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(generated from captions) wall Vietnam is still a communist dictatorship.We'll leave you now with an election announcement on behalf of the Palmer United Party. Thanks for watching, bye.I would make an excellent PM and in time a good and a just emperor. I only invest my money in top ideas like engineering dinosaurs, building the 'Titanic' for love and peace and a better future for those who come after me. It's not about nonsense, it's not about what's wrong, it's not about wleas right, it's not about Kish man Kev or rissole ablot, it's all about pie, it's all about pie, it's all thabt throwing quiche man Kev in the dust Palestinian. It's all about pie, it's all about throughing Ri sole Abbott on the barby. It's all about pie. In conclusion, I say if you want a drink let's eat a bigger pie together, mother fingers.Captions by CSI Australia.

Inside Business. Has the global economy reach an inflection point? The US rebound is under way, Europe has emerged from recession, China looks like it will avoid a hard landing and suddenly our terms of trade are rising again. We'll look at the big stories emerging from the reporting season including the change at the top of AMP. We'll talk to outgoing AMP chief Craig Dunn and his successor Craig Meller about what needs to be done in that business. This Program is Captioned Live.

Gerrard, Europe has emerged from recession. China is looking okay. when it gets off life support with QE3. Take us through how you see things.The world is looking a brighter place. Europe in particular coming out of recession is significant. Europe is the world's second biggest economy. In the June quarter preliminary figures suggest they've had a positive quarter for the first time in six quarters. There's a graphic that shows US and European growth.About the same. They seem to be merging.For one quarter. Even in the US they've done quite well when you think they had significant fiscal tightening in the first-half. Even the US in the first-half has surprised people. In China we've got recent data that's doused people's concerns about a potential hard landing. You're looking at the three biggest blocs in the global pie doing quite well. Not strong, but a lot better than the fears had at the start of the year. Yes, the world is looking a better place. One upshot of that is businesses are getting more confident. If you look at confidence in business in the big seven economies, the so-called G7, it is rising at the margin which is obviously bodes well for investment and it reflects profits are doing quite well. The world is looking fine. The big issue is, of course, it is not normal because we've got zero rates. That's a testament to that and it will be interesting to see how if the Fed starts to does to the economy and
markets. One upshot of all this from an Australian perspective is that our terms of trade, the ratio of export to import prices are starting to pick up. That's largely due to higher commodity prices. Nothing like going back to the boom times of 2003-08 but there does seem to be an intermediate bottom in place proceedings some tenuous support for the currencies. Gerard Minack turns bullish.Time to sell.Marcus take us through how this affecting the stockmarket. I think we've got a graphic here that shows the market has had a pretty good run since late June. A 10% rally, second really 10% rally this year.That's the market this year. Everything peaked out the moment the Fed started talking about tapering and putting an actual timetable on come
it. We fell 11.3%. We have come back 10.5%. The moment they started hedging their bets on that. We're in this volatile tapering discussion and it really is quite scary for people because we don't have the FOFC meeting until 17 or 18 September. We're not going to is hear whether they're tapering until then presumably unless they say it
something. During this period it is probably better than to arrive than to travel because one they actually announce it, it will be an anticlimax but for now we're moving on every sing single announcement. People don't like this volatility. Them avoid doing anything. The other argument going through the market there's not a value around. You see that in the CBA which we'll come time sure and ANZ trading update. Everyone is saying under weight, under performed, there is a some sell recommendations on CBA already. I would point out the Australian index is a bit of a joke because 20 stocks account for 50% of the index. 50 stocks account for 80% of the index. If you take outfox, Telstra and the four banks, the index hasn't gone up this year.Gerrard, the other thing that's been going on is business confidence and consumer confidence in Australia head ing indifferent directions. You've been doing your own calculations of that. Take us through that. That's right. We mentioned before that business confidence in the big 7 economies is on the way up. This graphic shows business confidence a measure I've constructed averaging all the monthly business surveys we get and businesses here are still fairly grumpy. That's the blue line.That's the blew line absolutely right. Business confidence down is mid CFC levels.Absolutely when we had domestic demand contraction. Not as bad as the early 90s recession. Consumer confidence is at long-term average. There was a pop in the last month. Consumers getting a little bit more cheerful. RBA rate cuts always work wonders there. Business not seeing a response yet. Down in the dumps.In that realm of confidence and it is worth listening to Ian Narev of CBA on that sufnlt he's pretty wary about the risk out there. There are through the lens we look up at the moment there is a credit quality stable but we series being to the economy. We're saying we need to be prepared if those happen that they may result in a dear racial of credit quality. We're certainly not sending alarm bells out and saying things are about to get worse. We're just saying there are circumstances under which they could so we immediate to maintain a degree of caution.You've been looking at insolvencies in the small and medium sized business sectors. Having interesting situation I think. The Tax Office seems to be going after the companies in a big way. Here's an example from earlier this month, a daily list of winding up proceedings across Australia put out by accountants Rogers Reedy. You can see a 25 of the 38 wind ups on that day were driven by the ATO. That's just one day. Pretty typical of It
