Never Let The Truth Get In The Way Of A Good Story

Different people/groups may ‘spin’ these figures in a variety of ways… but let’s simply take an objective and sober look at the facts.

• For all the talk this report has incited of ‘another global recession’… the same report says global economic growth in 2012 will be 3.3 percent! Dissecting the differences between individual regions and countries paints a positive outlook for Asia… and those countries tied to it.
• 2012 – 2013 growth in emerging and developing economies is expected to average 5.75 percent; down from the 6.75 percent growth in 2010 – 2011
• Despite a 0.75 percentage point downward revision, developing Asia is still projected to grow most rapidly at 7.5 percent on average in 2012 – 2013
• Economic activity in the Middle East and North Africa is expected to accelerate in 2012-13
• Most oil-importing countries in the region face muted growth
• The impact of the global slowdown on sub-Saharan Africa has to date been limited to a few countries, most notably South Africa, and the region’s output is expected to expand by about 5.5 percent in 2012

When reading editorials or listening to TV programs that report on what the IMF said… it’s important to be mindful of what their report actually contained. The points above should be comfort enough for those fortunate to be living in this great country we call Australia; but here’s some more nonetheless:

• “The adverse spillover effects are expected to be the largest for central and eastern Europe, given the region’s strong trade and financial linkages with the euro area economies”
• “The impact on other regions is expected to be relatively mild, as macroeconomic policy easing is expected to largely offset the effects of slowing demand from advanced economies and rising global risk aversion. For many emerging and developing economies, the strength of the forecasts also reflects relatively high commodity prices”

Like me you want to navigate your way through these challenging times and come out the other side better off. I see MORE opportunity to progress financially than in years gone by – we’re facing the perfect storm!

1. Sections of our property market have bottomed and are just beginning to rise – that’s a buying opportunity
2. Interest rates are low and dropping – this will increase demand for property and push prices higher
3. Australia’s population is growing yet new housing numbers consistently fall short – limited demand MUST result in higher prices

I’ll stop there although I could go on.

Swimming is great but care needs to be taken to avoid drowning… so too with investing. At mrd we only recommend the responsible use of the right kind of debt. Don’t make avoidable mistakes… talk to us first!

The Downside Of A Buyer’s Market

In a buyers market when prices are down… so too are valuations. In my experience this is when valuers are at their ‘worst’, making it difficult to access and use existing equity. For those in a position to take advantage of a buyer’s market… DO IT – THERE’S NO BETTER TIME!

Your Next Step

Step one is to have your current position assessed by someone whose motives are not self-centered. NB: Don’t pay to have this done – you don’t need to! For those with the borrowing capacity, buying conditions and some buying opportunities make now a great time to be considering your next investment.

• Heather from mrd finance… along with one of our property mentors will happily (and professionally) assess your current position before discussing your options with you. To request this support simply complete a “My Starting Point” assessment form >>>here.
• Alternatively… contact us with your question(s) on ‘anything property’ >>>here

Happy Investing,

Nick Lockhart

Our Customer Care Program works for you… because investing is personal!

]]> http://investmentmentor.com.au/news-commentary/from-the-desk/world-economic-outlook/feed/ 0 http://investmentmentor.com.au/news-commentary/from-the-desk/sex-sells/ http://investmentmentor.com.au/news-commentary/from-the-desk/sex-sells/#comments Fri, 20 Jan 2012 08:00:16 +0000 Nick Lockhart @ mrd http://investmentmentor.com.au/?p=16346

We know “Sex Sells”… and so does fear! I completed a Diploma of Financial Services and while undertaking my qualifications some years back I was horrified at some of the things that were being taught.

The course was divided into two parts: Insurance/Risk Products and Managed Funds. I objected to (and challenged) the lecturers teaching on techniques to scare people into signing up for multiple, high levelled cover risk products. NB: I personally believe in and have insurances… and I acknowledge the many trustworthy and responsible industry professionals selling these products. I was just very disappointed that a lecturer of what was a very expensive course I had signed up for would teach his class how to sell by manipulation.

