Australian Finance and InvestingAustralian Finance and InvestingThis blog is a place for learning, sharing and exchanging ideas for personal finances and investing in Australia. Articles
What started this bloody recession?
2008-03-20 14:41:00 The New York times today provided one of the most succinct summaries of how the subprime contagion and ensuing credit crisis has caused the global economic mess that we are seeing today. The writer David Leonhardt has done a great job synthesizing a complex topic into a simple essay. So if you don't understand why we are having the financial crisis or just want a quick re-cap, here are the key points from the article that explain it all:- It all started at the beginning of the US economic boom in 1998, when large numbers of people decided that real estate, which still hadn't recovered from the early 1990s slump, had become a bargain. At the same time, Wall Street was making it easier for buyers to get loans. It was transforming the mortgage business from a local one, centered around banks, to a global one, in which investors from almost anywhere could pool money to lend. - The new competition brought down mortgage fees and spurred some useful innovation. As is often the case with ... More About: Recession , Bloody
A temporary reprieve and a time to sell
2008-03-18 21:53:00 The American Federal Reserve's three-quarter-point cut in its key lending rate extended a stock-market rally that began after a pair of investment-banking giants (Goldman Sachs and Lehman Brothers) reported earnings results that, while weaker than a year ago, were free of nasty surprises. The Dow was up by more than 400 points and the S&P 500 rose 4%. The Australian, Asian and European markets should rally as well and most likely the euphoria will extend for a few days and perhaps to the end of the week. However, I think this would be a good time to "sell into the rally" rather than look for buying opportunities. The credit crisis is still around and it will take 3-6 months more before all the bad/dirty news is out. Also, a looming threat on the US economy is Inflation. Due to the aggressive interest rate cutting by the Fed, 2% this year alone, inflation is rearing its ugly head again. This could reduce consumer spending power, increase the cost of living and ... More About: Time , Sell
Are you prepared if you lose your job tomorrow?
2008-03-17 17:00:00 You get into work tomorrow and you are told that your position has been made redundant. Are you prepared for this scenario and its likely impacts on your financial security?In these volatile times with company profits on the way down, layoffs being announced every other day and a general economic malaise you need to be prepared for adverse circumstances such as losing your job. Whether you are in a dual income or single income household, you need to have contingency plans in place if your one or more of your main sources of income goes away. Here are four key items to plan ahead for.1. Get your financial house in orderEmergency Fund - have at least four to six months of living costs close at hand to whether the drop in your household income. If you don't have that kind of cash available keep other accessible sources like your home-equity line of credit untapped. It's a lifeline if you ever need it, and it costs nothing if you already have a mortgage. Pay-off any credit-card debt -... More About: Tomorrow
Fallen share prices drive dividend yields up
2008-03-15 14:39:00 Here is the second installment of Dale?s weekly market report. Dale Gillham is chief analyst at share investment company Wealth Within and provides his perspective on what happened in the markets over the last week and what?s ahead.___________________________________ Depending on where the economy is in regards to the business cycle, there will always be those who will win and those who will lose. In today?s current economic conditions the winners are those who are generating a high income from their investments as interest rates continue to rise while others are struggling to meet their mortgage repayments.Falling share prices in recent months has caused dividend yields to rise considerably, and it should come as no surprise to find Centro and Allco with the highest yields at 128.55% and 127.54% respectively. That said I am not suggesting you buy these shares to capitalise on the income, as the risk to your capital is likely to be much higher than the potential return right now. But... More About: Drive , Share , Fallen , Dividend , Prices
A conversation between Warren and Bill
2008-03-14 18:53:00 So Fortune, published it's latest - Richest People in the World List - and after 13 years there is finally a change on top. Thanks to the decline in Microsoft shares (along with the rest of the market) and increases in Berkshire Hathaway stock, Warren Buffet is on top of the list. Bill Gates drops to number 3, after Carlos Slim. Now Bill and Warren are friends, so here is an imaginary conversation they may have had over the phone when the list was released:Warren : "Morning Bill, Have you seen the latest list?"Bill : "What list?" Warren "Why, Fortunes Richest in the world list" Bill : I don't pay attention to listsWarren : Come on Bill, for 13 years you have been goading me about being the second richest man and now that you have been knocked of your pedestal, you are changing your tune. Not fair - why don't you "Google" the list now [Laughs]. Bill : Well....I have discovered my inner zen and that's why I am giving away all my money to charity and hedge funds shorting Microsoft ... More About: Conversation
Tipping Point - How much is enough?
