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Divorcing the Tiger

What the Australia/China ‘forever split’
means for your wealth

Dear Reader,

The following report is slightly more in-depth than what we normally publish here at Fat Tail Investment Research.

But it’s in your best interests to make time to read it.

It delves into a situation that’s evolving rapidly.

One the mainstream media is only grasping bits and pieces of.

But it’s a situation that could — very swiftly — become the singular issue facing Australians. And not just investing Australians. All of us.

I’ll show you what this situation is.

How it could impact everything from your share trading accounts…to your retirement savings…to your business interests.

And how you can go about preparing for it, starting now.

2022 is the Year of the Tiger

According to the Chinese zodiac calendar, the Year of the Tiger will be a year of strengthbravery, and exorcising evils.

Three characteristics that come in handy when you’re divorcing a partner you can’t stand anymore…

You’ve probably noticed Australia and China have been in the middle of a rancorous break-up for 18 months now.

You’ve seen that ramp up to a whole new level recently, with Australia signing up to the AUKUS alliance with the UK and US.

But get ready…

In 2022, the rift between Australia and China could become a ‘forever split’.

Understanding this divorce — and adjusting your portfolio for it — could be the single most important thing you can do right now as an Australian saver and investor.

If there’s one thing you should take away from this report, it’s this…

Things are never going to be the same between this country and China.

And because China was and still is the single biggest driver of the Australian economy, that’s a very big deal.

While it lasted, we were strange bedfellows…

Australia, a liberal democracy, population of 25 million.

China, a communist state, population of 1.3 billion.

But for many years, this strange marriage worked.

China got resources, goods, and services. And we got to share in their insane growth.

Well, the marriage is over.

And this divorce is getting more bitter by the week.  

I’m convinced that what’s unfolding here is the CENTRAL economic problem for Australia.

Yes, even bigger and more far-reaching than COVID.

Because the consequences of this divorce will be felt decades after we’ve figured out a way to live with the virus…

Simply put:

I believe our split from China will be the central Australian investment trend of the next two decades

Just like our cosy marriage defined the last two decades.

If you get ahead of the pack on this, and make a few adept changes to your portfolio, you could stand to make a lot of money over the next few years.

The time to get your head around trends like this is now. When virtually no one in the mainstream understands the significance of them. When other news is drowning out the REAL long-term story.

The pandemic set off a sea change in how the world interacts with China.

China is being scrutinised from every direction right now. And the pressure is building…

There are two immediate issues here you’ll have heard a lot about recently.

First, the worsening China situation on a geopolitical level.

Second, what’s going on inside the Chinese economy. Specifically, its property sector. Property developer Evergrande, with US$302 billion in liabilities, seems to be the canary in the coalmine there.

Let’s tackle trade and geopolitics first.

In September 2021, Australia signed a defence pact with the US and UK. The Australian reported at the time:

The agreement will deliver a fleet of eight ­nuclear-powered submarines, following the dumping of the $90bn French contract for 12 conventionally powered vessels, with Australia the only country other than the UK to be given access to the highly guarded US nuclear technology.

The agreement will provide access to electronic warfare technology capable of knocking out power grids, key electronic systems such as banking and crippling vessels before they leave port. It will also fast-track access to missile technology such as Tomahawk cruise missiles.

China obviously wasn’t happy with the announcement. A spokesman said:

The most urgent task now is for Australia to face up to the ­reasons for the frustration of the relationship between the two countries and think carefully about whether to treat China as a partner or a threat.

Based on the nuclear subs deal, Australia clearly sees China as a threat.

Which is a problem when it’s also your largest trading partner.

But what else are we meant to do?

The Chinese are burning bridges everywhere you look.

As the Lowy Institute stated on 11 August before the subs deal angered China even more:

In the past year alone both countries have lodged complaints against the other with the World Trade Organisation and a freeze on high-level diplomatic relations remains in place.

China has slapped tariffs on key Australian exports, while the chattering classes have unhelpfully stoked fear of a regional war.

Beijing has been interfering in our domestic politics here through funding scandals…and stoking pro-China demonstrations on Australian campuses.

We banned Chinese tech giant Huawei from taking part in our 5G rollout.

We cancelled two deals that the state of Victoria struck with China as part of its flagship Belt and Road Initiative.

And the Aussie government is seeking security advice over the port of Darwin, which has been leased to the Chinese-owned company, Landbridge. A possible outcome is the company being forced to divest on national security grounds.

And in the background…

Australia has led the world in demanding an open investigation into the virus outbreak.

When your biggest trading partner outright threatens a ‘huge impact’ to the Australian economy if we don’t shut up…you know something has fundamentally changed.

This is messy.

And it’s about to get messier…

Not since Hitler’s Germany have our relations with another country soured so badly, so quickly…

If you understand what lies at the root of this deteriorating relationship, you’ll have a good deal more confidence in the future than most Australians have right now.

You might even have a chance to potentially profit in a big way — if you agree with me on what’s about to happen…and take the right actions.

Few realise that divorce proceedings were first filed back on 8 June 2020.

In the midst of a growing pandemic, few noticed it.

But on that day, China abandoned its economic growth target for 2021.

This was the first time this had happened since 1994.

It was a massive deal.

And believe it or not, it poses a far bigger long-term threat to Australian prosperity than anything the virus has thrown at us so far.

