's cashed up is probably keen to buy another one at a 40% discount. Good reason to for him to try and scare people and has as you put it a "fairly large vested interest" himself.
Or do you think that bears could not possibly have vested interests ?