My objection to an over emphasis on risk type of products is that while the few will need income protection, temporary & permanent disability insurance and life insurance… just about all of us are going to make it through our working lives only ever really needing financial assistance in retirement. Two obvious but important points to understand:

1. If you ignore entirely or procrastinate on taking appropriate steps during your working life to financially secure your retirement years… you will struggle in poverty!
2. If you allow laziness or ignorance to stop you from gaining the knowledge necessary to accurately separate fear from fact… you are destined to react to sensationalism (designed to whip up fear – because it is an effective selling tool) which will result in terrible financial judgement and the same outcome as above!

I read once that “the worst investing advice usually arrives near the top and bottom of market cycles”. Too true! When markets are rising people think the cycle will never end. Equally when markets are falling or stagnant… people think the cycle will never end – both are wrong.

Where Are We Now

I repetitiously promote gaining accurate knowledge because you are going to continually hear mixed messages. I am not backwards at coming forward when it comes to giving my views on ‘everything economic’… but the things I predict are very often at odds with mainstream media – so who do you listen to? I’d suggest looking at the track record of the person(s) you listen to is a good starting point. Remember also that better than learning what someone else thinks is to learn how they think.

Confusion is a breeding ground for fear -> fear results in poor judgement and inactivity -> exactly why most people will end their working lives broke and dependent on a pension.

Recent media talk of another global recession lines up exactly with what I have been predicting for months. Its impact on Australia, however, is where I differ in opinion from those who (to me) are more interested in selling news via fear than anything factual. Let’s face it… if the hundreds of cruise liners that didn’t sink this past week made the front pages of the newspapers you wouldn’t buy any!

The term ‘another global recession’ refers to us having had a global recession – in 2008/09. As ‘global’ as it was… Australia did not go into recession; nor are we likely to this time (but headline with innuendo sells). Here’s what I have been (past tense) telling readers of this newsletter to expect will happen (future tense):

• Europe and the USA will go into recession
• Therefore, demand for Chinese produced goods will soften somewhat. But only somewhat because in the interests of protecting their own economy, the Chinese government will increase internal spending to maintain a strong growth rate
• That said, demand out of China for Australia’s minerals and resources will drop off a little, causing the value of our minerals and resources to soften a little (supply & demand determine the worth of everything)
• Lower prices mean lower inflation which in turn will bring about lower interest rates. This is exactly why I said the RBA got it wrong back in September when they left rates on hold, why they have since dropped twice and why they will continue to drop; commencing next month (February 2012)
• Lower interest rates will mean a weaker Australian dollar. NB: Our dollar may remain high against the US dollar given that economy will be in recession… but it will nevertheless be lower than it otherwise would have been
• A weaker Australian dollar is good for the manufacturing, tourism and the agricultural sector by keeping Australian produced goods cheaper for overseas customers
• Falling interest rates, coupled with rising rents, will make home ownership more attractive. It will also mean that investors will be able to afford to hold property that they may otherwise have been unable to hold. This will attract both home owners and investors into the residential property market

Other things that need to be considered include:

• The impact of higher unemployment (as our economy will slow somewhat) on people’s ability / willingness to take on new property debt and/or service existing debt
• The impact falling share values will have on home owners and investors alike
• The impact Australia’s ever expanding population will have on the demand for and value of residential property… especially in the context of an already existing housing shortage
• The impact brand new approved mining projects throughout Queensland and the Northern Territory (in particular) will have on immigration numbers, numbers of people employed and spending in the economy… including the demand these will place on existing housing numbers
• Where in the current property cycle different capital (and regional) city markets are positioned. That is, which markets have recently peaked and which have recently bottomed.

