October 2013

USA


Investing

Fixed interest markets enter chaotic period

15 October 2013 | PSI

ChaosThe possibility of a debt default by the United States is having its greatest impact on the fixed interest markets. Interest rates are already at extreme lows, and now US Treasury bonds are likely to be downgraded. In Australia, the picture for bonds does not look positive.


Gold sector comes under scrutiny

10 October 2013 | Broker reports editor

Gold ScrutinyThe price of the yellow precious metal has come off, and brokers are turning a critical eye on production levels and costs. Barring a sudden rise in the gold price because of the US debt crisis, investors need to scrutinise cash flow and balance sheets carefully.


Is ANZ fairly priced?

30 October 2013 | Broker reports editor

PriceThe ANZ result was strong, but very much in line with what analysts expected. Meanwhile, APRA is warning the major banks not to pay out too much as dividends so as to bolster capital reserves. For investors there do not seem to be many surprises.


Coles' momentum slows

28 October 2013 | Broker reports editor

MomentumColes is slowing, but Bunnings is strong and the coal assets reasonable. That is the confusing picture with the conglomerate Wesfarmers. Brokers are divided, and some are bearish.


Telstra rethought

24 October 2013 | Broker reports editor

TelstraTelstra has been seen as a defensive stock for some time, in part because of the uncertainty over the NBN and its changed status in the market, and in part because it is high yielding, paying out a high proportion of its profits. But is it a defensive stock, or a company on the cusp of a growth spurt?


Brambles getting mixed assessments

20 October 2013 | Broker reports editor

MixedBrambles gives exposure to the global economy, but analysts are seeing the stock as being fairly priced. The dividend yield is on the low side and the prospects for earnings upgrades are modest.


Housing market distortions

20 October 2013 | Melissa Peters

Housing distortionsA report by the Grattan Institute has reinforced the distortions in Australia's residential property market. For investors there is a judgement to be made about how safe a privileged asset class is going to be when ageing is likely to reduce demand over the longer term?

 


Qantas fails to impress

17 October 2013 | Broker reports editor

QantasJetstar is making forays into the Japanese market which may eventually pay off for Qantas. But there are many reasons to approach the stock with considerable caution.


Property trusts require scrutiny

14 October 2013 | Broker reports editor

ScrutinyThe $2.7 billion takeover offer for Commonwealth Property Office Fund by Dexus Property Group and its Canadian joint-venture partner may go higher. But analysts think the wiggle room is limited.


Westpac after Lloyds acquisition

13 October 2013 | Broker reports editor

LloydsBrokers are divided about whether Westpac is a good investment or not after the Lloyds acquisition. The implication seems to be, as brokers would say, to "buy on weakness". When analysts are divided, the pricing is probably close to correct.


Property prices under threat from baby boomers

13 October 2013 | Staff reporter

cash-inThe recent rise in the stock market and the property market is encouraging more baby boomers to retire. But this is posing a threat to those very same markets, suggesting gains might be temporary.


Property recovery will not be a repeat

13 October 2013 | Staff reporter

apartmentsThe apparent recovery in the property market will be in multi-unit dwellings rather than stand alone residences, which has implications for SMSF investors looking to invest in the sector. It also affects the prospects for investing in the shares of building products companies, who will struggle to increase profitability.


Is suburbia over?

10 October 2013 | Staff reporter

SuburbiaEndDiscussion continues about the future of suburbia and apartments in the Australian housing market, which is something of a battle between personal preference and government fiat. Meanwhile, banks are starting to lend aggressively for housing.


Positive property signs

10 October 2013 | Staff reporter

PositiveA decision by the Victorian state government to override objections to planning permits is indicative of the long term growth prospects in Melbourne. Meanwhile, the so-called "Sydney premium" has largely disappeared, suggesting that it is the most positive rental market in the short term.


AREITs need careful scrutiny

07 October 2013 | Broker reports editor

scrutinySMSF investors often prefer investment in commercial property for the income. AREITs, which proved to be a parlous sector in the lead up to the GFC, have become a more predictable asset class. But demand is weak and it is important to discriminate carefully.


Gas boom may be a fizzer

07 October 2013 | Staff reporter

BurntoutLNG is touted as Australia's next big boom. Woodside and Santos are big players. But developments in North America and Malaysia suggest that the competition is likely to become intense, suggesting the boom may not be as great as hoped.


Business premises going into SMSFs

06 October 2013 | Staff reporter

BusinessPropertySMSFs may soon be challenging the family trust as the best way to minimise tax and protect business assets, according to some advisers. The tax benefits are attracting many small business owners to use SMSFs to keep their rental costs under control and retain control of their enterprises.


