george street review - 133 issue 4

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2 GEORGE STREET REVIEW | ISSUE 133

CONTENTSCHAIR’S REPORT Jenna Wong

CAROLYN CRESWELL Johnathan Colak

WORKPLACE REALITYJames Howarth

US SHUTDOWNCourtney Olden

WOMEN IN BUSINESS EVENING

CATHERINE O’SULLIVANJenna Wong

TOP WOMEN = TOP PROFITSHelena Micheal

BLOOMBERG APTITUDE TEST

WHAT NOW? Andrew McNaught

WHAT THE FINANCEMark Johnman

WISE WORDS FROM POWERFUL WOMEN Werner Schmidt

WHAT TO MAKE OF THE MARKETS Dylan Gonzalez

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GEORGE STREET REVIEW

EDITORS:Brigette Foot

CONTRIBUTORS:Jenna WongCourtney OldenHelena MichaelKingsley AdvaniJonathan Colak

Andrew McNaughtJames Howarth Werner Schmidt Mark Johnman Dylan Gonzalez

GEORGE STREET REVIEW | ISSUE 133 3

Pty Ltd and the former CEO of Global Neuroscience Leader Sentis Pty Ltd.

Please turn to page 4 for more information on the Women in Business Evening and a profile on Chandra.

OpportunitiesBond Investment Group aims to deliver quality opportunities and experiences in order for students to excel and gain a competitive edge before launching into a career. This semester, we will continue to run the Bloomberg Aptitude Test, allowing students the opportunity to identify their strengths and weaknesses in various areas. The test allows employers to contact test-takers for an internship or full-time position and is a fantastic opportunity to get a head start in your career!

We will also be running our annual Investment Banking Competition, so for all you budding Investment Bankers keep an eye out for an incredible opportunity and an impressive prize for the winning group. Best of luck with the rest of the semester, thank you to our loyal readers and as always, remember to think BIG!

Jenna Wong Chair Bond Investment Group

Welcome to our final edition of the George Street Review for 2013. After 9 semesters on the Bond Investment Group,

this will be my final contribution as my time at Bond finally comes to an end. I have seen the group change and develop in a myriad of ways over the last three years and have had the opportunity to work with some incredible people. With every end comes a new beginning, so I would like to congratulate Courtney Olden as the incoming Chair. I am certain that she will do an incredible job with the Group.

This year, our Titans of Industry Forum gave attendees a sneak peak at Australia’s financial strategy in the current state of the economy. With Macquarie Group’s Global Head of Economics, Richard Gibbs predicting that unsettled and highly desynchronised global conditions are set to be the new normal for 2014, it will be interesting to see how policymakers and investors react in due course.

Women in Business EveningIt has been another busy year for everyone at Bond Investment Group and we have dedicated this edition to Women in Business in anticipation of our annual Women in Business Evening on Tuesday October 15.

We are thrilled to have secured a phenomenal speaker for the Evening, Ms Chandra Clements. Chandra has a list of accolades to her name including the 2013 Bronze Medallist International Executive of the Year (Business Services), she is also the Managing Director of her own company One Legacy

CHAIR’S REPORTTime to Move On

WANT TO CONTRIBUTE TO THE GSR? Please email: [email protected]

WESBITE: Please visit: bondinvestmentgroup.org

FACEBOOK:Please like us on facebook: ‘Bond Investment Group’

CONTACT US: Please email: [email protected]


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AN EVENING OF INSPIRATION AND EDUCATION!

The aim of the Women in Business Evening is to inspire the future generation of female business leaders to strive to reach their full potential. The event aims to bring together students, alumni and the wider business community to hear from inspirational speakers and explore contemporary issues facing women in the workforce today. Our inaugural Women in Business Evening was held in 2012, with keynote speaker Cynthia Whelan (CEO, Barclays Capital Australia & New Zealand).

BUILDING CONNECTIONS FOR WOMEN IN BUSINESS!

With an auxiliary aim of building connections for women in business, we encourage students, staff and industry representatives to network and socialise over the course of the evening.

This year, we are honoured to be hosting Chandra Clements as our keynote speaker.