Nothing is an exact science but with the right understanding things can be a lot easier to understand. The electrician who didn’t attend classes (if he ever gets a license) will be a failure… so it is with financial literacy. Learn and do… your retirement years depend on it!

Economically Australia has in recent decades decoupled itself from Europe and the USA in all areas other than the stock market. Interest rates, inflation and property prices are reflective of the state of our own economy and the Asian region in which we are located. The stock market… where most Australian’s have their superannuation invested is where the impact of this new global recession will be hardest felt. In fact… what happens in these overseas markets (good or bad) impacts us all; directly or indirectly – for many Australians directly AND indirectly.

All this aside, you still need remain ever mindful that the day is fast approaching when investing will no longer be an option. Opportunity will have come and gone and retirement (ready or not) will be your reality. So… what steps forward are you going to take in 2012?

Here are just some ways mrd can help you:

• Education and mentoring
• Complimentary financial health check
• Assistance in rolling your super balance from the stock market into residential property
• National Rental Affordability Scheme ($100,000 of NRAS money from the government)
• Queensland Building Boost Grant ($10,000 from the Qld government)
• Restructuring and/or refinancing your finances (correctly)
• Assistance in designing a ‘Property Strategy Blueprint’
• Securing a great deal on an investment property
• Simply finding out how much you could borrow right now

Our services are complimentary and without obligation because we believe once you engage with and get to know us you will want to do business with us anyway (if you can). Using the following link be sure to tell me how you would like us to assist you >>>here

Happy Investing,

Nick Lockhart
Our Customer Care Program works for you… because investing is personal!

Many people have heard of the parable of the talents but for those who haven’t it is essentially the story of a man preparing to leave on a journey who entrusts his wealth to three servants; dividing it on the basis of their abilities. The first receives five (units of currency), the second two and the third one. In modern terms we could say he apportioned $500,000, $200,000 and $100,000 respectively.

Servants one and two set about investing and doubled his money while the third, motivated by fear, simply hung on to the $100,000 (dug a hole in the ground and buried it actually). Inflation reduces the real value of money over time… hence the expression ‘if you’re not moving forward you’re going backwards’; there is no such thing as standing still.

Ponder these:

• Fear is nothing more than faith in a bad outcome
• Optimists and pessimists both hold expectation for a future they can’t yet see
• By definition you cannot overcome if there was no chance of defeat
• Every winner was a possible loser

I hold the view that long-term success (at anything) is ONLY enjoyed by those who push through the tough times. I’m not impressed by the ‘overnight success’ but I am by those who pass the test of time; still standing! Single parents, athletes, business people, accident victims and everyday ordinary people face adversity in the pursuit of their goals. Subject to attitude; the very same obstacles become stepping-stones for some but ‘tomb stones’ for others.

Throughout the 10 years of mrd’s existence I have attempted to evenly split my teaching between (1) the nuts ‘n bolts of (safely and responsibly) investing in property and (2) helping people stay the course when the going appears to be getting tough… the biggest battle is often in a person’s mind!

The Global Financial Crisis (GFC) and now the situation in Europe are classic examples. Doomsayers and fear mongers have repeatedly warned us of an imminent property crash. These self-appointed experts (NB: from other industries) were wrong; time and time again. I’m not suggesting sticking your head in the sand and thinking nothing can go wrong… just that if you are an investor you are ‘playing in the big league’ and you need to be a professional in what you do. Any athlete, musician, parent, CEO (or whatever) that acts from fear rather than responds from knowledge will never be the best they could have been.

Seasons & Cycles

There are four seasons in a year (or in Melbourne in a day); so it is with life. Tough times (in a marriage, the economy, a business or a career etc) pass. The ‘trick’ as I once heard Pat Mesiti say is “When you’re going through hell; don’t stop”!