Let me explain why this is so significant and why you need to prepare now…

Growth targets have been sacred text in China for decades. The yardstick of central government-driven expansion.

For years, local governments competed to see who could meet and exceed these targets.

Each municipality adopted its own specialty.

It didn’t matter how you did it; the goal was simply to meet and surpass the target.

If you were a local official who did that, you were THE MAN.

You were richly rewarded.

Handclapping from Beijing. Respect from peers. Your city elevated in China’s tier system. Most importantly, more money and a higher place of authority on the political ladder.

That’s the China boom in a nutshell.

It was a system that worked…for a while.

Chinese output was worth just 10% of US production in the mid-1990s.

Last year it had grown to 66%.

This chart tells you all you need to know:

Source: CNBC

Nothing for decades.

Then, come 1990, BLAST OFF.

Growth targets were the fuel.

And these targets, set 9,000 kilometres away from Sydney, fuelled our economy as well.

...
A MASSIVE mining boom shielded us from the last
economic turmoil. This time we won’t be so lucky…

China’s growth boom was our big payday.

We are now the most China-reliant country in the developed world. One-third of our exports ship there. Chinese nationals comprise 38% of foreign students and 15% of tourists.

But as I’m sure you’re aware, the real money came from shipping resources to the Middle Kingdom. Bulk commodities like iron ore, coking coal, and copper.

But mostly iron ore.

Here’s something that may seem odd to you…

Our iron ore exports have massively ramped up during the pandemic.

In the 12 months to July 2021, iron ore exports amounted to an extraordinary $180 billion — nearly 10% of GDP!

For comparison, two years ago, iron ore exports were just $75 billion.

There’s a reason Australia’s windfall jumped so sharply.

More ominously, there are also three key reasons why you should expect iron ore prices to head BACK to their long-term lows in the years ahead.

We’ll get to that shortly.

But at the time of writing, they’ve already collapsed 50% from their highs.

And as you’ll see, they could have a long way to fall still — with big implications for Australia and your portfolio.  

But here’s the thing: It goes a lot deeper…

Few people realise that resources are only part of the story when it comes to our reliance on China

For instance, they’re also our single-biggest buyer of alcoholic beverages and milk products (which we export both directly and indirectly through the informal ‘daigou’ or mail-order market).

Education, tourism, agriculture, wine…all are desperately hooked on Chinese demand.

We’re not the only liberal democracy with ‘China Dependency Syndrome’.

We just have the worst case of it by some margin…

Our trade with China has soared

Source: RBA Chart Pack

As Bloomberg reports:

That dependence is on display in the Western Australian coastal town of Geraldton, where an ocean “dragon” fires the incomes of local fishermen. The Longxia, literally dragon shrimp in Mandarin, is prized at celebrations in China for its rich red color, horns and spine that remind Chinese of the mythical creature.

The coronavirus shutdown on the eve of Lunar New Year means Geraldton’s fishing fleet is stuck at port during this traditionally bountiful period…

I love the Chinese,’ Chris Kelly, an Australian barley farmer recently told the BBC.

Love them. Every barley grower in Australia loves the Chinese because they made us wealthy.

Australia produces eight million tonnes of the stuff.

China used to buy over half.

And at a premium price.   

China has imposed an 80% tariff on the golden grain.

China has also suspended our beef exports.

They have completely smashed our wine, coal, copper ore, cotton, rough wood, and lobster industries.

Single-handedly.

Researchers from the University of Adelaide estimate that the Tiger divorce has already cost us $6.6 billion between July 2020 and February 2021.

Along the way, they’ve also warned Chinese national students to stay away from our ‘racist’ country. Education is Australia’s third-largest export after iron ore and coal. And much of that is due to Chinese students.

And the Australian Strategic Policy Institute says it’s ‘95% certain’ China was behind 2021’s barrage of cyberattacks on Australia. 

As Alan Dupont reports in The Australian:

Beijing’s vindictive punishment of our universities, tourist sector, farmers, coal exporters and Karm Gilespie has shattered two widely held assumptions about China’s rise: that it will continue inexorably and is overwhelmingly to our benefit.

Look, what I want to stress is that this is unprecedented.

It’s a giant break, happening right now. Camouflaged by COVID.

The bans on our high-quality food exports have been in place for a while now.

And many producers have done amazingly well in finding new markets for their goods. But the huge surge in iron ore receipts has more than made up for any loss of income.

China’s attempts to punish us financially are yet to have an impact. That’s because they desperately need our iron ore to keep their blast furnaces going.

But China’s post-COVID recovery surge is over.

Iron ore prices over US$200 a tonne were unacceptable to the Middle Kingdom.

At the time of the iron ore price peak in May, the Financial Review reported:

The Chinese government has drafted a five-year plan to slash its reliance on iron ore from Australia and other countries by almost half by investing in new mines offshore and seeking alternative supplies from Russia, Myanmar, Kazakhstan and Mongolia.

Documents discovered by the Lowy Institute have revealed a detailed proposal by China’s Ministry of Industry and Information Technology (MIIT), which also focuses on boosting domestic iron ore production.

The 15-page plan set a target of 45 per cent iron ore “self-sufficiency” by 2025. It says this would be achieved by greater use of scrap metal, more efficient mines, and by investing Chinese equity into iron ore mining operations overseas.

