A pleasant day here on Puckle Street in Moonee Ponds. This is a suburb of Melbourne Australia. Eggs Benedict and a sunny sky. Beautiful!
Aussies are depressed. I have spoken to dozens over the last week that I have been in or near Melbourne. From senior business professionals to the man on the street. Every single one was depressed. Why?
Under the sunny skies, Australia is in deep trouble. Prices are far too high and unsustainable. Nobody can afford anything. The same Coke Zero in the US at a 7-11 costs $2.50. Here: $4.50.
Taxes are brutal. Corporate tax and capital gains are about the same as the US but income taxes and VAT are much much higher than the US and heading higher.
Perhaps even more important is the current collapse in China. The government says that the economy is growing by 7.5% but private measures of the Chinese economy suggest it is only 2.5%. That is a significant recession by Chinese standards.
But it is a near disaster for the Australian economy. Australia has become a major provider of commodities, particularly iron ore and copper to China. Slower Chinese growth means really slow growth in Australia.
But the biggest depression in Australia is the depression of the people. You see, when people are depressed they tend to hunker down. They don't invest or hire new people. The economy stagnates as a result.
That is exactly what I am looking for in the future.
As a result, I'm bearish on Aussie assets such as the stock market and the Aussie dollar.