The Crumbling Greenback

With the price of gold soaring past US$940 and yet an another drop in US interest rates (by 0.5%) overnight, you know the US dollar is heading lower. This makes other currencies like the Australian and NZ dollars appreciate even more. Here are some interesting events demonstrating the fall of the once mighty greenback:

-The Taj Mahal, one of the world's seven wonders, welcomes about 2.5 million visitors each year--provided they don't try to buy tickets with US dollars. India's most popular shrine announced in November that it would stop accepting the plunging U.S. currency and take only rupees.

- Brazilian supermodel Gisele (pictured right, courtesy of dklimke) and other entertainers are reportedly refusing US dollar based payments and asking instead for payments in Euro's.

- Asian and Persian Gulf nations are concerned that the flight from the dollar is feeding on itself and may spur a crisis of confidence. Kuwait abandoned a dollar peg in May due to its weak buying power. South Korea's central bank in November urged shipbuilders to issue invoices in won, the country's currency, and take out more hedging policies to guard against the weakened dollar.

- Many economists are predicting that the century of Asia has arrived, and that US and other European countries economic and currency strength will continue to weaken. In the next 10 years there may come a time when the US dollar is no longer the world reserve currency, further exacerbating its fall.

So with a persistent weak US dollar, make sure review and reduce your investments that generate most of their revenue from the US (you can get higher returns elsewhere) and plan a shopping trip to America in the near future - things are very cheap here, relatively speaking.

Parts of this article were sourced from Bloomberg.com

Monkeys Everywhere - Financial Trickery!

Here's a funny joke I received the other day, which really does sum up legal scams in financial markets all over the world.

A man offered to buy monkeys from a village.

The villagers, seeing that there were many monkeys around, went out to the forest and started catching them.

The man bought thousands at Rs 10 and as supply started to diminish, the villagers stopped their effort.

He further announced that he would now buy at Rs 20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer rate increased to Rs 25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at Rs 50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.

In the absence of the man, the assistant told the villagers. Look at all these monkeys in the big cage that the man has collected. I will sell them to you at Rs 35 and when the man returns from the city, you can sell it to him for Rs 50."

The villagers combined their savings and bought all the monkeys.

Then they never saw the man nor his assistant, only monkeys everywhere! WELCOME TO THE INDIAN STOCK MARKET!!!!!!
------------

Made me laugh. Though the above could easily be applied to some of the private equity/investment bank deals in developed markets lately where re-floated companies have tanked after going public, yet the private equity fat cats and their advising investment banks have walked away with large profits leaving investors who bought in the IPO with large losses. I myself have suffered a similar fate with Dyno Nobel (DXL) which I bought during its IPO for $2.69 and now wallows around the $2 mark. Guess which millionaire factory investment bank brokered that IPO?

Photo Courtesy MarkNick

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Happy Australia Day - Australian Statistics

With another Australia day weekend past us, it is always interesting to know what is happening in and around Australia, what is changing and future trends. In fact for some of my financial analysis I look at past and future trends to try and gauge the impact of various macroeconomic issues (eg age demographics shows an ageing population, which suggest superannuation companies like AMP can benefit from this trend). It is also just interesting to see what is happening in Australia. The best site for this is the Australian Bureau of Statistics (ABS) website which has tons of useful statistics. Best of all, it is all free - thanks to our taxes!

Here are some national statistics you should be aware of:

- Australian Population : 21,194,703 (1.02% of world population). Projected population by 2100 : between 22.4 and 43.5 million. 7%–10% of the population is expected to be over 85 yrs old by 2101!

- Number or employed Australians is 10,588,500, with unemployment rate at a historically low 4.2%.

- In the 12 months to June 2004, (last survey point) Australian households spent an average of $893 each week on goods and services. I would estimate that is closer to $1000 now given inflation and strength of our economy. How does your weekly spending compare to the average household?

- Full-time adult ordinary time earnings rose by 5.2% for males and 4.8% for females in the twelve months to August 2007. So at your next pay review, use these figures to tell your boss that your pay should be greater than the average! Looks like men not only get paid more, their pay goes up more.....

- At the end of the March quarter 2007, there were 6.43 million active Internet subscribers in Australia. - 33% were still using dial-up connections. In South Korea and Japan, the figure is less than 1% using dial-up. Australia needs to catch up here and move everyone to broadband to really leverage the Internet.