But it’s not just China’s attempts to influence the price by diversifying supply.

There are other things going on in the iron ore market that will crush the price in the years to come.

At a time when lockdowns and Delta are getting all the headlines, THIS is what you should be paying attention to. The thing is…

There are no other options that come anywhere near to making up China’s numbers.

That’s Professor Jane Golley, a China economy specialist at the Australian National University.

...
The big one is turning on the little one…

Food producers are small and nimble enough that they can find new markets if China turns on them.

Iron ore miners cannot. There is no other market for iron ore like China.

We are like a remora — one of those little fish that travel with and feed off a great white shark.

Only, it’s a tiger shark.

And the tiger shark is now telling us to get lost.

China’s relentless drive for progress made us rich.

But with little mainstream media fanfare or reportage…that era ended on 8 June 2020.

That was when Chinese Premier Li Keqiang announced there would be no GDP growth target set for this year.

It was this action that essentially made the Australia-China divorce a certainty.

That has never happened since the growth targets were introduced in 1990.

But why the reversal? Why has China abandoned its winning formula?

Why is it such a big deal for Australia?

And what moves should you make with your investments now to take all this into account…and maybe even benefit?

This renunciation of growth targets came after China’s economy collapsed nearly -7% in the first quarter of 2020.

As we head into 2022, China’s clampdown on industries ranging from steel to education to property is rocking financial markets.

And killed their GDP growth from 12.7% in the first half of the year to just 4.7% in the second.

That is a momentous drop!

Much of this relates to comparisons to the prior period. The impact of COVID created a lot of volatility with all sorts of economic growth stats.

Jeff Snider, Head of Global Investment Research at Alhambra Investment Partners, is a close observer of China’s economic data releases. To get around the distortions provided by the COVID shutdowns, he looks at China’s two-year growth rates.

They are not pretty.

Jeff points out that retail sales in the two years to August 2021 were just 3%. ‘Prior to 2020,’ he writes, ‘the absolute worst 2-year change for China retail sales was 16.4%.

That’s an extraordinary slowdown that isn’t all about COVID.

You’re seeing it in other areas as well…fixed-asset investment…industrial production numbers…

In short, China’s economy is resuming the slowdown it was experiencing before COVID hit.  

The question is why.

And this is where it gets really interesting (and concerning) for Australia…

Divorcing the Tiger
A lonely continent once more…

Mao Zedong once called Australia the ‘lonely continent’.

Ironic. Because we’ve been best mates with China for three decades. But that friendship’s over.

And that is going to start reshaping the Australian economy…and Australian investment portfolios…very soon…

I need to fully explain this to you. You’ll need to excuse me if we go into details you think don’t concern your wealth, your investments, and your retirement. Because as you’ll see, ALL are intimately linked to this developing story…

Economic growth may have been very strong in China over the past few decades. But it has also been very ‘unbalanced’.

A huge amount of investment has gone into property, for example. This set off a huge speculative price boom as well as a long construction boom.

Things got so out of hand, it started to produce wealth disparities like in Western societies.

President Xi Jinping saw this trend as unacceptable. A threat to social stability that must be avoided at all costs in China.

So President Xi did a few things…

The three red lines

Late last year, he implemented a ‘three red lines’ policy aimed at curbing leverage and risk in the property development sector.

Developers were to be assessed against three different financial criteria (called three red lines) to ensure they weren’t taking too much risk.

If the developers failed to meet any of these ‘three red lines’, regulators would place limits on the extent to which they could grow debt. Not meeting all three, for example, means no growth in debt is allowed.

This is the background story to the problems you’re now seeing in the property development space.

At the time of writing, China’s second-largest property developer, Evergrande, is effectively bankrupt with over US$300 billion in debts.

The only question is whether investors will receive some sort of bailout or not.

In the past, ‘bailouts’ have been in the form of state-directed lending growth. That is, when debt goes bad, just create more of the stuff to paper over the cracks.

But that’s not going to happen this time around.

China has been doing that — to Australia’s benefit — for the past decade…and look where it’s got them.

Now Xi is determined to follow a different path. One that puts his position of power ahead of the wealth of the nation.

This different path has a name — it’s called ‘common prosperity’. As Reuters explains:

President Xi Jinping has called for China to achieve “common prosperity”, seeking to narrow a yawning wealth gap that threatens the country's economic ascent and the legitimacy of Communist Party rule.

“Common prosperity” as an idea is not new in China, but a sharp escalation in official rhetoric and a crackdown on excesses in industries including technology and private tuition has rattled investors in the world's second-largest economy.

Xi, poised to begin a third term in 2022, is turning towards inequality after concluding a campaign to eliminate absolute poverty, pledging to make “solid progress” towards common prosperity by 2035 and “basically achieve” the goal by 2050.

The message is clear:

China will not be our ‘get out of jail free’ card this time

You’re going to see the bottom fall out of our iron ore sector by the end of the year. As I said earlier, it’s already started. But it’s going to get much worse.

And then you’ll experience an even worse Australian economy in 2022 than you’ve seen so far, lockdowns or not.

Why?

Australia-China relations doomed to fail

…reports The New Daily.

That is true.

When your main economic partner is also your main security threat…well, that poses some issues, doesn’t it?

