News Updates
AS IT HAPPENS
China's lack of transparency often sends the wrong signals to the rest of the world. We all know that China's economy has slowed, but is it heading towards a bust, or is this yet another false alarm? Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
Often written off as a 'basket case' region, Europe, particularly European shares have some serious growth potential. Does your super fund have exposure to Europe? Read more here
Rick Maggi Westmount Financial Clear Focus. Better Solutions.
Through 2013-14 it seemed the Australian economy was starting to transition away from a reliance on mining investment to more broad based growth. Unfortunately this transition has wavered a bit recently and growth has remained below trend. Fortunately, the RBA has recognised the problem and resumed cutting interest rates. This note looks at the outlook for growth and rates and what it means for profits and investors. Read more here
Rick Maggi Westmount Financial Clear View. Better Focus.
The share market rallied to a six-year high today due to a positive cocktail of factors, including Rio Tinto's massive shareholder returns, rising oil prices, decent company earnings, the potential for more interest rate cuts, and optimism over Greece and the Ukraine.
The market's strongest one day gain in six weeks sent the All Ordinaries and S&P/ASX200 indices to their highest levels since mid-2008.
At the close today, the benchmark S&P/ASX200 index was up 133.9 points, or 2.33%, to 5877.5. The broader All Ordinaries index was up 127.8 points, or 2.24%, to 5835.5.
Interestingly, the big miners led the gains, with BHP up 4.8% to $32.17 and Rio Tinto up 6.5% to $63.79 after announcing a $US2 billion share buyback, while RBA governor Glenn Steven's comments today that more than one further rate cut may be needed if unemployment continues to rise lifted the banks and Telstra as the desperate search for yield continues.
Rick Maggi Westmount Financial
The official cash rate has been reduced to a new record-low of 2.25 per cent after being left on hold at 2.5 per cent since August 2013.
The Reserve Bank’s decision has come as a surprise: a survey of 30 economists and commentators found that 28 expected the cash rate to remain unchanged.
Westpac, NAB and ANZ all subsequently forecast that rates would fall some time in the first half of 2015.
The two survey respondents who predicted today’s cut were Bill Evans, chief economist at Westpac, and Nathan McMullen, head of product and digital at RAMS.
Mr McMullen said that with consumer confidence and inflation low, the Reserve Bank would cut rates to help boost the economy and depreciate the Australian dollar.
Several of the other survey respondents also gave an indication of what forced the Reserve Bank to act, even though they didn’t expect it to happen as early as today.
ME Bank’s general manager of markets, John Caelli, said growth and consumer confidence have been weaker than the board would like.
“Market sentiment has fundamentally shifted over the past two months as oil prices have plummeted and concerns about deflation in Europe grow. This has led to markets expecting 0.50 per cent in rate cuts in the first half of 2015,” Mr Caelli said.
The cut is being seen by many as an 'insurance policy' on growth going forward.
Of course, while this is great news for borrowers, it adds further pressure on investors, particularly retirees, with significant exposure to cash. With that in mind, it will be important for investors in search of a decent yield to be particularly wary of new and wonderful investment products promising higher yields - so please, run it by us before taking the leap!
At the time of writing, the Australian dollar has responded to the rate cut by falling from 0.78 to 0.77, while the local share market has rallied about 1.6%.
Rick Maggi Westmount Financial
Dimensional's Jim Parker illustrates the folly of trying to keep up with market sentiment based on the news of the day - a quick, easy to understand article worth reading. Read more here
Rick Maggi Westmount Financial
Deep down, we all know that New Year's resolutions just don't work. Consider the empirical data…
* 25% of people abandon their resolutions after just one week. * 60% of people abandon them within 6 months. * The average person makes the same resolutions 10 times without success. * Even after a heart attack, only 14% of patients make any meaningful change around eating or exercise.
Clearly, change is really hard.
Resolutions don't work, but goal setting does, provided you do it in the right way. Here are a set of 4 practices for setting effective goals that do work…
1. Write your goals down. Written goals have huge power, but you've got to to get them down on paper to get the clarity you need. 2. Make your goals 'SMARTER'. This is an acronym - Specific, Measurable, Actionable, Realistic, Time-Bound, Exciting & Relevant. 3. Share your goals with others, but do it selectively. Share your goals with people who are supportive but will also hold you accountable. 4. Review your goals regularly (at least weekly) so they stay top of mind. Diarise your reviews - remember, if you don't stay focused on your goals, they're guaranteed to fall by the wayside.
Whether you are just starting out, building your wealth or looking to retirement, goal setting (not vague resolutions) should be part of your DNA. Written goals are essentially 'dreams with a deadline', so go on, put pen to paper, be specific, be descriptive, and have fun with it.