2008-03-12 14:39:00 Having grown up in Australia and now living in America, it is always interesting to note the subtle difference in cultures between the two countries. One clear example is when it comes to "tipping". This is how a tip is defined : "A small monetary amount left to show appreciation for a service rendered above the norm". In America the standard tip is 15-20% of the bill, In Australia it is normally 1-!0%. The reason for the difference in tipping standards between America and most countries is due to the fact that American workers in the services sector are paid close to minimum wage (around $A7 per hour), whereas in other countries the minimum wage is much higher (In Australia it is about $A14). So the low minimum wage in America is justification for the large tipping component. In the restaurant and many other service based business, workers make more than half their wages from tips. I am not against tipping, in fact after being here for one year the ... More About: Tipping Point , Point
My post in the Carnival of Personal Finance
2008-03-12 03:12:00 Thanks to the Quest For Four Pillars blog for hosting the 143rd Carnival of Personal Finance and for including my article on those pesky bank fees and how to avoid them. There a bunch of other great personal finance articles available there and I would recommend you check them out. For blogs that I read regularly, check out my Aussie and US/Canada Blogrolls at Finance ViewPoint. More About: Personal Finance , Post
Desalination in Australia
2008-03-11 21:58:00 In the WSJ today was an interesting piece on the desalination plant built in Australia 's largest west coast city - Perth. Desalination is the process of removing salt from sea water. Coming from Sydney which went through a big desalination debate (still going on I hear) during the worst of the drought in 2006, I did not realize that other cities in Australia were well ahead in using desalination to provide part of their water needs. What was especially insightful was the environmentally friendly manner in which it was being done. Here is a video review by Patrick Barta of the WSJ that talks about the story behind the desalination plant:Points of note from the article were:- Opened in late 2006, Perth's $360 million desalination plant sucks in roughly 50,000 gallons of the Indian Ocean every minute. It then runs that water through special filters that separate out the salt, yielding some 25,000 gallons of drinkable water -- enough to meet nearly a fifth of Perth's current demand (...
Reader Poll - Decoupling and Will America drive the rest of world into a Re
2008-03-10 16:31:00 Decoupling. Not a rude word, but one that is being used to discuss the financial and economic separation between the United States and the rest of the world. In particular, economists argue about whether or not the world will follow America into recession, based on the strength of the interdependence or lack thereof between the new growth economies like China/India and America.Click here to vote on the US recession reader poll (left pane) at Finance ViewPoint.Decoupling does not mean that an American recession will have no impact on countries around the world. Just look at the current credit crisis and US recession which has been reflected in falling share markets all over the world. The point is that their GDP-growth rates will slow by much less than in previous American downturns. Most developing economies like China and India, enjoyed strong growth during the fourth quarter of last year, and some speeded up, even as America's economy ground to a virtual halt and its non-oil impo... More About: World , Drive , Reader , Poll
Dollar cost averaging and market expectations from Dale Gillham
2008-03-08 00:05:00 I would like to introduce a new guest contributor at Finance ViewPoint - Dale Gillham, who is chief analyst at share investment company - Wealth Within. Given his presence across a number of publications and media in Australia, I thought it would be worthwhile to get his views on various financial concepts and weekly perspective on what we can expect from the financial markets.So here is his Weekly Market Report for the week ending March 7th 2008.:___________________________Dollar cost averaging seems to be a hot topic within the industry of late. For those of you who may not understand this concept, it basically means that you continue to buy more shares in companies that you already own as they fall away in price in order to achieve a lower average purchase price. Now I don?t know about you, but I struggle to understand why anyone would want to buy shares in an asset that is falling.If you dollar cost averaged Centro and ABC Centres in the past 6 months you would most certainly be... More About: Cost , Expectations
Middle Class Millionaire Habits
2008-03-07 15:15:00 Marketwatch.com had an interesting article today on the views of America?s ?Middle Class Millionaire s? (MCM) - Those with net worth of $1 million to $10 million.What was striking to me was that these MCM?s thought that you need $13 million plus to be considered rich! I would think $4 - $5 million would put you in the rich category ? but then again I am not a MCM.Here are some the findings from the Prince and Schiff report:- 7.6% of American households, or 8.4 million households are middle-class millionaires- The average middle-class millionaire works 70 hours per week- Middle-class millionaires are five times more likely than the average worker to say they are always available for work- 89% believes that anyone can attain wealth through hard work- 62% believes that networking, or knowing many people, is the key to financial success- Nine out of 10 middle-class millionaires say they made a bad career or business move, but almost three-fourths say that was crucial to their business su... More About: Money , Habits
Centro - Worth a Punt @ 0.35 cents?
