CEO INSIGHTS – Week Ending 14 September 2018 By NAOS Asset Management

political and social crisis

“I’m not particularly worried at the moment. Two years out is when I’m worried about. It’ll be more of a dollar crisis than a debt crisis, and I think it’ll be more of a political and social crisis” Ray Dalio, Founder, Bridgewater Associates

As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.

Tourism

"There are 13 new ships to visit Sydney this year. It's not a record, though. We were full last year and we are full this year" Joel Katz, CEO, Cruise Lines Industry Association

Australian Economy

“Housing sales volumes are down and prices going down can be a problem for consumer confidence” Anthony Scali, CEO, Nick Scali Furniture

US Economy

"I think the [US] economy overall is performing pretty well. Demand's good for housing" Louis Gries, CEO, James Hardie

"The US economy is doing very, very well, and you will see with job security, with increasing disposable income and, I suppose, wage increase and tax relief that more people feel more certain about their future and are more inclined to buy a home" Robert Thompson, CEO, News Corp

Housing renovations market

“We would hope that renovation activity would start to pick up. We have seen through other cycles that when housing prices in cities do start to pull back a little bit, people do start to move into renovations and redecoration's. We haven’t seen that yet but we’ll be looking forward to seeing more of it” Glen Robinson, CEO, Beacon Lighting

“We’ve consistently said that when housing churn comes off, we see changes in alterations and additions, so that’s obviously something we will continue to work through” Mike Schneider, CEO, Bunnings

Manufacturing

“Have we been blindsided by the weight of increases in raw material prices, especially resin prices? You bet we have. That is a serious headwind. But headwinds eventually die down” Raphael Geminder, Chairman, Pact Group

Coal Mining

"The premium [of low ash coal] is fundamentally driven by two things; it is the hunger for good quality coal because of restrictions in the countries that burn them, and the lack of new mines being built in Australia because of the way this country has become from a mine approval point of view" Reinhold Schmidt, CEO, Yancoal Ltd

Surgical Robots

In the first few years of launching [surgical] robots we were selling one or two a year. This year we will sell between 15 and 20 new placements" Michael Trevaskis, CEO, Device Technologies

Aged Care

"Our message is clear: any organisation or person doing the wrong thing will be found. Substandard [aged] care will not be tolerated, including the option to shut down an operator doing the wrong thing" Greg Hunt, Health Minister

Grain Prices

"I've just sold a bit of my planting grain from last year for $470 a tonne. That is the highest price I've ever sold wheat for by $80 a tonne" Luke Arbuckle, Queensland Farmer

"Only pockets of the east coast are likely to produce any crop and some of what was earmarked for harvest is now going straight to fodder" Andrew Weidemann, Chairman, Grain Producers Australia

Mining

“As we look at our end user markets, you can see a mixed outlook. US thermal coal is off 30% from peak demand, we are seeing a looming supply shortage in gold and copper markets, which should lead to increased production for customers in Mexico, the US and Canada. In iron ore, we saw an uplift in volumes last financial year from the impact of tariffs applied and expect U.S. iron ore demand to remain stable into the foreseeable future as a result. And finally, in quarry markets, we expect 3% to 5% growth in the medium term” Greg Haye, Incitec Pivot

Trade Wars

"I do think we have to protect our national jewels: our technology. So this is a very serious matter [US/China trade war]. And sometimes, when you have a serious matter, you may have to take a little pain. That's how it goes" David Tepper, CEO/Founder, Appaloosa Management [Large US Hedge Fund]

Credit Conditions

"Our funding comes entirely from the wholesale markets, which has seen sustained and wholesale volatility for months leading to all lenders increasing their interest rates" John Oliver, CEO, HomeStart

Other

"I think some day soon I'll go back to teaching. This is something I can do much better than be CEO of Alibaba" Jack Ma, Executive Chairman/Founder, Alibaba Group

Thank you for reading.

Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.

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