what's been happening.It is. It is fascinating. There's a big time lag between a wind up and a company becoming insolvent. I actually asked a debt collection agency to run the numbers over the last few months and they looked at within three months there was 1450 companies that had wind up notices, nearly half were done by the ATO. Then if you put other government agencies in the mix, it was about 65%. They're not paying their taxes, things have got to be pretty grim when you're getting wind up notices. That's quite a lot. If you look from April to July, the numbers of insolvencies have started really going up.It is no wonder business confidence is down if they're all going broke.That's right.Let's face TIf you look at Dunn & Bradstreet put out figures last week and they were saying that people aren't getting their debts paid on time. You're getting suppliers that aren't getting paid on time. That's really blowing out which is causing cash flow strains which will probably end up with the ATO issuing wind up notices to them.Gerrard? It was from
interesting to see Mike Smith from the ANZ saying the opposite. We'll get over the election, the Australian dollar is down, and the economy is going to start to pick up a little bit and saying the opposite really.One hopes. This is all a reflection of the it
economy last year and I think it is too hard to blame the election on what's happening there. This is what the RBA has been cutting rate. This is why the RB is happy the currencies is dune because we have a very weak rate. This is corporates on their death bed sums it up really. I wonder what the sector breakdown is.Retail consumer discretionary, kerters would be in there Contractors. I had a look. Contractors two a day are being wound up. Contractors in construction and building they're really being really
hurt.NSW is the worst. It's really bad.They're merry killings if you can't pay the taxes you are deducting from your employees wages you deserve to be put out of your misery.It is the tip of the iceberg. How many are trading whilst insolventIn the small business sector it's been ever thus. They're very sensitive to business confidence and interest rates.And people not paying their debts on timeBig results on the calendar. The biggest surprise wasn't a particular frost or loss but the announcement that AMP chief Dunedin will be retiring at the end of the year after six years. He'll be replaced by Craig Meller who has been running the financial adolescent division. I caught up with both of them in the midst of a hectic round of investor briefings during the week.Craigs, if I can call you that, welcome to the program.Thanks Alan Craig Dunn superannuation has been going up, 9% of salary over the years. Help me understand in that situation how AMP's profits have been declining. Underline profit down the last three halves, 488, 462, 440. The impression you get is that superannuation industry is booming, yet, your profit is declining. Why is that? Actually the superannuation part of our business has done very well. What the drag on profits over the last 12 months or so has been our insurance industry. If you step back and look at our wealth management and our superannuation business, it grew its profits half on half by 20% this time around. We had strong growth in AMP Capital and our other businesses, it is this challenge we've got in life insurance.That growth in profit was due to cost reduction and how much to margin? As I read it, the percentage of funds un margin that
declining as well, isn't t the margin that you're getting? In the margin, if you like, the average price people are paying to AMP is coming over time, as the market gets more competitive and people want better value. The assets un management has grown faster than that and we've also taken out costs which means we've had positive jaws particularly in the last half versus the previous half for 2012 and that's driven that strong growth and earnings. As I said, we've had similar growth in earnings in AMP Capital, New Zealand our mature book. As been the challenge in the life insurance industry at the moment including AMP which are dragging the result back towards not being as good as we'd like.How do you feel now about the AXA acquisition which was the high point of your tenure two years ago, took over AXA. AMP share price since then has fallen 15%. Markets up 3.7%. You've actually under performed quite significantly the market since the act 20 axis.Both businesses, whether they were merged or had remained independent would have had challenges unfortunately on their share price because of the external environment we have been facing in life insurance and elsewhere. If you then go to the integration and say have we created value by bringing the two businesses together, we vaultly have. We increased our Synergy targets by 25% against the first target we set when we announced the merger. We delivered those about
