Steven
Johnson


Level
2,
282
Oxford
Street

 
 
 
 
 
 
 












(02)
8305
6000

Bondi
Junction
NSW
2022

 
 
 
 
 
 





























1800
620
414


SUMMARY


Steve
is
the
Managing
Director
and
Company
Secretary
of
The
Intelligent
Investor
Publishing
Pty
Ltd

(AFSL
282288).
He
is
also
a
Responsible
Manager
for
the
company’s
Australian
Financial
Services
Licence

and
sits
on
the
compliance
committee.


Steve
has
managed
the
day
to
day
operations
of
the
business,
developed
the
company’s
business
plans,

managed
staff
and
been
a
key
driver
of
The
Intelligent
Investor’s
development.
In
addition
to
these

management
duties,
he
has
played
a
key
role
in
the
company’s
value‐based
research,
with
primary

responsibility
for
infrastructure
and
finance
stocks.
Prior
to
joining
The
Intelligent
Investor
in
2003,
Steve

worked
for
Macquarie
Group
in
Sydney,
Vienna
and
London
and
worked
on
a
number
of
large
project

finance
and
cross‐border
leasing
transactions.


EXPERIENCE
RELEVANT
TO
THE
ROLE
AS
RHG
DIRECTOR


Financial
analysis
skills
and
experience


Steve
has
the
best
part
of
decade’s
experience
valuing
financial
securities.
This
experience
includes
the

evaluation
of
whole
businesses
such
as
the
Macquarie‐led
consortium’s
successful
bid
for
Sydney

Airport
in
2002
and
the
purchase
of
The
Intelligent
Investor
in
2004.
It
also
includes
the
analysis
and

valuation
of
a
large
number
of
listed
securities
and
unlisted
financial
products.


Business
development
and
staff
management


As
managing
director
of
The
Intelligent
Investor,
Steve
has
more
than
five
years’
hands‐on
experience

running
a
business.
Specifically,
experience
relevant
to
the
board
of
RHG
includes
staff
development,

staff
incentive
systems
and
general
stakeholder
alignment
and
developing
and
managing
compliance

systems.


Economic
trends
and
market
analysis


Steve
would
bring
to
the
RHG
board
the
ability
to
highlight
potential
risks
and
opportunities
in
the
wider

financial
markets.
His
training
as
an
economist
and
experience
as
a
financial
market
analyst
would

enable
a
unique
perspective
to
be
brought
to
the
RHG
board.
As
an
example
of
the
value
that
could
be

contributed,
enclosed
is
a
June
2007
article
written
by
Steve
titled
Hangover
will
follow
global
binge.

Insights
such
as
this
(it
was
written
before
the
onset
of
the
global
credit
crisis)
would
be
a
valuable

contribution
to
any
board,
but
particularly
one
largely
dependent
on
financial
markets.




Media
communication


Along
with
fellow
director
Greg
Hoffman,
Steve
has
been
the
face
of
The
Intelligent
Investor
for
the
past

five
years.
He
is
a
regular
contributor
to
Sky
Business’s
Business
View,
ABC’s
Lateline
Business,
CNBC’s

Squawk
Box
Australia,
The
Land
and
ABC
Southeast
Radio.
He
has
been
quoted
extensively
in
The

Australian,
Courier‐Mail,
The
Adelaide
Advertiser,
The
Sydney
Morning
Herald,
The
Age,
New
York
Times

and
Fortune
Magazine
and
has
been
a
keynote
speaker
at
Australian
Shareholder
Association
Prosper

Events
and
presented
to
thousands
of
investors
at
The
Intelligent
Investor
seminars.
This
experience

would
enable
the
RHG
board
and
management
team
to
develop
and
execute
an
appropriate
media

strategy.


