17/09/15: Putting recent share market falls in context

Implications for investors

At the time of writing, the Australian share market (ASX200) has fallen by 13% since the highs of February this year, much of this occurring over the last couple of months. It also seems that the usual doomsayers have been working overtime, doing their level best to frighten investors into either subscribing to their alarmist newsletters, buying their books or engage investment services. On the other side of the spectrum you have some perennially optimistic fund managers and financial advisers who prefer to bury their heads in the sand, refusing to acknowledge that the landscape has changed.

Of course, the truth is usually somewhere in between, and very few commentators strike the right balance better than AMP Capital's Dr Shane Oliver. In this article, Dr Oliver provides a calm, balanced, 'grown-up' perspective of the recent share market falls, and their place in history. As usual, this publication is a must for anxious retirees and investors. Read more here

Also, read 9 rules for investors to keep in mind

Going forward from here, Westmount clients will continue to be kept apprised of the latest important developments, in real time, good news, or bad.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

01/09/15: Interest rates on hold

But for how much longer?

The Reserve bank board met on Tuesday 1 September and kept official interest rates on hold at 2%, continuing to assess the impact of the two rate cuts earlier in the year.

Lack of business investment No doubt the RBA board would have discussed at length current weak commodity prices impacting our national income, the lack of business investment as well as two key developments that arose earlier in August. These include the recent devaluation of the Chinese currency and the weak Australian unemployment report.

Unemployment rate Previous RBA commentary indicated it considered the unemployment rate profile was around 6%. However the other key development in August was that the unemployment rate jumped to 6.3%. A higher unemployment rate is also a catalyst for an inflation downgrade, due to weak wages growth.

Business conditions and confidence The NAB business confidence survey for August pared back the post Budget gains, however both conditions and confidence are suggesting a turnaround in the non-mining economy, with conditions varying greatly across industries. The confidence index is still positive and holding around average levels.

Macquarie Bank is of the view that the combination of the Chinese currency devaluation, a weakening labour market and excess capacity in the economy all support the case for a further rate cut in November. The next RBA board meeting will be held on Tuesday 6 October.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

28/08/15: Busting the bond myth

Rate expectations...

The decline in interest rates to historic lows in recent years has led to anxiety among Australian investors about what will happen to their fixed interest holdings when overnight interest rates begin to rise.

This apprehension is based on the conventional view that longer-dated bonds underperform in this type of rising interest rate environment.

Dr Steve Garth provides another perspective in Cuffelinks.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

25/08/15: The Patience Principle

What we all know deep down inside...

DFA's VP Jim Parker weighs in on the latest market volatility. As always, Jim's 'Outside the Flags' issue is worth a quick read. Read here.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

24/08/15: Market Update 2 - 24 August 2015

The rout continues

Following a 3.5 percent sell-off on Wall St last Friday night, local and Asian markets continued to shed hard won gains with China leading the way, falling 8.5 percent in just one day. For some background on what has been happening, please read my previous note (Market Update 1 - 21 Aug 2015). For an updated viewpoint Read more here from Russell Investments.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

This update is published by Westmount Financial/Westmount Securities Pty Ltd (ABN 42 090 595 289/AFSL 225715). It is intended to provide general information only and does not take into account any particular person’s objectives, financial situation or needs. Because of this, you should, before acting on any information in this document, speak to us and/or a taxation/finance professional.

24/08/15: Let's compare...

A few surprises...

Sometimes it helps to take look the world through an unconventional perspective when thinking about the size of things.

So here’s a pretty awesome map from Bank of America Merrill Lynch’s Chief Investment Strategist Michael Hartnett that shows the world according to free-float equity market capitalisation in billions of dollars measured by the MSCI.

The US, with a market cap of $US19.8 trillion, is the biggest and represents 52% of the world’s market cap. Japan is in second place at $US3 trillion, followed by the UK at $US2.7 trillion, and then France at $US1.3 trillion.

Notably, Hong Kong’s market cap is nearly the same size of China (both of which are significantly smaller than countries like the US and Japan).

Meanwhile, Russia, which has a bigger surface area than Pluto, is about the same size as Finland in terms of market cap.

Check out the whole map below.

Capital

Rick MaggiWestmount Financial Clear Focus. Better Solutions.

20/08/15: Time is on your side...

The Vanguard 2015 Index Chart

Every year, fund manager Vanguard produce a graphical, chronological 'snapshot' of the performance of local and international sharemarkets, property, cash and bonds, along with significant news events of the day. Always worth a look. Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

29/07/15: China: What you need to know

Market update...

The Chinese share market has fallen dramatically in recent months. So what does this mean for you? Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

06/07/15: Greece after the "no" vote

Should you be worried?

As generally expected, the "No" vote won the day, with over 60% of Greeks rejecting further 'austerity' measures. So clearly it's back to the negotiating table, for now. So what does this mean for investors going forward. Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

18/06/15: Tax concessions and tax reform in Australia

A well balanced commentary...

As house prices rise and/or when economic activity slows, the inevitably cries for tax reform can be heard from both sides of politics. This note focuses on the debate around the four major "tax concessions" in Australia - negative gearing, capital gains tax discounts, dividend imputation and, of course, superannuation. Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

03/06/15: The Australian economy...

Where are we headed?

As local markets slide and interest rates fall, it would be easy to assume that Australia's fortunes have taken a sudden turn for the worst. That would be a mistake. Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

27/05/15: Super Co-contribution: Are you eligible?