A Lowy Institute poll just reported ‘unprecedented shifts’ in Australian public opinion. That we feel ‘unsafe’. That our optimism about our economy is at a historic low.

And there is a ‘precipitate decline’ in trust in China.

The tension you’ve seen between Australia and China since the COVID crisis began is just the start.

People don’t realise what this break-up is going to mean.

What we are witnessing now is the beginning of the end of the Chinese economy.

That was David Robinson, CEO of RTS Private Wealth Management, quoted on 8 June 2020.

He’s one of the few analysts on the planet who sees what I see and is speaking on record about it. 

You need to see what we see.

Because if you’re trying to figure out how to steward your wealth for the final 20, 30, 40 years of your life, understanding the Australia-China divorce is, I believe, the most important thing you can do.

As Robinson points out, this end ‘is now being catalyzed by geopolitical tensions stemming from the coronavirus 2019 (COVID-19) pandemic.

It will have a FAR more transformational impact on local investment markets than COVID.

And the implications for Australia — and your wealth — are even starker than what’s going on right now. 

As Robinson concludes:

Investors who get their arms around the situation sooner rather than later and assess potential impacts on their portfolios will be better able to limit damage and position to benefit.

Over the past 20 years, a few lone voices — me being one of the loudest — have warned of the dangers of having all our eggs in the China basket.

Of relying too heavily on resources, other trades, students, and free-spending tourists. That being a ‘remora’ to China’s great white shark would be our undoing.

Few listened.

What could possibly be wrong with hitching a ride with the next United States?

Well, the true costs of our ‘special relationship’ or ‘strategic partnership’ are about to be felt.

As Alan Dupont writes:

The coronavirus crisis has exposed the fragility of just-in-time supply chains and the folly of relying on a single country for critical goods and infrastructure.

Some economic separation is unavoidable and necessary.

And so, we come to what all this means for Australia.

And for YOU…

This China divorce will be the biggest hit our modern economy has ever experienced.

Yes…even bigger than the Great Depression.

That’s hard to wrap your head around.

Let me try and help you…

This century, we HAVE actually had a mild dress rehearsal of what’s about to happen.

It occurred between 2012 and 2016.

If you remember, those were four years where China’s growth target boom took a massive breather. It just couldn’t maintain such a crazy growth rate. The hangover from the boom kicked in.

And resource stocks that had been flying high for years got completely shellacked.

Seeing what happened in this dress rehearsal will give you a rough idea of what could be coming over the next two to three years.

Let me just briefly pause here for a quick introduction and to explain why I’m qualified to make these claims.

My name is Greg Canavan. I’m the Editorial Director at Fat Tail Investment Research, one of Australia’s leading independent financial and investment research firms.

I’m also the founder and editor of Greg Canavan’s Investment Advisory.

It’s in that capacity I write to you today. You see, I’m one of the few analysts that I know of in Australia who has forewarned of this crisis with China.

In fact…

In 2011, I gave a speech at the Windsor Hotel in Melbourne that predicted the 2012–16 downturn

It was titled ‘Why China Can’t Avoid a Hard Landing’.

...
Delivering an unwelcome message in 2011.

Now, the message wasn’t as apocalyptic as the one I’m giving you now.

I wasn’t saying China was about to radically decouple from multiple aspects of the Australian economy.

Just that the Chinese economy was about to experience a massive and fast cool-off...

That the best days of the mining boom would soon be behind us…

And that you should prepare now while the rest of Australia wasn’t yet reading the signals.

Just like now…the mainstream didn’t get what was coming in 2011.

In a recent Reuters poll of 30 economists at the time, not one of them predicted China’s growth rate would go below 8% in 2012.

I argued that was bollocks.

That China’s economy HAD to slow.

Similar to how Japan’s economy doubled every decade from the nadir of the Second World War to become the second largest in the world…

…and then slumped in 1990 to begin a ‘Lost Economic Decade’ (where the Nikkei crashed more than 80%).

That was my reasoning. And boy, did it meet some stern looks!

Remember, I was talking to a room full of folks at the euphoric peak of Australia’s biggest resources boom since the gold rush of the mid-1800s. 

I told you earlier: In the 2000s, China’s growth targets had transformed every aspect of the Australian economy.

And with it, our mindsets.

But one of the biggest transformations was the stock portfolios of the people sitting in my audience that day in 2011.

Even though these were like-minded readers, I remember frowns forming when I gave my projections.

Aussies love a gamble, and many of them had bet big on miners and explorers in the early 2000s.

They felt proud of themselves for doing so.

And why shouldn’t they have? They WON BIG.

I’m sure you’re aware of the crazy stock gains that were made.

Fortescue Metals is the famous example. You could have bought in September 2003 for 27 cents per share (or 2.7 cents adjusted for the 10­–1 split in December 2007). At Fortescue’s 2000s peak, it traded close to $12.

So you can understand the frowns.

My argument was that when nearly 50% of your GDP growth comes from fixed-asset investment alone…you have an investment boom that is out of control.

That Chinese cities and regions had invested in resource-intensive infrastructure projects without any regard for a realistic return on investment.

That, starting in 2012, this credit boom would end like all credit booms end.

And that for the next few years, the stakes couldn’t be higher for Australian investors.