ahead of times. When you think about the momentum in the business, which has also been important, you want to get costs out and the franchise, if you like growing, we've grown adviser and planner numbers stronger than the market. We've had good growth this time around. The market has been going backwards actually. The North platform which was a key attraction, if you like, to AMP of the AXA business has grown really well. In the first six months in the year that the merger occurred, the net cash flows going to North platform was a bit over 200 million. In the half we've just delivered now it is 1.9 billionCraig Meller, Craig Dunn has highlighted the problem in life, in the life insurance business which I think comes down to one of the issues a high lapse rate.Yes.The lapse rate seems to be as high now as it was when unemployment in around about 91 was double what it is now. Yes.Usually you would associate a high lapse with high unemployment. What do you reckon is going on and how are you going to fix it.There are a number of issue in the life insurance market that are cyclical that go with the economic environment. There's no doubt that the more difficult economic times has caused an increase in the lapse rates. I think the white collar recession, if you like, has been a bit stronger. The issues of the GFC and the fact that that's had an impact on employment in financial adolescent has men that more of the people insurance policies have found tough times and have cancelled their policies. There's also a second issue which is specific to the Australian market where the life insurance market in this country is driven by what we call step premiums. Each year you're a year older you get an increase in your premium which is great in the early years of the policy because it is a relatively low premium but as you get older the premiums go up.There is a high commission upfront in Australia. When I last took out life insurance it was the first year's premium.Yes.Was the commission. Is that still the case? That's still the case in Australia. That would actually be a similar theme around the world.Does that lead to churn though? Is that what you're seeing that leading to advisers churning? I would say it is a very minor part of the problem. However, if you look at what's really changing, is consumers are changing the way they buy stuff more used
generally and whereas people used to take out life inshoompbs pom cease for maybe 10, 12 years now they're taking them out for much shorter period of time. Structurally the commission structure of payments that frankly have lasted and lasted well for 163 of AMP's 164 years are probably going to be moving past their sell by date.Looking at the wealth business, the wealth management margins or fee of funds un management come town from 1.45 2010 to 1.25.YesGradually coming down as Craig Dunn said.YesIs your job as you see it in that business to continually get costs out and chase volume? That's really it, isn't it? We spend a lot of time talking to our customers about what it is they're looking for from the advice we provide to them, from their superannuation and one of the resounding themes that comes through people want to pay less. That's the same in any industry now. We're working on the basis that we're always looking to provide better value to our customers and that means that the headline price is going to continue to come down.One thing you've done Craig Dunn is to move the business towards self-managed. You've taken over Cavendish and a few other things in that area. Is that an inherently lower margin business in a sense lowers the overall margin of the company? Essentially. It can depend on the amount of assets un management that a person has in the fund. Overall, you're quite right, it is going to tend to be a lower margin business although as Craig said, margins are moving down in the broader business.Do you both see the SFS M trend continuing at the same rate? It has grown very strongly. People have often speculated how far can it go and can it keep growing at the same rate. Would you have to say at some point as it gets bigger and bigger the annual growth rate is going to fall a away. People want more transparent hand more control and that's what a self-managed fund does. That's why I think you've seen people move that way.Were you a bit caught out by the move towards SFS MIt's been going on for some time. The challenge we've had it is a very different market to what's been our traditional market. We looked at it as other competitors like us have done and said well, how do we get into this market and how do we do it in a way that makes sense? You also have to get your head around the idea of cannibalising yourself? In a sense. We've had like the rest of the market has, given our market share. If it's growing that quickly the growth is coming somewhere and it includes AMP customers. We were losing customers to that sector anyway. It came to the point we can lose them to someone else or lose them to a part of our own business. You're right in a sense. The world keeps changing, markets keep changing, so you have to accept at times that part of your previous business is going to be impacted by it if you of the
want to grow going forward.One of the interesting things in the results was the growth of AMP Bank.YesDoing quite well.Yes.Do you think at the end of your tenure AMP will be more of a bank than it is now? I certainly hope the bank is going to continue to have an increasing percentage of the earnings of the organisation. We've been really pleased with the results of AMP Bank over recent years. Principally, they're in the business of mortgages and deposits. We've been able to grow both sides of the balance sheet ahead of growth in market rates overall and that's obviously turning through into very strong growth in the profitability of the business. We're very pleased with our banking business. We're going to be investing in it going forwards. We think it'sing about to become a much more integrated business in with AMP and has a bright and prosperous future.We'll to leave it there. Thanks for talking to us. People who bought AMP to get on the superannuation boom would have been shocked to find that the life business fell over and cancelled it an insurance company as well.
