Fiesta time!
Global Insights Report 01 April 2015

Name a global sector that grew to US$1.4 trillion in 2013. Think of beach towels and parasols and you will be on the right track; yes it is travel and tourism. But as a massive growth area you may be even more surprised to hear that South America is giving the sector a massive boost and may provide some interesting opportunities for investors.

With countries like Ecuador reporting a 14% growth in visitors last year it is no surprise that Expedia is spending $346 million (US$270 million) to acquire a stake in, the biggest online travel booking service in Latin America. In fact, the United Nations World Tourism Organisation (UNWTO) believes that there will be a 4.4% growth in international arrivals in Latin America, double that of the more established markets.

Growth drivers

The UNWTO states that 80 per cent of travel in Latin America starts and finishes in the same continent, which naturally dictates that the growth is a direct consequence of the regions own increased tourism. In just a decade, one third of the Latin American middle class has surged with a daily per capita income (in purchasing power parity) between $13-64 (US$10-50) a day, a shift from the historic figure of one fifth.

There have been, and will continue to be, showcase events such as the 2014 Brazil World Cup and the 2016 Rio Olympics, and just as Brazil has had to improve infrastructure for these global events, countries like Ecuador has put substantial investment into transport, reducing journey times and further unlocking the country.

The new Pacific Alliance has reduced visa requirements amongst neighbours and the largest neighbour of all, the USA, is not only set to massively boost tourism to Cuba with the easing of past embargoes and travel restrictions, but targeting with large advertising campaigns, such as Ecuador paying $4.9 million (US$3.8 million) to be the first Sovereign nation to have a 30 second advertising slot during the US Super Bowl.

Is this a warning worth heeding?

So it’s looking good in the South of the continent, but what about the US? The Quicksilver Markets report issued by the US Treasury’s Office of Financial Research on 17 March is presenting a little more bearish front. The author, Ted Berg, defines a Quicksilver Market as being when stable markets do an about turn and “change rapidly and unpredictably.”

The report concludes that the S&P 500 is close to two standard deviations above the historical mean, the two-sigma threshold (similar to 1999, 2000 and 2007), a view shared by Jeremy Grantham, chief investment strategist of Grantham Mayo van Otterloo, who believes that a market bubble will occur when valuations go above two standard deviations from the historic average leading to a "reversion to the mean”, that is that markets will revert to mean historical levels from highs and lows. The report states that “valuations approached or surpassed two-sigma in each major stock market bubble of the past century.”

But based on the measures used in the report (CAPE ratio, the Q-ratio, and the Buffett Indicator), it would be hard to give a short-term view as to when, with such high valuations, the market may implode, and even if the market does appear overvalued, with interest rates at such low levels it is no surprise. The report states that it would be difficult to predict “the timing of inflection points,” and the markets could remain overvalued for a long period. Stay alert, with prices as they are you don’t want to be the last investor holding the baby.

Best regards,

John James
For La Trobe Financial

view newsletter in a browser - 13 80 10
Latest Articles:



Contact La Trobe Financial

Ratings And Awards

The above awards and ratings were given to the Pooled Mortgage Option within the La Trobe Financial Mortgage Fund and may be viewed

La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. The PDS is available on our website or by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.

- The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund and may be lower than expected. Investors risk losing some or all of their principal investment. The investment is not a bank deposit.
- Past performance is no guarantee of future performance.
- Withdrawal rights are subject to liquidity and may be delayed or suspended.
- The award and ratings were given to the Pooled Mortgages Option within the La Trobe Australian Mortgage Fund.
- Any rating is only one factor to be taken into account in deciding to invest.

1. Zenith's "recommended" rating indicates that it has high confidence in the manager meeting its objectives. The Zenith Investment Partners ("Zenith") ABN 60 332 047 314 rating referred to in this document is limited to "General Advice" (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product(s), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. To view the relevant research information, please visit The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective.
2. SQM Research - 4 stars to 4.25 stars - superior, suitable for inclusion on most Approved Product Lists. To view the relevant research information, please visit This rating will not take into account your, or your clients' objectives, financial situation or needs. It is up to investors to consider whether specific financial products are suitable for your objectives, financial situation or needs. Research houses receive a fee from La Trobe Financial for rating the product.
3. Lipper Leaders Rating Total Return (Score – 5) Lipper Ratings for Total Return reflect funds’ historical return performance relative to peers. The ratings are subject to change every month. The highest 20% of funds in each peer group are named Lipper Leader or a score of 5 for Total Return. Lipper Leader ratings are not intended to predict future results and does not guarantee the accuracy of this information. More information is available at Thomson Reuters Copyright, All Rights Reserved.
4. Australia Ratings (AFSL 346138) makes every effort to ensure the reliability of the views and rankings expressed in its reports and those published on its websites. Australia Ratings research is based upon information known to it or which was obtained from sources it believed to be reliable and accurate at time of publication. However, like the markets, it is not perfect. This report is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore discuss, with their financial planner or advisor, the merits of each rating for their own specific circumstances and realise that not all investments will be appropriate for all subscribers. To the extent permitted by law, Australia Ratings and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information within the report whether or not caused by any negligent act or omission. If the law prohibits the exclusion of such liability, Australia Ratings hereby limits its liability, to the extent permitted by law, to the resupply of the said information or the cost of the said resupply.
La Trobe Financial is one of Australia's leading independent credit specialist Fund Managers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 130 staff and has managed over AUD$10 Billion covering over 100,000 investment grade assets since inception in 1952.

Copyright 2014 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.

La Trobe Financial Services Pty Limited - Australian Credit Licence Number: 392385
La Trobe Financial Asset Management Limited - Australian Credit Licence Number: 222213

This publication does not constitute financial advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek your own financial or other professional advice before acting or relying on any of the content.

Terms & Conditions | Disclaimers | Privacy Policy