Yeah, like I said, I had trouble getting to sleep last night and I was thinking of the email I sent to you yesterday.
Have you read it?
If not, do it now. You'll be a lot smarter at the end of it.
But, I had a lot more to write about. I did that at 3am this morning.
Let me start with a story…
Geoff is a doctor – a surgeon in the emergency room at St Vincent's. We went out for coffee the other day and as we're sitting there he says, “Hang on a sec. I'm just going to duck around the corner for a ciggie.”
“A ciggie?!? I thought you'd doctors would know better than that!”
“Oh, everyone in E.R smokes,” he said. “It's part of the territory.”
What? I'm not about to let it drop so I quiz him about it. He reckons that working in ER shifts your perspective. You see so many people come in, young people who've treated their bodies like yogalates temples, who, by some twist of fate, just ended up in the wrong car, at the wrong time and the wrong place.
“You start thinking that it's all just a crazy game of chance. So what difference does it make if you smoke or not.”
“But if you look at the stats, cigarettes are a much bigger killer than cars.”
He laughs. “Yeah I know that. Still, it's what I see everyday. It's my reality.”
Our experiences become the lens through which we view the world outside. And I see investors fall into this trap time and time again.
They think they're doing the right thing. They read everything they can about the market, follow the news religiously, scan the internet like an inspector looking for Iraqi weapons.
And what always happens? They end up convinced that the economy is about to implode, and the only safe place for their money is in a nuclear fallout shelter somewhere in the Victorian alps.
Good news never made a paper sell. Remember that. The media is entirely geared towards digging up doom and gloom stories to spook and startle investors.
And if you're devouring as much ‘news' as you can, you'll end up like Geoff, convinced that the world is random and cruel and on the brink of collapse.
I've been there myself.
So today, I want to show you eight charts that are essential to understanding the big picture of where we're at and where we're going to put the so-called news in perspective.
1. Aussie GDP
This chart shows Australia's GDP, tracking along very nicely at a bit under 4 percent for 2012, and holding momentum of about 3.5 percent over the next couple of years, according to IMF forecasts.
These are solid growth numbers. 3-4 percent is a very solid outcome for a mature economy like Australia's.
Importantly it also shows how well we did through the GFC. While the OECD average fell by a little under 4 percent, Australia grew by a little under 2 percent.
We outperformed the world by 6 percent, and we're still going strong.
2. Contributions to GDP
A lot has been made of the ‘two-speed' economy, with some people saying that without the mining boom, we'd be stuffed.
This graph shows that isn't true. While the non-mining economy hasn't been growing as strongly as it did in the decade up to 2004, it is still growing. If there is an imbalance, it is because the mining sector boom has been so huge, not because the rest of the economy's gone backwards.
3. Unemployment rate
Australia's unemployment rate, at 5.4 percent, and remaining below 6 percent through the IMF forecast range, is very healthy. It's a little bit higher than what it was pre-GFC, but it's still well below figures record at the beginning of the millennium – and that was during the dot-com boom!
4. Net Debt
This one, on net government debt, has been doing the rounds on Facebook, but it checks out. The data comes from the IMF.
I'm not getting into any political side taking, but the broad point is undeniable – Australia is a long, long way from having “crisis” levels of debt (c.f Greek's 180% of GDP). No one outside of Australia is at all concerned about Australian government debt (in fact foreigners can't get enough of it, which is one of the reasons why the dollar's so high.)
5. Aussie Debt over the long run
There has been a pick up in government debt in recent years, but by historical standards, it's barely a blip on the radar.
And text-book economic management says you should save when times are good, spend when times are bad – to dampen the swings of the business cycle. If you're not allowing room to spend into something like the GFC, then you're pretty much ruling out any government intervention in the economy, at any time.
I know there's a lot of noise about this coming into the election, but really, it's a non issue. There are much bigger debates that we should be having.
6. Credit and Banking Assets
Some people worry about the expansion of Aussie household debt in recent years, and that it might be feeding into a credit bubble – like we saw in Ireland and Iceland.
This graph shows that we're a long way from that. Ireland's debt to GDP ratio was four times higher than ours at the peak, and there's a lot of other countries between us and there.
7. Bad loans and Bank bailouts
This graphic, from The Surgery, makes the point that the Australian financial sector fared very well through the GFC. The government put in place a Committed Liquidity Fund as a safety net, but no public money was used to bail out Aussie banks.
Compare this with failures and bailouts in the US, which reached 24 percent of total bank assets, and 29 percent in the UK, and 18 percent in China.
8. The Asian Century
And what about the future? Well, I think this chart, also from The Surgery, hits the nail on the head. It looks at how much of world GDP is located within a 6,000 mile radius of Australia.
It was about 15 percent in 1950, 33 percent in 2012, and is projected to be 66 percent by 2050.
The balance of the global economy is shifting. Our location (and isolation) used to work against us. Now it is firmly in our favour.
So is your investment glass half full or half empty?
There you have. This is the glass's half-full view of the world. The Australian economy is tracking well, all the triggers of collapse that you'd usually look for are absent, no debt crisis, no banking crisis, and the Asian century promises an exciting future.
No doom and gloom, no burning buildings, no riots in the streets.
Which is why it isn't ‘news'.