There's something there's a structural change afoot in the insurance industry. Both demographics are running against you also the type of product that's being offered. In the past people bought very high cost individual insurance policies. They're now buying it through group life, through their super contributions, where the rates can be a third of the price that you'd pay to an individual planner. The rates in group life are raiser thin. Of this's really Comanchero come down. A lot of the big insurance and reinsurers are experiencing big losses on those books. They have to be reprised but AMP is caught on the old model of selling individual firms and they got their provisioning wrong as well. Insurance is a risky business. It is all about the management of risk and I think as their customer base gets older, they're not going to find the replacement rate as well. You're going to have to factor that in I tried to up my life insurance and I turned out I had a financial planner. He wouldn't ring me back. Why can't I just do it like a car. Structurally that guy has been earning a trail off my life insurance for 10 years. I didn't even know.Adele? Income protection insurance that's people are twitching aboutThe AXA takeover, how do you reflect on it did not? I don't think it did. As you pointed out in the question, the share price has gone backwards. If you look at the earnings per share pre-AXA, it was about 36 cents. It is now about 32 cents. You'd have to look at synergies that they've taken out and they're saying it was above what they'd expected, but the costs of doing those synergies was $310 million and they got about $200 million in synergies. They're going to do the process again. More cost cutting, more synergies. At the end of the day it is the technology. They really need to improve the technology and get all the systems working right.Back to CBA now. The Commonwealth record profit was 7.8 billion dollars on Wednesday. Ian Narev is pretty cautious. He cruelled expectations of investors who had been looking for a dividend windfall.In the current environment there's no doubt the dividend is something people value high will you but that perhaps for the long-term. In this case we gave very clear guidance how we think about the dividend. There were people in the market leading up to the from that
result thought we might depart the
from that guidance and look for the tune to get a quick extra dividend out of the stock. That's not the way we manage the institution. Some of those people might have been disappointed they thought that and that's led to a sell-off today. That's life and that's why we don't watch share prices day to day.Marcus you do watch share prices day to day. I come back to the same thing with Telstra. Everyone is worrying about the dividend going up one cent and how exciting that is the share price went up 12 cents on the day. The share price of Commonwealth Bank they're talking about 10 cent special dividend. Fell $1.20 on the day. It is this Australian disease to focus on the dividend when the capital is winking around in the background. The other issue with CB was the same comment with ANZ everyone is quoting this case for perfection. There's no daut doubt on the historical scale all the banks are trading at the toppish end of their yield range and PE range and it is hard to see why you should buy them here. It is hard to really see why you would sell investor. You hold themGold miner Newcrest had a net loss of 5.8 billion. Not a good look, is it, Dean? Newcrest is a disaster really. They haven't since they bought they haven't hit their production numbers from the year they brought it which is just an absolutely damning situation. I think what the really damning part of it there's been no board accountability for the destruction of value. We still have Don Mercers the former head of the CBA bank in the chief. There's incentive to get the mining engineers in. I wouldn't be surprised if Don Mercer headed off for the rocking chair full-time.Have they got proper engineers on the board? They've got Vicente Gucci, the former CEO of MIM and there's enough mining experience there, but I think Changing of the Guard
there has to be a bit of a Changing of the Guard at board the
level there. It can't just be the Melbourne mining club. It has to be people who can really focus on the operation.The Melbourne mining club is an actual thing.Yes, I know.You mean more generally.The perception is the board of Newcrest has gotten off scott free and the shareholders haven't and that needs to change.Wesfarmers had a pretty solid set of results, profit of 2.3 billion dollars, up 6%. The driver was the supermarket market business Colesment here's Richard Goyder, CEO.We think there's a lot to go in Coles in terms of years of earnings growth ahead because we still know we're a long way hyped where we could be on some fronts. We've got many stores still to refurbish. We're about halfway through, we've got 300 or 400 stores to refurbish. We have a strong store opening program and get a lot more efficiency through the supply chain. Part of that will be with our suppliers but I anticipate that will be in a way where we work with our suppliers to get mutually better outcomes for us for the supplier and certainly for cure customers.There's lots of demergers going on about lately. Do you think they should demerge? I absolutely think so. I'm sure some shareholders would be pressuring them to. If you target and
look they've got K-mart and target and never do they the whole history of target and K-mart together one does well, the other doesn't. That's a classic demerge.Hive them off.If they demerge Bunnings I'd buy that. That's a phenomenon.Are you two being paid by investment bankers? Definitely not.You've seen in the last two months - not necessarily. Look at origin. It did very well from its demaerjer. There have been a few very good examples.It is interesting, the Coles takeover was overpriced, right? Yes.Smashed their return on equity. Yet, it does seem to be going okay, right? YesYou have to say.It's come off a very low base, hasn't it. They've done a great job getting it off that low base. Still not meeting its cost of capital. It does have still a long way to go before they talk about demerging anything. What investors want them to do is deliver on the business case that they were diluted for, which was buying Coles. They shouldn't be buying anything unless Els until they deliver it
