Too Much Luck: The Mining Boom and Australia's Future

[Ausprop]

Interesting to review in light of the MRRT and how it's fared

just bad politics at a crucial time, a real shame. this country should have a decent sovereign wealth fund. alas we have plasmas and house insulation buried in a pit

 

[zinc]

Why cant BHP, Rio, Rhinehart and Twiggy all put a lil chump change into the hat and do something major about the infrastructure here in Perth?

Jeeez, I was on the midland train awhile ago and it was packed like sardines!
Smelly, oily, filthy labourers like me squashed right next to business folk. Smearing my sweat hi-vis shirt right up against pressed suits!! This happens all the time.

Its not even london, its a wannabe London 26 years behind!

Trying to find a spot, at the train stn, to park my car is bloody impossible, I end up driving to work.

An inner city circle-line tram or underground train, like londons, would def improve cbd public transport im guessing.

But who am i?

Thought???

 

[redwing]

Norway has its wealth fund, an enormous future tied to strict rules that keeps it intact.

Income from the fund means that long after North Sea oil is gone, Norway will still have income coming in for thier future generations.

It's the elephant in the room, what if the Boom goes Bust?

Re Norway with $760bn or so of assets nowadays

The fund now holds assets worth twice the country’s annual non-oil economic output. With about 60 per cent invested in equities, the fund owns on average 1.25 per cent of every listed company in the world. Its average stake in European companies is 2.5 per cent

 

[pursefattener]

Not a bad stash put away for a rainy day .

 

[redwing]

I thought The Daily Reckoning & PPP were commodities bulls and property bears, so it was interesting to read the below and their ad's for Phil Andersons real estate cycles

An Epic Mining Boom?and We Blew it

Australia had a 10 year mining boom and forgot to get rich. Worse still...

We came out of the biggest boom in the history of the world in a WORSE financial position than when we went into it.

Here's what I mean...

1. We had a historic increase in national income thanks to a record terms-of-trade. Rivers of cash flowed into Australian coffers.

2. And yet the government and households managed to pile on record amounts of debt...

In other words, we've come out of the boom in MORE DEBT than when we went in to it.

You might think that's impossible, but that's exactly what's happened.

If you're still unconvinced, you only need to take one look at what's happening on the ground...

? INVESTMENT BANKS ARE GETTING OUT OF COMMODITIES

JP Morgan Chase is one of the biggest traders of oil, industrial metals, and coal on Wall Street. But in August it quit the physical commodities business altogether.

Only three years ago it bought trading house RBS Sempra Commodities for $1.6 billion. Today, they've written off every last cent.

? RESOURCE-BASED BUSINESSES ARE GOING BUST

Take Andrew Howard as a typical example...

For the last 10 years his business was buying and selling jumbo-sized earthmoving equipment from his base in the northeast coast city of Mackay - home to the largest mining service centre in Australia's richest coal country, the Bowen Basin.

At the height of the global financial crisis, Andrew travelled to the United States to buy up machinery cheap in a depressed economy...and later sold it to a resurgent Australian mining industry.

But after a decade of tracking the rise and fall of Australia's mineral boom, he's shut the doors of his business AFG Equipment for good.

'There's just absolutely nothing happening,' he says. 'We're just treading water.'

? BILLIONS IN INVESTMENT WRITTEN DOWN EVERY WEEK

In July, OZ Minerals took a $240 million write-down in its assets after gold and copper prices plummeted in the second quarter...

Gold producer Evolution Mining followed with a write-down of the value of its assets of $400 million for the fiscal year...

And gold miners including Newmont, Goldcorp and Newcrest had to write-down $12.6 billion against the value of their assets...

How you can you possibly go 'back to normal' after all this?

You can't.

 

[BayView]

just bad politics at a crucial time, a real shame. this country should have a decent sovereign wealth fund. alas we have plasmas and house insulation buried in a pit

Yes, sadly; when you give handouts to the masses - who are mostly rabid consumers and just above broke with no assets....

It's scary how many folk we see through the workshop each week who are pouring god knows how much of their income into their cars, ciggies, tatts, and all things useless to improving their wealth.

 

[redwing]

The Reserve Bank of Australia's (RBA) index of commodity prices was 0.1 per cent higher in the month, in Special Drawing Rights (SDR) terms, after falling by 0.4 per cent in October.

The price index is measured in terms of special drawing rights (SDRs), an average of four major currencies - the US dollar, euro, Japanese yen, and British pound.

