In July 2013 we held one of our regular client functions where we discussed the state of the Australian and global economies and our outlook for the next year. If you were unable to attend the function you can view the presentation below.

1. Slide 1
Baiocchi Griffin Private Wealth
Economic and
Investment Markets Update
25th July 2013

2. Slide 2
This presentation and the associated discussion is
general in nature and does not take your individual
situation into account. You should not act on
anything contained herein, or discussed as a
consequence of the contents of this document, without
receiving personal financial advice from a suitably
qualified person such as a financial advisor.
General Advice Warning

3. Slide 3
What will be covered
A look at the global economic environment
&
Australia: the State of the Nation
&
An update on investment markets

4. Slide 4
Team BG-JTF!
Not investment related, but…

5. Slide 5
The global economy
The Good News….
The Bad News….
The Nobody-knows
News…
The United States is in
recovery
Europe is still in
trouble
An uncertain future in
China

6. Slide 6
Good news: The US economy is on the mend
Though still
high by
historical
standards,
unemployment
in the US is
heading in
the right
direction

7. Slide 7
Though it has been a long hard road

8. Slide 8
The US economy is growing strongly
The US economy has benefitted from a number of positive factors:
- A weak US dollar has helped to grow exports
- Quantitative easing by the US Federal Reserve (‘money printing’) has kept
interest rates low
- The housing market has finally begun to improve

9. Slide 9
The benefits of a weak currency
80
85
90
95
100
105
110
115
120
125
130
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
1998 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
USDollarTrade-WeightedIndex
Billionsofdollars
US Dollar (RHS)
US Exports to the rest
of the world (LHS)

10. Slide 10
Europe is still a concern
Steep cuts to government spending, high government debt and a severe recession...

11. Slide 11
Austerity was seen as the solution
Enforced government austerity measures have not helped Europe’s cause and the
voting public in many EU countries have had enough

12. Slide 12
There is light at the end of the tunnel
Italian Government borrowing costs Greek Government borrowing costs

13. Slide 13
China: a credit bubble waiting to pop?
Debt as a
percentage
of GDP has
nearly
doubled in
less than
five years

14. Slide 14
China’s situation looks familiar…
US household sector debt as a percentage of GDP
Notice the rapid
increase prior to
the global
financial crisis,
and the
subsequent fall
when the crisis
struck.

15. Slide 15
China also has a demographics problem
In just over
a decade,
the number
of working
Chinese
citizens will
begin to
decline.

16. Slide 16
Australia

17. Slide 17
Not so lucky anymore
The commodities price
boom and mining
investment boom have
both ended, earlier
than expected.
??

18. Slide 18
Another view of the mining slowdown
Future major projects
are becoming scarce:
Browse Basin $50bn
Olympic Dam $20bn
Port Hedland outer
harbour $30bn
Abbott Point $11bn
Wandoan Coal $6bn
Kooragang Island Coal
Terminal $5bn

19. Slide 19
The last boom in commodities…
The 1971-74
commodities
boom was the
most recent
boom prior to
the current
boom.

20. Slide 20
…ended badly for Australia
When the boom
ended,
unemployment
rose from 2% to
10% over a nine
year period.
The boom ends in 1975

21. Slide 21
Who benefited from the mining boom?

22. Slide 22
There are worrying signs
While low by
international
standards,
unemployment is
trending upwards.
Recent new jobs have
also tended to be
part-time positions,
viewed as ‘lower’
quality.

23. Slide 23
The RBA is doing what it can
Interest rates
are at historic
lows as the
RBA tries to
keep the
economy
growing
May be an
appropriate
time to lock in
your home
loan, invest in
variable rate
investments

24. Slide 24
Economic growth is slowing

25. Slide 25
Households still cautious

26. Slide 26
The impact on markets
ASX All Ords 21 Jul 2012 to 22 Jul 2013
Despite a sluggish economy, up 17.92%

27. Slide 27
All Ordinaries: since 1985
A
1987 market
crash
1994 bond
market crash
Dot-com
bubble bursts
Market all-
time high
The ‘GFC’

28. Slide 28
Right place, right time
The strong investment performance was not widespread, but
confined to a relatively small number of companies…
Capital growth
past 12 months
CBA 30.33%
Westpac 28.62%
ANZ 25.18%
NAB 26.59%
Telstra 24.81%
Wesfarmers 23.10%

29. Slide 29
ASX Small Ordinaries
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2,500
O.9% return for the past twelve months

30. Slide 30
Outlook
Given economic conditions, we expect the following:
- One or two more interest rate cuts by the Reserve Bank
- Continued demand for high-yielding, dividend-paying investments
- Further falls in the value of the Australian dollar compared to the US dollar
- Slower economic growth in Australia for the next few years, offset by a pick-up
in housing as low interest rates take effect
Our investment approach is unchanged: a focus on income-earning investments,
companies with strong balance sheets and healthy business models.

31. Slide 31
The Peel Street Index
An index comprised of all listed companies with a
presence on Peel Street
• A hypothetical investment of $5,000 into each listed company with a presence
on Peel Street, beginning on 1 January 2000, or the date the company listed on
the ASX
• All dividends re-invested

32. Slide 32
The Peel Street Index
Companies within the Peel Street Index:
AMP Limited
ANZ Bank
Commonwealth Bank
Flight Centre
IAG
JB Hi-Fi
NAB
RCG Corporation (Athletes Foot)
RuralCo Holdings
Singapore Telecom (Optus)
Sonic Healthcare
Specialty Fashion
Suncorp
Tabcorp
Telstra
Wesfarmers
Westpac Bank

33. Slide 33
The Peel Street Index: Performance
Past five years – up 77.82%
Since inception – up 172%

34. Slide 34
Thank you
Questions
?