…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
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
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
29/09/14: Medibank Private
Get ready….
The share sale process for the nation’s largest private health insurer — covering almost four million Australians — begins on Sunday with a government campaign to get mum and dad investors to pre-register their interest.
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
25/09/14: Australian property - a little too hot?
...well that depends
A balanced analysis of the Australian property sector. Read more here
Rick Maggi Westmount I Financial Solutions
04/09/14: Profits and the Australian economy
Not bad!
The property reporting season that just finished was reasonably good with profit growth expectations affirmed. Read more here
Rick Maggi Westmount I Financial Solutions
04/09/14: How long can interest rates remain on hold?
…perhaps a little longer
An interesting read for a recurring theme out there. Read more here.
Rick Maggi Westmount I 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.
09/06/14: Abenomics
Good for Japan. Good for investors. Good for Australia.
Party politics aside, this is a big positive. Read Here
Rick Maggi. Westmount. Financial Solutions.
11/06/14: Europe getting its act together
…and what it means for investors
Dr Shane Oliver takes a close look at the European landscape. Very encouraging. Enjoy! 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.
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.
17/04/14: Are shares headed for a crash this year?
…not likely
After a strong period of growth its natural to wonder whether the share market is headed for a crash at some point in the near future. This article examines the potential going forward. Read more here If you have any questions about the structure of your own superannuation or investment portfolio, please don't hesitate to call us. Rick Maggi, Westmount. Financial Solutions.
30/04/14: Smart End of Financial Year strategies 2013/14
The countdown begins...
With the end of the financial year fast approaching, we're commencing a 60 day countdown to assist you in getting your financial affairs organised and ready for the June 30 deadline. Taking action now can open up more opportunities for you. The following guide lists 12 key superannuation and insurance based solutions you should look at. Read Here
As always, we're only a phone call away. So if you would like to discuss your own strategy, tax, superannuation, investment, retirement planning, Centrelink issues or the Federal Budget, please call us on 9382 8885. (Rick Maggi. Westmount. Financial Solutions.)
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.)
02/04/14: Connecting the dots
'Outside the Flags' with Jim Parker
Human beings love stories. But this innate tendency can lead us to imagine connections between events where none really exist. For financial journalists, this is a virtual job requirement. For investors, it can be a disaster. Read on here (Rick Maggi, Westmount. Financial Solutions.)
15/03/14: Why asset allocation is so important
…making a comeback
If we've learned anything since the GFC, it's that a well diversified portfolio of assets, including local and overseas shares, property, cash, bonds etc., is the smartest (and easiest) way to preserve and grow your capital, whether you are retired or accumulating assets. Even as the global economy recovers, thanks to the pain experienced by most of us during the GFC, its unlikely that a new found respect for asset allocation will fade anytime soon.
In this article, Dr Shane Oliver explains what asset allocation is, why it's important to you and how to manage the economic cycles. It should be liberating to know that about 90% of the gains (or losses) investors experience in a lifetime have to do with the amount of exposure they have to various sectors like shares, property, cash etc., and much less to do with micro-decisions such as stock selection or the specific managed fund they purchase.
In other words, managing your portfolio of assets can be much less time consuming, less stressful and less expensive, if structured and maintained properly, regardless of your personal objectives and style. (Rick Maggi, Westmount. Financial Solutions)
17/03/14: …More on the Ukraine
Worse for Russia, less so for the rest of us
A well balanced update on the subject. Read here (Rick Maggi, Westmount. Financial Solutions)
07/03/14: Australia: Looking beyond the gloom
Cheer-up, it's much better than you think!
In this article, AMP's Shane Oliver focuses on the Australian economy, which has been getting some depressing press lately. Read more here (Rick Maggi, Westmount. Financial Solutions.)
05/03/14: Ukraine: Relief rally (and then some)
A more conciliatory tone
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.
And locally...
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.)