- There were 498,800 short-term visitor arrivals to Australia and 429,900 short-term resident departures from Australia during November 2007. When travellers equal 5% of the population, you can see why the Airports are so busy. Macquarie Airports (MAP) anyone?

You can even get statistics on beer and wine consumption trends at this site. That's where all the media channels primarily get their information from. Feel free to comment on this post by clicking here.

You may have also noticed I have got a new header on my site - what do you think? click here to comment on it. Also, thanks to Neerav Bhatt from the Road Less Travelled Blog for permission to use the Sydney Harbour picture in the header. Check out the other great photos and articles on his blog which I read regularly.

American Stimulus Plan....delaying the inevitable

The US government announced one-time tax rebates to pump about $150 billion into the economy this year and perhaps stave off the first recession since 2001. About two-thirds of the tax relief would go out in rebate checks to 117 million families beginning in May 2008. Businesses would get $50 billion in incentives to invest in new plants and equipment. Basically, Individual taxpayers would get up to $600 in rebates, working couples $1,200 and those with children an additional $300 per child. Businesses can write off 50% of purchases of capital equipment

"This package will lead to higher consumer spending and increased business investment," Bush said in hailing the agreement.

Or will this just delay the recession? The government is trying to help, but as history as shown markets are complex and fiscal policy (government driven) has temporary and limited effect. Hey, given I am working in the US, I am not complaining too much as I get a slice of the rebates. Doesn't make me want to run out and buy stocks anytime soon though.

Do you think Australia will get such tax breaks if the economy tanks? I think not. Click Here to comment.

5 Easy Ways to Save Money

If one of your New Year's resolutions is to save money, you're probably preparing yourself for a long year of penny pinching and bargain hunting. But saving more doesn't have to be such hard work. Here's five easy ways I have found to put more money in the bank no matter how much you make. 1. Set up automatic deposits into a high interest savings account. Direct deposit or payroll deduction is the ultimate method of painless saving because you don't have to do anything -- money just automatically moves into your savings account. Don't skip this step if you can't save much -- even $10 a week can add up quickly. And to make sure this money stays in savings, stash your savings in an account at a bank that's not convenient to reach. Forgo the ATM card to make it even more difficult to withdraw funds. 2. Give yourself a goal. Working toward a goal can keep you motivated. So figure out how much money you could realistically save each month and use that as your goal. Keep track of your progress throughout the year, and even challenge yourself by increasing your savings goals if you find that you're hitting the mark without too much trouble. 3. Save the loose change. Try making a game out of saving. Team up with your partner or a friend to see who can save more in pocket change in a month. You will be amazed how much those coins add up to every year. 4. Save reimbursements. If you get reimbursed for travel or other work related expenses, consider saving those reimbursements when you receive them rather than treating them like a windfall. (Unless, of course, you charged the expenses on a credit card, in which case you should use the reimbursement to pay off your credit card.) 5. Save your raise or any other windfall. If you get a raise this year, make sure that at least half of it goes right into your Super or another savings account. You're already used to living on your current salary, so it shouldn't be too difficult. Do the same with a tax refund or cash gift.

For even more money saving tips and ideas there is a new website that is gaining a lot of popularity amongst its users and other personal finances blogs. It is called Simple Savings and contains hundreds of tips and ideas to save money. It is for Australian, New Zealand and US based consumers and offers the potential to save hundreds of dollars on various everyday purchases and services. Check out the various free stuff (tip sheets etc) that are available on the website. You can sign up for their email newsletter if you want regular updates and more detailed information. Also currently available is a 2008 savings calendar which you can download for free. So for many more local saving money tips, check out the website by clicking here

Meltdown, but don't panic and sit tight.

The S&P/ASX200 index lost 393.6 points to close at 5186.8 (down 7.3%), the lowest point in two years, while the All Ordinaries was smashed by 408.9 points to end at 5222. This was the biggest drop since the October 1987 crash and the fourth worst day in history. Panic selling gripped the market and a number of traders were desperately selling.

Back in the states, I was shocked when I checked the market figures in the morning. My portfolio of shares, already battered from the falls since the new year, were down over 10% yesterday. All my gains for 2007 were wiped out! I am sure a lot of investors were in a similar position and not very happy. I had sold some shares a week ago, shares that I thought would not make it through a severe downturn, but even the "safe" shares that I held like Woolworths, AMP and Macquarie Airports were smashed.