Shareholder
communication


The
Intelligent
Investor
has
a
reputation
for
presenting
financial
information
in
a
language
that
enables

its
members
to
genuinely
understand
their
investments.
It
is
also
at
the
forefront
of
new
web‐enabled

communication
mediums,
such
as
podcasts,
vodcasts,
online
forums
and
webinars.
Steve
would
bring

his
experience
in
this
area,
in
addition
to
extensive
experience
providing
face‐to‐face
presentations,
to

the
RHG
board.
This
would
enable
the
board
to
clearly
communicate
its
intentions
and
strategy
to
the

wider
shareholder
base
and
enable
those
shareholders
to
understand
what
an
investment
in
RHG

entails.


ACADEMIC
QUALIFICATIONS
 


Bachelor
of
Economics
(Econometrics
and
Finance),
University
of
New
South
Wales.


EMPLOYMENT
SUMMARY




September
2003
–
current
 

The
Intelligent
Investor
 

Managing
Director




February
2000
–
June
2003
 

Macquarie
Group
 

Business
analyst
and
Manager,




Investment
Banking
Group



November
1996
–
December
1999
 

UBS
 

Part‐time
accounting
role



Issue 225, 23 May - 06 Jun 07

Feature Article
Hangover will follow global binge
Date: 4 Jun 07

The world has changed dramatically in the past 20 years and it has important implications for your
share portfolio. ‘In a world where globalization is acknowledged in every international speech given by a
central bank official the concept seems to disappear immediately they sit down around the policy making table of
their own countries … This is what makes the current state of financial markets possibly the most dangerous in
history.’ – Dr Jim Walker: Apocalypse Now? An Unnatural Tale, CLSA Asia-Pacific Markets, 1st Quarter 2007.

The most dangerous state of financial markets in history? Surely not, this is the age of stability and global
prosperity, right? Well, globalisation has changed the world and mostly for the better. But included with its many
benefits are some new, and potentially very dangerous risks. And, whether you like it or not, those risks are very
relevant to you.

Globalisation is one of those words for which everyone seems to have a different definition. If you’re a
left-leaning arts student protesting at the 1999 World Trade Organisation meeting in Seattle, it probably means
the rape and pillage of third-world countries by those greedy capitalist western corporations. If you’re a well-paid
executive in a greedy capitalist corporation, it probably means the ability to sell your product to the rest of the
world.

For our purposes, though, it means the integration of a large number of national economies into one global
market for goods, services, labour and capital. And we won’t get involved in the arguments about its merits or
otherwise. It’s happening, and we’ll stick to working out what it means for you and your portfolio. In this respect,
there are two important areas we need to examine: the direct effect of globalisation on the companies you own,
and its effects on financial markets and investor psychology.

Aussie companies in a global economy

Firstly, let’s take a look at the aspect that’s in our faces every day. The first thing you probably think of when you
hear of globalisation is your local $2 shop, chock-full of goods manufactured in China and Vietnam. But the
impact of globalisation on the companies you own goes much further than imports and exports.

Think about a bull bar sold by ARB Corporation in the US. Iron ore gets dug out of the ground in Australia and
sold to a Chinese corporation which turns it into steel. That steel is then sent to ARB’s manufacturing facility in
Thailand, where it’s turned into an Aussie designed bull bar. It’s then shipped, on a Norwegian freighter, to the
US, where it’s sold, with the proceeds being converted into Australian dollars and sent back here.

It’s a mind-boggling sequence of events, but the concept is really quite simple – find the most efficient place in
the world for each stage of the production cycle and send that part of your job there. With instant
communications to almost anywhere on the planet, the economic benefits are vast. But it’s also not hard to think
of a few ways that things could go wrong.

The amount of profit an ARB shareholder ends up with depends on Australian mining policies, Chinese steel
prices, the cost of labour in Thailand, shipping rates, political coups, import tariffs and exchange rates, just to
name a few of the risks. A disaster in any one of these areas, all of which are outside management’s control,
could knock your returns for six.

While that gives you a lot more to think about, globalisation has proceeded at such a pace because these
business risks are more than offset by the benefits. At this point in time, however, the same can’t be said of the
other area that globalisation has revolutionised.

Monetary policy set loose

The side of the equation Dr Walker (of our opening quote) is fretting about is the international market for money
– global capital markets. We share his concerns.

