How so many directors keep getting roles with less than stellar performance.

As a competent, good Director, he is mystified.

Shhh…

Of course no-one in the community says this publicly. I am a member of peak body AICD, and never heard it there! Truth begone! Top-down folk there.

With some Directors, often I get the feeling they want to investigate, interrogate you, and pick your brains. That’s if they can’t find out whose son you are.

It’s like university lecturers. Publicly, they will not tell you many are pressured to accept students who have not acquired necessary skills. That was struck from an ACS report on the ICT industry in 2006.

Not an Australian disease alone, off-balance sheet disasters, and debt-buyouts are rubber stamped by the professional board class.

Boards need to assert more influence on the managerial class. Michael West makes the point, as well.

Ians?

Catherine Deveny, called them Ians, yesterday.

The public service is infested with these types, we need them.

Innovators typically can’t fill out forms, do admin or accounting. Ad agency people I met are lucky to have matching socks. But maybe that’s intentional!

When someone does something innovative, Ians add all their costs, projections and overhead. And outsource it. And pretty soon it’s too expensive to do.

Often they tend to be judgmental of innovation. Or not cautious enough, employing outdated metrics to measure it. Cost, cost, cost is the cry.

The old needs the young to renew. And innovators with judgment. To make revenue from opportunity.

Eddington’s $20 Billion of Waste.

I have read quite a bit on Eddington’s plan for Melbourne.

In short, a couple of $10 billion tunnels.

As usual, rather than fixing infrastructure and managing it well, we just throw some big numbers at it. We perhaps, shock, need competent management of what we have, within a new paradigm of innovation.

I saw Eddington speak, and found there was a lack of intellectual depth in his arguments.

West mentions Eddington’s other interests. Eddington, for his mettle, was director of failing Allco. Allco, and David Coe, tried to take over Qantas.

Had Qantas been taken over Qantas would now be in serious trouble, given the proposed debt load. Where are the questions in and of the Qantas board?

Perhaps it’s the ‘don’t rock the boat’ survival instinct for boards?

And I don’t – unlike a few people – believe diversity, or gender, have much to do with it. Margaret Jackson supported the Qantas Allco bid.

Common sense & ethics are gender neutral.

Yet right now, Eddington is being made king in deciding Australia’s infrastructure priorities.

And, I can’t picture Sir Rod trying to get to the work on the Glen Waverley line.

Money, mo’ money.

Out of touch.

Problem is, the idea that you have to spend huge sums of money is a typical idiotic bureaucratic and corporate response.

The collapse of ABC and others, pricks the balloon of some of the glowing analysts reports sitting in shelves everywhere. How efficient ABC was at childcare? When profits came from chicanery of property development zero-shuffling. Allco. Centro.

Analysts writing those reports told retirees to ‘hold-tight’ as stocks fell.

Opportunity, instead.

In the 2thinknow view, there are so many opportunities. Not for costs, but profits.

All that is needed is a new understanding of business.

Instead of looking at sustainability as a cost look at it as a revenue opportunity.

Transport is a money-losing venture because the Government are incompetent. The managers are incompetent. And everyone is hamstrung.

But there are opportunities, 2thinknow can identify for profitability.

But it requires dropping the mind-set of costs. Put Garnaut in unimaginative too. Yes let’s all eat roo meat. That’s realistic!!

Action Arnold.

California is getting on with the job building Australian solar plants that can’t be built here, because everybody is busy paying Deveny’s Ians to write reports.

I would like to see some intelligent opportunity from Rudd not more committees, waffling academics and usual corporate suspects. I am still waiting.

Incompetence of MBA.

When I was at AGSM I was struck by how incompetent & inaccurate the MBA program was. The curriculum represents the negatives of business, advising virtually all free market, no regulation, debt-finance.

In only one example, one of my senior classmates from HP in the IT class felt the lecturer had no practical concept of IT, despite his ‘experience’. The lecturer is now fortunately shoving pins into corporations consulting for a big firm, where his theory will be useless.

