Russian President Vladimir Putin said he saw no immediate need to invade Ukraine while leaving open the possibility of using force, as the U.S. weighed sanctions on Russia and offered aid to the Ukrainian government.
In his first public remarks since Ukraine said its Crimean peninsula was seized by Russian forces, Putin said yesterday he has a duty to defend ethnic Russians in the region and reserved the right to military action. U.S. President Barack Obama challenged Putin’s rationale for intervening, as Secretary of State John Kerry unveiled $1 billion in loan guarantees to Ukraine’s cash-strapped government during a visit to Kiev.
As a result stocks rebounded worldwide yesterday after Putin’s remarks stirred optimism that the worst crisis between Russia and the West since the end of the Cold War is cooling. Putin said troops stationed in Crimea, where Russia keeps its Black Sea fleet, have only been securing their bases. Gunmen who’ve seized crucial infrastructure and surrounded military installations are acting independently, he said. At the time of writing, the US Dow Jones Index had rallied 227 points to 16,395 overnight while Australia’s All Ordinaries Index is up 0.60% to 5,444.
Perhaps more importantly, today, Australia’s quarterly GDP surprised on the upside posting an annualised rate of 2.8% – higher than the 2.5% GDP rate economists were expecting. When coupled with the announcement today, from Chinese authorities, that their growth rate ‘goal’ for 2014 will remain at 7.5%, this should add more fuel to the overall optimism currently taking hold of financial markets – great news for Westmount clients. (Rick Maggi. Westmount. Financial Solutions.)
Warren Buffett’s annual letter to shareholders is almost always a treat to read, even if you don’t own any shares of Berkshire Hathaway. It’s eminently readable, and he usually throws in some evergreen personal advice that anyone can use. This year is no exception, based on an exclusive excerpt just published by Forbes magazine.
In the letter, Buffett tells the story of two investments made more than two decades ago: a 400-acre farm outside Omaha and a commercial building in Manhattan. The farm is now worth more than five times what he paid. And he says the Manhattan investment produces annual income equal to more than a third of the initial investment.
His secret? He focused on the fundamentals of what the investments would produce, not on their fluctuating value. The real estate property, for instance, was adjacent to New York University, which he notes “wasn’t going anywhere.”
“Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard,” writes Buffett. “If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.”
Buffett says that for “the nonprofessional” (that’s the rest of us), there’s no need to be picking winners in the stock market, or hiring someone else to do it either. And you should definitely ignore people on TV who try to predict broader market conditions. A low-cost index fund, which captures a wide enough cross section of businesses, should be plenty. And he reveals that he’s following his own advice in his will (emphasis added):
My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire Hathaway shares will be fully distributed to certain philanthropic organisations over the 10 years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions, or individuals.
So there it is. You don’t need much more than a portfolio of well diversified index funds (like Vanguard’s) along with the right exposure to various assets, which depends on your personal attitude towards risk, volatility and reward. Of course, the lesson from Buffett and others is that ordinary investing doesn’t need to be complicated. In fact, if it’s not simple, you’re doing it wrong.
As most Westmount clients are already taking advantage of ‘indexing’ and have seen the results first hand, Buffett’s comments should come as no surprise, but it’s reassuring to know that you’re in good company! Rick Maggi (Westmount. Financial Solutions.)
The US economy is yet again reinventing itself. this has been helped along by a determination to get the US economy moving again after the Global Financial Crisis, but the real drivers are an energy boom, a manufacturing renaissance and American innovation. Read on Rick Maggi (Westmount. Financial Solutions.)
Today the All Ordinaries Index closed at its highest level since 19 June 2008 as Australian company earnings continue to impress, but also following a strong lead from Wall St overnight.
Interestingly, investors have been dismissing disappointing US economic data of late, pointing to harsh winter weather as a reason for unexpected weakness. Instead, investors have been taking a relatively optimistic view, positioning themselves for an improving growth trend in the US, betting that improved earnings will be enough to lift the market further this year.
In other words, sentiment, for better or for worse, is finally taking on a life of its own, pushing up US markets (and in turn our own), despite mediocre to ‘ok’ earnings results. Of course, we’ll need to see concrete improvement over the coming months to justify the optimism, and clearly there are are some headwinds out there if you really want to worry (Fed tapering, lower Chinese and Australian growth, Ukraine debt default etc.), however, for now, our general view remains unchanged – we’re still at 8pm, on the ‘Economic Clock’ (a quaint measure, certainly, but a useful tool just the same) View Economic Clock Here Enjoy your weekend. Rick Maggi (Westmount. Financial Solutions.)
Whether you have a superannuation, pension or managed fund, direct shares or property, what happens in China, the world’s second largest economy, matters to your financial health. In this article AMP Capital’s Dr Shane Oliver looks more closely at some of the ‘noise’ surrounding China these days, and whether this is something we should all be worried about. As usual, an easy to understand reader-friendly article from one of Australia’s most respected Economists. Enjoy. Read article here Rick Maggi (Westmount. Financial Solutions.)
Sometimes being at one with a crowd can be nice, as safety in numbers can provide comfort. However, when crowds turn they can be dangerous – you might get trampled! In fact a wariness of crowds is essential to successful investing. Read more here Rick Maggi (Westmount. Financial Solutions.)
Since 1950 the average cyclical bull market in Australian shares lasted 48 months with a 126% gain. The current bull market has gone for 28 months with only a 37% gain. So where are we now in the cycle? Are we heading into a bear market already or is there more growth to come? Read on… Where are we now? Rick Maggi (Westmount. Financial Solutions.)