03/02/15: RBA cuts rates by 25bps, shares rally

An 'insurance policy' for growth...

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

28/01/15: Weather vs Climate

Are you informed or inundated?

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

18/01/15: Designing Your Future: Goal Setting

Are you ready?

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

12/01/15: 2015 Outlook

2 things you need to know…

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

8/12/14: Lessons from 2014

Plus 3 themes to watch going forward…

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

30/10/14: Punchbowl removed: The end of 'Quantitative Easing'

End of an era… After a year long phasing down period, last night the US Federal Reserve finally ended its quantitative easing (QE) program, introduced at the height of the Global Financial Crisis back in 2008.

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

19/10/14: Comment: FOFA amendments disallowed

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

18/08/14: How does the world see you?

A fascinating exercise…

I think this is a must read for all of our clients and colleagues… Read here

Rick Maggi. Westmount. Financial Solutions.

14/08/14: Why I love dividends

…and so should you

Another great read from Dr Shane Oliver. Enjoy. Read here

Rick Maggi. Westmount. Financial Solutions.

24/07/14: Investment Outlook 2014

Another solid year, but where to from here?

An excellent, easy to read commentary. Enjoy!   Read Commentary Here

Rick Maggi. Westmount. Financial Solutions.

11/06/14: The Certainty Principle

When investors wait for certainty...

A frequent complaint from would-be investors is that "uncertainty" is what keep them out of the financial markets. "I'll stay in cash until the direction becomes clearer," they will say. So when has there ever been total clarity? Rick Maggi. Westmount. Financial Solutions.

Read more here

06/06/14: The structural challenges facing Australia...

…and what it means for investors.

A sobering, but balanced commentary from AMP Capital's Dr Shane Oliver. Worth a read in this blurry, politics laden post-budget environment. Enjoy!  Rick Maggi, Westmount. Financial Solutions.

Read here

03/04/14: Are we in a property bubble?

A commentary from Dr Shane Oliver...

As the China driven mining boom fades, the Australian housing recovery couldn't come at a better time. But with interest rates poised go up over the next six-twelve months, what does this mean for property investors and borrowers? Read more here  (Rick Maggi, Westmount. Financial Solutions.)

26/02/14: The US reinvents itself, yet again!

What does this mean for you?

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.)

19/02/14: China debt worries and growth

Overdone?

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.)

23/01/14: Expect more...

The risk of a share market correction...

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.)

17/01/14: The Year Ahead

Westmount Clients Only

11/12/13: Review of 2013, outlook for 2014

Insights from AMP Capital's Shane Oliver...

It's that time of year again where we can take a look at the year that was, and then look forward to the next twelve months. Read more here  Rick Maggi (Westmount. Financial Solutions.)

06/12/13: Rest in peace

e definition of forgiveness...

30/11/13: Deflation or rising inflation?

What is the risk?

AMP Capital's Dr Shane Oliver looks discusses the potential consequences of a deflationary spiral versus rising inflation on your hip-pocket. Enjoy. Read more here  Rick Maggi (Westmount. Financial Solutions.)