As I wrote at the time:

The Aussie share market has hitched its carriages to China’s high-speed economy. If you don’t get off the train before the crash, you can’t say it was because of signal failure.

Even as the slowdown became apparent in early 2012, the mainstream pundits refused to believe it.

In an interview I did with a journo in March that year, I was the only one who said mining companies were terrible investments for the foreseeable future.

The 14 March Sydney Morning Herald article was titled (if you can believe this) ‘Good grounds for growth’.

One fund manager said it was a ‘good opportunity for investors to acquire some likely long-term capital growth’ from Iluka Resources.

Iluka shares went on to lose more than half their value over the next few years.

I was right about all of it.

And I’m convinced I’m right about what’s going to happen in 2022 and beyond.

2012 saw China’s growth in imports come to a screeching halt.

Businesses who had been gobbling our resources for years started to lose their appetite.

You may remember 2012 was the year when ominous reports of ‘ghost cities’ and ‘bridges to nowhere’ started appearing.

Over the previous decade, China was said to have built the equivalent of Rome every two months.  

As a result of this overbuilding, by 2012 it was reported that Beijing alone had four million apartments standing empty.

My contention that day at the Windsor Hotel was that you needed to prepare your resource stock portfolio for a sizeable correction.

If you took that advice, you were thankful you did so a few years later…

10 months later, iron ore and coal prices hit three-year lows.

This hit the big miners first.

I wrote in my newsletter that plunging commodity prices would lead to ‘a loss of confidence, no follow-through buying, delayed and abandoned projects.

That happened.

In 2011, when I gave my first warning, BHP traded for $46.

Even in 2012, in that ‘Good grounds for growth’ article, one ‘fair value’ for BHP shares was $51.

Four years later, it traded for $15.

In 2011, Rio Tinto traded at $86.

Five years later, it traded at under $40.

Look, my point here is not to brag.

It’s to illustrate three things…

  1. How even just a TEMPORARY cool-off in China has massive ripple effects here in Australia.
  2. How mainstream investment media and practitioners will be the VERY LAST people to warn you.
  3. And that what we saw in 2011, 2012, and 2013 were mere dress rehearsals for the main event I see coming in 2022…

As you know, that last cool-off rebounded again in 2016. China went back to the stimulus well. Its economy went back to growth…and so did resource stocks.

The damage of that four-year downturn was MAINLY restricted to the mining sector and mining stocks.

Australia’s real economy was only minimally impacted. That was largely thanks to having plenty of interest rate ammunition.

While the resource sector tanked, interest rate-sensitive stocks like banks and just about anything that paid a dividend went much higher.

But this time around, interest rates are already zero.

The chances of rates returning to anywhere near normal in the years ahead are remote. You’re going to have to learn to live ‘Life at Zero’ (what I call the ‘new normal’ of living with zero interest on your savings) for much longer than what anyone thinks.

So what areas of the economy will this new dynamic impact?

Well, I’ve spent quite a lot of my lockdown time trying to formulate an investment strategy for you…

It’s tricky. We’re in uncharted territory.

But there ARE historical precedents.

And I have a multi-step strategy for you that I believe could SIGNIFICANTLY outperform the market over the next several years, if I’m correct.

It’s not just ‘sell all your resource stocks’.

Although step #1 DOES entail dramatically scaling back any exposure you have to the mining sector right now.

Just like when I gave this recommendation at the Windsor Hotel in 2011, I expect some will not like this advice.

But what you need to understand is the iron ore market is toast…and will be for years to come.

The last iron ore bear market, from 2013­–15, resulted in a 75% price fall. I predict this bear market will be worse.

I do not think you’ll see iron ore-related stock prices this high for a very long time, maybe decades.

This is your chance to act…before it’s too late.  

Why?

In June 2020, a consortium of Chinese, Singaporean, and French companies signed an agreement with the government of West African country, Guinea, to develop the massive Simandou iron ore deposit, one of the highest-grade iron ore deposits in the world.

The partners need to build rail and port infrastructure, which won’t come cheap. But China knows it will pay dividends through lower iron ore prices.

According to the Financial Review, a US$1 fall in the iron ore price translates into US$1 billion in lower costs for Chinese steel mills. It says:

This perspective means that maximising output as quickly as possible would bring about payback in a very short space of time...

Many analysts had already factored in medium-term iron ore price targets of between $US55 and $US70 a tonne before the Simandou development agreement was signed.

Those price targets will become a reality in 2022.

But what next?

How do you deploy your capital over the next few years in a way where you could SIGNIFICANTLY outperform the wider market?

Even if the economy gets worse in 2022.

And even if the ASX falls significantly from where it is today.

To answer this question correctly, you need to think about the ramifications of MUCH lower iron ore prices, and how Australia will respond to it.

You probably know that higher iron ore prices have contributed to Australia’s strong post-COVID economic performance. Sure, lockdowns have hurt us big time. But what makes them politically easier to impose is that we have money coming in from the iron ore boom.

You see, for the past two financial years, Australia has produced a current account surplus for the first time since the commodities boom of the 1970s. We normally produce deficits, meaning we spend more than we earn.

But in 2020–21, Australia generated a surplus of $90 billion. And that was largely thanks to iron ore. Sales of the red dirt hit an extraordinary $170 billion last financial year, nearly 10% of Aussie GDP!

