Good riddance to 2008, a year that will not be remembered fondly, but it will be remembered. Whilst the signs were there, no-one was clever enough to foresee the extent of the difficulties or the way they would compound on each other – we certainly weren't. This collapse was different. It is common for the banking sector to suffer as a result of recession but rare for the banking sector to cause one. Share market valuations were not excessive and while deep value was difficult to find, there was no hint that underlying value was about to be ignored. Just as it is impossible to predict irrational greed, it is equally impossible to predict irrational fear. Caution was insufficient, concern would have been better and downright fear would have been right on the money.
In building a report about investment ideas we look to the future. No-one can say what will happen in the short term, but we can focus on selecting investments that will likely benefit from long term trends. In order to benefit, however, the investments need to survive and such was the extent of the credit crisis, most of the ideas we putforward last year have suffered. Some ideas and companies have failed completely, along with a number of the biggest names in world finance.
Taking a long term view, there is only one likely destination – the world and investment markets will return to normal as they have in the past. This does not happen by magic. After a period of disruption, life always returns to normal. Only the nature and thelength of the journey to normality are unknown.
Australia's ageing population and the threat of climate change, are very real trends that have not changed since 2007 and will define our economic landscape well into the future.
The most likely outcome is that for much of 2009 the world economy will struggle and western economies will likely contract before recovery begins later in the year. This view is predicted on the assumption that the concerted efforts of government and regulators, of a magnitude and breadth not seen since the 1940's, will be successful in averting disaster.
Our 10 best investment ideas for 2009 are as follows:
Australian industrial shares – Go for the top shelf
Energy, food, but maybe not resources (yet)
Banks and financial services
Recapitalised real estate investment trusts (previously known as Listed Property Trusts)
Infrastructure – The builders
Generational change – technology drivers are demographic
Watch out for the long term interest rate increases
The coming year is unlikely to be as difficult as 2008, but then few years will ever be. At some point the situation will improve and this is likely to start in 2009. There is tremendous fundamental value in investment markets and those who stay the course will be rewarded. However, patience will likely be required.
If you would like more information on the above, or would like to speak to a WHK Financial Planning Representative, please don't hesitate to contact us using the details on the opposite page.
Any advice contained in this document is general advice based on the investment merits of the security or issuer alone without taking into account any person's investment objectives, financial situation and particular needs.
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