2008-03-06 21:29:00 One of my readers emailed me asking "What are my thoughts on Centro shares (CNP) which have a had big fall of late....and is it good value at $0.35c?". I had been reading about the plunge in Centro stock, an Australian property trust which invests in and manages retail properties, but not really paying much attention as I don't own its shares and the property management sector has not been one of the areas I have been following. However, armed with the question and after doing some research, here is what I found. At 35 cents the shares could present a good, albeit very risky, buying opportunity. The low share price (the stock was trading close to $10 a year ago) and potential developments could present a good entry point now. However, I reiterate, this is a very risky investment and you could just as easily make significant losses. So read this article to get my views, but do your own homework as well.First some background on Centro and how it got to this stage - Yesterday Centro P... More About: Cents , Worth , Punt
Avoiding those Pesky Bank Fees
2008-03-05 00:00:00 We have all read about the ever increasing fees and charges that banks and other financial institutions charge us on our everyday savings and checking accounts. But how well do you know the various bank fees and how much you could be charged? A recent government study on bank fees revealed that consumers are ill-informed about the fees they are paying on their accounts and tend to pay more than then need to. In the US alone, $36 billion in bank fees were charged last year to consumers. In Australia, the estimate is about $3 billion. While bank fees are not going to go away or lessen anytime soon, savvy consumers can avoid a number, if not all, of these fees by being informed and shopping around for the best deals. Here are some of the more common bank fees/charges and tips to avoid them.Monthly Account Keeping or Service Fee : The most common fee you pay for an organization to manage your bank account. Generally runs anywhere from $3 to $7 per month ($36 - $84 annually). However, yo... More About: Fees , Banking , Bank
Avoiding Bank Fees
2008-03-04 23:02:00 We have all read about the ever increasing fees and charges that banks and other financial institutions charge us. But how well do you know the various bank fees and how much you could be charged? A recent government study on bank fees revealed that consumers are ill-informed about the fees they are paying on their accounts and tend to pay more than then need to. In the US alone, $36 billion in bank fees were charged last year to consumers. In Australia, the estimate is about $3 billion. While bank fees are not going to go away or lessen anytime soon, savvy consumers can avoid a number of these fees by being informed and shopping around for the best deals. Here are some of the more common bank fees/charges and tips to avoid them. Monthly Account Keeping or Service Fee : The most common fee you pay for an organization to manage your bank account. Generally runs anywhere from $3 to $7 per month ($36 - $84 annually). However, you can search around and find ways to avoid this fee by fi... More About: Fees , Bank
Avoiding Bank Fees
2008-03-04 19:40:00 We have all read about the ever increasing fees and charges that banks and other financial institutions charge us. But how well do you know the various bank fees and how much you could be charged? A recent government study on bank fees revealed that consumers are ill-informed about the fees they are paying on their accounts and tend to pay more than then need to. In the US alone, $36 billion in bank fees were charged last year to consumers. In Australia, the estimate is about $3 billion. While bank fees are not going to go away or lessen anytime soon, savvy consumers can avoid a number of these fees by being informed and shopping around for the best deals. Here are some of the more common bank fees/charges and tips to avoid them. Monthly Account Keeping or Service Fee : The most common fee you pay for an organization to manage your bank account. Generally runs anywhere from $3 to $7 per month ($36 - $84 annually). However, you can search around and find ways to avoid this fee by fi... More About: Fees , Bank
About Finance ViewPoint