Without getting into detail, let’s just say that booming iron ore prices have a whole bunch of positive economic impacts.

It stands to reason then, that the impact of a FALLING iron ore price will be negative in a whole host of ways.

As I mentioned earlier, in the past, the Reserve Bank of Australia could offset the impact of falling iron ore prices by cutting interest rates.

They can’t do that anymore.

But what they can do is hold interest rates at zero for much longer than anyone thinks possible. They will continue with ‘QE’ (quantitative easing) and whatever other stimulus efforts they will dream up.

And then you’ve got the government. Last year, in response to COVID, they got a taste for deficit spending. They won’t hesitate to keep the deficits going to prop up growth.

I guess what I’m saying here is that it’s not as easy as just thinking ‘Crashing iron ore prices will crash the economy, I’ll just go to cash and wait for the bust.’

This is why I’ve put together an Investment Action Paper:

‘An Investment Strategy for the Australia-China Break-Up’

In it, you will see just how much the game has changed.

China’s economy simply doesn’t have the capacity for ongoing massive stimulus measures in the same way it did in 2008–09 or 2016.

There is neither the will nor the means.

It’s all explained in detail in ‘An Investment Strategy for the Australia-China Break-Up’.

If you agree with that evidence…then we’ll get to work on a strategy…

As I said, most of my lockdown hours (apart from tending to the kids) have been devoted to one thing:

Figuring out HOW you should position your wealth for a structural change in China’s relationship with Australia and the West

As mentioned, avoiding iron ore producers from here on is the first step.

But there’s much more to it than that.

Buying the US dollar, for instance, is another move you can make.

I’ll explain this part of the strategy too.

And retaining exposure to gold should provide some defensive qualities to your portfolio. 

What else?

You’ll find out in ‘An Investment Strategy for the Australia-China Break-Up’.

Specifically, you’ll get a four-part portfolio repositioning plan which — when combined with reducing your exposure to iron ore — should set you up for everything we’ve been talking about.

You can get the report now, if you like.

All I ask in return is that you take a 12-month subscription to my investment service, Greg Canavan’s Investment Advisory.

You can give it a no-obligation run around the block during a 30-day trial period.

If during those 30 days you decide you don’t wish to continue — for any reason at all — just contact my customer service team and you’ll receive a full refund.

And you can keep ‘An Investment Strategy for the Australia-China Break-Up’.

Even if you get a refund.

Am I qualified to be offering the opinions and investment strategies you’ll find in this report? Ultimately, of course, that’s up to you. That’s what the trial period is for. So you can get your money back and go about your life if you think there are holes in my argument.

But here are some kind words from some of my readers.

(NOTE: My newsletter previously went by the name Crisis & Opportunity.)

I’m sure I’m one of many who enjoys reading Greg’s emails and I hope it continues to flourish. His advice is usually incisive but more importantly he goes to great lengths to justify his recommendations.

– George

I like that you cover different underlying trends and base your picks on the fundamentals with upside opportunity if it plays out. Not a gold bug/tech head/divi diver/pot stocker but happy to cover each — normally out of favour stocks with solid financials, these will suit longer term investors who can wait for the trend to kick in again. Keep up the great work Greg it is appreciated.’ 

– Wayne

‘Crisis & Opportunity is in my opinion a great advisory service. So far I have profited on every stock I had chosen from Greg’s recommendations. I highly recommend.

– Juraj

I have been a subscriber to C&O for over a year and have found Greg’s weekly and monthly updates to be first rate. Importantly they have also enabled me to profit. In particular the cool-headed analysis of major market movements have been most appreciated.’ 

– Carl

Greg provides a unique investment service, combining good analysis of fundamentals as well as the charts in support of every recommendation, which brings a humility to the style that few in the industry demonstrate!

‘C&O recommendations have made a substantial contribution to my portfolio returns and it’s one of the few services I trust implicitly after many years of investing, to the point where if time poor I will invest first and read later.

– Name withheld by request

The humility the last subscriber describes is essential if you want to be consistently successful over time.

Hubris is a PORTFOLIO KILLER.

That said, I’m as convinced about this as I’ve been about anything in my career. I really do think you should check this investment strategy out. I can’t stress enough how important moments like these are.

I know it seems like the coronavirus is the headline issue right now.

And of course, it’s intimately linked to the China story.

But it’s also masking what’s REALLY going to matter for Australia this decade.

I believe that understanding China’s retreat from the Australian economy over the coming years is probably the single most important thing you can do for your wealth and business affairs.

I know that may sound like an overstatement.

But I really do believe it.

Just as I believe that making a few determined moves right now, with this transition in mind, will be the best thing you do with your investments for years to come.

That’s why I’ve put so much effort into getting this to you now.

It’s a strategy that involves certain investment options and strategies.

You don’t need to employ them all.

You can pick and choose which parts of the strategy suit your situation

If you just stick to the more practical measures outlined in ‘An Investment Strategy for the Australia-China Break-Up’, I think you’ll be massively better off than the average Australian investor and saver by the end of this decade.

Not opinionated or full of BS predictions.

Not opinionated or full of BS predictions. Instead Greg gives both sides of the situation allowing me to make an independent and informed decision of which I can comfortably profit from. Both personally and from an investment point of view. Keep doing what you do so very well Greg.

