Report from Down Under

Down Under

“You know more of a road by having traveled it than by all the conjectures and descriptions in the world.”
~ William Hazlitt

By Catherine Austin Fitts

The way I understand what’s happening in the world is by getting in a car, a plane or a train and going to see for myself. I talk to people, I wander around, I check out what’s happening on the streets and in the shops. I breathe in what Michael Ventura once called “the psychic storm.”

When I was on Wall Street, I was a great believer in riding the elevators in a company’s headquarters and talking to people in the hallways. I was able to learn a lot about their culture in this way. I was always the one who wanted to go to annual meetings: just listening to the management told me a lot.

I once attended an annual meeting for one of our largest clients, a consumer products company. They showed a ten-minute video of women in countless countries buying their products. Then, an activist shareholder wearing a fur coat and tennis shoes asked why there were no women on their board or in management. The chairman replied that there were no qualified women available. I knew that they needed Erma Bombeck on their board, not women from business schools with MBA’s and executive experience.

I went back to my office and reported that their company was out of touch with the market. The partner in charge of the account laughed. But, sure enough, the stock soon began a long-term slide.

As the global equity markets continue to grow and become more accessible to US investors, I am drawn to doing due diligence on the ground. I want to know what’s happening as the global economy re-balances and what it means to you and me.

For the last three weeks, I have been in Australia and New Zealand. It has been a productive trip – in part because these are two remarkably beautiful countries and also because I have been “in cahoots” with some terrific Solari Report subscribers and entrepreneurs who are thriving down under.

I found the mood to be much happier in Australia and New Zealand than it is in the US. You can see some of the reason for this when you look at the numbers. According to the World Bank, China’s per capita income was $314 in 1990. The US per capita income was 76X greater, or $23,954. Australia’s was $18,221 at that time. As of 2013, China’s per capita income had increased 22X to $6,807 while the US had doubled to $53,042 or 8X the Chinese. Australia, at $67,463, had surpassed the US by a significant amount. New Zealand had moved from $13,543 to $41,824 (view the World Bank GDP statistics).

I spent most of my time in the large business capitals, Sydney and Auckland. It is clear that the large cities have benefited the most from the strength of China and the Asian economy and the continued growth of the financial markets. According to one Auckland businessman, Auckland has generated 80% of the economic growth in New Zealand since 2007. Reports from the rural areas are that they are struggling – same as in the US.

Australia (24 million people) and New Zealand (4.5 million people) have significantly smaller populations than the US. In terms of land mass, Australia is equivalent to 90% of US.  More than four million or approximately 20% of the Australian population live in Sydney. However, given the extraordinary beauty of the city and its beaches and ocean, Sydney is enormously livable.

While the people of Australia and New Zealand struggle with the same centralization and debasement as we do in the US, their economy and lifestyle is more human.  Australia’s minimum wage is much higher than ours and the unions are stronger, not to mention their national health care plan and retirement plan.

Australians and Kiwis expect a square deal from each other. When I explained to one Aucklander that I was one of those “gun nuts” he thought were so bizarre, he struggled to understand what it’s like to live in a community where I need a gun to defend myself from drug dealers (ultimately supplied by – many of us believe – our own government).

Winter begins on June 1 “down under,” so I arrived in late autumn and left in winter. However, when people here describe the weather as being cold, “cold” in a subtropical climate means sunny, cool, crisp and pleasant.  Throughout Australia and New Zealand, the landscape was green and lush – a welcome relief to the dusty drought which has plagued the US in California and the Southwest.

I arrived after a long flight from Memphis to Dallas, Dallas to Los Angeles and then (17) hours to Sydney. I had breakfast and then flew to Uluru in the Australian outback. Here is the report: The Stories of Uluru.

Back in Sydney, I had a day at the Sydney Opera House for TED X Sydney: Greetings From Sydney.

