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Summary of Weekly Review Articles
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17-Jan-05	Equity Market Prospects The investment guideposts used by thebigpicture would have helped deliver superior investment outcomes in 2004 but they also suggest it will be hard for companies to duplicate the performance in the year ahead.
24-Jan-05	Forecasters Are Only Human The complexity of markets conspires with the competence of forecasters and limitations imposed by their own thought processes to frequently produce inadequate results. Looking at alternative scenarios to the ones forecast can often provide insights into the market processes.
31-Jan-05	How Much Do CEOs Know? Corporate chief executives around the world have become more bullish about prospective economic conditions at the same time as professional macroeconomic forecasters are expecting some slowing in growth. The corporate view might simply be reflecting the circumstances prevailing when the survey was undertaken. If not, conditions might be more buoyant than the formal forecasts suggest.
	The Demographic Picture Show This issue of thebigpicture depicts in a series of charts sourced from United Nations and International Monetary Fund data the long term influences likely to lead to some of the most momentous economic and financial changes in 300 years.
7-Feb-05	A Basket Case or Just Typical? Is National Australia Bank just a typical Australian company or a basket case - or both? The question is prompted by the bank’s diagnosis of its ailments at its annual meeting last week.
	Can Research Be Independent? More listed companies are paying for research about themselves. That means it is not ‘independent’ but as long as investors refuse to pay, independent research remains a fantasy.
14-Feb-05	Reform Is No (Irish) Joke Economic reform might be making a comeback and Ireland might be the model for success.
	Another Company Seeks Growth Foster’s Group is yet another company in the news grappling with how it can add value for its shareholders, opting for a radical transformation of its wine business through the acquisition of Southcorp.
21-Feb-05	A Very Strange Resources Cycle The structure of the current resources cycle is unusual and more risky for investors than the typical pattern has been. China is on its own as a driver of demand and, in Australia, there is little overall industry growth to create value for investors.
	Good News From The Reserve Bank The Australian economy is approaching a critical junction. Something has to change. Growth in demand must fall to better reflect the capacity of the economy to deliver. Otherwise, interest rates have to rise.
28-Feb-05	Demography And Investment Returns Lower fertility rates will eventually lead to weaker profit growth and reduced investment returns as well as the more widely accepted consequences of an aging population.
	GST: Another Cunning Idea Bad policy has a way of perpetuating itself. Smart and cunning ideas have a way of coming back to bite the perpetrator. The GST is now a good example.
7-Mar-05	Capacity Constraints: A New Bandwagon Capacity constraints have suddenly become a hot topic. The economy might be able to adjust more smoothly than some consider likely. In any case, government and business have been content to let others do the heavy lifting.
	Interest Rates and the Deficit Higher interest rates might be just as likely to damage the current account balance as help reduce it.
14-Mar-05	Government And RBA At Odds Both the Prime Minister and his Treasurer have come very close to an explicit disagreement with the Reserve Bank about whether the latter should have raised interest rates. This might confirm the Bank's independence but a difference in opinion can be dangerously counterproductive.
	Morals: Symbolic But Fruitless Australia's pursuit of its next free trade agreement seems to be affecting its moral compass and risks making it appear a weak negotiator.
	Mining: Growth At Last ABARE is suggesting that we might finally see some meaningful growth in the mining industry.
21-Mar-05	Synergies & Competence: What Value? Who should benefit from synergies and how to appraise management competence are key issues in valuing takeover targets but independent experts may not be in a position to enlighten us about either.
	Funding Students: Different To The Rest? The Australian government is taking a more activist role in defining how services are delivered. No area of the economy seems too obscure for its scrutiny as it departs from fiscal and political principles which it would have once held dear.
4-Apr-05	Why Commodity Prices Are So Volatile Equity investors are often surprised at the volatility in commodity prices. At times, price movements may appear bereft of any sense. But there is an underlying pattern.
	US Economy Strengthens The US economy appears in robust good health according to recent economic data.
11-Apr-05	Stock Selection Becomes More Difficult Stock selection was relatively difficult in the march quarter.
	Value Chain Tug-of-War A company's position in the value chain can determine much of its economic success. The grocery trade is shaping up as another example of why investors should be conscious of this guidepost.
	Monopolies May Not Be All Bad Monopolies are supposed to be bad but they can get the job done.
18-Apr-05	Managing The Transition Investors will have to decide how they manage the transition from near record profits and stable, low interest rates to slower growth and the risk of higher interest rates.