In the parable I referred to above, slave # 3 reacted to (was gripped by) fear, resulting in a strong rebuke and being called “evil and lazy” by his master. He had the original $100,000 taken from him and given to the servant who had turned $500,000 into $1,000,000. Bob Brown and the Australian Greens would not be happy about that. They’d rather penalise the successful risk taker (via higher taxes) to reward the person controlled by fear. Good luck lifting the living standards of the whole (and by default individuals) by incentivising mediocrity and laziness.

Where To From Here?

In 2012 you are faced with exactly the same decisions as you were in January 2007, 2008, 2009, 2010 and 2011. Will you will turn on the six o’clock news, hear of  the challenges in Europe and sit on the sidelines for another year… or you will look for knowledge and opportunity and take action? Whether with property or not… I sincerely hope you do ‘something’ because there is no such thing as standing still!

For a complimentary financial health check and the opportunity to have your potential borrowing capacity assessed, complete an mrd ‘My Starting Point’ assessment form >>>here

To speak with a property mentor about property opportunities (including Federal or State Government grants), leave your question(s) >>>here

Happy Investing,

Nick Lockhart
Our Customer Care Program works for you… because investing is personal!

There have been some suggestions that the floods have pushed down the value of the Aussie dollar and may end up pushing up interest rates. Blame that on slow news days early in the year. The Reserve Bank will look through the short-term flood impact. And I suppose that the euro is also weaker because of our floods?

Some prices for fruit and vegetables will rise and some supplies will fail to reach markets at all. But shortfalls may be met via imports in some cases, by frozen product or supplies from other regions of Australia. It may be that growers from other regions will lift supplies to meet market demands. And consumers will substitute high-priced or unavailable items for other fruit, vegetables, frozen product – or do without completely.

What about the impact on the economy? In the short-term there is the impact of lost production and activity. But in many cases this will be made up over time. Given that the floods have hit early in the quarter, lost production may be made up over February and March, minimising the impact to GDP. There may be a modest reduction in export output in the March quarter that will be recovered over the June and September quarters. Further, any reduction in building and production over the March quarter will be offset by repair and rebuilding activity over the remainder of the year. We see no reason to change our GDP growth forecasts of 3.5% for 2011.

The cost of the floods will be met by governments, donations, reinsurance and private individuals. But the net cost is a different figure. Some coal and farm producers in other parts of the country will benefit from increased prices and demand. And builders, construction companies and retail operations will face increased demand for services and goods when repair and rebuilding work get underway.

The week ahead

Recent data indicates that the Australian economy ended 2010 with a whimper rather than a bang. Admittedly the data released so far covers so called “second tier” indicators. But there is a rash of “top tier” or “top shelf” indicators to be released in the coming week such as retail sales and employment, so we will get a better sense of how the economy was tracking late last year. And in the US there will similarly be a raft of ‘top shelf’ indicators.

On Monday retail sales results will be released. Unfortunately the data covers November, not the keenly-awaited December figures. For that, we need to wait another month. But for the November figures, we expect that spending lifted by around 1% in the month. That may appear encouraging, but that is until you consider that sales slumped by 1.1% in October.

Still, anecdotes from retailers suggest that consumers embraced the discounts on offer in December which adds to the more positive trends gleaned from the Commonwealth Business Sales Indicator in the last few months. Buoyed by a solid jobs market, consumers are emerging from their burrows, albeit cautiously.

Data on job advertisements will also be released on Monday. In recent months hiring demand has remained resilient, but it will be interesting if the trend has been maintained in light of weakened business activity.

On Tuesday, data should indicate that Australia notched up yet another solid trade surplus in November courtesy of the mining boom with a figure near $2 billion expected.

On Wednesday four indicators are slated for release – housing finance, credit card lending, tourist arrivals and departures and job vacancies. Most interest will be in the data on new home loans, but a flat result is expected. While the number of loans to owner-occupiers likely rose by 0.5% in November, the value of all loans, including loans to investors, probably eased 0.5%. The Reserve Bank lifted rates at the start of November so future results may prove even softer.