Most central banks around the world use interest rates as their monetary policy of choice. The idea is that by
putting interest rates up and down they can control the demand for money and therefore steer their respective
economies on a path of low inflation and consistent economic growth. The problem is that there’s now a global
market for money, but there’s no global central bank.

‘When the US Federal Reserve, ECB and Bank of Japan talk about appropriate monetary policy they do so in a
national context,’ says Dr Walker. ‘The Fed has stopped raising rates because of the US housing market slump;
the ECB has been slow to raise rates because of sluggish EU growth; and the Bank of Japan has dragged out the
process of interest rate normalization because of the lack of inflation in Japan.’

While the Bank of Japan is sitting there focused solely on its own economy, everyone else in the world can borrow
using its super-low interest rates. That means the Bank of Japan influences the price an American private equity
firm might be prepared to pay to participate in a takeover of Qantas.

Nasty hangover

The net result of low interest rates in all of the world’s large economies, in each case justified by domestic issues,
has been a global liquidity binge of unprecedented proportions. You’ve probably benefited in the form of higher
asset prices in Australia, but you should be preparing to deal with Australia’s share of a nasty hangover.

The likely consequence is a global bout of inflation and, as prices rise, that inflation will get imported to Australia.
And there’s naught the Reserve Bank of Australia can do about it. When the prices of all those Chinese goods on
the shelves are rising, raising interest rates here is hardly going to fix the problem.

Our economy has become so integrated with the rest of the world that we’re really a small part of one large
economy, and we’re going to share commensurately in any pain. We think higher inflation will be the main culprit,
but the pain could come from any number of areas.

Psychology goes global

Jeremy Grantham, (see our feature article A few drinks with Jeremy from 25 May 04), travels the world a lot. He
runs GMO, a global funds management business investing in every developed market, and some not so developed
markets, on the planet. And he’s been doing it for a long time. Never before has he seen global investors in such
agreement.

In his latest quarterly letter, he writes: ‘The great Japanese land and stock bubble was utterly persuasive to
everyone in Japan, but completely unpersuasive to almost all of our clients. Seen through our eyes 10,000 miles
away, it seemed obviously overdone and dangerous, didn’t it?’

This time, he writes, ‘everyone, everywhere is reinforcing one another. Wherever you travel you will hear it
confirmed that “they don’t make any more land,” and that “with these growth rates and low interest rates, equity
markets must keep rising,” and “private equity will continue to drive the markets.” To say the least, there has
never ever been anything like the uniformity of this reinforcement.’

Unexpected stresses

With the integration of financial markets, investor psychology has gone global. Combined with a flood of cheap
money, this has created the first truly global boom, across almost all asset classes and countries around the
world. And if, or when, there’s a bust to follow, it will be the first truly global bust. In Grantham’s words, ‘since no
similar global event has occurred before, the stresses to the system are likely to be unexpected.’

Now is the time to think about how those unexpected stresses could affect your portfolio.

It’s important not to forget the economic benefits that globalisation has brought to the world. Over the long term,
we expect those benefits to continue to accrue. But it’s also hitched the world to one wagon. Never before have
the decisions of the People’s Republic of China, the Bank of Japan and the US Federal Reserve had such important
implications for your domestic portfolio.

Right now we see a lot of risk and not enough reward in almost all asset classes around the world; cash therefore
looks like a pretty attractive investment class right now. But globalisation itself is not a reason to be worried. It
just gives you, and us, a lot more to think about each time we look at a potential opportunity.

Disclosure: Staff members own shares in ARB Corporation, but they don't include the author, Steve Johnson.

Copyright © 2009 The Intelligent Investor. Published by The Intelligent Investor Publishing Pty Ltd.
ABN 12 108 915 233. Australian Financial Services Number 282288.
PO Box 1158, Bondi Junction NSW 1355. Ph: 1800 620 414 Fax: (02) 9387 8674

WARNING This publication is general information only, which means it does not take into account your investment objectives, financial
situation or needs. You should therefore consider whether a particular recommendation is appropriate for your needs before acting on it,
seeking advice from a financial adviser or stockbroker if necessary. Not all investments are appropriate for all subscribers.