2008-03-02 21:47:00 Well, I have just completed over 6 months on Finance ViewPoint during which time I have learnt a lot about the world of blogging, on-line commerce and web page development. However, the best aspect has been the feedback I have got from readers, family/friends and other bloggers who read this blog. Thank You. A number of people I have talked have asked me various questions about this blog, why I blog, how did I start, how much do I make etc. So I thought I would take this opportunity to answer some of these questions in a FAQ (Frequently Asked Questions) format. Q: Why did you start this blog? A: I started after reading about the "blogging" phenomenon in various articles that talked about the growth and potential in blogging. I also read a number of prominent blogs and thought this is something interesting and productive I could do in my spare time. If I was to select the top 2 reasons, among many, to start this particular blog they would be: 1. Living overseas, I wanted a way to kee... More About: Viewpoint
The U.S. currency now classified as a "low-yielding asset"
2008-02-28 17:00:00 It pains me to write about the continuing fall in the US dollar as I am working here in the states and with the continuing decline in the US dollar my effective savings in Australian dollars is rapidly declining - make it even more expensive to move back home. Also it doesn't look like the US dollar is going to reverse the current trend anytime soon - so more gloom ahead. I have written a number of times on the Australian/US dollar relationship, and this topic seems to be one of the most popular links into my site, so I guess I need to keep writing about it as that's what my audience likes. A recent reader poll I conducted resulted in an estimated range of $0.80c to $0.90c for the Aussie/US dollar exchange rate by mid year. However with recent moves and news, it looks like Aussie and US dollar parity is inevitable by mid-year. "Global investors are looking at the strong Australian economy, looking at that wonderfully high interest rate that they're picking up relative to the US a... More About: Currency , Classified , Asset
A Great way to Teach your Kids about Shares and Investing
2008-02-27 21:54:00 One of the things that confront many adults today is a lack of experience with how stock markets work or which stocks to invest in. In a number of cases this can be attributed to not being exposed to the stock market and investing at an early age. Think about computers and our senior citizens. Those under 30 feel at ease using a PC, browsing sites, social networking and using the web as a daily part of their life. A lot people over the age of 60 are terrified of using a computer and wouldn't know where to start. It's all about exposure. Those under 30 have grown up with computers through most of their life, whereas the 60+ yr probably didn't have exposure to personal computers until their late 40's to 50's, and the older you get the harder it is to learn new things.The same lesson can be applied to ones comfort in investing in the stock market. I look at it as an opportunity, others look at it as a mass of numbers that are in the "too difficult to understand basket". I was alw... More About: Kids , Great , Investing , Shares
Bluescope Steel (BSL) - one to watch
2008-02-24 20:38:00 I wrote a while back about Bluescope Steel (BSL), Australia's largest steel producer, and why I thought it was posed to rise further amid a strong export environment and rising domestic prices. It was trading around $9.80 at that time and despite recent turmoil in the share markets it is trading at $11.40. One of the few stocks to actually go up. I still think that steel prices will continue to rise, driven by demand from China/India and from the run up in coal prices (the key ingredient for making steel) which are being passed on to end consumers.Bluescope (BSL) is expected to deliver an interim profit of up to $328 million on Monday. The consensus among analysts is that Bluescope will deliver a first half profit of about $300 million. "Bluescope should benefit from its exposure to sharply rising export prices, while domestic sheet prices have also gained," UBS analyst Chris Drew said in a February 15 client note.While there are some adverse factors affecting profits (higher curre... More About: Watch
World's Largest Stock Markets
2008-02-23 16:05:00 I received an interesting reader question asking what were the world's biggest stock markets and where does Australia rank. So I did some research and based on the latest data I could find (as of Mar 2007), the Australian stock market has a total market capitalization of A$1.39 trillion (US$1.098 trillion). This puts it at around No 15 on the list of largest stock exchanges....not bad for a country of 20 million people.Here is the list of the Top 10 Stock Exchanges by market capitalization:(figures in trillions of U.S. dollars)1. NYSE - $21.792. Nasdaq Stock Market - $11.813. London Stock Exchange - $7.574. Tokyo Stock Exchange - $5.825. Euronext - $3.856. Deutsche Boerse (Germany) - $2.747. BME Spanish Exchanges - $1.938. Borsa Italiana - $1.599. Swiss Exchange - $1.4010. Korea Stock Exchange $1.34Source: Reuters and World Federation of Exchanges Web site Interestingly India and China are not on the Top 10. However, recent stock exchange mergers and the growth of the Indian and Ch... More About: Stocks , Markets , Largest , Stock markets
