New Website Launched
We are proud to announce the launch of our new Bridgewater AFS Website. It contains a great deal of Investment and Financial Planning information.
We trust you will find of interest and of assistance in planning your financial future. Please feel free to log on to the site on a regular basis for updates and news articles at www.bridgewaterafs.com.au
Seeing Your Financial Adviser
John will be visiting the Cairns and Townville region during the third week of November. If you're in the area and would like to catch up please call the office and we will make an appointment.
Finally, we would like to remind those self-managed superannuation funds we administer to keep sending in your statements. This will enable Asavia Super Solutions to keep your records up to date and compliant.
Beth Perkins
We need more power cuts - Baby Boomers and the Ageing Population!
Lester Wills
We are all aware of the fact that the population of much of the world is ageing. This has come about due to the fact that the mortality rate has fallen significantly, life expectancy has increased markedly and the birth rate has fallen dramatically.
As a result, Baby Boomers now represent more than 20% of Australia's population. They account for approximately 25% of all spending, more than a quarter of all consumption, virtually 40% of all total wealth and well over half of all financial assets.
Several milestones regarding the Baby Boomers are rapidly are approaching. In 2012 large numbers of this group will attain the age of 65. As a result, from that year, the proportion of people over 65 will grow much faster than the rest of society. In some parts of Europe such milestones have already been reached. In Germany for example there are already more people aged over 65 than there are aged below 16. That will occur in Australia sometime around 2020.
Back in 1950, the average male who retired at 65 could expect to live around 10 - 12 years in retirement, the average woman, perhaps 14 years. Today the average male is likely to face 18 - 20 years and the woman even longer.
Whilst it is a combination of these factors that has led to this situation, the single most important factor in determining future population is the total fertility rate (TFR). The TFR is the average number of babies born to women during their reproductive years. A TFR of 2.1 is considered the replacement rate; as once a TFR of a population reaches 2.1 the population will remain stable. When the TFR is greater than 2.1 a population will increase and when it is less than 2.1 a population will slowly but surely decline.
Australia's fertility birthrate is currently less than 1.8, in Europe it is below 1.6 with the lowest rate in the Ukraine at less than 1.2. However, Australia's population is still growing as immigration is having a significant impact and without it our population would be shrinking. The following illustrates this perfectly:
I found an article under the banner "Japan fertility hits record low". The article went on to explain that "Japan's fertility rate has sunk to a record low. The rate was 1.25 in 2005, down from 1.29 in 2004". Not only that, the 2005 rate was the lowest since the government began keeping records in 1947. As a result, Japan is likely to see its population shrink by up to 25% between now and 2050.
The other piece of news I found was in stark contrast and was under the banner, "Fertility rate at 26-year high". The article went on to explain that the fertility rate in the UK has hit its highest level since 1980 as more women in their late 30s and 40s have babies. The figures revealed women in the UK are having 1.87 children on average, up from 1.8 in 2005. Not only that the fertility rate in England and Wales has been rising since the all-time low in 2001 of 1.63 following an almost continuous fall since the late 1980s.
However, as you will notice, it is still below the replacement rate and what's more, experts predicted it was unlikely to keep rising as the upturn has been largely driven by increasing birth rates among older women. The highest percentage increase for any age group was for women from 35 to 39 which rose by 7% in a year. Fertility rates have also doubled for women aged 40 and over in the last 20 years.
So, not such good news after all.
Which brings me back to my title for this piece. No one should be surprised to discover that when there are prolonged power cuts, the birth rate tends to rise.....
The Chinese are Coming or Maybe Not!
John Robertson
Chinese investors are proving less reliable than we had anticipated. The presence of Chinese investors has breathed life into the Australian stock market during 2009, raised resource sector stock prices and maintained the flow of wealth which has kept the Australian economy aloft while other countries lurched into recession. In short, Chinese interests have played an important role in sustaining Australia's economic well being.
Chinese activity in the past year has been the culmination of their experiences in the prior eight or ten years. Chinese state owned enterprises had been prowling the world to access industrial raw materials for their factories and public infrastructure. Iron ore, copper and other base metals have been high on the list of targeted purchases. As their industrial needs continued to grow and new supplies were less readily available, Chinese buyers reassessed their strategies. They began to invest directly to secure the supplies that they would need.
In recent months, it seemed that any Australian mining group worthy of its place in the industry has been lining up a Chinese partner. At a time when capital markets had lost all enthusiasm for risk, the Chinese were an (albeit atheistic) godsend. They had capital, the lifeblood of the resources industry, and the encouragement of an autocratic government.
From global giant Rio Tinto to up and comer Fortescue and mining minnow Terramin the Chinese were there setting the price and making the difference between commercial success and failure. In the past few days, however, the ardour has seemed to dim. Fortescue announced that it could not finalise terms with its Chinese associate within the previously set deadline. Platinum Australia gave up and raised the capital it had been promised from local institutions rather than its reluctant Chinese partner. Lynas Corporation had to tap traditional investors in a deeply discounted $450 million raising after its Chinese benefactor backed out of their deal rather than limit its stake to 50% rather than 51%.
It is possible to read too much into these events. There are more deals going ahead than being cancelled. Nonetheless, to understand the risks attaching to this important source of national funding, we should ask some questions about what is happening behind the scenes.
- Is there someone in Beijing with his hand on the capital spigot turning it off in response to instructions?
- Have the Chinese authorities realised that the strategic urgency which had been driving their purchases is unnecessary?
- Have short term needs been reappraised in response to weaker global market conditions and rebuilding raw material inventories?
- Did some Chinese investors always retain the option of withdrawing from the deals because, quite simply, their understanding of a contractual obligation differs sharply from that among Australian businessmen?
- Are the Chinese miffed at how reluctantly parts of the Australian community have embraced their presence in the resources industry?
- Have Chinese authorities decided that Australian companies should be downgraded as investment targets in favour of companies operating in more friendly jurisdictions?
Until now, many Australian companies have had a choice between a Chinese strategic investor focused on accessing long-term output and less concerned about share prices than others, on the one hand, and a broker pushing for a 15-20% discount to make a share placement, on the other. The choice had once seemed clear-cut but is now more ambiguous.
Until the Chinese money is in a bank and counted, companies will need to be more prepared to go with the broker to reduce the risk of ending up with nothing despite the potentially dilutive impact on existing shareholders. This could create additional equity supply for local institutions and individuals but, in doing so, place some downward pressure on equity prices.
A few examples of the Chinese themselves being rebuffed may emphasize to them that they need to become more circumspect in using their own economic clout. Alternatively, they might simply go somewhere else.
Edited by Beth Perkins
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