	Turning Point Risk Global output growth of 5.1% in 2004 - the strongest in three decades - is widely expected to decline to around 4¼% in 2005. For investors, ‘turning point risk’ is probably more important than the level of growth itself.
	Market Ratings and Growth Profile As the macroeconomic growth outlook is reappraised, investors should be looking for any signs that individual stock prices are reflecting growth rates which are becoming harder to achieve. Of course, this is a test which can be applied at any point in the cycle.
25-Apr-05	Sell Consumer Sensitive Stocks, Buy....? With consumers reluctant to spend, investors will be looking to switch funds to companies with less exposure to household budgets.
	Australian Consumer Review Australian consumers appear to be past their prime for this cycle. The best conditions for Australia’s retailers and suppliers of consumer goods and services were probably in mid-2004.
2-May-05	A Lot Of Disclosure But No Information The recent profit downgrade by listed industrial company Paperlinx offers a few warnings about the quality of information being given to the market. This might be further evidence of too much disclosure but not enough information being delivered to investors.
	The Global Growth Big Picture Taking forecasts at face value, global growth is expected to be better than average in 2004. But the bigger picture reveals that all is not so well.
	Imbalances’ or What Can Go Wrong ‘Imbalances’ is the low key, polite technical term coined by economists for what is going wrong.
9-May-05	Ratings For Analysts, Too? Large earnings downgrades have been coming rapidly. Investors are generally not well-enough equipped to keep up. The credibility of continuous disclosure for listed companies as well as the role of analysts in facilitating information flow are facing some tests.
	Creating the Right Environment Business managers increasingly see company-owned art as a waste of money. However, corporate success requires companies to foster creativity among employees by demonstrating its value.
	Business Costs on the Rise Rising costs of doing business have been placing pressure on equity markets in Australia and the USA. One way to look at the bigger picture of what is happening is through the perspective of unit labour costs for which we have macro data.
16-May-05	Global Investor or Market Risk? The government’s proposed Future Fund could lower corporate performance standards and increase risks from investing in the Australian stock market unless it is given freedom to invest in international markets.
	ASX: No Rules, No Role? Without its regulatory responsibilities, there is an argument that the ASX should lose its monopoly position as provider of a market for listed company equities.
	Accidental Policy This month’s Commonwealth budget seemed more than usually predicated on happenstance rather than an appraisal of what the economy needed.
23-May-05	Whatever Happened to Absolute Value? Knowing what a company is worth should be an intrinsic part of investing. However, investors are continually being encouraged to lose sight of absolute value.
	Volatility and Absolute Value Large swings in individual share prices might not be knee-jerk reactions but soundly based value adjustments where unrealistic expectations had been allowed to build.
30-May-05	The Small Company Sell-Off Small companies seem to have been treated harshly as the market reappraised growth expectations. However, financial performance aside is only one element of market standing.
	US Profits: Signs of Value US corporate profits have grown strongly in the past year suggesting that US equities have become better value.
6-Jun-05	Lower P/E’S: So, What? Market P/E’s, according to some commentators, are lower than they have been before. Does this mean that equities are cheap? Not necessarily.
	Commodity Prices: The Miners Are Doing Best Metal and energy prices are in a strong upswing but other commodity price movements have been more subdued.
13-Jun-05	Corporate Sustainability Guideposts An investor needs to judge whether a company can sustain its existing financial performance. That is best done with some simple, consistently applied guideposts.
20-Jun-05	Europe: Market First, Then Politics The biggest gains in living standards were always going to be from eliminating market barriers not political union.
	Executive Options: Who's To Blame? Occasionally you see some muddled thinking from supposedly well qualified people. In this case, conclusions about executive remuneration from an organization called Proxy Australia qualify.
27-Jun-05	Australian Profitability: Where To? The profitability of Australian companies remains strong but the momentum of improvement has slowed. Losing this latter support is not fatal for market performance but makes for more market volatility.
	Outstanding Growth: Why It Cannot Last? Outstanding growth cannot last forever. Markets often overlook this seemingly obvious warning but not indefinitely. Flight Centre is another topical example.
11-Jul-05	Business Strategy: Selling As a Last Resort Selling assets is often portrayed as a shareholder friendly act to improve investment returns. The bigger picture might be one of management and strategic failure.
	Labour Costs: Prices Are Compensating Improvement in company cost performance has become less noticeable. Prices have become a more important contributor to profitability.
