Hollywood loves the golden hour. It’s the last hour of sunlight in the day. During the golden hour, everything is lit up in a soft, warm glow. This is the best time, for example, to take a photo of a city skyline. The buildings are lit up in sharp contrast. All the best pictures of New York’s World Trade Center were taken during the golden hour.
Light at the end of the day is not as harsh as the light of high noon. Because the sun is parallel with the horizon at the golden hour, the light travels an extra distance and has an altogether different quality. It’s gorgeous.
“It is a ‘golden era’ for most Australians,” reports today’s Australian. Dr Don Stammer tells us that low interest rates and soaring share prices are set to continue beyond the sunset, and on into the foreseeable horizon.
“Exactly how much of the future IS foreseeable?” we recall newsletter writer Jim Grant once asking an audience. His point was that all cycles end. All trends fail. You should never base your forecast on events that lie too far in the future, beyond your sight.
Yet we can’t help but ask the question today. Is it a golden era for Australians? Or is it a golden hour?
Is it the last hour of a long, beautiful day? Or will tomorrow be pretty much the same as today…bright, glorious, profitable and just a wee bit better for your share portfolio?
We can’t be sure. But we recommend you take a picture of this economy, dear reader. It’s beautiful. And the picture may last longer.
Then again, 3.8% annualised growth in the first quarter is just the latest in a long line of quarterly growth figures. Imagine an economy that’s gone sixteen years without a recession. Whole hordes of MySpace users have no recollection or experience of long unemployment lines. A whole generation has known only prosperity. That’s lucky indeed.
There is a compelling argument that Australia’s boom could last as long as China’s boom lasts. And China’s boom-fuelled as it is by the emerging industrialisation of a nation of 1.2 billion people-could last for quite some time. In fact, this is precisely the argument we made in the latest edition of Outstanding Investments, where we looked at the “Big Dig”.
The “Big Dig” is the huge investment in expanding mining and resource capacity to meet the demand of developing Asia, and especially China. Those favourable terms of trade we mentioned yesterday have boosted corporate profits to record levels. Those profits are already being reinvested in new projects. The beat goes on.
In the shadows of the economy there are odd scraps of data that aren’t quite as golden. For example, while corporate profits are up, wage growth is “under control.” Stable wage costs are good for employers. But what about employees? Has their prosperity coincided with the national boom? We honestly don’t know because we moved here ourselves barely a year ago.
And there are other signs of distress. “Australia’s leading mortgage insurers are feeling the pinch from rising home loan defaults, after insurance claims from banks and other lenders soared more than 500 per cent last year,” reports today’s paper. “The two big mortgage insurers – Genworth and PMI – were hit by sharp rises in claims from home lenders according to 2006 accounts filed with the Australian Securities and Investments Commission.” If everything is so golden, why are foreclosures on the rise? Who’s being left behind in this boom?
“Did you know the golden hour is also a medical term?” our colleague Brian asked us. “It refers to the first hour of emergency medical care after an accident. A victim’s chances of survival pretty much hinge on getting quality care in those first sixty minutes.”
Markets and Money