So what I am going to do? Nothing. That's right, for me the best option is to ride out this severe downturn as I believe the stocks I hold will recover in the long term. I am fortunate that I don't need the cash right now nor have a margin loan so I can sit through this period of volatility. I do think shares will rebound in the next 6 months and once things stabilize there will be an excellent buying opportunity for some of our top companies.

Why do I think this?

1. A US recession and global slowdown has been factored into the stock prices, hence the large share prices drop over the last few weeks. I think the drop has gone too far, but that's what happens when a feeling of pessimism and panic set in.

2. US and other reserve banks (in conjunction with governments) have started taking action. Just today, the US reserve dropped its official interest rates by 0.75% in an out-of-session move in response to the deterioration of US and global financial markets. This is one of the few times the US reserve bank has acted out of session and with such a large cut. I think this will also hold off the Reserve Bank of Australia's proposed rate hike and may in fact result in a rate cut.

3. Global growth is still intact. China and India are still growing rapidly and this should buffer longer term Australian economic growth.  Australia's biggest companies like BHP and RIO make most of their money outside the US and the big 4 banks make most of their revenue domestically. So a recession in the US should not have as pronounced an effect on Australia as reflected in the share market.

4. Superannuation and Managed funds have large cash positions as they await the market weakness to subside or have liquidated their positions in the last few months. Eventually they will have to get back into the market as cash returns are very low over the long term. Once they get back into the market, the share market should rise significantly.

Unless you have to sell, sitting through this spell of market weakness is probably your best bet. This is only my opinion and everyone should make decisions based on their own unique situation. This is a terrible time to be owning shares, but this is part of investing. Markets have their cycles and we're going through a down cycle now. This is not the beginning of the end.

Don't forget to coke the car

clipped from i16.tinypic.com

This year I am looking to start the application process for B-Schools to begin my MBA program. There are so many choices out there, that it is hard to know what to pick. Also, I don’t want to stop working (I have a family to support after all) and so the best option for me is an Executive MBA. One site that I came across during my search on the web was Pepperdine University's Executive MBA Program. There is a lot of information on their website about the program, location and curriculum. Basically their EMBA is “designed for experienced managers or senior-level executives seeking skills and strategies to take their organizations to the next level.” This sounds like me. They an extensive and varied curriculum which like all good MBA programs focuses on problem-solving through peer interaction, you will learn how to lead and manage with maximum effectiveness.

I like their location as well in Northern and Southern California, which should provide a good campus life as well. Their strategic management focus and small groups is ideal for MBA programs. For a detailed overview of their curriculum, check out their website, which also includes their various EMBA options. They have a flexible program which should be great busy executives. One thing I also liked, which shows they have a strong track record, is the large alumni network. You will join the largest MBA alumni network in California of more than 30,000 professionals, including 3,600 currently leading organizations around the world as CEOs, vice presidents, and presidents.

They have a practical and real world based approach to the program. To me, having this approach – and not just a theory based program – makes this a much stronger offering and will enable me to add more value to my organization when I complete the program. This is one EMBA program worth checking out when you are doing your search for Executive MBA programs.

Confirmed - Australia least affordable nation for housing

Following on from a past post on the unaffordability of housing in Australia, a recent article in the Australian discussed the housing affordability results from a survey of 227 cities published in the 2008 Demographia study. This just confirmed that overall Australia is the least affordable country for housing and that are most of our major cities would be classified as "severely unaffordable". Here are some interesting points from the article:

- Sydney is ranked the 11th least affordable city in the international survey.

- The least affordable place to live in the world is Los Angeles, but because Australia has the most cities - 18 - in the top 50, it is the least affordable nation for housing. s

- There are no affordable markets in Australia and there are no moderately unaffordable markets. Twenty-five of the 28 markets are rated severely unaffordable.

- All of the large capital cities (Sydney, Perth, Melbourne, Brisbane and Adelaide) are rated severely unaffordable.

- Perth, ranked 19th, is almost on a par with London, which is the 18th least affordable city.

- "It's not just the big cities. This study confirms that affordability is also a problem in areas including Mandurah, the Sunshine Coast and the Gold Coast," Property Council of Australia chief executive Peter Verwer said. "It's important with these new cities that we don't make the same mistakes, which is put a ring around and them and say: no more development beyond here. That just makes prices rise.

- "On average, Australian families are forced to spend 6.1 times their entire household income to buy a typical home compared to 3.1 times in Canada and 3.6 times in the US, and that's before interest charges.