Chandra is the 2013 Bronze Medallist International Executive of the Year (Business Services), Managing Director of her own company One Legacy Pty Ltd, the former CEO of Global Neuroscience Leader Sentis Pty Ltd, the 2012/13 Gold Stevie Female Executive of the Year for Asia, Australia and NZ, the 2012/13 Telstra Young Business Woman of the Year for Australia and the Qld Young Business Women of the year. Chandra is committed to creating great places to work, increasing global innovation, improving levels of engagement and empowerment within workforces, and helping people and organisations alike to unlock their full potential.

Chandra has worked across Australia, the Middle East, Asia, New Zealand, America, South Africa, Europe and the UK, totalling 28 countries and six industries. She is an advocate for business ethics, women’s empowerment, the need to increase female Executive representation across the globe, and the education of future leaders. Chandra loves to help people raise money for worthwhile causes and holds an Australia Day Young Citizen Award as a result. She also holds multiple awards for her local and international public speaking.

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CHANDRA CLEMENTS (Bsc (Psyc), Bbus (IR & HR), FAIM)

IN BUSINESS

Date: Tuesday 15th October Location:University Club, Bond University Time: 6-8pm


CHANDRA CLEMENTS

“ “Do one thing every day which scares you

- Eleanor Roosevelt - First Lady of The US, 1933-1945


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TSPOWERFUL WOMEN wise words from

WERNER SCHMIDT

“Passion is energy. Feel the power that comes from focusing on what excites you.” – Oprah Winfrey (Entrepreneur/Personality)

“I work really hard at trying to see the big picture and not getting stuck in ego. I believe we’re all put on this planet

for a purpose, and we all have a different purpose… When you connect with that love and that compassion, that’s

when everything unfolds.” – Ellen DeGeneres (Comedian/Personality/Philanthropist)

“I don’t believe in guilt, I believe in living on impulse as long as you never intentionally hurt another person, and

don’t judge people in your life. I think you should live completely free.”

– Angelina Jolie (Actress/Philanthropist)

“Don’t be intimidated by what you don’t know. That can be your greatest strength and ensure that you

do things differently from everyone else.” – Sara Blakely (Founder of Spanx – Worlds Youngest Female

Billionaire)


“We cannot change what we are not aware of, and once we are aware, we cannot help but change.”

– Sheryl Sandberg (COO of Facebook)

“I always did something I was a little not ready to do. I think that’s how you grow. When there’s that moment

of ‘Wow, I’m not really sure I can do this,’ and you push through those moments, that’s when you have a

breakthrough.” - Marissa Mayer (CEO of Yahoo)

Not all of us can do great things. But we can do small things with great love.”

– Mother Teresa (Philanthropist/Charity Worker)

If you are successful, it is because somewhere, sometime, someone gave you a life or an idea that started you in

the right direction. Remember also that you are indebted to life until you help some less fortunate person, just as

you were helped.” – Melinda Gates (Philanthropist)

“I’m selfish, impatient and a little insecure. I make mistakes, I am out of control and at times hard to

handle. But if you can’t handle me at my worst, then you sure as hell don’t deserve me at my best.”

- Marilyn Monroe (Model/Actress)


MS CATHERINE O’SULLIVAN BIOGRAPHYPro Vice-Chancellor, Pathways and Partnerships A highly accomplished senior executive and educator, Ms Catherine O’Sullivan has achieved more in 30 years than most. She has led an exceptional and diverse career in senior management roles in education and state and commonwealth public administration, working with indigenous communities; schools; and sporting groups. As the Pro Vice-Chancellor, Pathways and Partnerships at Bond University, Catherine is responsible for driving the strategic development and growth for Indigenous engagement, Women in Leadership, Sport, School Partnerships and Bond College.

A highly acclaimed senior executive, Catherine has been recognised for her leadership and management acumen of employment and training initiatives and her commitment to delivering education in partnership with local communities. She has won numerous awards, including the Queensland Telstra Business Woman of the Year Overall Winner (2002), Citizen of the Year for her work in the Goondiwindi community (2002) and the IPAA Queensland Public Sector Excellence Awards Overall Winner for Leadership (2009). And in amongst a hectic executive management schedule, Catherine juggles motherhood - her 18-year old daughter Bridie is studying a Bachelor of Laws at Bond University.

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1. Who has been your greatest influence?My greatest influence has been my mother as she was an inspiration in her own life, widowed at the age of 36 she raised 6 children and juggled the demands of creating a career for herself and future for each of her children.

