EWA 10 Years of Australia Rules…

An interesting little chart. A 10 year weekly chart comparing Australia via the EWA fund to China as FXI and both the USA (via SPY and TLT for bonds) and the EU as EZU. Also in the ‘mix’ are the Euro FXE and the British Pound FXB vs the UK stocks EWU.

So we get a comparison of “sells stuff to China” vs “buys stuff from China” vs China. Also a look at the currencies of those folks buying a lot of stuff from China. (Since this is all in $US, there isn’t an explicit $US line, but realize that the $US has had about a 20% ‘haircut’ over that time. 2% a year for 10 years is a ‘modest’ estimate of the inflation rate…)

EWA Australia 10yr vs EU USA UK and China

This is a very large chart, so you can click on it to get a more readable size.

The live chart is available at Bigcharts.com

So, what’s interesting here? First off, over a decade time scale, Australia has out performed China, though with a fairly tight “coupling” between the two fund tickers. Lately, Australia has ‘pulled away’ from China. News flow is about how China is suffering a labor shortage for “blue collar jobs” and with rising prices. (No real surprise, we in the USA are exporting massive inflation to China via their currency peg to the $US. Well, “creeping peg” more accurately. We are playing a game of “bugger the currency” to avoid getting in the face of the Chinese about that Mercantilist behaviour, so they get more of our inflation than we do…)

At any rate, the $Australian is up relative to the $US as well. Not on the chart, but about 1/3 over 6 years. Yes, a 33%+ gain. China hands Australia $US to buy ‘real stuff’… and those get turned into $Australian and that, well, puts upward pressure on the $A and down on the $US. That, and our Central Bank is printing like crazy while our Congress and Da Prez are spending like they can just print the stuff… which, it seems, they can…

At any rate, back at the chart…

For all the talk about China, Australia has been the better performer. I held a fair amount of Australia funds into the crash, and dumped during. Then didn’t get back in. Clearly that was a mistake, as the Australian market recovered much more than did the US market.

Now look at EZU, the EU Fund and FXE the Euro fund. Riding up with China and Australia, but post crash, just a turkey.

From a much higher high (nearly the same as China and Australia) but not even recovered as much as the SPY S&P 500 in the USA (that is basically ‘whole’ having recovered to the prior highs of before the drop). The Euro is up ‘single digits’ against the $US over that time period, so has had about a 10% real inflation ‘bite’ if the $US number is close to right.

It looks like Euro Land is not a very good place to be investing or looking for growth…

Now about those folks in the UK who are only 1/2 committed to Euro Land? In the markets, not in the currency?

FXB the British Pound Fund is down nearly 20% against the $US over the 7 years it has traded. So close to 40% in real terms if the $US inflation number is close to right. (It’s also possible there is ‘slippage’ in the fund and it isn’t a good indicator of actual currency changes over that long a time scale; but since it’s what I’ve got available to trade, it’s what I look at.)

EWU the UK fund, is that green line about 1/2 way between SPY and EZU/FXI/EWA on the run into the market peak. Doing better than the USA into the financial bubble, but not as much as the EU. Coming out of the crash, recovering better than the EU, but not as well as the USA. Nowhere near Australia…

So What’s It All Mean, Then?

Don’t really know.

To me, it looks like the Euro and EU are very sick and not getting any better. Took a big hit in the financial crash, and are still trying to cope with it. The UK took a hit, and “got over it”. About an 8 year ‘go nowhere’, and with the currency buggered, but “making it”. The USA has had a nice recovery in stocks, but never was that much of the Financial Mess (despite the news flow) having sold large chunks of the “Special” Investment Vehicles over in Euro land…

The real and clear winners are places with growing real economies. It has been China, but they are starting to show some pains, and is presently folks who “Sell Stuff To China”.

So “Hats Off” to the Australians! Well done!

Will it ‘hold up’? Well, I expect so. Doesn’t really matter WHO is winning the manufacturing wars. They still need the minerals and energy (coal) that Australia sells. Canada too! as they have a nearly identical end point on their graph, but rise a bit more out of the crash before Australia caught up in the last year.

So “Hats Off” to the Canadians too! Well done!

It’s likely that the Kiwi’s in New Zealand are in there too, and likely some other countries who “sell stuff to China”. I expect that ‘theme’ will hold up for as long as China is the manufacturing center of the world. Especially as their consumer class ‘comes on line’ and is looking for New Zealand lamb and dairy goods, and Australian gold and opals.

Add to your ‘watch list’ “What is China buying?” and from whom…

Especially if they have their own currency that is more sound than the $US and €Euro…

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