I then flew to Auckland for three days. On Friday night, we had a fundraising dinner with trustees and key supporters at the Northern Club and on Saturday afternoon a lecture series to support the Ficino School:

On Sunday, I had a chance to catch up with good friends and allies, Claude Lewenz, who is a passionate author and developer of villages based on Waiheke Island and Mary Evans, co-founder of Heron’s Flight Winery. The Heron’s Flight wine is not to be missed. I spent the evening trying to persuade Mary to distribute it in the United States (it is currently available in New Zealand and the United Kingdom). Mary had brought two bottles for me to take to Wellington to inspire my discussions with Alastair Thompson and his amazing wife Wendy.

So it was off to Wellington, the government capital of New Zealand: See more from Recharging with Alastair Thompson, Publisher of Scoop Media and Footnotes from the New Zealand Budget.

Thank heavens, I also got to tag along with Alastair to Les Mills Gym and spend time at my favorite Wellington haunt, TePapa Museum.  My dinner companions in Auckland were insistent that I make time for the Gallipoli exhibit at TePapa. I was glad I did.

New Zealand sent approximately 13,000 men to fight at Gallipoli. Approximately 8,000 of them were killed or wounded. This slaughter brought back the poetry of Wilfred Owens’ Dulce et Decorum Est: “The Old Lie: It is sweet and right to die for your country.”

While I was in Wellington, one of New Zealand’s most popular TV news shows, Campbell Live, was cancelled and 180 people were laid off. A clear trend and direction is the extraordinary debasement of the corporate media and news in New Zealand. To see this happen in one of the most literate countries in the world is quite shocking.  It is one of the reasons I believe it is so important that Scoop Media make it through this period. Theirs is a rich database of the cultural and economic life of the New Zealand people from 1997 on. For a people to have power, they must have access to their history.

After two days in Wellington, I took off for Nelson to visit Akaimai EcoVillage: Akaimai EcoVillage: A Passion for Connection and Resilience.

The clear message from Kiwis in Auckland, Wellington and Nelson is that the flow of people from Europe, Asia and North America who are moving to or buying homes in New Zealand continues to grow.

After another two days in Wellington, I headed back to Sydney. On the first weekend there, I spent time looking at the Sydney property market. This has long been a topic of interest to me – the boom in Australian housing prices has been a global topic for awhile and it is important to Australian subscribers and to several clients.  When you look at the value of Australian residential capitalization in relation to GDP it is higher than that of the US by several multiples.

I have been expecting the bubble to burst. Asian growth has been moderating and commodities prices are coming down. This means that Australian mining and commodities businesses have been impacted.

Instead, the Sydney real estate market looks like San Francisco and Silicon Valley – it is up significantly in the last two years despite the much higher interest rates which Australians carry.  As China continues its financial reforms, I expect to see growth in the flow of business and capital that wants to do business and to invest in Sydney.

This is one of the many signals I have seen regarding the growing ties of these economies with a rising China: Footnotes from the New Zealand Budget.

Sydney is spectacularly beautiful. It is livable. It is in the Southern hemisphere. The weather is terrific. The tech and university clusters are strong. The people are entrepreneurial and hard-working. It looks to me that Sydney real estate is in a long-term primary trend which is positive as long as Asia is growing.

For my first few days back, I stayed out in Whale Beach. An early Sunday morning found me at the French’s Forest Farmers Market and enjoying some of the extraordinary local restaurants:

I moved into town for my presentation in Sydney: Catherine in Sydney: Planet Debt.

The next day was a day to see the city, including the Royal Botanical Garden, the Bondi to Cogee Walk and the spectacular lights of Vivid Sydney in and around The Rocks and from the top of the Shangri-La International.

I headed out on a beautiful sunny day this morning for the airport. I am looking forward to a month in Tennessee and then onto California in July.

Stay tuned for my report on the Australian and New Zealand stock markets in our next Equity Overview and on their precious metals market in our next Precious Metals Market report.