AGSM, a pre-eminent as a business school teaches dogma, not how to think.

The great lecturers there, Alex Malley & Grant Foster, were great in the practical aspects of their subjects. They had real commercial experience.

It’s time we stopped praising academic waffling mediocrity, or corporate climbers, because they just have an imprimatur.

It’s an opportunity for an ideas-based meritocracy. A great conversation of great ideas and great minds.

Instead?

ABC was incompetent and badly run. Turns out they had no special skills, despite analysts glowing reports.

ABC couldn’t even do their 123s of accounting, according to Julia Gillard in Question Time.

Allco was at best optimistic, at worst, fill in an adjective.

Centro was stupid & naive.

Babcock & Brown’s model has serious ethical issues.

Macquarie. Sydney airport. Toll roads. Mmm. Kaboom.

NAB is badly run, but at least they have money.

There’s more blood in the streets. Because the people running these places focussed on costs, debt and lacked operational management.

In short, did they do something? Other than zero-shuffling?

Next for Australia?

I wouldn’t be surprised to see Qantas forced to merge. And Macquarie in trouble.

And I suggest we look at high-debt business that have low-margins. Kaboom.

Interestingly Time must lose money on its flagship. No adverts.

Business is done by doing. Let’s thin the ranks of the executive dead wood and managerial pretenders who do nothing but manage-up.

We need those Ians, but let’s not pretend they have original ideas. Nor vision.

We get in to trouble when we believe our corporate PR.

Australians who want to get ahead, go offshore, that’s the message.

Meritocracy of ideas is a thought whose time has come.

Nobody has admitted it yet. The decline trend is well in its death spiral, the day Iemma resigned. There is no rebirth without change.

“The Governor may…..remove from his office, or suspend from the exercise of the same, any person exercising any office, or place, in the State…”
– The Royal Instructions, Clause 10

NSW, Doomed.

NSW politicians have destroyed Australia’s most prosperous state.

Largely run by factional hacks, and political plotters, NSW is now only a political state.

No one is professionally managing the basics. Economy, jobs, investment, urban planning or infrastructure. No forward-thinking.

Certainly, no innovation in Government.

NSW was under-performing before the boom. And now is in a truly disastrous state. Under-performance will be magnified by entering a severe national downturn.

There is a mid-term threat of NSW facing dire financial defaults.

Competence.

The Mini-Budget represented an incompetent handling of the crisis. It is the exact opposite of economic medicine needed.

Raising taxes & no stimulus was largely how Hoover brought on the Great Depression, according to many economists.

Read Sydney’s respected Ross Gittins here, describing the mini-budget as a “sham”and “will in fact make things worse… produced not because of the downturn, but in spite of it.”

The NSW Government is acting against the long-term interests of its citizens. When leading economists tell them what they are doing is incompetent, why are they doing it?

Self-interest.

Simple. The Rees Government is acting to save its political skin. It’s purely factional. And political. It is no longer acting as a part of the Government. These representatives are not in the interests of those who democratically elected them.

History has shown that once a decline has commenced, even unprecedented economic butchery to arrest a declining credit rating will not cause the decline to halt.

If NSW was a company the management (and board) would have been sacked & replaced. For acting against shareholders interests.

Opportunity.

The 2thinknow View is that NSW is in terminal decline short to mid-term. NSW probably actually hit bottom in late 2006. But the current government is delaying a turnaround.

NSW has an educated hard-working workforce. High profile overseas. Economic infrastructure that requires maintenance. Resources. Assets.

NSW has better assets than other Australian states that are outperforming it. Under-performing the index, in business terms, means the management have failed.

A competent business manager could pull NSW out of its current mess.

Not these stooges…

But to lead NSW out of the crisis it is in, and to prevent a further deepening of the crisis and crash into disaster, the government MUST be replaced.

If the crisis turns even slightly worse, then having the NSW government led by it’s current pack of self-serving idiots is a disaster.