– Leanne

All you need to do is hit the giant ‘SUBSCRIBE NOW’ link at the end of this white paper.

Give my service a test run. Take a dip into my back catalogue — at no obligation to keep your subscription — and see exactly where I have my readers positioned right now…

My Advisory attempts to help you chart a smart path through the myriad uncertainties that face Australian investors right now.

You can take a ‘sneak peek’ at all the back issues and see for yourself.

Go over ‘An Investment Strategy for the Australia-China Break-Up’ with a fine-toothed comb.

‘Interesting, Enlightening, Entertaining, Informative, Sensible, Logical, Trustworthy.’

Greg has introduced me to stocks I would have never considered, at least one near doubling within a short timeframe. His advice has applied to both large and small caps. To me, his recommendations have made sense and I have followed a number of recommendations with confidence and trust. Single word descriptors would include: Interesting, Enlightening, Entertaining, Informative, Sensible, Logical, Trustworthy. I have especially appreciated the follow up analysis and advice if the stock or market trend changes. I give my thanks to C&O (Greg) I will be renewing.

– PS

Then make your own mind up.

If you’d like to stick around, great!

If not, simply contact us within 30 days for a full and unconditional refund.

If you’re familiar with our work at Fat Tail Investment Research, you’ll know that a 30-day trial period is standard practice.

This is rare in the financial advisory business.

But it’s important.

I am a firm believer that no one else is responsible for your wins and losses but you. I can use my knowledge and experience to help you along the way. But ultimately, you are the one charting your course.

If what I’m doing doesn’t align with your own goals, you should let us know within the trial period and we’ll refund every cent of the (very small) subscription fee.

No hard feelings.

I’ll also include, as part of the deal, a digital copy of my 2021 book:

You, Your Brain & the Stock Market

I hope you’ll find this an interesting — and timely — read.

The aim of this book is to help you recognise the inherent investing blind spots we all have.

The thing is, when you recognise what the problem is, you can take action to fix it.

The good — if somewhat confronting — news is that the problem is always…you! And it’s easy to fix.

By the time you finish reading You, Your Brain & the Stock Market, you will have all the tools to be a smarter, better, and humbler investor and/or trader.

In advance, just keep in mind that arrogance, hubris, overconfidence, and letting emotions get the better of you are all common characteristics of portfolio blow ups.

This book helps you overcome these hurdles.

So how much is Greg Canavan’s Investment Advisory?

It’s just $199 per year.

But you won’t pay that today.

Our publisher has discounted your first-year price to just $99.

I believe the advice you’ll receive in ‘An Investment Strategy for the Australia-China Break-Up’ alone is worth 10 times that.

But why not see for yourself?

Remember, you’re guaranteed a full refund of that $99 within the first 30 days if you wish.

I’ve been in a battle for a while now, with the publishing and accounts departments here, to have this priced at least five times higher.

In my view, it’s a service that’s worth several thousand dollars a year, rather than $99 for the first 12 months and $199 thereafter.

I reckon you could pay $2,500-plus for everything you’ll be getting today, and it would still be a bargain.

I may be close to winning that battle. And this may well be the last time you get to try Greg Canavan’s Investment Advisory at this low price point again.

If you want to get in the door at this low price while you still can, then we need to hear from you now

Here’s the deal.

Click the ‘SUBSCRIBE NOW’ link at the end of this white paper and you’ll be directed to a secure order form.

Choose the discounted $99 First-Year Option.

Have a really good examination of ‘An Investment Strategy for the Australia-China Break-Up’ and everything else you get access to in that time.

Get a refund if you wish within 30 days.

If you stay on for the duration, you’ll be automatically renewed at the standard price of $199 every 12 months thereafter, unless you tell us otherwise.

Again: Even that $199 seems like WAY too much of a bargain to me. It annoys me to write it!

But for now, that’s how the deal stands.

So you’d do well to accept it today by clicking the big ‘SUBSCRIBE NOW’ link below.

Thanks for staying with me.

To summarise, here’s what I’m offering now:

  • ‘An Investment Strategy for the Australia-China Break-Up’
  • A 12-month subscription to Greg Canavan’s Investment Advisory, with a no-obligation trial for the first 30 days
  • PLUS, a digital copy of my book You, Your Brain & the Stock Market

You’ll be granted full, password-protected access as soon as your trial begins.

Unless something very extreme happens in the markets, you will receive at least one new investment opportunity each month.

Remember, you have a full 30 days to trial your Greg Canavan’s Investment Advisory subscription.

Study my analysis, download and read my special reports…

And if at any time within your first 30 days you are not 100% over the Moon with my service, for whatever reason, simply contact my customer service team for a full and courteous refund.

If you’re not happy, then I won’t be either. And you’ll have a full 30 days to try out the service.

I’ll finish with this.

I know 2020 and 2021 have been exhausting.

And 2019 feels like 1950. Another planet.

But you need to put the virus to one side right now and think a few steps ahead…

It’s like a metaphorical wall is being built in Australia right now.

On one side, there are those who understand there’s more going on with our economy than just a pandemic, what a seismic shift our move away from China is going to cause, and who’s acting accordingly…

On the other side...well…unfortunately, that will be most Australians…those who don’t get or care about what’s happening…or are too distracted by lockdowns and face masks and unemployment figures to notice.