Rick Maggi Westmount Financial
The economic backdrop for the year ahead is likely to be fairly similar to what we saw in 2014; expect continued economic expansion but at a relatively modest and more uneven pace…
Globally • Growth is likely to remain around 3.5%; ranging from 1-1.5% in the Eurozone and Japan, 3.5% in the US and 7% in China. • Inflationary pressure is likely to remain fairly low and the overall monetary backdrop, despite a probable tightening by the US in the middle of the year, will remain fairly easy. We will likely see further easing in Europe, Japan and China.
For Australia • We should see growth move up to around 3% • Inflation is likely to remain benign • The Reserve Bank of Australia is projected to cut the cash rate to 2.25% early in the year with a 50% chance of another cut in the June quarter.
Rebalancing the economy As Australia transitions back to a more balanced economy, investors should try to avoid getting too gloomy. Yes, the mining sector is slowing down, but low interest rates and a falling Australian dollar is providing a great boost for non-mining parts of the Australian economy. For instance, we’re seeing a return to life for retail-related areas of the economy. Housing and construction has picked up, construction activity related to infrastructure continues, and the tourism, manufacturing and higher education sectors are showing signs of improvement.
Unemployment will eventually fall While economic growth is still not strong enough to lead to a fall in unemployment, we expect that the job market in 2015/16 will start to pick up as the stimulus to the economy from lower interest rates and the falling Australian dollar starts to feed through.
What does this mean for investors? It should mean another year of reasonable returns for diversified investors. But there are two key things that investors need to be mindful of: 1 What we saw in 2013 and in 2012 (returns of around 20%) out of shares is not sustainable over the long- term. Expect something more like 8-10%; 2 Every year experiences a lot of ‘noise’ and 2015 will be no different. This can be negative in terms of distracting you from your key investment strategy. Try and turn down the volume on the financial news and focus on maintaining a long-term investment strategy. (Dr Shane Oliver, AMP Capital)
Rick Maggi Westmount Financial
This edition of AMP's Market Watch is a quick, simple read, but I think the most important reminder relates 'market seasonality' and the usual 'Santa Claus' share market rally phenomenon. Read Market Watch here
Rick Maggi Westmount Financial
The Reserve Bank of Australia has announced the outcome of its monthly board meeting, deciding to leave the official cash rate on hold at 2.5 per cent.
NAB chief economist Alan Oster said he expected no change in the cash rate until the end of 2015.
"The RBA still believes that a period of stability in interest rates is the most prudent policy for the time being," Mr Oster said.
"While there are tentative signs of an improvement in household spending, they do not yet signal a sustained change in household and business conditions," he added. In the absence of any "major surprises", the cash rate is unlikely to rise until late 2015, Mr Oster said.
Westpac chief economist Bill Evans noted that the November monetary policy meeting minutes were "slightly more dovish" than October's. "The growth outlook is a little less optimistic while there appears to be less hysteria around the potential risks associated with the housing market," Mr Evans said. "Indeed there is no implication of a substantial intervention by the authorities. The RBA is clearly in an ongoing ‘wait and see’ mode," he said.
It is also worth noting that in other quarters further interest rate cuts are being predicted for 2015. Deutsche Bank today went on the record predicting two 25 basis points cuts mid and later next year.
Our view at Westmount is that talk of interest rate cuts is premature at this point. Unless the Australian economy significantly deteriorates further, we expect the RBA to simply maintain current rates a little longer than previously expected. Of course, if rate cuts do occur, this would probably be a positive for shares and property, so it is critical to keep your portfolio diversified and flexible at all times.
Watch a full interest rate report from Macquarie here.
Rick Maggi Westmount Financial
The recent decision by the People's Bank of China to cut rates is a positive for commodities and Australian shares. Read more here
Rick Maggi Westmount Financial
Since the worst days of the GFC, unemployment has fallen, consumers are spending again, businesses are investing and banks are lending. So after all is said and done, QE seems to have actually worked - the US economy is now well and truly into expansion mode and looking a lot stronger than Europe and Japan that have taken longer to adopt QE.
It would be fair to say that, while the US economy isn't exactly booming, the Fed Reserve's decision to take the economy off life-support was, at least for now, an important sign that the US may now be able to finally stand on its own two feet.
While the punch-bowl may have been removed from the table, the music continues to play. Consistent with the Fed Reserve's softly, softly approach, they've also indicated that interest rates won't be going up in a hurry, even as the US economy continues to recover - an encouraging signal to the US (and the rest of the world) that concrete evidence of a sustainable recovery will be needed before interest rates are finally raised in earnest.
The ending of US QE is also a positive for Australia and removes a source of upwards pressure on the Australian dollar (great for exporters).
Rick Maggi Westmount I Financial Solutions
Should you care?
Back in July, the government negotiated a deal with Clive Palmer to save the 'FOFA' (Future of Financial Advice) amendments. However this morning two cross benchers (Senators Lambie and Muir) did an about-face and joined Labor senators opposing the government's FOFA agenda. We can only assume that we will now see the return of FOFA (the'full-strength' version) unless a compromise can be found.