2. What is one piece of advice you would give to 20-year old Catherine?Learn to take your talents a little more seriously.

3. What is the best advice you have received or have given that you would pass onto our readers?Know yourself, be yourself and forget yourself. I always interpret this as understanding your strengths and weaknesses, being the best you can be, leaving your ego at home.

4. What do you do in your spare time?Shopping and indulging in good food and wine….wishing I would exercise instead.

5. What is your greatest achievement?I know this sounds incredibly corny and most mothers say this but I genuinely think that the privilege of being a parent and in particular a mother to a fabulous daughter cannot be surpassed.

6. What is the best or worst decision you have made?The best decision I made was to become a high school teacher as a platform to an incredibly interesting life of career opportunities.

7. What was your dream job as a child?A hairdresser (still is my dream job)

8. What do you think is the most significant barrier to female leadership?Male leadership! It is critical that all leaders understand the value of diversity. This means people thinking, speaking, and acting in divergent ways. One of the leaders I most admire actually said he likes to deliberately surround himself with people that think differently to ensure that his leadership encompasses the breath of the people he leads.

I have always believed that every organisation is essentially about people leadership. Engaging the hearts and minds of people, underpins the success of any business. If the leadership team look and sound the same, then you will create a monoculture that does not reflect the colour and movement of life in diversity.

9. What will be the greatest challenge for the future generation of women?The greatest challenge will always be providing flexible workplaces that respond to family needs so that we can ensure equal access and opportunity for all jobs at all levels. I remember as a female high school teacher who only ever saw males as principals I really believed I would never be able to manage that job. As a female principal my leadership looked different to those of the males before me. As females we have to continually challenge our own mental models of what leadership could/would look like. We also need to realise our own potential by being the best that we can be.

10. How do you deal with pressure?I enjoy pressure as it provides an opportunity to test yourself and broaden your skillset. Life without pressure sounds very boring to me.


TOP WOMEN = TOP PROFIT$

Australian women have proceeded with jumps and bounds over the past few decades, being more educated than ever before and having an abundance of employment opportunities. Despite this fact, women representation in senior leadership positions is still severely lacking across the public and private sectors in Australia.

Currently, female Chief Executive Officer representation in Australia on the ASX200 is only a mere 3.5%, one of the lowest rates in the Western World. Despite these disappointing results, Australia has made some significant improvements with female representation at a board director level with an increase in this representation from 8.4% to 12.3% from 2010 to 2012. It is indicative that Australia still has a long way to go if they wish to achieve greater gender equality at senior levels in the workplace.

So what are the benefits of having female representation at a senior management level? Numerous studies have indicated that greater gender diversity in the workplace can lead to greater profitability. A study conducted by Credit Suisse identified that companies that had greater female board representation outperformed companies that did not and also performed better in falling markets by being less volatile. In addition, having greater female representation means that companies are able to make well-informed decisions because all issues and perspectives are equally represented in the decision-making process.

A great example of a company who has had success with a female CEO and has thrived with gender diversity in the workplace is PepsiCo. The company has been named as one of the top places where women to work and one of the best companies for multicultural women, not to mention the fact that it has been highly successful.

So why is women representation in senior positions lacking? The main barriers facing women in senior leadership positions are the balance between work and family. One particular study conducted identified that female colleagues had been forced to decide between family and career. This indicates that there still is a lack of family friendly and flexible working environments in the corporate arena.

Given Australia’s disappointing female representation on senior boards, Australia has introduced several initiatives to increase female representation. Firstly, the Australian Stock Exchange requires that companies report the number of women in senior-decision making roles, set targets and report on their progress each year. In addition, the Australian Human Rights Commission’s Gender Equality Blueprint in 2010 has pinpointed women in leadership positions as one of their key priorities.

There is an abundance of research and report to support the inherent benefits of gender diversity in the workplace and having female representation in senior management positions. Companies will see not only improvements to their bottom line but will also have a broader representation of views and issues in the workplace. Although Australia is attempting to improve their female representation in senior management positions by initiating changes, there is still much more progress that needs to be made. With female progression into top leadership positions being unsatisfactory in Australia, now is the time for Australia to make serious changes to our workplace environment to enhance our international competiveness.