These political hacks & plotters led the state into this mess. They cannot lead the state clear of this mess.

The 2thinknow View is that the Carr-Iemma-Rees team  have mismanaged the state of NSW. Decisions have been taken against the long-term interest of the State’s people.

How?

The Governor of NSW, Professor Marie Bashir, can dismiss the NSW government. As the representative of the Queen in Australia.

Dismissal has been done before. In fact, examples of the dismissal are taught in the NSW school curriculum.

“In the exercise of the powers and authorities vested in him, the Governor shall be guided by the advice of the Executive Council, but if in any case he shall see sufficient cause to dissent from the opinion of the said Council, he may act in the exercise of his said powers and authorities in opposition to the opinion of the Council, reporting the matter to Us without delay, with the reasons for his so acting.”
– The Royal Instructions, Clause 6

“The Governor may…..remove from his office, or suspend from the exercise of the same, any person exercising any office, or place, in the State…”
– Clause 10

Cause to Dissent.

There are numerous legal grounds available for dismissal.

If the Governor, Prof Bashir, believes the NSW government is acting incompetently and against the interest of the State then she should act to dismiss.

In 1932 the Governor waited until the crisis had turned into a depression to dismiss Jack Lang.

Unprecedented Under-Performance

The 2thinknow View is that the NSW Government is damaging the State of NSW.

And acting as a magnifier on any economic downturn.

The Governor can wait and see.

But 2010 elections can cost a lot of NSW citizens jobs and homes.

The key point is the NSW government is acting against its citizens economic interest in a time of crisis. The NSW government is preserving power at all costs.

Dismissal should be used, is intended to be used, when politicians act against the interest of their citizens. It is a matter of time. And losses.

What do you think, how far gone do you think NSW is?

A patch/hatchet job to make up for years of fundamental neglect.

The 3 Amigos: Carr, Iemma, Costa.

Neglect under Bob Carr (especially), Morris Iemma & on to Nathan Rees.OK, Nathan hasn’t had a chance yet.

A special word goes to the spectacularly self-aggrandising Michael Costa. Costa managed to leave fingerprints 3 inches deep on several disastrous portfolios.

Infrastructure.

In an economic & property boom, no funding was spent on:

1) Transport

2) Schools

3) Infrastructure

4) Urban Planning

5) Roads

6) Energy infrastructure.

Wasted opportunity.

Property Developers.

Instead, the whole process was outsourced to private sector, property developers.

The NSW State Government were warned by their own public service, about this.

I worked for the NSW State government & professionally heard incidents that made me cringe in NSW. I won’t speak about specifics.

In general, the public service system is politicised, privatised and ideologically broken.

There are frustrated intelligent individuals. But I can say the system they work in is grindingly inefficient. It kills innovation.

T actually be competent inside the NSW system is in many departments is unrewarding. Sometimes, impossible.

Ahoy, HMAS NSW.

Good people in Government don’t rock the boat.

And this boat is a sinking ship.

Fortunately, Sydney hit rock bottom in 2006 & 2007, and is now in the nascent stage of rebuilding.

The key issue is ethics. The government is focussed on personal interest, and money; not on the long-term good of the State. NSW could do with a few good Catholic Democrats.

And less left-wing atheist capitalists, who have no faith in their own ideology of the Left.

But as usual, recovery will require local innovation.

The NSW government don’t deserve their jobs.  They are good for nothing.

If there was a case for oversight of politicians, this is it.

Do you live in NSW? Have you seen it’s recent decline… ?

Manufacturing skills, infrastructure & cars are important.

Rudd’s $6 Billion on the Amex.

The Rudd plan is broadly positive, however it has a large cost. $6 billion to be precise.

One of the problems with Government intervention in the economy is that Governments see costs, and not opportunities. Costs not revenue increase.

It’s unimaginative.

But when I’ve worked for Government that’s what I normally find. Lack of imagination.

Most farsighted ideas will be killed. Or implemented in a ham-fisted all-thumbs way.

