HAUKE: There’s little down side to investing Down Under

  • Comments
  • Print

Keenan Hauke InvestingAustralians are a fun group of people with a unique and interesting take
on life.

The country started off as a dump for prisoners and other unwanted British citizens, but it has evolved into a modern-day
paradise. Where else can you get some of the world’s best weather, great beer, awesome surf and, oh yeah, a booming
economy? Down Under could be the place to be.

Australia has not been immune to the massive asset and economic disruptions of the last 10 years. Its economy is heavily
commodity-based, and the volatility in oil and gas prices hit it pretty hard. It had a few banks that galloped around the
world buying state-owned infrastructure like bridges and roads at peak prices, and those mistakes have filtered throughout
the populace to some degree. Its stock market fell more than 60 percent in the bear market that ended last March and its currency
got hammered against many other G-20 nations. Despite those problems, the country maintains the best balance sheet in the
world and its prospects remain bright.

The best long-term growth in the world is still found in Asia, and its thirst for energy and other basic needs should stay
strong for decades. Australia is in a unique position to supply much of those needs. The country has plenty of natural gas
along with some oil and plenty of land to grow the food Asia is devouring at ever-increasing rates. The best part is that
they are right next door. There are huge natural gas pipelines being built right now in Western Australia heading directly
for the Asian markets. I imagine there are some boomtowns sparking up there as we speak.

There has always been a competition around the world for money from investors. This battle is more intense today due to the
Internet and lower trade barriers. One way countries attract investors is to offer higher interest rates than other nations’.
Australia’s central bank just raised interest rates again for the fifth time over the last several months. It is now
paying 4.25 percent against the U.S. rate of 0.25 percent. An amazing difference and one Australians claim shows how strong
their economy is.

If you are looking around the world for some currency or bonds to buy, I would urge you to look at Australia. Until recently,
it was the only country in the world with zero long-term debt. That is changing a little as current political leaders who
want to stay in office are promising benefits, but it will take years before it comes anywhere near the rest of us.

The story lines up as a slam dunk, but the stock market, which is the greatest leading indicator known to man, is not putting
up a great show for Australia. Its market has done OK with a par performance with us for the last six months, but I would
expect more based on all it has going for it. You can track the market using the exchange-traded fund EWA, which looks like
it is breaking out now. I am inclined to look at it as a possible purchase on any near-term pullback.

A big stumbling block for Americans is the higher tax structure, but for Europeans, I would think this is a no-brainer. Taxes
are a little lighter than most Euro spots and the future is far better down there. If Australia ever did lower its taxes,
I think half of California would move there instantly.

I’ve never been to Australia, but it is on my list. I would like to visit while the country still has its sense of
excitement and opportunity, before the rest of the world teaches Australians about debt and reckless spending, and they join
us in the mud.•

__________

Hauke is the CEO of Samex Capital Advisors, a locally based money manager. His column appears every other week. Views
expressed here are the writer’s. Hauke can be reached at 203-3365 or at keenan@samexcapital.com.

Please enable JavaScript to view this content.

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.

Get the best of Indiana business news. ONLY $1/week Subscribe Now

Get the best of Indiana business news. ONLY $1/week Subscribe Now

Get the best of Indiana business news. ONLY $1/week Subscribe Now

Get the best of Indiana business news. ONLY $1/week Subscribe Now

Get the best of Indiana business news.

Limited-time introductory offer for new subscribers

ONLY $1/week

Cancel anytime

Subscribe Now

Already a paid subscriber? Log In

Get the best of Indiana business news.

Limited-time introductory offer for new subscribers

ONLY $1/week

Cancel anytime

Subscribe Now

Already a paid subscriber? Log In

Get the best of Indiana business news.

Limited-time introductory offer for new subscribers

ONLY $1/week

Cancel anytime

Subscribe Now

Already a paid subscriber? Log In

Get the best of Indiana business news.

Limited-time introductory offer for new subscribers

ONLY $1/week

Cancel anytime

Subscribe Now

Already a paid subscriber? Log In