HELENA MICHAEL


Usually when the average 18-year-old manages to scrape together $1,000, you might expect them to put it towards a car, or perhaps blow the lot on a trip to Bali. Not Carolyn Creswell. Unbelievably at 18, Carolyn found herself offering her life-savings to buy out her employer. “It was a small business that made home-made muesli for a few cafes and delis in and around Melbourne”, Carolyn says. “I worked there one day a week while I was at Uni, and I loved it. When the owners put the business up for sale, I thought my job would be in jeopardy so I offered them $1,000 which was initially dismissed, and then finally they took up my offer”. The subsequent growth of Carman’s is the stuff of entrepreneurial dreams. Carman’s now exports to over 32 countries. “I am not an overnight success”, Carolyn says, “I have been chipping away at this for 20 years now”. Some would disagree with Creswell’s self-assessment. Only 20 years from cottage industry to a multinational, trusted Australian brand is akin to overnight success, especially if you consider Creswell’s youth and inexperience in the beginning. Although successfully completing an Arts degree at Monash University, Creswell has had no formal business mentor or coach, nor has she done any business studies. She has learned on-the-job and believes that because she has done everything herself at one time or another for the business, she can empathise with her staff much more easily about their jobs and the hurdles they may be experiencing.

Carman’s has been named one of BRW’s Fastest

CAROLYN CRESWELL 100 Growing Companies and Carolyn has recently won the 2012 Telstra Australian Business Woman of the Year Awards, the 2009 InStyle Women of Style Awards, the 2008 Veuve Clicquot Award which is presented in 17 countries annually to honour exceptional women in business, and the winner of the 2007 Ernst & Young’s ‘Young Entrepreneur of the Year’ Award. Carolyn is a graduate member of the Australian Institute of Company Directors. She is also an active board member for Stephanie Alexander’s Kitchen Garden Foundation, which works to get kids into the garden and the kitchen, so they appreciate the origins of fresh food. Carolyn is married with four young children and prides herself on the balance she maintains between her career and her growing family.

JOHNATHAN COLAK

Carolyn’s Top 5 Tips #1:Think of the people you work with as another family, delight your customers constantly and your business will quickly thrive. #2: Have a crystal clear vision of where your business is heading and refer to it every day when decision making. #3: Write lists, prioritize and clear your inbox every day. Learn to say ‘no’ to things that are not important, so you can ‘work smarter’ rather than ‘harder’. #4: Drive it like you stole it’ – Sometimes you just have to trust your instincts, dive into the deep end and go for it! #5: Love what you do! Your passion, drive and enthusiasm will determine your business’ success.

You can see Carolyn on ‘Recipe to Riches’ every

Tuesday 7:30pm on Channel Ten


When someone asks you, “What do you do?”, and let’s face it, you will get asked this, thousands of times per year, many people blandly state, “I’m an accountant, ha-ha don’t hold that against me”, or “I’m a lawyer, don’t hold that against me”. This is a big mistake. People’s eyebrows rise, their pupils dilate and they slowly move away from you, to avoid having to talk anymore.

The ‘What do you do?’ question is a massive opportunity, so don’t waste the first five or ten years of your professional career with a bland and boring response. Don’t even waste one year.When people ask me what I do, I leap at the opportunity to make a sale or future client. In reality, no one cares what you do. They‘re asking you your occupation to see if you’re worthwhile knowing. Are you? If you’re not convinced yourself, you will never be able to convince someone else.

When I get asked what I do, I leap into a thirty second speech that I have rehearsed and refined with advertising and marketing legends:“I am a wealth manager. I help people make money and reduce their tax. I find exceptional companies, with exceptional economics and I buy them for less than their true value, to help my clients get rich or richer, whatever their goal may be.”

The usual response I get from this is, “I have some money that needs investing”, or “I hate paying so much in taxes, let’s get together to discuss this some more”. It hits them right between the eyes and they decide right then what we can do together.

Professional services are a huge opportunity. You can make millions helping people and have a great time in the process. Accounting is a great profession; I wish I was an accountant. Law is also a great profession and I’m currently adding this to my list of professional skills. Medicine, engineering, architecture are all

WORKPLACE

REALITY

great opportunities for people so inclined to love and pursue such aspects of life.

Finance is not a profession; it’s a body of knowledge. It can be a great profession if one under takes the Chartered Financial Analyst or financial planning route, but the mere study of finance at university does not allow for the immediate pursuit of professional service. To attend university and leave with anything but a profession is in my opinion a waste of valuable time.