Big trouble at Leighton

04 October 2013 | Broker reports editor

Agriculture Claims that Leighton Holding has been involved in bribery has resulted in the stock falling by a tenth. Brokers, however, are not overly troubled about the company, tending to sit on the fence. It is part of a continuing level of uncertainty about the company's future, however.


SMSFs may be worst option to borrow for property

04 October 2013 | Staff reporter

Property Buying property in your super fund may sound attractive, but how effective is it really? Research into the tax implications suggests that it can be a poor option. Everything depends on the price at which the property is purchased.


Are shares too expensive?

04 October 2013 |

expensiveInvesting in shares is all about timing. There is much discussion at the moment about whether or not low interest rates are fueling a property boom. But there is less discussion about the possibility that share prices are being boosted too much as investors pursue yield. Yet low interest rates traditionally drive higher equity prices; in traditional investing they are seen to be closely related.


Big miners undervalued

02 October 2013 | Broker reports editor

AgricultureInvestors in the big miners have had a disappointing two years. But some brokers are arguing that the undervaluing of the sector has gone on too long, and that an upwards correction is coming. Investors should ponder why the market is sceptical, however, tailoring expectations accordingly.


Beware property sharks

01 October 2013 | PSI

Property SharkThere are increasing signs that property spruikers are targeting SMSF investors to sell houses. This represents some danger for the sector. Sticking to investment fundamentals, especially net rental yield, is paramount if problems are to be avoided.


A rare agriculture investment

01 October 2013 | Broker reports editor

AgricultureNufarm is one of the few stocks on the ASX that offers exposure to the agriculture sector. The company manufactures crop protection products. The stock has risen by a fifth since last April but brokers are divided about the best investment strategy.


News

SMSFs need to look to foreign shores

24 October 2013 | Reynard

DiversifyThe SMSF sector has only a small proportion of assets overseas, unlike the professionally managed funds. That may be a missed opportunity when the Australian dollar is high. The size of the superannuation sector also implies a need to think beyond the domestic options.


A glimpse of the post $US future

17 October 2013 | Reynard

PostFutureThe self induced American debt crisis has given the world a glimpse of the end of US financial hegemony. It may take a long period, but there will be a time when the $US no longer holds total sway. All eyes are on China.


Lobbying fierce to keep conflicts of interest

11 October 2013 | Reynard

conflictThe financial advice industry and the banks are lobbying hard to keep their conflicts of interest, in what is an extraordinarily unseemly demonstration of venality at the expense of clients' interests. The Abbott government seems intent on bowing to the pressure.


Is gold a good play?

06 October 2013 | Broker reports editor

GoldGoodPlayIn times of uncertainty investors traditionally invest in gold. It is as much psychological as real, but because investors think gold is a safe haven, therefore it is a safe haven. The US shutdown may be the time to look at some possible investing.


The US debt crisis

04 October 2013 | PSI

usaThe American dollar rules the world, and so America has options no other country enjoys. What, then, are the likely consequences of the current political stand off? Some possible investment and political implications.


Of elephants and rewriting Shakespeare.

17 October 2013 | PSI

ElephantsSome important definitions of words in commun use in the financial sector. Certain to help you jump off that bridge when you come to it, after making sure that the rolling stone is gathering moss after the horse has bolted.


Two heads face off

04 October 2013 | PSI

liarIn today's column we examine the art of having two faces in financial and property advice, the mysteries of Dostoyevsky's Crime and Punishment and certain insights into risk management that are only whispered in quiet places amongst consenting fee structures, if at all.


Economics

US bears retreat as America recovers

30 October 2013 | PSI

RevivalIndicators of bearish sentiment are low as the US economy sputters back into life. For Australian investors that will probably mean a lower currency, which suggests it is a good time to look offshore for options. But there are risks.


Clouds over the Australian economy

27 October 2013 | PSI

Westpac's chief economist is calling for further drops in interest rates to spark the Australian economy after the mining boom ends. It is not likely to be enough; Australia is likely to develop the weaknesses of the other economies of the developed world.


Investor sentiment is the real financial crisis

14 October 2013 | PSI

investorThe prospect of an American debt default is troubling. But the real danger is that investor confidence will take a battering, which will then become self fulfilling. According to one economist, the world still has too much debt.