An Alternate View.

Governments can instead create the systems for innovation & implementation of business ideas. The tools for entrepreneurs.

Government supplies the infrastructure, sets the rules of the game and umpires.

2thinknow would call that close to the California model. (see some slides here on these concepts). It works.

Our neighbours.

The 2thinknow view is that a healthy manufacturing industry is important to Australia places in Asia, and the world. Cars are a part of this. But only part.

Countries like China use barriers to trade, and protect their industry with subsidised inputs. Tariffs are currently unfashionable. But tariffs are another tool, whereas some countries use dumping or sheer size to enforce their strategic interest.

Cutting the tariff further smacks of naivety.

Opportunity for manufacturing.

The most pressing issue is with Brumby-Bracks Victoria, and Carr-Iemma-Rees NSW.
As 2thinknow pointed out earlier today, these Governments refuse to support local manufacturing of trains & trams despite problems with imported rolling stock.

The Australian Industry Group are making similar calls, according to The Age, where 2thinknow is also quoted.

It seems typical Kosky-Brumby out-of-date dogma to source further infrastructure from overseas, when companies like Bombardier need local purchasing.

Most importantly, China does this. Germany & the EU do this.

Opportunity & profit is often ‘low-hanging fruit’. Manufacturing your own infrastructure has many economic & skilling benefits. In addition, the skill base makes it easier to repair, rather than relying on overseas suppliers.

Most of the top 10 economies do this. Despite the rhetoric.

Local innovation.

And best of all, local firms can profit in local regional towns in regional Victoria, NSW & South Australia.

The 2thinknow view is that there are opportunities to profit from local innovation, not just subsidise it.

And create winners.

Local innovation, in a broader framework of global idea exchange, is the superior strategy based on trends. We make the case for Local Innovation here.

Innovation can create revenue. Not costs.

But tell that to politicians.

Consistently the Victorian Government in Melbourne, & NSW Government in Sydney import trains & trams rolling stock.

According to The Age, $3.6 Billion dollars of import orders in the last 18 months.

For citizens.

The imported trains & trams often have problem working in different climates, on different rails, and with different power requirments.

Furthermore, the seats in imported trams provide less effective seating, being often too small for the Australian market.

For local manufacturing.

If the Governments do not support local manufacturing then the work will go entirely offshore.The loss of crucial skills & capital is one issue.

More importantly, as an industry manufacturing produces something essential; financial engineering does not.

Like the Carr-Iemma government, Brumby prefers to constantly advertise on TV. The money expended on advertising annually could be applied to actually delivering services.

The 2thinknow view is that trains & trams should be made in Australia. Victoria. South Australia. NSW. Local industry becoming local innovators.

Crisis, Buy Local.

Rather than wasteful money stimulation packages, how about taking money earmarked for imports & replacing them with local product?

Trends haven’t yet moved towards local manufacturing, but a nascent cycle is due.

Let us know your thoughts…

Long-time readers will know that I have been predicting this fall for some time. Friends will recall I have held the belief that Australian property has been strongly overvalued in recent years.

Why will house prices fall in Australia?

Property in Australia is globally overvalued. It is simply more expensive to purchase or rent an equivalent home here than most other cities globally. And there really is a large expanse of unoccupied Australia, which does not support high prices.

Visits even to pricey-property cities like Paris, Vienna and Boston highlight how little any of us receive for our property dollars in most Australian capitals.

There is a disconnect between market value and how much of the price is comprised of:

a) intrinsic value

b) market distortions like capital gain taxes or stamp duty

c) speculative value

d) area/city value

The reality is that speculative component is too strong, and a tax regime in Australia that favors asset purchases over wage income has enhanced the upward rise.

Which is what I have been saying for the last 4-5 years about Sydney, and last 2-3 years about Melbourne. The Howard government created these artificial over-valuations, encouraging speculation, via tax, fiscal and monetary policy influence.