All knowledge is great, but you do not get paid for what you know. The world is full of impoverished PHDs.

If your goal is to make money and help people, a profession is a great start. I did finance and

economics as an undergraduate. This I feel was a mistake. These were subjects

I wanted to know. My advice is to obtain a profession first and do

the things you want to know as electives.

On my first day back at Bond I was asked, “Why study law?”. My response was that investment banking is a law

based profession. With finance and economics alone, without

knowledge of the law, I think it is unlikely that one would

be successful in gaining entry to investment banking. This I believe

shocked the asker of the question. Whilst I have been successful as a result of

my undergraduate study, my path took a much different course than I had intended.

JAMES HOWARTH Wealth ManagerMathon Capital

Website: www.mathoncapital.com.au Blog: www.jrhowarth.wordpress.com

JOHNATHAN COLAK


AMERICA ERROR RECOVERY

“AMERICA” WAS NOT SHUT DOWN CORRECTLY. (Use the arrow keys to highlight your choice.)

START “AMERICA” NORMALLY

RESTART “AMERICA” WITH MORE HEALTHCARE AND NOT SO MANY

GUNS (Recommended)


The US government has shut up shop after spending a solid while bickering about whether or not to spend dollar bills on Obamacare and failing to come to an agreement.

Please explain what just happened.So what does that mean? Do US citizens just embrace anarchy? Punch a vet? Eat a bald eagle? Not quite. Essential federal employees continue to work, while the non-essential ones (close to 800,000) take a little unpaid holiday. Laws are still in effect, social security and Medicare payments continue, the US military will keep operating, US citizens still get their mail delivered. The national parks, libraries and museums are closed.

So what’s the damage? If people aren’t getting paid, they won’t spend as much money at the shops. Analysts have estimated that the shutdown will knock $300m a day off US economic output. Yikes.

This would never happen in Australia...Before you start shaking your head in bewilderment and disappointment, let’s remember that Australia had a government shutdown once too. We were locked in a budgetary squabble in 1975, where the House of Reps passed a bill to fund the government but the Senate refused to pass it unless the its outlandish demand was met because it thought the government was spending too much moola. Sounding familiar so far?

The difference between the American shutdown and ours is the ending. Our Aussie shutdown came to an end by the Governor General giving Prime Minister Gough Whitlam the sack and appointing the opposition leader as the new PM. The Senate then passed the bill and injected some cash into the government. America doesn’t have this option though, they can’t just fire Congress, hold snap elections and restart from scratch since they rejected the British monarchy a couple of centuries ago. Maybe if you ask nicely though, America, Britain will take you back?

Who is going to blink first and end this madness? The shut down is in its second week already (at the time of writing), and the world’s largest economy is just seven days away from default. Obama is staying firm on his position – he’ll negotiate on budgets and healthcare once the Republicans agree to reopen the government “because we can’t make extortion routine as part of our democracy.”

For the moment, public opinion is behind the President to hold his ground in the hope that the Republicans are rational and won’t allow the US to default.

The last 17 US shutdowns have lasted between one and 21 days so 10 days is about normal.

So we’re looking at a few options for how the shutdown could play out: either side could give in; both sides could yield a bit; or the government could default.

US

SHUTDOWN

COURTNEY OLDEN


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WHAT NOW?We’ve heard all sorts of rhetoric about the Coalition’s “Plan for Real Action”. The catch line is “Hope. Reward. Opportunity.” but it doesn’t exactly express its policies to do this, other than asking voters to rely on its history of delivering budget surpluses during the days of Howard and Costello.

At present, government spending makes up approximately 25% of our GDP so it is undoubtedly a huge driver of economic growth. Beyond this, government has an enormous influence through its framework that it provides for businesses. The Labor government used the budget in true Keynesian style to guide Australia through a turbulent global period. To date, we have been relatively unaffected and a 2.5% GDP growth is forecast.

However, with a change of government this spending, and this framework, can change. In this first edition of GSR since the Federal election, what change can we expect for our economy and business, and will it be for the better?