Still worth it...

The Government's superannuation co-contribution for lower income earners seems to shrink by the year, but it's still worth the effort. Read here for more information.

Or if in doubt, call us on 9382 8885 before June 30th.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

21/05/15: Don't look back - what drives potential returns?

A medium term view...

AMP Capital's Dr Shane Oliver discusses the thinking behind their investment projections, and offer some interesting insights for the medium term.

This is an excellent read for retirees and investors - a little technical in parts, but worth persevering. In the end, I think the most important takeaway is that we should have reasonable return expectations going forward, and watch your asset allocation more than usual. Please call me if you have any questions.

Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

20/05/15: EOFY strategies to consider, right now...

A checklist

With just over a month to go, and the Federal Budget behind us, now is the time to prepare for the end of the financial year. Created by AMP, this is an excellent link for those clients needing a checklist. As you would expect, it's AMP-centric, but the fundamentals are universal. As always, feel free to call me personally if you'd like to take a closer look at your personal situation. Read EOFY checklist

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

07/05/15: 'Wealthier' retirees to take a hit

Age Pension eligibility tightens...

This morning, the Social Services Minister, Scott Morrison, announced a plan that targets wealthier retirees by reducing the threshold at which part pension cuts out.

Currently, couples can own $1.15 million in assets on top of their family home and still qualify for the part pension. However, starting in 2017, that threshold will be reduced to $823,000 for couples.

To help compensate, the assets test threshold (for the full pension) will be increased from $286,500 to $375,000 for couples who own their own home.

If passed, it is estimated that about 91,000 people will no longer qualify for the Age Pension, while another 235,000 will have their pension reduced.

While we anticipate a significant number of our clients being adversely impacted by this proposal, the bulk of retirees (across Australia) will either see no changes to their pensions, or will receive a small boost.

Thankfully, the Government also stated that the family home would not be included in the asset test, and that those affected by the tighter pension rules will be guaranteed access to the Commonwealth Seniors Health Card, which provides the same concessional access to pharmaceuticals as given to those on the pension.

I'll keep you posted of any further developments.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

13/05/15: 2015/16 Federal Budget

Just the facts...

Last night the Federal Government handed down the Budget for the 2015-16 year, and as foreshadowed, the Budget contained relatively few surprises, with a number of announcements made in the previous weeks.

Of course the most notable announcement impacting clients were the 2017 Age Pension changes and the ‘no new superannuation taxes’ commitment I highlighted last Friday (click here for another copy).

Self-managed super funds also dodged a bullet with no mention of implementing proposed changes to limited recourse borrowing arrangements.

The Government appears to be banking on small business to lead the recovery and has set out a series of generous new tax concessions for businesses with turnovers of less than $2 million. These include a drop in the corporate tax rate to 28.5 percent, immediate tax deductions of up to $20,000 for capital expenses, and FBT exemptions.

Primary producers also do well, regardless of their size with generous depreciation concessions for fencing, water rights and fodder.

So where is the sting in this Budget?

The Government has been careful in its targets. Rather than increasing taxes, the Government has focused on loopholes where there is a clear argument for ‘fairness’.

For example, Multi-national companies who avoid paying tax on business profits in Australia are in the firing line, and GST will be extended to imported digital products and services.

Also, fly-in fly-out (FIFO) clients may lose the zone tax offset, and caps will apply to salary sacrificed meal and entertainment expenses for employees of charities, hospitals and public benevolent institutions.

For a more detailed summary of the Federal Budget Click here.

Even better, feel free to call me personally if you’d like to know whether this year’s budget is likely to impact on you personally.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

12/05/15: Correction time?

Or something worse?

The last few weeks have seen the investment scene hit another rough patch. So is this just a seasonal glitch or something more sinister in the making? Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

12/05/15: The interest rate wheel

It doesn't need to be difficult...

Forecasting interest rates is a tough job. Even when you get it right, there's no guarantee the market will react as you expect. The good news is you don't need to be able to forecast rates to earn the returns from fixed interest. Read more from Jim Parker

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

08/05/15: Words of wisdom from two old pros

Quotes to invest by...

With interest rates at an all time low, many cash investors are now, somewhat reluctantly, being forced to consider alternatives. But with this comes some danger and discomfort.

At 81 and 94, Warren Buffett and Charlie Munger have earned the market's respect through performance, but they've also earned the appreciation of the broader investment community through their willingness to share what they've learned and how they've been so successful.

So it seems timely to revisit some of their more famous quotes and advice...

Warren Buffett:

“Time is the enemy of the poor business and the friend of the great business.”

"Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."

“I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”

“Price is what you pay; value is what you get.”

Charlie Munger:

“When any guy offers you a chance to earn lots of money without risk, don't listen to the rest of his sentence. Follow this, and you'll save yourself a lot of misery.”

“People have always had this craving to have someone tell them the future. Long ago, kings would hire people to read sheep guts. There's always been a market for people who pretend to know the future. Listening to today's forecasters is just as crazy as when the king hired the guy to look at the sheep guts.”

I'm not sure that I entirely agree with Charlie's last point, but I'm happy to give him due deference.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

06/05/15: Treasurer vows no super tax changes

Encouraging news

As the Federal Budget moves ever closer (next Tuesday evening), the rumour mill is working overtime, so it was encouraging to get some clarity from Treasurer Joe Hockey this morning, with regard to possible tax changes on superannuation. Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.