Matt states that Greece & Spain will default

Yes Matt is a fund manager of 2.3Billion who occasionally leaves his four simultaneous computer screens to appear on business TV or face financial advisers.

There was plenty to take out of his presentation but as always we are interested in the future & so some notes working backwards from his answers is a way to summarise his case.

I.e. the last 30 years is no guide to the next 10 years.

So expect less capital gains & focus on risk & income.

·         Earnings growth of companies to be below average

·         Asia to be the global growth driver

·         Interest rates to rise

·         The main driver of returns to be income growth

·         Lowest risk debt is corporate & not government

·         Preferred risk hedge is income producing assets & not US bonds

·         Asset exposure to emphasis quality & not growth

·         The Australian $ will remain above parity.

Currently the markets [share]have priced in all the bad news & are the lowest in 20 years.

Matt did have some great slides which included comparing returns of the 5 major asset classes over various periods. [which we have for you to view]

The key point out of those & hence wealth creating was reinvesting the income back into the class & allowing compound interest to work. This had a dramatic long term impact.

And the winner was  over any 20 year period ,you guessed it, shares with a multiple of 160 times original as they are exposed to the real economy. [Property was 44times & cash 25 times].

Matt also showed a slide comparing previous similar cycles & where we are on the current one.

As Peter Q has also shown us we are ‘grinding’ towards the big upswing in the markets.

The markets are going to be dominated by long term trends according to Matt. i.e.

·         hard commodities down as we see this week although we are a ‘gold fondler’.

·         Emergence of income investing as a source of wealth creation

·         Downward earnings & valuations in advanced economies.

·         An evolution in risk return dynamics

Matt comments ‘that it wont be the smartest or fittest investor that benefits from the new environment but the investor that who is most adaptable to change’.

We had PIMCO [huge global bond manager] asking ‘ Will action follow words in Europe?

They suggested 6 key areas that Europe needs to focus on and

This is a challenging list, especially for the next few weeks; and it requires the type of political leadership and coordination that, hitherto, has tended to elude the eurozone.

When we read that SMSP trustees are putting their retirement funds into residential houses or Australian property & cash we understand that anything else is too hard.

However as Matt clearly showed its income that creates wealth & the net rental return from such property is 1% from all the observations we have made. Matt mentioned an income  fund that was returning 7% & there are plenty of such income funds.

 Debbie told us the worst  decision & experience she made was a rental property. We  as a baby boomer are well aware that contempories are retiring & finding the negative cashflow from such properties too much. They are selling which isn’t helping the housing market as we know.

We observe today on our Linkedin sites that an ex colleague is selling houses in USA. An ex Coalition leader has a trust for similar. Greece & Spain maybe buys after their default. These maybe better options but who is going to look after them for you?

Although  the bus driver asked us if we had a seniors card on returning from Matt’s talk we have the same challenges as we expect to Bat as long as our late ‘Auntie’ Freda i.e. to 95. Wealth creation is a challenge & evolutionary & for those who live & breathe the markets.

Of course getting  to age 95 needs Brilliant health & at 95 we might need Aged Care advice.

 We have solutions for both challenges.

As the European meddlers return from holidays &the looming ‘fiscal cliff’ & as the Volatility index VIX is very low then as Richie says D for defence could be the best strategy for the short term.

However Cash or rental property won’t  achieve the 1,000,000 Capital we need outside the house.

 Mark suggested that they could do better budgeting. When he also pays 35,000 in taxx then there must be a better way as high incomes also need tuning.

You are welcome to call on 07 3848 1088 or email or visit our websites  as we have helped tune finances for 28 years. We do have  for you to view Matt’s presentation but we admit we are not Matt.

 

John McAuliffe

 

 

If your Mum had to move into an aged care facility today then what is the solution?

If your Mum had to move into an aged care facility today then what is the solution?

 Yes it generally or frequently happens before you are ready.  The instinctive reaction to sell the house may not be the only solution to the funding requirement.

 Norman  advised us whilst watching the AB win that ‘the RE agent cost 18,000’. I.e. not selling the home is a big saving itself.

Questions that you might ask yourself include.

·         How will the accommodation bond or charge be funded?

·         How much are the ongoing costs & how will they be funded?

·         Is the family home to be retained or sold.

o   [We were advised by Garry many years ago that ‘the best place to buy a property was thru the Public Trustee’ as the children wanted their share fast & were quite prepared to drop the price]

·         Can the family home be rented out?

·         Are investments to be sold ?

·         Is a reverse mortgage appropriate?

·         Can the family contribute to the Costs?

·         Is it important to keep the pension benefits & are there strategies to keep the benefit?

·         What are the tax implications when moving into aged care?