- "In Sydney, the multiple is 8.6 and Melbourne is 7.3, but it's even higher in some of Australia's fastest-growing cities, including Mandurah, (9.5), Sunshine Coast (9.3) and the Gold Coast (8.6)."

A bleak picture for those looking to buy a place. However, like all things financial everything is cyclical. What goes up, must come down. With weak equity markets, property prices will probably hold up in the short term. However, I think natural market forces (like impacts from a US recession) and government agency policy changes will drive property prices down in the medium term and make them more affordable.

Click here to post a comment on this article at Finance Viewpoint

Love, Health and Wealth = Happiness

The title of this post is my interpretation of an old Chinese proverb that talks about the ingredients of happiness. So why I am talking about this in a finance blog? Well, it is because is reflects my thoughts at the end of my holidays back home to Sydney, Australia. Here's my breakdown on the quote:

Love : This refers to Family and Friends. Having a loving family who can support you in good times and bad is extremely important. I am fortunate to have this as demonstrated during my holiday where I had plenty of "good" times thanks to my family and friends. You sometimes take your family for granted and it is only when you do not have them around for support that you realize what you are missing. In addition, spending time with close friends made the holiday especially enjoyable. Despite being away for over a year, true friends make you feel like you never left and it was great to feel part of a close group of friends. The friendly pressure to come back to Sydney was a nice sign that we were missed! I really discovered a much higher appreciation for the value, love and support from family and friends on this holiday. Thanks to everyone for making my family and I feel so welcome.

Health : Good health as everyone knows is important to enjoy life. It is only when you are not "healthy" that you realize the value of being healthy. I have had a back problem for the last month or so which restricted me from playing golf (another of my hobbies) during my visit. I had taken it for granted that I would be playing every other day, but it is only when I couldn't play because of a physical limitation that I really appreciated the value of being "healthy" to do what you want. So this year I have vowed to get healthy, get fitter and hence reduce the chances of injury. On another note, when bad health does strike unexpectedly, the value of close family and friends becomes evident through the support you get. My family was very supportive during my relatively minor back episode, but this is nothing compared to what people go through when it comes to bad health. What was really an eye opening was to meet and talk about the experience of a close family friend who had a tough battle with cancer last year. It was an inspiration to see him get through this ordeal and fight the odds. Just like family and friends, you should never take good health for granted.

Wealth : Well, this is what this blog is about. So if you want more information read past articles! Wealth is the third element because by itself it will not result in contentment or happiness, but it can help facilitate it. For example, travelling to and spending time with family and friends, having a good time, is not free – so having adequate finances to spend on one self, family and friends makes life eminently more enjoyable. Through the experiences of others and my own I have seen limitations due to finances, but I have also seen what "chasing the dollar" can result in. It is important to be financially smart and to be well-off when it comes to living, but don't forget the bigger picture and important things in life.

The order of the quote is deliberate in terms of priority, but you cannot achieve happiness until you have some balance of all three. So three cheers to these ingredients and remember to appreciate what you have and set goals for what you want to have.

What's your prediction for the Australian Dollar by June 2008 - Vote Now.

In a post a few months ago I had predicted that the $A would finish 2007 at 0.95c against the US dollar (I.e $1 Australian dollar buys 0.95 US dollars). I then went on to say that it would reach parity by Mid 2008. Well, I can admit my prediction was a bit too optimistic and the Aussie dollar finished 2007 at about 0.89c, and is currently at those levels. I didn't predict the ASX and metal price downturn that started in Mid December and is still going on. This was the biggest drag on the $A.

Anyway, I still think with interest rates set to drop in the US (to curb the recession they are expected to have) and booming growth/employment in Australia (record job numbers announced today) that the $A will continue to rise. Also looks like the RBA will have to increase interest rates to curb inflation despite the global slowdown. This will help the $A and I am still predicting parity of the two currencies by June 2008.

However, I would like to get my readers views on where the $A will finish by June 2008. I have set up a poll where with one click you can pick one of the 4 bands you think it will finish in. So click here to access Finance Viewpoint and select band in the $A poll (left pane). Look forward to seeing what the aggregate view is.

Reader Questions - Australian IT companies, UK Superannuation & NIB Shares

Here are there 3 reader questions I received over the last few weeks and responses to them. These are only opinions based on available information and should not be constituted as legal or professional advice.