No Real Shortage of property or land…

But, in the end, fundamentally there is no real shortage of housing.

There is instead a shortage of available housing, with landlords or property sellers behaving in a manner that does not fit with ‘economically rational’ behavior.

One example of economically irrational behavior

Instead of selling or leasing at the market price many landlords and vendors are waiting for very long periods of time to sell a home or investment property.

One investment property vendor waited 18 months to achieve an extra $40,000.

So many land-owners are achieving their above market rates by waiting. They have wealth to wait. Something of a luxury with falling share market values and rising credit costs, so this may not continue.

But the average property investor is emotional about the price, and does not want to accept anything less than ‘top-of-the-cycle-price’ so he/she is holding back, but will have to release soon.

Land Supply

There is a land-release issue with around 50% of Australian land still owned by the Crown, i.e. the Queen of England! But this primarily affects large homes in suburban fringes, and new estates.

Much Australian suburban land is “controlled release” by property developers, building in waves.

Release of land would have the effect of lowering prices in poorer or new suburbs only if it was developed. It’s what Australians call ‘mcMansions’.

However, there is a shortage of builders. And prices in estate areas are contracting mostly, it is established areas mainly that contribute to growth, where infrastructure such as schools and transport are part of the pricing.

Prior to the IMF report, 2thinknow nascent trends identified a downward trend in property prices.

An earlier and fuller 2thinknow analysis of the probable fall in property prices is here.

When your house price falls, what to do.

Well inevitably, good properties in good areas will one day catch up to the peaks of today’s market. Who knows whether that will be 5, 7 or 15 years.

And in lesser, new suburbs the value increase when the State Governments finally create infrastructure such as trains, trams, roads, hospitals, schools and services in those areas. Despite a slow approach to infrastructure, this will improve eventually.

So long-termers, or those not highly leveraged, may simply sit tight, even wait for the trough and a drop in demand for builders, then renovate at lower cost.

Those who are highly leveraged, and behind on payments, as is being reported in the Australian news would be best to sell now, before 2 things happen:

a) more forced sales further depress prices (likely to hit poor suburbs first)

b) baby-boomers retiring sell assets to cover drops in their superannuation (likely to hit established suburbs over the short to mid-term).

The rest would need to assess whether they want to sell their home and whether a loss of 25% of value, depending on area, may actually cause them to have negative equity.

Further share market falls may contribute to and magnify losses, and it seems the Australian market has ventured into over-optimism, when our dependence on foreign credit is very high.

The big concern is there is property being ‘held back’. A major risk is that the land supply being held back by reluctant vendors, retirees, baby boomers, developers and government will be released suddenly into a market where credit has tightened.

Also, there is the characteristics of an aging population changing as baby boomers retire.

Specific 2thinknow predictions for major Australian Capital Cities

It seems highly probably, based on these factors, that within the window between now and 2011, properties in excess of $300,000 will fall by a margin of 20-25%.

I see little upside in an over-valued market for property until after 2011.

Intrinsically, the property worth is not as high as the prices being paid, and until incomes catch-up to asset prices a fall is nearly inevitable — if indeed this is a free market.

Any political fixes to keep house prices elevated; will exacerbate supply-side infrastructure issues. Smart government will let the house prices fall, for if they don’t the inevitable economic effects will be worse.

Banking Analysts sit on the fence

Most analysts are fence-sitting on this. As was said recently, hope is not a strategy, and one cannot take rising prices with excitement then say that falling prices are a mistake.

If Australian property prices fall, this will assist with housing affordability; a major issue limiting Australia in terms of innovation.

Falling prices will also see the Australian population turn back to labor and productivity as the only true long-term drivers of economic growth, and away from an obsession with speculative asset-driven wealth.

In nearby Melbourne, it is easy to have a good-size quality meal in small café venues. There are Melbourne city venues where you can get decent lunch specials of classics like veal for $10 or $15 a plate (about 6-8 EUROs), the latter with a glass of wine.