One area where the economy has been performing very well is in terms of job creation. On Thursday the employment results for December will be released and we are tipping a 25,000 lift in jobs, consistent with recent data showing a rise in job advertisements. If the participation rate eases from record levels, the jobless rate could also ease from around 5.2% to 5.0%.

In the US, there is a bevy of top shelf indicators to be released, but the first one doesn’t appear until Thursday. Earlier in the week wholesale sales figures are released on Tuesday with export and import prices, the Beige Book and the monthly budget on Wednesday.

On Thursday, the producer price index and international trade figures are released while consumer prices, retail sales, industrial production and consumer sentiment are all scheduled for Friday.

Most interest will be in the activity indicators – sales and production – and the results should confirm that the economic recovery is firmly grounded. Overall economists expect that retail sales lifted 0.7% in December while production rose by 0.4%.

Apart from US data, investors will also be focussed on the latest economic information from China. The monthly export and import figures are expected on Monday. Other indicators such as retail sales, production and the December quarter GDP figures are generally released around mid-month, but no set time has been scheduled as yet.

Monday, 10 January 2011 08:30
Craig James via http://www.smartcompany.com.au/economy/20110117-the-big-picture-why-the-rba-will-need-to-wait-to-see-how-the-floods-play-out.html

But likely interest rate hikes will slow the market in 2011, the Global Real Estate Trends report predicts. The report, released by Canada’s Scotiabank, tracked the housing markets in 12 advanced economies throughout 2010. Home prices increased in Australia, Canada, France, Sweden, Switzerland and the United Kingdom. They remained flat in Germany and the United States, and fell in Ireland, Italy, Japan and Spain.

Australia led the pack, thanks to relatively low unemployment and tight housing supply. But interest rate hikes and a cut to the first homeowners grant slowed a “red-hot” property market in 2010 to some degree, the report said .Economist Adrienne Warren anticipates the Reserve Bank of Australia will lift interest rates by an additional 75 basis points in 2011. Australia’s close trade ties with Asia and resource wealth would continue to underpin a solid pace of domestic activity. ” Higher interest rates will worsen already strained affordability,” Ms Warren said in a statement. Canada’s market also fared well, but was “one of the most volatile” expected to be tempered by more moderate employment and income growth in 2011. The UK property market staged a strong early-year recovery while Germany’s decade-long housing slump also came to an end. But it was a different story in Spain, Ireland and Italy, where the market continues to fall. Japan’s two-decade long property slump continued in 2010, and is expected to slump further in 2011 on the back of a weaker economy.

The surprise result came from the US where the housing market stabilised.That trend is expected to continue, with the report predicting the US Federal Reserve to maintain its record-low 0.25 per cent rate through the end of 2011.

via Australian housing market strongest in the world | Courier Mail.

THE city’s tourism industry will begin 2011 in its best shape for almost three years with 2.8 million tourists expected to visit the Gold Coast during the Christmas-New Year holiday period.

The Gold Coast’s “comeback” figures, revealed last week, showed the city had broken the 10 million visitor mark for the first time since 2008.

Mantra Group, the biggest accommodation provider on the Gold Coast, has reported increased bookings for December and January.

Mantra marketing manager Susan Sullivan said the holiday season was a welcome relief.

 read more….

The way our attitudes and emotions play a role in how we invest and what we buy is of great interest to both psychologists and economists. Known as behavioural finance and behavioural economics, the theory is that investors and consumers don’t behave rationally.

Human foibles, bias, irrationality and inconsistency all affect our success as individual investors and the movement of markets as a whole. In one recent study, only 22% per cent of respondents were described as ‘rational’ when it came to money matters.

read more.

Australia’s remarkable run of economic growth – 19 years – makes it a member of a very elite club. In fact, says CommSec Chief Economist Craig James, you’d be scratching your head to find any other countries that can lay claim to the same performance.