Markets brace for the best

13 October 2013 | PSI

brace Political gridlock in America is almost certainly going to have some bad consequences in the global capital markets. In bad times, the biggest bargains appear, so it may be time for SMSF investors to be on the lookout.


How Australia's rent seekers affect super

11 October 2013 | PSI

rentA speech by a well known economist about partisan politics, lobbying and the uneven effect on industry sectors is an important element in the thinking of investors. It suggests that SMSF owners are likely to be left alone by government, but they need to follow what decisions governments are making.


Risky times still for world financial system

10 October 2013 | PSI

World RiskyThe global financial system is still in trouble, which should be a warning to all investors. A recent IMF meeting indicated that the after effects of the GFC have not yet been fully dealt with, which means unpredictable times for the markets will remain.


Global growth weak

09 October 2013 | PSI

WeakThe latest IMF report on the global economy reveals continuing weakness, which should leave investors cautious. It is unlikely that an across the board recovery will emerge, suggesting the choice of asset classes should be judicious.


Debt crisis may be opportunity

07 October 2013 | PSI

debtThe strangeness of the current situation with the potential stand off over the US debt ceiling is that it is likely to cause investors to buy US Treasuries. The biggest impact will probably be felt in the stock market, which may well open up opportunities for investors. The high Australian dollar may also be a reason to look offshore.


US shutdown may create opportunity

06 October 2013 | PSI

USShutDownThe growing intransigence in US politics is of mainly psychological importance in the markets, but psychology matters. High levels of volatility seem assured and this may create opportunities for SMSF investors.


Will the over-60s be taxed?

01 October 2013 |

Over60There is an increasing level of noise about introducing taxation on superannuants who are over 60. While it is extremely unlikely either side of politics would do anything that would result in a voter backlash there are many issues that should be watched. Super splitting is one of them.


Is America's self-destruction an opportunity?

01 October 2013 | PSI

USAOpprtunityThe American economy may be adversely affected by the political gridlock in Washington. If there is serious volatility it may open up some buying opportunities. Investors may gain from watching the markets closely for mis-pricing.


Portfolio

Will the ASX copy America?

28 October 2013 | Broker reports editor

“AS”XThere are some similarities between what happened to the US economy and what is about to happen to the Australian economy. Will the ASX, as America's stock market did, perform well because of high profitability? The omens are mixed.


Why herds exist

24 October 2013 | PSI

HerdsWhy are markets irrational? It is a question that has exercised analysts and frustrated investors of the centuries and it is not about to be solved. But at least the latest Nobel prizes have given the question some attention.


Picking the right sectors and companies

22 October 2013 | Broker reports editor

PickingThe mining sctor has shrunk sharply over the last two years while banks and consumer staples have increased in size, according to a report by Boston Consulting Group. The report gives some pointers to how to identify sectors and companies in which to invest.


Derivative use a concern

22 October 2013 | PSI

concern The increasing use of derivatives in SMSFs is becoming a concern. It was derivatives that were largely to blame for the global financial crisis and the risks have not gone away.


The dark labyrinths of super

16 October 2013 | Melissa Peters

ComplexThe super industry has many layers of management. Big industry funds outsource much of the investment to outside providers. Little of this is transparent to superannuants. It is very much a case of 'trust me.'

 


Three consequences of the US debt deal

16 October 2013 | PSI

DealConsequencesThe American political impasse seems to be over. What are the implications, especialy for asset allocation? A quick look at some of the possibilities as the market absorbs the implications.


Are companies that give back cash good plays?

14 October 2013 | PSI

GoodPlay Should companies invest for the future or hand the cash back to investors? It is one of the perennial problems in management and investing. Recent research suggests that there is too much of a bias towards handing back cash to investors, creating valuation distortions and a dangerously low level of investment for future strength.


Super

Well off pensioners duck a bullet

28 October 2013 | Staff reporter

BulletProposals by the previous government appeared to only target the very rich super fund members, but there were a number of hidden dangers. And SMSF investors are potentially the most vulnerable, especially those using debt and looking to get large, one off capital gains.


Big shake up in super fund governance

10 October 2013 | Staff reporter

Governance shake upThe Coalition's proposed changes to governance of super funds imply yet another argument for starting your own SMSF in the right circumstances. At least with your own fund you can manage the interests in an easily understood way. With retail funds and industry funds, the transparency is low.


Tax for SMSFs and big funds

02 October 2013 |

AgricultureWith one exception, SMSF funds and managers of big super funds are subject to the same tax requirements. But they tend to behave differently because of the differences in scale. This especially affects the approach to property and certain aspects of stock market investing.


 

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