Prego, in Melbourne CBD on Collins St, has one such special.

In Sydney, in contrast, you may end up in eating in food court or an over priced café, where food is served with chips, salads drizzled with some oil and everything served with some jus concoction.

Well there is a Sydney special, few outsiders know about. Underneath Grace Bros, in the Pitt St Mall, there is a foodcourt. A giant barn of Asian re-heated food, with some takewaway burgers, in the far right corner is a secret.

Tonias Kitchen, Meat and vegetables

Although the ubiquitous pomme-frites (or as we say chips) abound, all meals can be served with vegetables or salad.

Garlic Steak, Chicken Romano (tomatoes & olives), Veal meatballs, the schnitzel standby, or various pasta. The food is not oily, over-cooked or over fussy. It is not big plate small meal, it is basic good quality home cooking that men walk miles for.

Vegetables include potatoes, pumpkin, broccoli and cauliflower. Salads are more diverse, and normally popular with female customers.

The food is served in hot trays yes, some recipes appear East European, possibly Hungarian or Romanian adapted to Australian Italian-style taste.

Service is fast, and with the central venue, this means you can seat and eat in 20 minutes, should you desire to do so. I have been eating here for 4+ years, and have never had a slow meal.

Unlike many venues in Sydney with good food, this venue has space, plenty of seating, real cutlery and no stools or ‘grunge’ like many Thai venues.

They are, as is rarer for Sydney cafes, licensed – so you can have a drink. A nice Peroni Nastro Azzuro beer goes down a treat with this hearty food.

Bottom Line

My recommendation is garlic steak, extra serve of vegetables, cracked pepper on top, washed down with Peroni. Or an organic Fruit juice mixture.

The meal is only $11.50 Australian (around 7 EURO), plus drinks. The quality is consistent.

Tonia’s Kitchen is a safe choice, with consistent quality, healthy options and fast clean service. It’s a bargain. And if you feel like chips you can have them.

New York? Paris? Boston? Vienna?

In general, better value than Sydney, as has been reported in numerous media stories today. Property prices are at 7.5 average median earnings.

And we’re not talking Park Avenue property here, more like Queens.

Sydney suburban Bondi is a sleazy second rate suburb, not comparable to Park Avenue. Yet property is priced in the millions of dollars.

There seems little doubt that Australian capitals of Sydney, Melbourne, Brisbane and Perth property are over-valued.

In Paris I have seen beautiful Left Bank apartments for under USD $1,000,000. And Paris is in the centre of Europe.

Distance is the main reason Australian property is overvalued

Sydney is 13 hours minimum travel time from the world’s super power.

West Coast USA, is close, New York further, and most other major US cities are a long way in travel time from Sydney.

Europe is more than 21 hours flying time ex-Sydney to a hub, let alone a final destination.

How can a small city of 3-4 million people, as in Sydney and Melbourne’s case, have properties worth more than a capital of finance, influence and culture?

In short – Sydney, has a harbour, but no culture. (As a librarian observed to me privately, Sydney has beautiful libraries that no one uses… )

New York has a culture, and a CBD like Manhattan which is a 130+ streets long, and has the variety of Tribeca, Park Ave, Fifth Ave, Wall St, Upper East Side, Chinatown, Bowery & Little Italy…

Further property standards in Sydney are far lower than most global capitals when ranked on construction, industry standards or materials according to European and American tradespeople I have met.

There is no cultural comparison between an uppish Sydney and New York or Paris, or the top European capitals…

Unless …

Property price rises was part of the far-Right’s debt-filled asset bubble. No labor for income, just asset interest. No need to work, just wait for your house price to rise.

Many Australians have been doing just that.

Now they don’t want to accept a falling market. Asset bubbles don’t last.

But as property prices start to fall over coming months and beyond, those same people will cry ‘foul’.

Why must Australian property prices fall ?

There is no intrinsic (other than manufactured) shortage of land in Australia.