The current economic expansion began in the September quarter of 1991. The nineteenth year of the expansion was completed in the June quarter 2010 and the twentieth year of growth has begun with the Australian economy expanding by 0.2 per cent in the September quarter. While growth was only modest in the latest quarter, arguably Australia is still in the strongest position of any global advanced economy, says James.

read more.

But Treasury remains concerned the states are unprepared for a population boom, with housing shortages and infrastructure bottlenecks across the nation.

The April briefs for Mr Burke, obtained by The Australian using Freedom of Information laws, give a frank assessment of population trends and future challenges. Net Overseas Migration — permanent migrants and long-term temporary migrants — is a key driver of population growth and within 10 years is expected to equal the natural increase.

While Treasury forecasts NOM nonetheless falling to 180,000 by 2020, before plateauing, it warns a further fall to 100,000 and lower fertility would be enough to slow growth to 2.3 per cent, and slash gross domestic product by 17 per cent by 2050.

“Population growth ameliorates the ageing of the population,” the ministerial brief states.

“Migrants tend to be younger on average than the resident population, boosting the labour force.”

With Australia’s population expected to surpass 29 million within 20 years, Mr Burke has been told NSW, Queensland, Western Australia and the Northern Territory have no population policies. Queensland — which will accommodate more new residents in regional centres, compared with mainly capital city increases in other states — also lacked reliable population projections but was still “attempting to plan for current and future needs”.

Mr Burke, who was given the portfolio specifically to develop an overarching population strategy, said yesterday the forecast NOM reduction was “simply a projection; not a target . . . not a policy”.

“Much of the public discussion on population is about total national figures and ignores the different needs of different parts of Australia,” he said. “The truth is, if Australia only contained 10 million people, we would still be overcrowded if they lived in Sydney.

“What the debate needs now is to look materially at the differences between those parts of the country where infrastructure and carrying capacity is being stretched and those areas that are crying out for more workers.”

Aakifah Suleman, 21, migrated from Zimbabwe with her family in 1989, her parents expecting their children to benefit from an Australian education and then return home. But they enjoyed their experience so much they stayed, with Ms Suleman recently graduating as an occupational therapist and working with the Multicultural Development Association in Brisbane.

“When people come from other countries, they bring so many different skills and elements of their own culture and it makes Australian culture much richer,” she said.

The permanent skilled migration program, the government’s main policy lever to influence NOM, is reviewed annually within a budgetary context. The government has set a preferred band of 150,000 to 230,000.

Immigration Minister Chris Evans last week heralded a 20 per cent drop in NOM,saying it would hit between 230,000 and 250,000 by the end of 2009-10.

via Treasury push for big migration boost to offset population ageing | The Australian.

MYER boss Bernie Brookes yesterday confirmed the iconic retailer will open its third Gold Coast store at the yet-to-be built Coomera Town Centre in 2014.

Speaking at a business lunch on the Coast, Mr Brookes said the Coomera store would be one of 15 that the company would open across Australia over the next few years.

“These are not speculative,” he told a 150-strong audience at the Crowne Plaza hotel. “These are all signed.

“There are opening dates for all of them.”

Mr Brookes said the 15 news stores would deliver an additional $500 million in sales to Myer.

The retail heart of the $1 billion Coomera Town Centre is to be developed by Westfield which has indicated it will lodge a development application in the second half of 2011.

Myer will be joined at the long-awaited shopping centre by two discount department stores, two supermarkets, up to 10 ‘mini-majors’ and 150 specialty shops, potentially making it the city’s biggest retail complex.

Westfield, in partnership with Queensland Investment Corporation, owns a 35ha site on Foxwell Road where it is working on its plans for the shopping centre.

Westfield could not be reached yesterday for comment on a firm construction timeline.

via Myer confirms Coomera store in 2014 Local Business | goldcoast.com.au | Gold Coast, Queensland, Australia.