Q1 : From VN: I recently read an article on stocks to watch for 2008. They talk about IT Stocks doing well in 2008. I am interested to know if you have any resources on where I can find discussions about Aussie IT Stocks. With not much access to global IT Stocks (unless you got $10000) , I would like to follow the Aussie IT companies and watch the growth and the ones to watch out for. I work in IT, it would be easier for me to decipher the"true" intentions of the org.

Answer : Click here for a list of all the publicly listed IT companies in Australia. This list is the XIJ technology sector and provides a good starting point to begin your research. I would do a a Google search for more background details on the company(s) you are interested in.

Unfortunately ASX listed IT companies Australia are relatively small and so have limited analyst or media coverage. The big IT companies are mostly multi-nationals listed in the US or Europe. However, you can find occasional free coverage of some up and coming technology companies (Oakton was recently featured) in our financial media. I have found that the Australia Criterion section, AIR and Share Cafe (links are available on the right pane of my site) do provide reviews of various IT stocks from time to time.

The other sources is paid investment newsletters like Fat Prophets, Huntleys etc that have coverage of current and upcoming IT companies. Another thing to do is keep track of upcoming technology IPO's available at asx.com .


Q2: I am moving to the UK for a few years on work. What should I do with my Australian super? Can I cash it in to take to the UK?"

Answer : A representative from Goodwin Financial Services provided the following answer :

If the person is under preservation age (55 for some but age 60 for most) and you were a resident in Australia (i.e. not on a short term, visa), the majority of funds cannot be withdrawn from the Australian System unless your super has a component called Unrestricted Non Preserved. All funds contributed since 1999 are known as preserved and cannot be withdrawn even if you were to leave the country permanently unless you were here on a short term working or holiday visa.

In most cases people have it in a Personal Super Account therefore available to be active again (receive contributions again) on their return and some funds in Australia are known as QROPS qualified (in Australia) which means when they do return they can accept their UK rollovers into them without tax penalty if transferred within the first 6 months of returning and becoming an Australian Tax resident.

Q3: If I had NIB health insurance, am I entitled to shares in their IPO?

Answer : Yes, as long as you had health insurance with them at the time of their IPO last year. You need to verify your details to receive the shares. For most people they will get between 500 to 1000 shares (worth $600 - $1200). So make sure you claim your shares and don't miss out on this "free" money. More information can be found at NIB Shareholder center.


Feel free to add to or comment on the above. I'll try to post reader QA's once a month so if you have any questions let me know and I will let you know my viewpoint.

Big Money from the Subprime mess

Well looks like it is going to be 8 down days in a row for the ASX 200 tomorrow, given the sharp fall in the Dow Jones overnight. What a terrible start to the year! It is depressing to just look at my portfolio and the red values around it.

The sub prime/credit crunch mess that started all this has been bad for most, but some traders made a killing by shorting the trend (i.e. bet that this all would happen). Here is an interesting article from the WSJ about a trader (John Paulson) who made $4 billion last year from this. Should have invested in his fund.

What a difference a year makes - 7 Changes I have noticed

After more than a year away from Sydney it has been great to be back on holidays. It is especially good to get away from the freezing winter in the states.

However, I have noticed a number of economic changes in the time I have been away. Some are good and some are not so great. For locals many of these changes have been gradual and probably slipped by unnoticed, but coming from overseas and living in a different economy the changes are definitely apparent. So here are the 7 changes I have noticed:

1. Australians are richer or at least appear to be. There is a definite feeling amongst the people I have met that they are better off and more secure financially. This is in part due to the ongoing economic boom in Australia and shortage of workers, resulting in higher salaries. Also, the stock market and property has done well boosting (on paper at least) the wealth of the average Australian.

2. Things are more expensive and I am surprised inflation here is not higher (currently 3%). This is one thing I have definitely noticed. Going out for dinner to a decent restaurant costs close to $40-$50 per person. One year ago it was closer to $30-$40. Not to mention the increase in costs in getting to the dinner (fuel) and the increased cost of parking in or near city areas. Still the food is great and the restaurants are full so musn't be affecting people too much.

3. Latte Test. I could buy a Café Latte (Coffee) for between 2.50 – 2.80 at most Sydney City Café’s. Now the average prices are around $3.00 - $3.50. Still the coffee here beats anything you can get in the states.