Considering Senator Lambie's recent clashes with PUP leader Clive Palmer, this seems more like a personal grudge, along with a good helping of political naivety. But for better or worse, that's the system we now have.
So exactly what does this mean for you, as a client of a financial adviser? Hysteria and vested interests aside, probably very little.
If you already have a good relationship with a non-aligned financial adviser who provides an efficient and meaningful service to you at a fair price, you won't notice much (or any) change to the way he or she interacts with you.
Let's not forget that FOFA (Labor's full strength version) was introduced almost 18 months ago which, among other things, effectively banned investment commissions and ramped-up disclosure requirements, creating a more transparent, trusting environment for investors, retirees and professional financial advisors alike. And contrary to media reports, this law was welcomed by virtually all concerned, including financial advisors, and continues to this day.
The FOFA amendments or FOFA 'lite' (introduced by the Liberals) sought to reduce some of the new law's excessive 'red-tape' without jeopardising the lion's share of consumer protections. Personally, I thought a regulatory adjustment made some sense, but that's history now.
I've spent over 30 years in financial services and I believe that the vast majority of financial advisers I've known over this time are ethical, educated, well-meaning people who sincerely want the very best for their clients, and to also run profitable practices for themselves, their families, and their employees. That's just good business.
So naturally, it has been disappointing to see the reputations and motives of solid professionals being publicly denigrated during this lengthy, polarising process.
My advice is to ignore the cynics with obvious vested interests. If you're comfortable with your current financial adviser, hold on tight and follow your own instincts, chances are you're in very good hands.
Time to move forward.
Rick Maggi
The prospectus, which will indicate the price per share, will be available in the second half of October with the enterprise due to list on the domestic stock exchange by December.
The offer will preference registered policyholders, who will be able to get a greater share allocation than non-policy holders. Finance Minister Mathias Cormann said the government anticipated a “large amount of interest” in the sale, which could raise about $4 billion for the federal coffers.
The coalition is hoping to offload 100 per cent of Medibank Private, saying there is no reason why the federal government should be involved in the health insurance market. The proceeds would be invested in productivity boosting measures, he said.
AMP chief economist Shane Oliver said it wasn’t surprising policy holders would get preferential treatment.
“It’s consistent with what happened in the past with privatisation — where policy holders get preference,” he told AAP on Sunday.
“Even AMP, when it demutualised, it’s policy holders got shares initially.” Dr Oliver said at an expected $4 billion, the initial public offering (IPO) was one of largest seen in Australia for some time. “Along with other capital raisings and IPOs in the next few months, this means quite a lot of money will be drained out of the market,” he said.
People wishing to register for the share sale can go to: medibankprivateshareoffer.com.au.
The IPO will also be open to domestic and foreign institutional investors.
The coalition is hoping to offload 100 per cent of Medibank Private, saying there is no reason why the federal government should be involved in the health insurance market.
Finance Minister Mathias Cormann said the government anticipated a “large amount of interest” in the sale. It has often said there is a conflict of interest in the commonwealth being both the regulator and the largest market participant in the sector.
Senator Cormann said Medibank Private would perform better in private hands, but denied privatisation would lead to higher insurance premiums.
“Medibank Private ... will continue to have to compete for customers with 33 other health funds and that of course will put a natural limit on Medibank’s capacity to lift premiums beyond what is competitive,” he told reporters in Melbourne.
The finance minister refused to say how much the government hoped to raise from the float, slated for December.
“The best possible net return for taxpayers — that’s what our objective is with this sale,” Senator Cormann said.
Senator Cormann said the privatisation of Medibank would see it perform better as a business.
“Medibank Private is already performing very well as a business, but there are obviously some restrictions that come with being government owned and we believe that in private ownership, that Medibank private will be able to perform even better,” he told reporters.
He said the public would get first access to buy shares, before the sell-off proceeds into the institutional phase.
But he said no buyer could own more than 15 per cent of the company.
Medibank chairman Elizabeth Alexander welcomed the announcement. “We’re excited for this new opportunity for Medibank and what it may bring and we are pleased to be proceeding with this next step that will lead us to our debut on the Australian Stock Exchange,” she said She assured Medibank customers that they can expect the same service after the sell-off.
“The Medibank you have trusted for years is the very same Medibank that will continue to look after your health well into the future.”
Rick Maggi Westmount I Financial Solutions
Rick Maggi Westmount I Financial Solutions
The property reporting season that just finished was reasonably good with profit growth expectations affirmed. Read more here
Rick Maggi Westmount I Financial Solutions
An interesting read for a recurring theme out there. Read more here.
Rick Maggi Westmount I Financial Solutions
An excellent, easy to read commentary. Enjoy! Read Commentary Here
Rick Maggi. Westmount. Financial Solutions.
Party politics aside, this is a big positive. Read Here
Rick Maggi. Westmount. Financial Solutions.
Dr Shane Oliver takes a close look at the European landscape. Very encouraging. Enjoy! Rick Maggi. Westmount. Financial Solutions.
