When massive job losses are inevitable, where do you invest?
Right now in Australia we have the Australian Government’s massive jobkeeper programme keeping millions “employed”. We have big banks deferring and pausing the repayments on millions of loans. Trillions of dollars has been accessed early from super funds.
Right now in Australia we have the Australian Government’s massive jobkeeper programme keeping millions “employed”. We have big banks deferring and pausing the repayments on millions of loans. Billions of dollars has been accessed early from super funds. Just about every other industry is doing its level best to chip in and bend over backwards to help flatten the recession curve through to a place and time where the economy can reopen again. However despite the coordinated stimulus, economic assistance and support, there is a growing sense of foreboding that it can’t go on forever, and that when it all stops there will be a very sharp cliff, a long fall and sharp rocks below.
A sobering thought but one worth thinking about and preparing for. The insolvency and debt restructuring industry has, like gold and some “sin stocks”, been a hedge against uncertainty and difficult economic conditions in past downturns.
One company likely to be a beneficiary of the economic conditions is insolvency, lending and debt restructuring company, Credit Intelligence (ASX: CI1). Last month the company reaffirmed its profit guidance for the 2020 financial year of A$13.5 million, up 125% on the 2019 fiscal year.
Jimmie Wong Credit Intelligence Founder and Executive Chairman is confident that the growth is set to continue too. He will be talking to Reach Markets on Tuesday 21 July at 11am, in a Live Online Investor Briefing which you can book into here.
Credit Intelligence has entered the Australian market with the acquisition of Sydney-based debt negotiation business Chapter Two Holdings. Credit Intelligence also announced this month a share purchase agreement to acquire a 60% stake in Chapter Two.
Mr Wong speaks from experience when he says that when economies take a turn for the worse, more people will require the type of financial solutions that Credit Intelligence provides.
The economic conditions that Australia is about to experience will be the first major disruption to the economy in many decades. Many people will not know how to adjust and adapt to living in a recession. Credit Intelligence can help and provide these individuals and companies with a pathway forward.
Credit Intelligence, through Chapter Two, offers hardship assistance, reduced debt settlements and long-term financial arrangements to Australians unable to maintain their outstanding debts.
The past few days have shown clearly that the way out of COVID-19 induced recession will not be quick or smooth. Many analysts expect it to take some time before the economy returns to pre-COVID-19 levels and many expect things to continue to get worse before it slowly gets better.
According to estimates by research firm Roy Morgan, about 2.1 million Australians were unemployed in early June, equivalent to about 8% of the nation’s population.
Many businesses, particularly in the retail and travel sector, may not recover despite the easing of lockdown measures and Australia’s summer bushfires also had an adverse effect on businesses before the coronavirus pandemic.
The country has one of the highest private household debt levels in the world – almost double its household disposable income level, according to the Reserve Bank.
The Australian Banking Association also revealed in May that one in 14 mortgages were granted repayment breaks due to financial hardship associated with the pandemic.
Credit Intelligence is a trusted partner for Australian individuals and companies as high current debt levels meet surging unemployment.
“I foresee there will be a fall in the property prices in Australia and many people will lose jobs or have a fall in income, so many people will have trouble repaying their mortgage and debts,” Mr Wong said.
Reach Markets have been engaged by CI1 to assist with private investor management.
Sources:
- smh: JobKeeper and Seeker revamps planned as jobless rate hits 18-year high
- Bloomberg: Australia Banks Extend Loan Holiday as 800,000 Defer Payment
- Credit Intelligence Limited, June 2020, Investor Presentation
- Reserve Bank of Australia, June 2020, Household Sector
- Roy Morgan, May 2020, 2.16 million Australians (15.3% of the workforce) out of work in April
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July 8, 2020
July 8, 2020
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