IPL Frenzy - Money and Celebrity
2008-02-21 05:22:00 The Indian Premier League (IPL), a 20/20 local-global cricket competition, is real and rich. The recent bidding wars for various international cricket players has produced a frenzy of bidding. It has shown just how much money there is in Indian cricket with about $A44 million spent buying up the rights to 77 players from around the world. What has made this more interesting and glamorous to the public has been the direct involvement of India's richest businessmen and big-name Bollywood stars like Shah Rukh Khan and Preity Zinta (pictured) The top prices were cornered by Indian and Australian players - ranging from Indian skipper MS Dhoni's $A1.63 million, $A1.47 million to Australian all rounder Andrew Symonds and $A1.03 million to Indian bowler Ishant Sharma and $A979,500 to Australia's Brett Lee. Yet top players like Ricky Pointing could only fetch $A435,350 - reflecting how important media perception is. Mind you all these figures are for about 18 weeks of cricket (6 weeks per... More About: Celebrity , Money , Frenzy
Video killed the radio-star....
2008-02-20 17:43:00 Remember that song? Well Toshiba's HD-DVD format player was officially killed today by the Sony-Blu ray format. For me this is personal as I had bought a Toshiba A3 HD-DVD last year around Christmas, now an obsolete piece of technology. I got a good deal for it at the time - $169, but it is now selling for close to $120 as stores try to get rid of stock. It'll get cheaper over the weeks until it becomes a collectable. The DVD format battle had been fought during the past several years. Sony has led a group backing its Blu-ray technology. Toshiba has promoted its HD DVD format, which it touted as the affordable choice for consumers. Persuading major film studios and US retailers (like Walmart and Best Buy) to issue movies in the Blu-ray format was crucial in Sony winning the battle. They lost the home video war - Sony Betamax versus VHS, but they won this time around. Toshiba is planning to stop production of all HD-DVD platers by March 1st 2008 and to completely phase out t... More About: Video , Radio , Star , Killed
Ouch! - Crude closes above $100 for first time ever
2008-02-19 21:50:00 It has finally happened - Crude-oil futures surged nearly 5% Tuesday to close above the $US 100 a barrel mark for the first time ever, as concerns that the Organization of Petroleum Exporting Countries may cut production and a Texan refinery shut down boosted prices. Despite a potential US recession and global slowdown - normally bad for crude oil prices, oil prices keep rising. Economists are struggling to explain this, even after accounting for US dollar weakness (the currency in which crude oil is priced). Most say speculation is one of the big drivers for the $10 rise this week alone.Most "experts" think that the factors driving up oil prices are temporary and prices should fall back to around the $90 mark by month end. However, you will soon be seeing higher prices the next time you fill up the car. Higher transportation costs will also drive up grocery prices and eventually lead to inflation. Higher inflation will mean higher interest rates. So you see, oil going up has much m... More About: Time , Ouch , First Time
Aussie Banks Taking a Hit
2008-02-18 18:08:00 Looks like the Australian banks - normally considered a safe investment in these volatile markets - are taking some major hits to their stock prices. If you are a long term investor the next few months could present a golden opportunity to get into Aussie banks at relatively cheap prices. However, there is no need to rush in. Wait till they have all reported earnings and unexpected surprises before making the buy decision. I still think they could fall another 10-15% as their write-offs increase and earnings/dividends are impacted.From some of the articles around the web, here are what banking heads and analysts are saying about the outlook for the banking stocks. A relatively pessimistic picture.- ``People are facing up to the fact that they've got to adjust their figures on the banks,'' said Angus Gluskie, who helps manage the equivalent of $500 million, at White Funds Management in Sydney. ``Bad debts are going to be higher and the banks are going to wear them for the rest of ... More About: Banks , Taking
Global and Australian economic outlook - What should Investors do?