·         How important is it to preserve  current assets?

·         Has a will & Powers of Attorney been established & maybe reviewed.

·         Has a superannuation or pension death benefit nomination been established or reviewed?

·         Are there strategies for funding care now & in the future?

Yes over one  million older Australians are currently in some form of aged Care or support each year & this number is only growing bigger.

These costs can be very high when moving into & residing in an aged care facility & it is smart & wise to

·         Minimise these costs

·         Maximise social security benefits

·         Minimise taxx

·         Choose suitable investments

·         Plan for the distribution of their estate

As there were landmark changes proposed on 20^th Aril 2012 & to be implemented on 1^st July 2014 then you need to be very aware of the solution to your problem.

If you wish to know which of the 10 core strategies maybe the relevant solution to your problem

Then we welcome your call on 07 3848 1088 or email  or contact us through our website as we might save you that $18,000.

Our aim is for you to be at least better off with our advice than if you were to DYI.

 John McAuliffe

Lets taxx the gold medal winners because we can

Lets taxx the gold medal winners because we can

Yes we read in W/E Australian 4/08/12 that “Athletes could be required to pay up to $US9000

 ($ 8565) in taxx for each gold medal”.

The USA might be close to 14 trillion in debt but surely that suggestion is bankrupt but it is an indication of what governments are willing & able to do.

What scares us the most is in superannuation regulations & how hard it is to get your own money out of there.

The concept of superannuation when we first advised [& sold]in 1984  was that you couldn’t get it out & thus it would be there when you needed it. Fair enough & ideally that is still the simple concept today.

However the devil is in the detail that has been generated since then.

E.g.  ATO bans tax breaks for kids who stay at home | The Australian 31/07/12

We have had occasions when clients due to challenges such as floods or the pink slip or cashflow have asked how they can access their super. Good luck we say unless you suffer from ‘Severe Financial hardship’

In general there are Two tests

1.       Written evidence from a government department or agency stating continuous income support for at least 26 weeks

                And unable to meet reasonable & immediate family living expenses.  [APRA has produced guidelines for this subjective test].

2.       Otherwise a person has reached preservation age [from 55 to 65 depending if you are not gainfully employed] PLUS Written evidence from a government department or agency stating continuous income support for at least 39 weeks .

There are other ways

·         such as a lost & lazy smaller than $200 in  a lost & lazy super account which is better than visiting a payday lender

·         or even Unrestricted non preserved UNP amounts which is as it says

·         departing temporary residents

·         compassionate grounds

·         temporary incapacity

As Mark wrote we ‘because we can’

The government has legislated that they WILL take super monies if temporary workers or public servants or lost individuals left their super lost & unloved for more than 5 years.

Every person we meet we meet cannot waste money as much as the government. Yes sure advisers have tracked down a billion + in lost super for clients & the ATO has a tool to help you do so yourself.

However as another Big Brother advt said ‘ be alert & be alarmed’.

We would be remiss if we were not to mention the taxx on death benefits from your super.

Its fine if the payment is to your spouse but as link above suggests even your hard to move on family member may not be a dependant.  The taxx on super benefits could be as high as 30% + Medicare.

Would this help your grandchildren?

Your estate could be increased with your cover outside super. Dont you expect to expire after you retire?

Be alert & alarmed & advice is wise.

We also read in the W/E Australian 4/08/12 where Industry funds management suggests super funds could be used to fund infrastructure. This has been suggested before . Surely they should be used for your retirement & not some government pork barreling as we frequently witness in ‘independent’ electorates.

Be alert & alarmed & advice is wise.

We are suggesting in general that contributing to super more than legislated  may NOT be in your own best interest. As we have said before ‘Daughters tell fibs & the big boys tell lies’.

What if as is suggested  a Call to lift super age to ease pension pressure | to age 62. What if ill health occurs?

Let’s not forget that the government has your TFN & knows where your super & other monies are. If it doesn’t then the taxx rate you pay in your super is close to 50%. Because they can.

An alternative strategy  PCMS*is to build a portfolio outside super for all the reasons that you may need it. The income from it could be used to switch your mortgage into deductible debt so that the taxx man subsidizes your interest payments.  Of course you need to qualify for this strategy PCMS* such has being able to save $10+ per day & have the right risk profile.

The gold medal table at least suggests that Australia  is behind even Korea  or NZL.  I.e. lets not always believe our own press.

As every person has a different financial  challenge then checking out our menu on our website & dining Monday to Saturday is a great way to have confidence in your financial future.

You are Welcome to call on 07 3848 1088 or email as Treasury isn’t going to make life easy for you.

Strategies & concepts to move you financially forward are Not found online.

John  McAuliffe