G'day

This week's Fodder starts and ends on a positive note. Amid all the doom and gloom about markets, volatility and sluggish economic growth, there is one positive - falling oil prices. Mohammed El-Erian explains why low oil prices will be with us a fair while yet. Then GaveKal's Anatole Kaletsky explains that oil is the go-to indicator for the real message about global economic growth. On all recent occasions when the oil price has halved, faster global growth has followed, he shows.

Unfortunately, that's not likely to stop Australia falling into recession, according to Longview Economics' Chris Watling. In his recent top rated Conference 2015 presentation, Chris argues that Australia's economy is displaying all four characteristics that define bubbles and recession is beckoning.

On a different note, in the highest rated presentation of Conference, Professor Moshe Milevsky explains why and how we must include clients' most valuable asset - their human capital - in portfolios. No doubt, 10 years from now, this will be accepted as best practice but it's revolutionary (and challenging) now.

Independent funds analyst, Michael Furey, looks at how "real return" funds have fared against their promise. For big targets like the popular CPI+5%, he argues that real return investing hasn't been too real at all.

Finally, back on a (cautiously) positive note, we end with JP Morgan Asset Management's recent white paper on Europe's prospects, on a country by country basis. For all the negatives around Greece, a broad-based economic expansion appears to be underway in most of Europe.

All the best for another great weekend's learning! - Graham

P.S. We're continuing to populate the Resources Kit from Conference 2015 (Crossroads - Dilemmas | Decisions) so you can "Attend" the 40 sessions online.

LATEST...

Oil's new normal
Oil prices have headed south again. The current decline also has an important demand dimension. A sustained price recovery will not occur quickly...
Mohamed El-Erian, Allianz | Opinion

The real message from oil
If you want to understand falling oil prices, forget Chinese consumption and focus on Middle East production. And, if you want to understand the world economy, forget about stock markets - focus on the fact that cheap oil always boosts global growth.
Anatole Kaletsky, GaveKal | Opinion

Crossroads... The Australian economy – recession or “she’ll be right”?
Australia – recession is beckoning
Special one-off factors have underpinned Australia's record expansion. The key to forecasting the next Australian recession lies in forecasting the end of cheap money – if correct, then clearly a major investment crossroad for all Australian residents and investors.
Chris Watling, Longview Economics | Resources
* Rated 2nd of 40 presentations by Conference 2015 delegates

Crossroads... Retirement income certainty - is it an oxymoron?
A client's life is a mix of stocks & bonds - allocate around it
It is time to properly account for risk characteristics of client’s most valuable asset - their human capital. This isn’t easy to implement and places practitioners in a difficult situation...
Prof Moshe Milevsky | Resources
* Rated 1st of 40 presentations by Conference 2015 delegates

Real Return funds…lacking reality?
Real return investing isn't too real at all, with big targets like CPI+5%. It is an objective that is not strongly linked to the reality of investment markets - so prepare for another investment approach aligned with disappointment.
Michael Furey, Delta Research & Advisory | Opinion

Europe's recovery - from caterpillar to butterfly?
The progress we have seen in European markets in 2015 is sustainable over the next 12 months. But, investors should temper return expectations and anticipate continued market volatility.
JP Morgan Asset Management | White Paper

RECENTLY...

The true causes of this week's global market correction
This week's market correction is long overdue. It is also not over because the true underlying problems are much more serious than the commonly cited causes. And, at last, markets are teaching Xi and Li who in fact is the boss.
Dr Woody Brock, SED | Opinion

Time to think contrarian
I don't believe this week's market corrections portend the ultimate downturn in this investment cycle. The endgame will take a few more years. Here are some market, currency and China milestones to watch for to check this view is correct.
Dr Robert Gay,  Fenwick Advisers | Opinion

What to worry about and what not to in China
Fears that China's economy is teetering on the edge of collapse are exaggerated. But it is slowing. And, as it continues, the slowdown will inevitably highlight problems that until now have remained largely hidden, triggering fresh bouts of market volatility..
Andrew Batson, Gavekal | Opinion

Is China done?
Many have taken an alarmist approach to the recent sell-off in China's A sharemarket, declaring the bubble has definitely burst. The question was well put by one of our key clients who in late June asked, "Is China Done?".
Dominic McCormick, Select Asset Management | Opinion

Crossroads... The global outlook - lower for longer, or higher is here?
Markets are mispricing the future level of interest rates
With the Fed signalling its intention to raise rates, there is great disagreement about the quantum of the rises ahead. Rates are likely to go higher than most expect over the next three years - and the risk of a material equity market correction is elevated.
Hamish Douglass, Magellan Financial Group | Resources

Crossroads... The global outlook - lower for longer, or higher is here?
"Lower for longer" is the view of the bulls, not the bears
The view that markets will go on tolerating lower interest rates for far longer is the more benign, market friendly (almost bullish) outlook than the common thinking that higher interest rates will be good.
Brett Lewthwaite, Macquarie Investment Management | Resources

Crossroads... The global outlook - lower for longer, or higher is here?
Crossroad: The global outlook - lower for longer, or higher is here?
Our panel debated the contrasting views of Hamish Douglass and Brett Lewthwaite on this crossroad - that global growth and rates are likely to go higher than most expect over the next three years vs that markets will go on tolerating lower interest rates for far longer.
Resources

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