Australia is a long way from European capitals, and European population. And the USA and Canada. And even much of Asia.

London prices are high, but the small UK aisle holds many times more people than Australia, and is a comfortable 7 hours from New York, and a commuter 2 hours flight from most of Europe.

In a global world, it is only Australians who value their property so highly.

Property is Australia’s tulip bubble.

But once the foreign debt Australia is borrowing dries up, then property prices will plummet.

Intrinsic value is what prices reflect, long-term.

And Australian property and cultural exchange is not as globally valuable or easy as New York or Paris. Or London.

Full stop.

US sliding into a chasm

The debate on whether the US economy is in recession or not seems to be over.

The bear is among us.

For months people have been standing up that the US economy is not as bad as first believed. The US recession was predicted by 2thinknow in December 2007, using our innovation models.

Before Christmas, many were sitting on the fence. I called this recession, in this journal, in straightforward terms before Goldman Sachs, or UN made their announcements.

Of course many on Wall Street probably held off so they could sell their shares before this inevitable slide. I don’t have much respect for investment bankers. Most are not the best human beings, and would detonate their suburb for a profit.

I still remember the brokers after 9/11 shorting stocks or gambling commodities on Wall Street, near the blast zone. Humanity should matter more than a stock profit.

So 2thinknow innovation models for predicting change waves have been a success in this instance as well. The models succeed because they are based on trend analysis, not on a complex raft of financial models. Trends once identified are rarely wrong.

And thanks to the unmitigated economic disaster of the current White House (yes, they are those you must thank for this US recession) then the recession will appear to ease, clear up, then deepen.

The US recession is due to ignoring basics such as manufacturing inside the USA. And silly subsidies that create market distortions. This US government has been ‘bamboozled’ by economic wizardry, and has forgot common sense like controlling food supply and foreign ownership.

The Bush-Cheney administration has been less than ethical in the view of many, dangerous in the view of a few, short-term in anyone’s view and in the end, economically disastrous judged on hard figures. The worst economic administration since the 1920s.

Australia, a people with their head in the sand

Many Australians love a ‘punt’ or a gamble. They tend to be overly optimistic, as a nation. Thinking they can ‘beat the odds’. Whether horse-racing, elections or stock-markets ‘irrational optimism’ means that

2thinknow innovation models on 2nd October 2007 predicted the Australian November election result within a 1% margin.

But more importantly, earlier than any the myriad of positive voices, 5 months ago, 2thinknow called the current Australian stock market slide.

In fact, further than that, I was able to pick the ‘top’ of the market. In November. Then it has slid ever since.

Very few economic predictors in the media were able to do so. I do not know of a single one voice. If you successfully did make the same prediction, post a link to the article in the comments below.

In fact, in Australia, ‘blue chip’ bank and insurance stocks have been punished the most. If you had sold Australian stocks when I stated was the probable best time, you would be up to 20% better off than selling now.

Reality is, personally I would still sell, unless I was a long-termist.

Whilst I can’t provide financial advice, my belief, based on innovation trend models, is that the floor of 5300 on the All Ordinaries Australian index will bottom out. The ‘real’ floor for the Index is 4500, as I predicted in early January.

My earlier predictions of an April – September ‘economic shock’ event still stand. This shock may be offshore/global, but is likely to impact and reinfore the downward stock-market trend.

Once again, on behalf of 2thinknow, my predictions were ahead of any major analyst group or journalists that I’m aware of. Correct me if you know otherwise.

Where’s Australia going?

It’s irrational optimism to think that the falling Australian Stock market will rise again. That’s irrational optimism.

Banking stocks are falling. This will worsen, as banks use this opportunity to do more ‘dirty work’ like the ABC Learning takeover.

The bellwether hope of the remaining optimists, resource stocks will fall in the next 2-3 years, as China overheats. This is based on 2thinknow Nascent Trend Analysis, something that is a new technique pioneered by myself.

The fact is the US market has been surviving on a last gasp of Bill Clinton’s administration, and over-enthusiastic consumer confidence. Borrowing for consumption is not wise.