My best advice is simple: Make sure you are on the right side of this wall.

Today I’ve made it very easy for you to take the first necessary steps.

You’ll pay just $99 to receive everything I’ve described here.

And if you don’t agree with me that this is the absolute best investment strategy to hold in Australia through the 2020s…no worries. Let my customer service team know in the first 30 days, and they’ll refund your $99 payment.

If you care at all about your financial future, this information is critical.

Yes, there are risks. Any investment and anything you do with your money involves risks.

But we are living in a very dangerous financial time. And I think the much bigger risk is doing nothing…missing out…and relying on a status quo that is crumbling before your very feet.

The Australia-China marriage was mutually beneficial while it lasted.

But divorce papers have been filed.

It can’t be stopped. 

The only question is: Will you be ready?

To BE ready, click the ‘SUBSCRIBE NOW’ link below.

Sincerely,

Greg Canavan Signature

Greg Canavan,
Editor, Greg Canavan's Investment Advisory

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Frequently Asked Questions

Is Australia’s relationship with China REALLY as important as you say?

In a word: Yes. In fact, I would go so far as to say I’ve not had the space to properly show you what the Australia-China fallout will fully mean in this report.

It’s a complex relationship, developed over decades.

An Investment Strategy for the Australia-China Break-Up’ will show you in much more detail what this relationship’s unravelling will mean for our economy and your investment future.

As I hope I’ve shown you quite clearly, the walls are closing in on China.

For the first time since 1994, it has abandoned an economic growth target for the year. Its debt-to-GDP ratio hit 317% at the end of the first quarter, up sharply from 300% at the end of 2019. Credit growth is running well above GDP growth, meaning this debt-to-GDP ratio will continue blowing out to ever more dangerous levels.

The fallout from the pandemic, which began in Wuhan in late 2019, is only just starting. Major Western nations, including Australia, are seeing for the first time their over-reliance on China for the functioning of many strategic industries.

The trend to reverse this outsourcing to China is underway.

A recent report from a British think tank, called ‘Breaking the China Supply Chain: How the “Five Eyes” Can Decouple From Strategic Dependency’, details how the Five Eyes alliance between the US, the UK, Australia, Canada, and New Zealand needs to rethink its trade relationship with China.

The report highlights that, of all the countries, Australia is the most dependent on China. I don’t mean that from a simple trade perspective. It refers to the fact that Australia has outsourced so much to China that the supply of a range of strategic goods and materials is totally dependent on the Middle Kingdom.

It’s not just the West, though. Japan recently announced it would provide subsidies and loans of up to US$2 billion to support companies moving manufacturing from China back to Japan.

The world is waking up.

But, being closest to China, this is going to affect us far more than most.

I’ll show you why and what to do about it in ‘An Investment Strategy for the Australia-China Break-Up’.

What do I get?

First of all, you will get a 12-month subscription to my investment advisory, Greg Canavan’s Investment Advisory.

You’ll receive every piece of news and analysis I publish for the next 12 months.

This will cost you just $99 today.

By signing up today, you’ll also get immediate access to ‘An Investment Strategy for the Australia-China Break-Up’.

And a digital copy of my book You, Your Brain & the Stock Market.

REMEMBER: There is a no-obligation, 30-day trial period to your subscription.

Within that time, you can access my entire stock buy list, complete archive of past updates and recommendations, and the special investor reports section of the members-only website.

If any of this is not for you, you can cancel for a full refund any time within 30 days.

Are all those testimonials real?  

I know — they’re pretty good, right? 

To be honest, I never check our testimonial file (which is maintained by our customer service department). In preparing this paper, I was humbled and flattered by the unbelievably kind words.

Yes, every single one is genuine.

Each subscriber has granted permission to use their words. And they’re all kept on a verified master file here at Fat Tail Investment Research.

This is going to sound like bragging, but we couldn’t even fit half of them in today. 

Here are a few more, though...

A great service with amazing and genuine insight into the current state of the economy and the direction Greg feels that technical indicators are pointing towards in the future. Definitely a safe bet for the price.

– Roger

‘My primary advisory service for some time now. I am not affluent so I can’t afford the premium services. I find your service to be well researched and pertinent to the market. Thank you for your work.

– Jan

All I ask from a service provider is a genuine effort and a fair chance to improve myself and I would like to thank you for that opportunity. I consider your service very good value and would recommend it to anyone who is looking for those points. Thank you for the chance to improve [my] financial life.

– CG

The only ‘must read’ for me every month. Your combination of fundamental and technical analysis has consistently performed, and it is the best investing strategy in my opinion.

– Yan

I have no hesitation in recommending this publication.

– Theresa

If you buy the daily newspaper you get yesterday’s news. I enjoy Crisis & Opportunity as a future outlook…Love it!

– Bill

I am of the view that this service is extremely valuable as the recommendations are well thought through with all the positives and negatives fully explained so that the subscriber can make an informed decision whether to invest or not.

– Brent

I appreciate Greg’s honest, no BS approach to investing and to date I have gained good value from his newsletter, stock tips and market commentary.

– Graham

Priceless data for the time it takes to read your reports. I couldn’t invest my time as wisely digging through the “minefield” of pros & cons for each recommendation. Keep up the great work, I’ll keep profiting & reading it.

– Steve

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