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.

05/05/15: Interest rates cut

A record low...

Today the Reserve Bank of Australia (RBA) finally decided to take the plunge and reduce the cash rate by 25 basis points to 2.00%, a record low.

This wasn't a huge surprise as economists this morning were factoring in a 78% chance of a rate cut today. Interestingly, the RBA provided no outlook statement for interest rates going forward, so unless the Australian economy deteriorates significantly from here, this could be the last of the rate cuts. We'll see.

At the time of writing, the Australian share market was initially up 1.1%, however has since fallen into negative territory as the Australian dollar, surprisingly, went up in defiance of the interest rate cut.

While this is welcome news for borrowers, the decision will put more pressure on investors, particularly retirees, with significant cash/term deposit holdings - interest rates are low and will stay low for some time to come. If you need income, it's time to consider your options.

On a different matter, the Federal Budget will be announced next Tuesday night (12 May) and, as usual, the rumours have been flying fast and furious, from superannuation to negative gearing to pensions.

Our advice is to ignore the background noise. Typically, the lead up to every Federal Budget is a showcase of worse case scenarios and general fear mongering, coming from both side of politics, usually leading to fairly unspectacular, watered-down announcements on the night.

We'll distill the budget details into a simple, easy to understand report for our clients soon after budget night, once we've had a chance to thoroughly weigh-up the proposals on the table. More importantly, we'll contact you individually should there be anything important to discuss.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

29/04/15: Where are we in the investment cycle?

Approaching a bubble?

It is now six years since the Global Financial Crisis ended. From their 2009 lows US shares are up 212%, global shares are up 159% and Australian shares are up 91% Despite this, there seem to be constant predictions of a new disaster. This note looks at where we are in the investment cycle. Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

10/04/15: Australian home prices and interest rates

Where are we headed?

The interplay between falling interest rates, the Australian dollar and housing demand is a complex one. While the RBA would dearly love to see our dollar fall, rising house prices, particularly in Sydney and Melbourne, isn't part of the script. So what happens if, as widely expected, interest rates are cut again in the coming months? Another interesting read from AMP's Dr Shane Oliver.Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

02/04/15: What is 'risk' in investing?

Comments from Dr Shane Oliver...

An interesting, common sense article about investment risk from AMP's Dr Shane Oliver. An easy read. Click here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

27/03/15: $20 oil could be a reality

…if this happens...

Watch video here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

24/03/15: Cast in iron?

Protecting your portfolio against investment 'fashion'

Dimensional VP, Jim Parker, discusses the pitfalls of building investment strategies around "hot" sector stories. Read more here

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

18/03/15: China: Boom or Bust?

…or something in between?

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.

13/03/15: Reasons to be optimistic on Eurozone equities

Not so bad…

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.

04/03/15: Australian economy still in the doldrums...

More help needed...

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.

13/02/15: Shares surge to new highs

Planets aligned...

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

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

15/12/14: Holiday Opening Hours

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

02/12/14: Interest rates remain on hold

Where to from here?

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

01/12/14: China cuts interest rates

…and why it matters

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