When the US situation worsens, and because the Bush administration have failed by following economic free marketeers, China and Australia will stall. Chinese consumption is not ready to overtake US enthusiasm for consumption yet.

In Melbourne, some friends with investments have been saying since October I have been wrong to predict a fall in the stock market. These people forget that stock prices are tied to fundamentals. And that fundamentals are subject to at least 12 to 24 months lag time in most cases.

In Sydney, a close friend thought I was crazy in October to predict the slide. But the trend is there, and that trend is now clearly all ‘downward’, excepting a few ‘winners’.

The Bottom Line for US & Australia

It’s all about China. and resources. And that, with economic shock events, and a fundamental change that is very long term shift away from consumerist society at the nascent stage, means the stock market will fall.

My suggestion is that you those of you who elected John Howard and George Bush in 2004 are to blame. Dual conservative leaders who preferred the ‘gas pedal’ to the brake pedal on the world economy. Blair, also formed the gang of 3.

If they had allowed a ‘pause’ in the economy to prevent overheating, if they had regulated instead of de-regulated, if they had thought about aggregate supply and capacity… we wouldn’t have the coming recession. The mistakes are myriad.

Their Iraq War, their false ideas on oil economics, and too much reliance on free marketeer theorists from right-wing think tanks has created an economic rut.

Blame Howard, Bush, Blair and their advisors. You need to brake into a corner, notdrive on through.

But for now get a spade, and dig in. The bear is loose.

The next event will be a big shock in April, or shortly thereafter, most likely.

This will be co-chaired in April by Kevin Rudd, and the Vice-Chancellor of Melbourne University, Glyn Davis. Attendees will pay their way and give their time.

Davis is one of the men who 2thinknow believe are a true innovator in the university system in Australia, with the Melbourne model.

First the Positives of National Conversation

Conversation is a good thing. For a long while this is what many people yearned for under Howard. Including me, and many others I spoke with.

The key thing is that it is a chance to input into the national debate.

The sense of ‘exclusion’ explained to me globally in my travels, is why the ‘Global Innovation Conversation’ was started in the first instance.

The main purpose of 2thinknow is a global exchange of ideas and innovation across cultures, so as to create positive social change.

To a large extent Rudd’s dialogue is an Australian conversation.

A dialogue is a method that 2thinknow strongly recommend to cities or regions looking to become innovative. In this case, Australia should learn from Germany, France, USA, Canada … and also, China, Finland, Switzerland, Korea and other nations. And it’s own citizens who represent many nationalities.

Rudd with the Zeitgeist

Rudd, as Australia’s PM, and his advisors, have the finger on the pulse here.

The main driver of disillusionment in the electorate, and democracy worldwide, has been ‘exclusion’. A sense that whatever voters do, you or I do, it doesn’t matter.

This is profitable for conservative ‘preserve-the-status-quo’ groups in society. So for those whose major, or sole, motivation is economics and profit-maximization.

But for those who see society as more a cultural exercise, disillusionment is a powerful negative.

Rudd is engaging with Australian citizens. Which can only be positive.

Possible risks

‘Closet conservatives’ have such a powerful interest in the status quo for wealth or job reasons that they will act against the national interest.

Ideas need to consider practicalities and implementation. But their needs to be a chance for the idea to grow, not be ‘cut-down’ so as to endorse (rubber stamp style), existing measures.

And at Symposiums many of the usual suspects show up, and they cut out any new or innovative ideas. The ACS Symposium in Geelong was a proto-typical example. (I chaired a session of very negative professors).

I believe Rudd and Davis want this to work, and hope they will select well. So,I hope Rudd and Davis bring in a true cross-section. Commercial. Arts. Cultural. Social. And new people.

New people bring new ideas.

It should be a positive outcome for Australians, and an example of ‘engagement democracy’ that can be applied globally.

Professionally, I believe it will work. And ‘Go Global’.