on that.Or Marcus's comment, it was the Coles takeover was fantastic for investment banks.Absolutely. As was the Myer float. That was private equity that did well out of thatElse has been going on in the profit season.Not just profit season but Newcrest up 8% on its results but everyone was seller. Bradken up 8% on its results. All the broker research got sell under per, sell, sell, sellThe stock went up anyway.The gold price is going up a bit. The gold sector is having a run. Bradken up 12% on the list. A list went around the short the stocks with results coming up. That's what happened to bratd Ken results. They were okay. They shot up. Macmill land Shakespeare starting to move on. It halved on the FBT on cars. Everyone is quoting a coalition victoryThey tracked coalition polls.Dominos pizza up 13% after they bought 75% of dominos pets 20 Japan. Very well received. Quality stock obviously. Am con up 10%. Telecom sector still alive. Real 5%. All those quality stocks everyone has them in a value portfolio. They're looking expensive. You can't really buy them now. With the results they're getting sold off a bit. Everyone loves CSL. Everyone was a buyer after the results. Only one buy recommendation on CBA after the resultsIs the market looking expensive? I think it is actually. Equities globally in the US particularly expensive. The cheap patches are the ones coming out of recession, Europe and the emerging markets which have been until recently absolutely thupd. If we do get better confidence China bottoming avoiding a hard landing Asia looks The Place to Be in my It is
view in the next six months. It is prepared under owned and the macro are getting betterAre you a short-term bear long-term bull. Would that be a oversimplification? The world's seems to be going back towards normal. I'm sure it will actually make it. While ever people think that, it is going to be good for equities. We have just go over the hump with the Fed withdrawing the QE.What happens if it doesn't make it. What do you mean? Policy from the
makers can still snatch defeat from the jaws of victory, particularly in Europe where there's a lot beneath the surface that still is fairly poor. We'll see how the US copes with something other than era zero rates. At the end of the day most places look good on zero rates. Free money is lovely. It is disastrous. We're all dodging around in the equity market trying to avoid the big one when it comes. We've got to make as much as we can whilst we can and not make grand declarations. The issues fall
haven't gone away. China could fall over is not good for pension funds.That's why so many people are in cashThe SFS M is in 30% cashThe busiest week of the reporting season coming up of the the highlight will be BHP on Tuesday, Boral and Woodside are on Wednesday, Thursday cease Fairfax, Fortescue and origin posting their results. It is quiet on Friday, Crown and Iluka are among a couple of stocks that round things out. Final thoughts? What do you think? Interesting to see whether the election does provide a further upswing to consumer and business confidence. The market will fluctuate around day to day but that seems to be the chance for a reset in some ways.That's certainly what a lot of people are sayingThey sure are.We'll see, therefore, what comes out of what Gerrard is talking about.That's right. How fast the Fed tapers. They're going to taper, but it's what's moving global markets. It is watching every Ben
statement, every wink and from Ben Bernanke.That's where we'll have to leave it for this week. If you'd like to check out the program again or the full interview with Craig Dunn and Craig Meller, it will be posted on our website a bit later. Thanks to our guests Marcus, Adele, This Program is Captioned Live.Hello and welcome to Offslders. The dominant sports story of the year escalated and on multiple fropts this week. Charges were laid against Essendon and its key officials as battle lines were drawn with the AFL. The net is closing around the Newcastle Knights with suggestions that club is the genesis of the drugs in football scandal and ASADA is under fierce scrutiny over conduct and process. We'll delve into every corner. On the brighter note the Australian dur f has its own Pegasus, a white flyer anointed to come Nate the coming spring carnival.He's a length and a half in front. He starts to storm now. Second in it comes.

Barrie has given me the keys for the election campaign so that's just how I roll. John Stanley, what is the Melbourne Cup favourite doing winning a 1,400 metre race 11 weeks ahead of the main event?It's the sort of thing we saw from the likes of Kingston Town in the past and there were stories in the week what is the next superstar of the Australian turf to follow Black Caviar the answer came yesterday. This was a horse that was 70, 80% fit. First outing, it's been aimed at the Melbourne Cup. On the turn Glenn Boss, it looked like he would have to work it hard even to get it to the finish. It poked its head through and accelerated quite at the end of 1,400 and Boss who has written the likes of So You Think and Makybe Diva said it's the best horse he's written.Going to benominally popular.It will be very popular because it's the ghostly grey. We've had all the great grey horses. The odds are already very skinny for the Melbourne Cup. They will be even skinnier because when you've got a horse that looks like this it is going to

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