Free trade agreementIn 2005 negotiations began with China to formalise a Free Trade Agreement. We’re now into our 19th round of negotiations and despite the efforts of previous Coalition and Labor governments, none of them could successfully complete this. Prime Minister Abbott has self-imposed an ambitious one year deadline to achieve this. It remains to be seen whether he will be successful but this landmark agreement would surely provide this government bragging rights as diplomats and economic managers. However, it could come at a cost as in return, China wants greater freedom to purchase Australia’s agricultural land. This could cause some pretty interesting rifts between the Liberal and the National counterparts of the coalition. Watch this space.

Big shoes to fillJoe Hockey is succeeding (arguably) two of Australia’s finest Treasurers in Peter Costello and Wayne Swan and the expectations are high. Costello oversaw a period of outstanding growth, whilst Swan navigated the economy through its most testing period. The result, Swan was awarded the World’s best Treasurer in 2011 as global superpowers looked enviously at the state of our economy. Hockey is a proven Minister but his fiscal credentials have come under fire recently as an “L-Plater.” He also waited until the eve of the election to announce his budget costings, which raises doubts.

ANDREW MCNAUGHT

WHAT CHANGES CAN WE EXPECT FROM THE COALITION?


WHAT NOW?WHAT CHANGES CAN WE EXPECT FROM THE COALITION?

Small businessThe government will look to dismantle the carbon tax as soon as parliament sits next. It claims that it will only cost between $80-90m but the economic cost will be far greater and compensation for the polluters could reach as high as $2 billion. In return, small businesses can expect a lower cost structure and less green tape to manage.

Abbott has declared that he wants to be remembered as an “Infrastructure Prime Minister” and the immediate method that he is employing is roads. $20 billion worth of roads Australia wide. The intention is that this will increase productivity with more efficient supply chains and less time stuck in traffic. Complementing this is a 1.5% company tax rate cut although this doesn’t seem particularly congruent with the 1.5% levy that the coalition intends to place on big companies to fund their maternity leave scheme.

ConfidenceLike it or not, businesses got the change they wanted. It showed with business confidence spiking to a 3 ½ year high in September. Even if it is isn’t the case, many companies believe that their interests will be better served by a coalition and they are now more willing to spend, borrow, hire and conduct business. This is a highly qualitative factor but its value can’t be ignored.

The signposts that the Coalition has placed are promising but what remains to be seen is whether its people and its politics are good enough to make it happen. That in itself is a huge cause for concern.


WHAT THE FINANCE?Ten weird financial buzzwords explained.

1 BAGEL LAND. If a stock or other asset is headed toward bagel land or is approaching $0 (resembling the hole in the

middle of a bagel), investors generally feel that the security is nearly worthless. In such cases, a company may be nearing bankruptcy or facing major solvency issues. While returning from bagel land is possible, the likelihood that equity investors will lose their entire stakes in the company becomes very high.

2 BLACK/WHITE/GREY/YELLOW KNIGHT. Black knights attempt hostile takeovers of target firms. A white knight

can help the target firm by offering terms for a friendly takeover. A grey knight is a company that offers an unsolicited bid, while another company is negotiating a takeover with the target firm. A yellow knight is a company that initiated a hostile takeover, but changes tactics during the process to negotiate on more agreeable terms.

3 CHAMPAGNE STOCK. A champagne stock is typically one that has at least doubled or tripled in value in a relatively

short period, creating a huge profit for the company’s shareholders. The term is used because individuals who hold such

stocks will often order an expensive bottle of champagne to celebrate their

good fortune.

4 CYBER MONDAY. An expression used in

online retailing to describe the Monday following U.S. Thanksgiving weekend. There are a couple of theories

as to why online sales increase on Cyber Monday, although some debate whether all retailers experience the same trend. One theory suggests that people see items in the shopping malls over the weekend and wait until Monday to buy them online, where they can compare prices, avoid lines and/or take advantage of free shipping or other offers. Another theory states that people have faster internet connections at work and, therefore, wait until then to make online purchases.

5 FAT CAT. A slang word used to describe executives who earn what many believe to be unreasonably high salaries and

bonuses. These top executives also receive generous pensions and retirement packages, consisting of extra compensation not available to other company employees.

6 MINI MADOFF. Financial con men that are accused of or have committed crimes similar to those of Bernard Madoff.

Mini Madoffs tend to orchestrate ponzi or pyramid schemes that

are similar in nature to Bernard Madoff’s, but are smaller in size and notoriety. In a ponzi scheme, like Bernard Madoff’s, investors are promised unusually high returns and early investors receive these returns from the money invested by new investors. The cycle of illegitimate returns can continue until the pool of investors fails to grow. With all schemes of this nature, eventually the infusion of new money dries up and the hoax unravels.