	Chaney: How Can The Others Cope? The departing chief executive of Wesfarmers has again decried the short-term pressures on executive decision making.
18-Jul-05	Harnessing Resources Growth One challenge for investors (and their advisers) is to tap the growth of relatively fast growing parts of the local economy like mining without compromising their risk tolerance.
	Reform: Recognising the Costs For industrial relations reform to boost employment, some existing conditions will have to be given up. Ultimately, good policy will acknowledge the trade-off explicitly. That will let people decide their positions on the merits of the argument.
25-Jul-05	LICs: Get Rid of Them New listed investment companies are struggling to gain acceptance. Reputational problems associated with poor share price performance and sometimes unclear investment intentions are affecting their standing.
	thebigpicture investment Results thebigpicture’s intrinsic value Australian equity portfolio increased in value by 27.6% over the year ended June 2005.
1-Aug-05	Nationalising Telecommunications The National Party appears intent on renationalising the Australian telecommunications industry as it uses its parliamentary leverage to bargain for a share of the Telstra sale proceeds. The upshot might be accidentally good policy
	Global Economic Weakening The global economy is weakening. The downside risk for investors is the possibility of more to go. The upside is that the worst might be over with more positive conditions becoming evident early in 2006.
8-Aug-05	Mining: Don't Be Scared For an industry with such an important place in the Australian economy and such a long history of outstanding growth, mining is viewed with surprising scepticism as a source of attractive investment returns. This attitude often reflects confusion about the true nature of potential investments in the sector.
	ASX: Giving Away Our Advantages Australian investors have been short changed by the loss of ASX market indexes for mining.
	Mining: Don't Invest For Prices Without underlying output growth, there are few reasons why mining company earnings should improve in the longer term.
15-Aug-05	Reserve Bank Says "We Don't Know" The next interest rate move will be either up or down but we do not know which. That was the latest Reserve Bank message about the policy outlook.
	Telstra: Another New Broom The recently appointed head of Telstra is just the latest manifestation of the ‘new broom’ phenomenon among chief executives.
	People Are Leaving New South Wales The relatively poor economic performance of New South Wales might be a reaction to its high housing costs.
22-Aug-05	Reserve Bank: Independence or Debate Some say Peter Costello should refrain from discussing interest rates publicly to preserve Reserve Bank independence. Investors will benefit from open discussion about how policy is being framed.
	Telstra: Others Couldn't Do This Some of the government’s Telstra stock is going to be warehoused in the Future Fund. Meanwhile, government ministers are again providing dubious investment advice.
	US Growth Picture: The Expansion Continues The momentum of growth in the USA has slackened but recent outcomes are consistent with steady expansion.
29-Aug-05	Oil Prices: Why No Crisis? Oil prices have hit record levels of over $70 a barrel, over five times the price level in the early 1970s when the world was in the midst of an oil ‘crisis’. Everyone seems more sanguine now.
	Australia Needs Less Oil Australia needs less energy, including oil, than it did in the early 1970s to produce the same output.
5-Sep-05	Australian Companies Are Quitters, Too Australian executives could easily gain a reputation as quitters. Only a minority of executives among the larger companies have been able to demonstrate conspicuous success in following through on their more aggressive expansion plans.
	The Oil Market, Statistically The numbers behind the oil industry do not suggest that prices should be acting as they are.
	US Profits: Stronger Markets To Come The latest US corporate profit data suggest stronger equity markets ahead based on the historical alignment of the market and macroeconomic conditions.
12-Sep-05	Katrina: Redefining Limits to Government Hurricane Katrina might have been big enough to alter indefinitely what governments are expected to provide for their citizenry.
	Mining Services: Gaining More Leverage Investing in mining service companies might be a riskier option than taking a stake in the miners themselves.
	Australia's National Accounts Australia’s national accounts data often contain some interesting insights into longer term changes in the Australian economy despite the implications for interest rates drawing many of the headlines.
	Is Mineral Exploration Worthwhile? Just under $40 billion has been spent on mineral and petroleum exploration since 1960. It might not have been well spent.
19-Sep-05	Should Companies Give Earnings Guidance? Earnings guidance seems to be falling into disrepute but the temptation might be too hard to resist.
	TCF: Battling the Chinese The much restructured textiles, clothing and footwear (TCF) industries are having more changes forced upon them.
