The European Debt Crisis looms as the biggest threat to global economic stability let alone recovery after the GFC. However most Australians mistakenly think it will not have a major impact here. As David Koch (Channel 7 News) said, “Don’t underestimate this crisis, it could be a fatal mistake.” At Fusion we tend to agree with this. Portugal, Ireland, Spain, Greece, Italy and now there are some concerns over Germany the biggest economy in the Euro Zone. The Storm is coming and you need to secure a safe harbour!
16 Dec – See the AFR article on Banks told to prepare for the worst
First Greece and now Italy has serious problems to service their $2.6 Trillion Debt (That’s $2,600,000,000,000) which is 120% of the size of their entire economy. The new austerity measures include a freeze on pensions and public service wages, a surcharge on high income earners, their GST being increased to 21%. Greece has a $1.9 Trillion Debt yet the entire European Stability Fund is only $1.3 Trillion, way too small to make much of an impact.
A European sovereign debt default could sink both Europe and the US back into recession, reducing demand for goods made in China and reducing China’s need for Australian resources. Our sharemarket will also be affected and many Australians will see their Superannuation eroded unless they take control and manage their affairs more closely.
Here is a summary of the recent economic data:
1. Global Commodity price risk due to low demand by US & EURO
2. China’s production is expected to be significantly impacted
3. Australia will feel the effects due to 1) & 2) above
4. Global Banking systems will falter because of excessive debts
5. Recovery will be a slow grind which can take 10 years or more affecting pre-retirees Super benefits
6. Super valuations will be severely affected across the board as a result of their share market exposure
It’s a great feeling at Fusion that we continue to add significant value in the SMSF space having protected our clients’ Super investments, especially in recent times when financial markets continue to experience volatility and uncertainty. Some say the markets will turn around in the future while other reliable sources say it will take over 10 years for a recovery in some major economies. To grow a portfolio in this market requires a laser sharp focus and the ability to react quickly, one of the reasons many of our clients opt for Individually Managed Accounts where we actively trade a share portfolio on their behalf.
Now don’t go off and make drastic changes without getting proper advice. That’s equally disastrous. But if you wish to protect your wealth and future prosperity of your family in these uncertain economic times you should contact us on 1300 038 746 for an obligation free review of your investments.