4. Electronics have become much cheaper thanks to the high Australian dollar and increase in competition from specialist electronic retailers like JB Hi-fi and Clive Peters. Living in the US, Flat Panel TV’s are becoming the norm, and it generally took Australia 6 months to 1 year to catch up. However, it looks like Australian's are not far behind in the consumer electronics race at all and nearly every house/hotel visited had a flat screen TV.

5. Broadband is becoming the norm. About time! Australia still lags behind the world in Broadband speeds available, but looks like in most major metros, broadband usage is the standard rather than the exception.

6. The amount of focus on water conservation and associated technologies is amazing. This is due to the drought I am sure and despite the heavy rains over the last few months, a green Sydney has not meant people have forgotten about water conservation. With droughts now in the Northern Hemisphere, Australia is providing a good model for managing water resources. Go Aussie!

7. Housing – Seems that everywhere I look a new housing or apartment development is coming up. Yet house prices (median in Sydney is now $600K!!) and rents continue to rise. While it is good to see urbanization and economic development, I wonder if a housing glut is around the corner like the one currently taking place in the states.

What do you think about the above changes? Do you agree? Are there any other changes I have missed? Feel free to comment by clicking here.

Overall, change is inevitable, and I still think Australia is one of the best places to live in the world for all it has to offer.

Save $360 just by filling on the right day

One thing I noticed when living in Sydney and which still persists during my visit back is that fuel prices vary dramatically during the week. The thing that allows you to save money with this price variability is the fact there is a clear trend. Fuel prices are the lowest on certain days, e.g. Monday and Tuesday and the highest on Wednesday in Sydney. For example, on Tuesday last week the average price of fuel at 5 fuel stations near where I am staying was $1.33. On Wednesday the average price was $1.48. The days may vary across the various capital cities, but the trend is still present.

If you manage this variability you can realize significant savings. If you are a regular commuter you will most likely fill fuel once a week. Assuming 48 working weeks in the year and an average 4D sedan with a 50 litre fuel tank, results in a saving of $360 (=$0.15*50*48) per annum. This is equivalent to a pre-tax saving (i.e. how much you need to earn) of over $550. This is a significant and easy saving which can be had with just a little discipline. If you have multiple cars in the household, the savings are even greater.

Now, you may disagree with my assumptions and figures and I realize that everyone is in a different position. However, the point I am trying to make is that there is a clear trend which you can use to your advantage with little effort. Your savings may be less than $360 if you don’t drive much, or if you are a road warrior they could be significantly more. Either way this is a really simple way to save and I can definitely think of better things to do with my $360 in savings than spending it on expensive fuel.

A good post that also talks about this phenomenon and details behind it is available at lifehacker, and refers to an Australian fuel saving website – motormouth.com.au. This site provides some good fuel tips and can provide you with the cheapest fuel prices around Australia. I haven’t used this site before, but it looks reputable and I’ll see over the next couple of weeks (while I am in Sydney) how accurate it is. It has fuel widget available (shown below) which shows the cheapest prices by region in Australia’s largest cities.

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Stock Review : Bluescope Steel (BSL) - Leveraging Strong Global Steel Demand

A Sharecafe article painted a rosy picture of the outlook for global steel demand. Some key points were:

- World steel demand to hit more than 1,450 million tonnes in 2011, which is up more than 320 million tonnes from the 2006 level of 1,134 million tonnes. Early figures indicate consumption in 2007 rose 7.1% from the 2006 level to 1,215 million tonnes, with a further 21% increase expected over the next four years.

- Asia to lead the way in terms of stronger demand, with more than 65% of the extra demand between 2006 and 2011 to come from the region driven by a 40% increase in China. Demand in Emerging economies like Africa and the Middle East is expected to rise by as much as 50%.

- The increased demand from emerging regions will offset modest growth among the more industrialised nations. The share of world consumption attributed to these regions (Western Europe and the NAFTA countries) has fallen from almost 50% in 2000 to around 33% now. On its forecasts the MEPS group expects this share to fall further to about 27% by 2011.

One stock that you can buy to leverage this demand is Australia's largest steel producer - Bluescope Steel (BSL). In fact during the recent market weakness, it is one of the few stocks that has held up well and actually gone up. Here is my pro and con summary analysis of the stock:

Pros

- Australia's biggest steel maker and has a strong market presence and influence. Is the dominant player (along with One Steel) and so has significant pricing power.
- Growing international exposure from recent acquisitions, particularly in Asia and America. This provides diversity in its earnings and ability to leverage global demand.
- Strong balance sheet and has a 5% (fully franked) dividend yield.
- Good growth outlook if the above global steel demand predictions are correct.
- PE ratio of 10 is significantly below its competitors. Provide upside to its share price.