2008-02-15 14:20:00 I recently read a copy of Shane Oliver's Global and Australian economic outlook report. Given he is the head of Investment Strategy & Chief Economist at AMP, he probably knows what he is talking about. Here are some of the more interesting points from his article that I think you should consider before making your next investment:- A US recession is now a 50/50 call. [The report is about 2 weeks old - From recent media reports, I think it is a 70/30 call now. Ie, 70% chance we will have a US recession]- There is increasing evidence that the US downturn is spreading from the housing sector.The Institute of Supply Management (ISM) survey of manufacturers has fallen to its lowest level since 2003; The US labour market is starting to slow and durable good order are getting weaker- How vulnerable is Australia to a US recession? It used to be said that "whenever the US got a cold, Australia got the flu." This is reflected in the close relationship between US andAustralian gross domes... More About: Outlook , Economic , Investors
Is Indian Outsourcing getting too expensive?
2008-02-13 18:37:00 A recent business week/yahoo article talked about the rapid rise in Indian salaries due to a labor shortage in many industries. Indian companies are finding they need to significantly boost salaries in order to attract or retain employees. Could this mean that they are losing their pricing edge, that makes Indian outsourcing for western countries so cost effective? According to a recent report from London human resources firm ECA International, average wages at multinationals in India are likely to jump 14% this year, putting India at the top of a ranking of 47 countries worldwide for the second year in a row. "Salaries in India are catching up to developed nations at a faster rate (than in many other Asian countries)", says Lee Quane, Hong Kong-based Asia general manager for ECA. "Companies have had to provide higher salaries." The pay hikes are also pronounced in other fast-growing sectors such as retail, infrastructure and enginee... More About: Outsourcing
Is your Salary above Average?
2008-02-09 20:39:00 I like to keep my eyes on what the average Australian salaries are and how they are trending. Firstly, I use the averages as a comparison to what I am making in the US and secondly to have an idea of what I could earn when I return to Australia. I found a good guide for this at the My Career website.For people already in a job, I think it is always good to know how you compare to the average and how much upside/downside you have at your next pay review or for future jobs. It is also a good starting point for people looking to work in Australia and to get an idea of what they could earn across the various sector and job roles. I have included a graph form the My Career website which shows the Australian salary trend over the last few years. $77,800 is the current average which is an increase of about 7.5 per cent over last year, according to their figures. The averages across all sectors were much higher than I thought, but I guess this reflects Australia's strong economy and low un... More About: Employment , Salary , Average
BHP-RIO Takeover & Other Metal Plays
2008-02-07 00:24:00 The announcement of the formal BHP/RIO takeover yesterday made me consider other metal stocks which could be potential targets for a takeover given that a number of these stocks have taken big hits lately and are trading on very cheap valuations. Here is a list of metal stocks from ABN AMRO that shows their recommendation and potential upside from stocks prices as of February 1st 2008From the list Zinifex (ZFX), BHP, ERA, Perilya and Kagara Zinc (KZL) are all rated buys. The stock that I do like on this list is KZL. The reasons I like this stock are that it is relatively cheap (fundamentally and from a share price perspective) and that it has a strong development pipeline. Kagara's shares have lost about 48 per cent of their market value since mid-December due to overall market falls and from news that profits were down from the previous corresponding period. I think there has been an over-reaction and that the stock price has gone down too far.Kagara chief executive Kim Robinson s... More About: Metal , Takeover , Plays
Ten Tips for Using Your Tax Refund
More articles from this author:2008-02-05 17:06:00 I filed my Australian tax returns in January when I was back home on holidays and will soon be doing my US taxes. I cannot explain to you the sheer joy of doing 2 tax returns (note the sarcastic tone)! Having to collate paperwork, get employer/investment documentation, health expenses across two countries is not something I look forward to. All I can recommend is to get a good accountant like I did. Anyway the good news from doing the tax returns is that I should be getting tax refunds from both my filings. This got me thinking about what I will do with the tax refunds. So based on personal experience and searching the web, here are ten ideas1. Retire your debts. Put your refund towards the balance on high-interest credit cards or other outstanding loans2. Start an emergency savings account. Financial experts recommend keeping a savings account with 3 to 6 months pay to cover emergencies3. Save for a down payment on a home or new vehicle. If home or vehicle ownership is one of your ... More About: Tips 1, 2, 3, 4, 5, 6, 7 |
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