7 OBAMANOMICS. A buzzword used to describe the economic philosophies of United States President Barack

Obama. While Obamanomics encompasses all of President Obama’s policies and proposals, it is often used to refer primarily to his philosophy that the rich should pay their fair share of taxes, or what his detractors derisively call the “redistribution of wealth”.

8 PAC-MAN DEFENCE. A defensive tactic used by a targeted firm in a hostile takeover situation. In a Pac-Man

defence, the target firm turns around and tries to acquire the other company that has made the hostile takeover attempt. This term comes from the Pac-Man video game. In the game, once Pac-Man eats a power pellet he is able to turn around and eat the ghosts that are chasing after him in the maze.

9 SANTA CLAUS RALLY. A surge in the price of stocks that often occurs in the week between Christmas and New

Year’s Day. There are numerous explanations for the Santa Claus Rally phenomenon, including tax considerations,

happiness around Wall Street, people investing their Christmas

bonuses and the f a c t

that the pessimists are usually

on vacation this week.

10 ZOMBIES. Companies that continue to operate even though they

are insolvent or near bankruptcy. Zombies often become casualties to the high costs associated with certain operations, such as research and development. Most analysts expect zombie companies to be unable to meet their financial obligations.


CPA

WHAT TO MAKE OF THE MARKETS?

2013! A year not completed, but one that feels like three years completed within the financial world. We have seen markets collapse, deals passed and comedic shows performed within the United States of America. Yet, relatively speaking, the past ten months saw great returns for many markets around the world.

Taking a look at the Australian Markets, it has been fantastic news, as the SP/ASX 200 has seen a 16.13% increase over the last ten months, and the All Ordinaries has increased by 15.9%. With regards to the shares themselves, many have seen 20% plus gain – shares are no longer dirt cheap. Technically speaking, this year has seen the shares pass through two phases, with the third yet to be experienced. The first phase was driven by the cheap unwinding valuations (mainly real-estate; domestically and globally), the second phase (which we are currently at the tail of ) has been driven by stronger profits – in particular the basic blue chip shares i.e. Woolworths, Telstra and the big-four banks. Finally, the third phase, also known as the blow-off stage, will occur as investor confidence becomes excessive.

A snapshot at stocks, the best performers for the year have been telecommunications – in particular M2 Telecommunications –, and the energy sector – AGL and Origin have been the major players.

US This year we have seen the US economy look to become more self-sustained on the back of a housing recovery, the shale gas and oil boom and stronger profits driving improved business investment and jobs. Looking at the main markets, the Dow Jones Index has improved 13.6% since January this year and the Nasdaq has seen a 17.7% increase. Despite this, the impasse between Democrats and Republicans continues to adversely impact the US economy, with both sides seemingly no closer to a budget deal. Up to 800,000 federal workers have been have been at home without pay since October 1.

International Monetary Fund chief Christine Lagarde has warned that a failure to raise the debt ceiling could ´´very seriously damage´´ the global economy. At the same time a US Treasury report declared that a failure to raise the debt ceiling could potentially lead to a default with a ´´catastrophic effect´´ on financial markets and economic growth. Signs are worrying, as

as judgement day (October 17) approaches.

EUROPE A gradual improvement in business conditions suggests a return to modest growth in Europe. The FTSE has shown the lowest growth of all markets this year, with only a 7.63% increase since January. This is to be expected, as this region was the most affected by the GFC.

ASIA The big news out of Asia has been Japan’s reincarnation, with their rise from more than two decades of stagnation leaving investors with nothing but green to show for the year. Japan’s Nikkei has jumped more than 38% for the year and added another 0.2% this past week to become one of the world’s best performing stock indices. The signs are promising for Japan’s goals of steady economic growth and inflation.

However, the major economy, China has showed signs this year that their growth engine is encountering more drag. The Shanghai Stock Exchange, China’s largest stock exchange and the sixth largest stock market in the world is

giving signs that we should expect it to continue to decline for at least the next year, probably longer, with it recording further losses this week to finish 40 points lower than it was at the start of the week.

DYLAN GONZALEZ

Bond Investment Group.

george street review - 133 issue 4

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