Cons

- Has made a few US acquisition recently at good prices, but could suffer if the US economy enters into a recession. Partly protected by still strong Asian and local demand
- If Australian or Asian demand does slow significantly then the company's earnings will suffer sharply.
- Relatively New CEO (after a smooth transition) has to prove himself.

Overall, I think this stock is one to keep on your watch list and buy if it drops below $9.60. It is a stock for the medium to long term and the strong dividend should provide a nice source of passive income.

Disclosure : The author owns BSL shares.

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Bill Gates Funny Retirement Video

Love him or hate him, Bill Gates has been one of the most influential figures in the world of technology (and the richest man to boot) for the last 20 odd years. Just to show his lighter side, here is a very funny short video he presented at the 2008 CES show. Has a number of US celeberities and political characters throught the video. Who knew Bill could be funny!

Video Running time is approx 8 minutes.

Over the Holiday period I received a number of Christmas and New year cards. While this is common, what caught my eye was some of the personalized Postcards I received. It is especially nice to received cards that have a personal touch and pictures of people I have actually dealt with. I thought this would be something I should look into doing later this year when I send work related cards. I found that in Australia that there is a company called Vista Print that does this at quite a reasonable rate. You can easily configure the design or use preexisting templates. Its good to have my Holiday cards taken care of so soon!

Doom and Gloom - Stop.Review.React

"Growing fears the United States economy is slipping into recession - Dow to its worst start since the Great Depression"

With headlines like this coming from the world's largest and most influential economy it is time to take action and evaluate our investment positions. Bad news from the US has been flowing over the last 6 months, but has not had too much impact on the Australian markets. Until recently that is. NAB raised interest rates due to increases in their costs for wholesale funds arising from the subprime fallout. Other banks will soon follow suit and with increasing inflation in the Australian economy, interet rates are set to rise by 1-2% this year. The ASX 200 has also been performing very poorly this year and is down 4% since the start of the year (over 2% yesterday and more falls expected today). Normally their is always some optimism for a rebound in share prices, but things are starting to look increasingly grim fom broker and media reports I have been reading.

So what is my plan to manage the risk of a potential US and subsequent Australian downturn:

1. I currently have about a 75%/25% equities to cash allocation in my portfolio (I don't own any property). I am going to change this to a 50/50 split and to a 30/70 split if things get worse. This means selling some of my equity (stock) positions. The shares I am going to sell or reduce positions in are the most agressive and/or US focused ones. I also have a US based portfolio which is not performing too well so will looking to sell most of that down. I am not rushing to sell everything tommorow and will wait to for the right opportunity to sell as the market will still up days. However don't hold on to stocks with poor outlooks for too long in the hope you will make your money back - sometimes you have to sell for a minor loss to prevent a major loss.

2. The $A should remain in the US$0.80c - 90c range for this year. If China and India weaken a lot due to the US slowdown, then the $A could go down to 0.70c. However I don't think this is likely. Either way, if most of your portfolio is in Austalia I don't think this should be a major factor in your investment decisions.

3. Inflation due to high oil prices and increasing produce prices will mean that the value of your savings in real terms will decline. To minimize the impact of this on your investments make sure you hold most of your cash savings in a high interest account (I use ING Direct, but there are many options out there) and also choose stocks that pay a solid dividend (>4%).

4. As mentioned above, interest rates are going up. So make sure you budget for increasing home/investment loan repayments. If you have any outstanding credit card debts, make sure that these are paid off first.

5. With all the downward volatility in share prices, I think there will be some excellent opportunities to buy long term stocks at good prices, eg BHP under $30, or the big 4 banks which pay strong and reliable dividends.

Everyone has different circumstances so you need to review and react accordingly. Just don't sit there and expect things will get better in the short to medium term. Passive investing is fine if you only invest via your superannuation or have a 20yr+ investment time frame. However all other (active) investors should start reviewing their portfolios now.

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With the US in the grips of potentially its worst recession ever due to problem stemming from the credit and subprime markets, a number of consumers are struggling with high levels of household and personal debt. These financially tough times are new to a lot of people and they with