15 Apr 2024
Market Metrics: Inflation
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Financial experts never seem to know what is going on right now but in hindsight they are perfect.
For example, the United States was forecast to go into recession in 2022 after the Russian invasion of Ukraine which resulted in supply shocks and rapid global interest rate rises but the United States did not fall into recession.
Again, the United States was forecast to have a recession in 2023 but it did not happen.
Why because no one had worked out that the insane printing of money by Governments during COVID-19 period had left consumers with excess savings. This excess has now been depleted expect for Australia.
Click for excess savings charts.
Our point is that financial experts almost never know what is going on in the present.
Markets have been forecasting (and are still forecasting) that inflation has peaked, that it will fall and consequently interest rates will be cut in 2024.
For goods inflation we agree however not for services inflation.
Wages increases are high and showing no signed of reduction in the short term which means that inflation (the sum of goods plus services) will remain high and that means no interest rate cuts in 2024. In fact, interest rates are more likely to increase in 2024.
Click for services inflation charts.
If correct and interest rates do increase in 2024 then it will again mean a correction/crash for assets prices.
What action does one take?
None, just follow Benjamin Graham’s value investing principles and remain invested according to your appetite for volatility and look to buy more quality assets when prices fall.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
10 Apr 2024
2024 US Presidential Election: Biden vs Trump
- Posted by Dejan Pekic BCom DipFP CFP GAICD
We keep being asked the question, what happens if Trump wins?
Donald Trump brought chaos and disorder to the Office of the President of the United States and will likely again if elected again.
Attached is a matrix of potential winners and losers of Biden versus Trump and a reminder that the US Federal Reserve has changed interest rates in every Presidential Election year since 1980 except for 2012.
Meaning that although the US Federal Reserve is expected to reduce interest rates in 2024, they could still end up increasing rates instead.
Click for Biden vs Trump.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
4 Apr 2024
Low hanging fruit: Superannuation
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Many of you a are too young to remember but I was there advising on the 1st July 1992 when the Superannuation Guarantee (SG) began.
Today superannuation holds $3.5 trillion in assets and by 2048 it is forecast to grow to $13.6 trillion.
Click for charts.
Why does it continue to multiply? Because it is financially gorgeous.
Just imagine, you can invest in this thing called superannuation and only be charged a maximum tax rate of 15% on earning compared to the top 45% marginal rate for individuals.
And then when you begin drawing an income the tax rate drops again to 0% on everything- capital gains, distributions and withdrawals.
It does not get much better than this.
Apart from tax free capital gains on the primary residence in Australia there is no other legal way to reduce tax on earnings to 0% and that is the reason for so many restrictions on superannuation.
The math’s however is simple, we each get a $1.9m cap (meaning $3.8m for couples) and the Federal Government will not force you to take advantage of this low hanging fruit.
The best part is that you do not have to get on a ladder, you do not have to climb a tree, just reach up and take advantage of this opportunity.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