The RBA said prices for gold, coking coal and wheat fell.

These were offset by increases in the prices of iron ore and thermal coal.

Over the 12 months to November, the index declined by 1.9 per cent.

 

[dubjohnston]

with wage deflation on the cards and higher unemployment, I can't see how property prices can continue to go up.

 

[redwing]

Whilst many other nation's struggle, Norway's sovereign wealth fund has grown so much that it makes every Norwegian citizen a 'theoretical' millionaire

Why Norwegians Are Millionaires and Americans Are Paupers

Norway's Government Pension Fund Global was created to be an intergenerational savings vehicle to secure income from a fossil fuel resource and to prevent "Dutch Disease," or the economic phenomenon when an increase in natural resources leads to a decline in other sectors like manufacturing or agriculture, explains Maduell.

The sovereign wealth fund is integrated into Norway's fiscal budget: 4 percent of the fund's assets can be spent each year by the government. Unlike the Alaska Permanent Fund, no dividends are paid out each year to its citizens.

"The rest of the money accumulates in the sovereign wealth fund, which is why it is so large today," Maduell said.

Oil and gas are financial drivers for many of the sovereign funds in the world. Norway happens to be the seventh largest oil exporter.

After Norway, the country with the second-largest sovereign wealth fund is Saudi Arabia with over $675 billion, followed by the Abu Dhabi, United Arab Emirates with $627 billion, according to the Sovereign Wealth Fund Institute. Alaska has one of the highest sovereign wealth funds of the U.S. states with about $47 billion.

 

[euro73]

I thought The Daily Reckoning & PPP were commodities bulls and property bears, so it was interesting to read the below and their ad's for Phil Andersons real estate cycles

An Epic Mining Boom?and We Blew it

Having completely missed the opportunity to invest mining profits in a sovereign fund, a second chance called LNG may well have presented itself. Meh...What odds of any Australian politician having the most fundamental business acumen to try and get it right the second time around? Buckleys and none, I would think.

 

[redwing]

I guess the answer to "what happens if commodity prices suddenly collapse' is coming to play

 

[knightm]

I guess the answer to "what happens if commodity prices suddenly collapse' is coming to play

Yeah except it was more gradual, and less sudden. Price declines have been real though.

 

[pinkboy]

Seems the Chilean Government was smart.

Wonder what else is good there?

pinkboy

 

[redwing]

Re: Australia, Commodities and Luck

"Australia has run out of luck."

That is the blunt assessment of one of world's leading market strategists, Gerard Minack.

Mr Minack - the former global head of developed market strategy for Wall Street giant Morgan Stanley - says, with Australia's once-in-a-century commodity boom (unsurprisingly) reversing, there is a serious risk of a recession in 2015.

Now running his own boutique advisory firm for large global institutional investors, Mr Minack puts the chance of an Australian recession at around 40 per cent, although it becomes his base case scenario if the leading indicators of employment deteriorate.

"Under almost any scenario the outlook is for a lower Australian dollar, lower interest rates and under-performing equities," he argued.

"If there is a recession expect sharp outright losses in equities, notably banks, and significant falls in house prices."

 

[MTR]

Silly me, I never thought making money in good or bad times had anything to do with luck

 

[redwing]

Silly me, I never thought making money in good or bad times had anything to do with luck

I think I was lucky to be born in Australia rather than the Congo

 

[redwing]

Reserve Bank governor Glenn Stevens says we must invest to survive mining downturn

Reserve Bank governor Glenn Stevens says he believes Australia will survive the winding down of the mining investment boom without a serious downturn, but we will need to do things such as invest in quality public infrastructure to give us the "best chance" of doing so.

Speaking at the American Chamber of Commerce in Australia on Friday, Mr Stevens said the global backdrop was less supportive to Australia than it had been some years ago, with falling terms of trade and declining mining investment having a negative effect on incomes and government revenues.

But the ongoing economic recovery in the United States was favourable for Australia, and it should not be underestimated, he said.

It may support Australia's much-needed economic adjustment to the end of the mining investment boom.

Cont...

 

[NedKelly]

No one is sure there is a real economic recovery in the United States. But Glen is hardly likely to say that to the American Chamber of Commerce in Australia.

 

[Hooray]

No one is sure there is a real economic recovery in the United States. But Glen is hardly likely to say that to the American Chamber of Commerce in Australia.

Why not? The rba doesnt need american support.