26-Sep-05	LICs: A New Generation A new generation of listed investment company is being created from the increasing antagonism toward the performance of the second generation. These are likely to be more shareholder friendly than their predecessors.
	Metal Prices: Where Are We? History says that a cyclical peak in metal prices could be happening now and that there will be another cyclical trough by2009.
3-Oct-05	Wealth Planning: Three Macro Pressures A radical realignment of Australia’s sectoral savings rates has changed the landscape for financial strategists. Individuals are funding consumption from assets, governments are cutting tax rates and companies are offering higher investment yields. The key judgment: can the changes persist or will there be a reversion to the historical norm?
	India: Just Like Australia? India is widely expected to be the next China: a large economy capable of high, self sustaining growth contributing significantly to the expansion of global output. However, in some respects, India is more like Australia.
10-Oct-05	Australian Productivity Lags Behind Broad based measures of productivity say a lot about the capacity of an economy to carry a market higher. However, Australian productivity growth is disturbingly weak judging from what is happening in the USA.
	Breaking The Mould Macroeconomic data continue to emphasize a radical change in underlying business conditions in Australia. An important historical mould seems to have been broken.
17-Oct-05	Using The Government Balance Sheet Australia might be better off if the government considered more leverage to help boost national income.
	Corporate Profits: Now Less Risky The strength of Australian corporate profits has come with less volatility. Both higher profits and lower volatility boost the value of Australian companies.
24-Oct-05	The AM Season: Much Ado... Another Annual General Meeting season is upon us before there has been any substantial reform of these shareholder meetings to make them more useful.
	Not Much of A Boom After All With global commodity prices well ahead of where they were two or three years ago and widening agreement that buoyant conditions are likely to persist much longer than once thought likely, investing in the resources sector should be easy. If only that were so.
31-Oct-05	Industrial Relations: Any Change? The industrial relations debate in the federal parliament has been termed historic by many participating on both sides. If these changes had occurred in the 1980s, the description might have been apt but not now.
	Bernanke: Another Greenspan? The changeover from Chairman Greenspan to Chairman Bernanke poses a market risk in coming months. While the precedent of the last transition is reassuring, there are some more fundamental issues to address.
7-Nov-05	High Profits But Little Enthusiasm Despite an unprecedented increase in profitability, something seems to have gone awry in Australian business. Some features of business performance sit oddly with record breaking profits.
	Another Look At Mining Returns There has been a resurgence in resource sector conditions but the sector is still not paying its way.
14-Nov-05	Executive Pay: Who Is My Peer? Directors are able to exercise considerable discretion in the choice of companies they use for comparisons when determining executive remuneration. Contrived comparisons potentially reward inefficient use of capital.
	Oil Prices: Getting Policy Just Right High oil prices have been identified as a risk for the global economy. One source of risk is forcing policy makers to react.
21-Nov-05	Private Welfare: Looking for the Wealth One of the challenges for welfare and community groups in trying to capture more of Australia’s wealth is to identify where it is. The next focus of their attention could be superannuation funds.
	When Insider Trading is Expected Insider trading is not always frowned upon in markets. In some cases, it is understood to be a prime motivation. Recent machinations in the copper market are again proving the point.
28-Nov-05	Brambles: Another One Drops Australian investors might not be such bad judges after all. That seems to be the message from the Brambles about-face on being listed outside Australia.
	Why Resource Companies Fail The risk of failure in the resources sector is still significant even in the good times. However, it is possible to identify some of the reasons.
5-Dec-05	A DIY CPI The consumer price index no longer measures cost of living changes for any particular group of people. If you need a cost of living indicator, why not construct your own?
	Gold Prices To Hit $1,000? The gold bugs are beginning to salivate at the thought of gold returning to its rightful position in the firmament. History suggests that they are engaged in wishful thinking but the structure ofthe market is what gives them hope.
	RBA: No Experience Necessary The most important role for the Reserve Bank is to determine monetary policy. And, yet, experts on manufacturing and corporate management are being invited by the government to take the decisions.
12-Dec-05	Small Companies: 2005 Winners and Losers Australia’s emerging companies have had a mixed 12 months. Some conspicuous failures spoiled the renaissance which had been occurring. Nonetheless, the sector is healthier now than it has been before.
	Private Schooling: A Sustainable Business? Rising school fees suggest an unsustainable industry unless it can change the way it charges.
	Global Growth: More Bullish Signs that global economic growth is beginning to accelerate slightly are evident in more recent forecasts.

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