Future Shock

Future Shock

Some thirty plus years ago in the 1970’s ‘Future Shock’ by Alvin Toffler was a very popular book. In fact we should go back & reread it to see how close he was to what is happening today. Certainly George Orwell and 1984 is very relevant in today’s big government knows better present. Animal Farm is also very close to the mark.

What could be some future shocks in 2010 & are we prepared for them. From our observation many here believe that the GFC has gone & life is good & let’s go back & buy more even if that means more debt.

There is plenty of future shock to come in 2010 & it’s all concerned with debt levels.T

The good old USA has a current account deficit of 1 TRILLION+ per year forever. So who is going to lend to the USA unless their rates go up. Of course with 35 million on food stamps in USA [1in 4 children & 1 in 8 adults line up at soup kitchens] that is not a desired outcome either. With unfunded liabilities of pension & health costs we read that there is a better standard of living In Haiti than USA. Rates going up in USA will force asset prices down. Let’s remember the GFC & US house prices down by 40+%.

We now read of the PIIGS. I.e. Portugal, Italy, Ireland, Greece, Spain who all have high deficits & hence need to borrow more. [Spain has an unemployment rate of 30% & a deficit of 10% of GNP]. So they are all caught between a rock of rising interest rates to attract savings & the rock of unemployment which needs small business & lower rates. If we are going to travel then Euro land could be good value as the Euro heads down. We will watch with interest.

Is Australia any different? Gail @ Westpac AGM warns of higher interest rates. Our client today is suggesting 10% on his mortgage. Wayne is swanning around big spending to win the headlines with no recession stories. The RBA is suggesting enough is enough & raising rates. What if the RBA rate does go higher by another 1% or 2%?

Barnaby is suggesting that even Queensland is tottering & hence the asset sales & increasing state taxes to reduce debt levels. Queensland will need to borrow & just another entity needing a ‘swag’ of money. Why should you [the government] pay for my health & education costs?

Hence the cushion for the 2010 future shock is still the same- a strategy to reduce the personal debt levels.
We only heard today of a family with 3 boys each parent just losing their job. Saving, perhaps built up as equity, helps for a period of readjustment. This can only be done with the right strategy which also requires discipline.

We also advised clients today not to be sucked in by the 50% tax break on various business deductions available from the government. They are only going to buy what they can’t afford to service. Of course these ‘assets’ say cars & computers are worth 50% or less in 2-3 years. Why buy in the first place.

Of course they will get different advice from the bank that will of course say yes & now see the loan arranger or advisers who will increase your loans. And of course servicing it & living & the stress that goes with it is your problem because the bank has made the sale. It is the wrong advice in most cases. What is good for the bank or government is generally not good for you.

We are here to provide advice & that means it what you need to hear & not what you want to hear. Our active wealth strategy may save you from future shock

Welcome to call on 07 3848 1088 or email or visit our websites.


John McAuliffe