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Australian Finance and Investing

Australian Finance and Investing
This blog is a place for learning, sharing and exchanging ideas for personal finances and investing in Australia.

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An interview with outgoing ANZ chief - John McFarlane
2007-10-08 19:19:00
Saw an interesting article in the Wall Street journal over the weekend on retiring ANZ Chief John McFarlane. He will go down as one of Australia's leading CEO's and provides a glimpse into his management views and practices. He helped transform ANZ from a predominantly institutional bank with thin margins and high risks into one of the most successful retail banks in Australia and New Zealand. ANZ's share price almost tripled under Mr. McFarlane's tenure. I have included some excerpts from the article below.WSJ: What was your first job and what did you learn from it?Mr. McFarlane: My first job was in the production area of Ford Motor Co. in England where I was a graduate trainee in 1969. I don't think you'll find tougher circumstances, so everything after that was much easier. But I learned about manufacturing, operation, cost control, and purchasing. I learned that I didn't want to be in manufacturing, and I went and did my M.B.A.WSJ: Do you think people should go to busines...
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2007/08 Australian Tax Brackets and Capital Gains Tax
2007-10-07 16:16:00
The 2007/8 Australian tax brackets are as follows: The tax brackets do not include the 1.5% Medicare tax levyEven though taxes have dropped in Australia, they are still relatively high from a worldwide basis. Therefore when investing it is particularly important to consider tax factors. The main one you will be impacted from while investing is Capital Gains Tax.Capital gains tax (CGT) is the tax you pay on any capital gain you make and include on your annual income tax return. There is no separate tax on capital gains, it is merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate (per the table above). The only caveat is that if you hold an investment for than 1 year, you only pay CGT on 50% of the gains.Your net capital gain is = your total capital gains for the year MINUS your total capital losses (including any net capital losses from previous years)I will discuss some CGT minimization strategies in the next few weeks -For more deta...
More About: Capital Gains , Capital Gains Tax , Capital Gain

Outlook for the start of the week
2007-10-07 14:28:00
(From AAP) : The Australian stock market is expected to open stronger on Monday, after solid monthly jobs data in the United States boosted stocks on Wall Street. On Wall Street on Friday, banks and financial stocks lifted as employment growth eased fears that the US economy was headed for recession as a result of defaults in the US sub-prime mortgage market.Figures from the US Labor Department showed that payrolls lifted by 110,000 jobs in September. Furthermore, a fall of 4,000 in the prior month was revised upwards to an increase of 89,000, which calmed investors who were concerned that sub-prime mortgage losses were weighing upon the economy.The Dow Jones industrial average rose 91.7 points, or 0.66 per cent, to 14,066.01 while the Standard & Poor's 500 Index was 14.75 points, or 0.96 per cent, higher at a record close of 1,557.59. The Nasdaq Composite Index lifted 46.75 points, or 1.71 per cent, to 2,780.32."I expect the Australian share market to open strongly on Monday,...
More About: Outlook , Start , Week , The Star

Couples and Money #2 : Tips for avoiding financial disagreements
2007-10-06 21:49:00
Here is the second lifeworks article about Couples and money. The first one was The Importance of Talking . This one is on how to handle financial disagreements when they (and believe me - they will!) occur.Tips for avoiding financial disagreementsIn addition to talking regularly about money, you can take other steps to minimize financial disagreements.Draw up your household budget together and review it periodically. Even if one of you is much better than the other at managing your finances, both of you need to understand where your money is going. Needless arguments can result if one member of the couple has no idea how much children's clothes cost or how much the heating bill has gone up in the past year.Keep your financial papers organized. Both of you need to know where you keep bills and other financial papers, such as bank statements and insurance policies. Some couples buy an accordion file divided into months and keep each month's bills there. Filing all bills promptly --...
More About: Money , Financial

BHP and RIO - In the sights of China Investment Corp
2007-10-05 22:12:00
I know I said to hold BHP for now, but some recent news has made me bullish on it again. It has been reported that the world's biggest mining group, BHP Billiton, and its Australian mining counterpart Rio Tinto are expected to be on the shopping list of China Investment Corp (CIC). now that the state-owned investment fund has initiated management of the $200 billion in capital it has at its disposal.CIC aims to invest in about 50 large-sized enterprises around the world. Just a few days beyond its official launch this past Saturday, the state-owned investment arm has already aroused considerable speculation about its acquisition plans. ''We believe it is also certain that the two huge mining companies in Australia--Rio Tinto and BHP Billiton --as well as Companhia Vale do Rio Doce in Brazil, would catch the attention of China Investment Corp.,'' Credit Suisse analysts said Thursday in a note to clients.Credit Suisse predicted CIC would only take a 5-10% stake in each company, r...
More About: Sights

Couples and money : The importance of talking about money
2007-10-04 22:31:00
Taking a slightly different tack to my previous posts, I am going to look at some articles on couples and money. Apart from personal experience, I scoured the web for some good references. Here is the first of these articles on the importance of talking about money Many arguments about money occur because couples haven't clearly spelled out their expectations about spending or saving. Instead, each member of the couple simply assumes that the other shares his or her views on the subject. That's why there so many jokes like, "What's her's is hers and what's mine is hers - that's how we share our money!"That's why it's important to bring your feelings into the open. You may take it for granted that you need to put aside some money for emergencies while your partner believes that saving for a rainy day is less important than enjoying the present. Or, you may want to pay your bills as soon as they arrive while your partner likes to wait until the last minute to pay. Talking fran...
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Top Australian Dividend Stocks
2007-10-04 03:13:00
Investors sensitive to market volatility might like to consider buying stocks that are better positioned to weather further credit turmoil, while paying a good and stable dividend. See table below for a list of the top franked and unfranked dividend paying stocks.Most of the top paying dividend stocks are in the utilities, infrastructure and financial sectors. The biggest risk to these is an increase in (long term) interest rates as it makes the yield less attractive. However for a balanced portfolio it is always prudent to have some high dividend/strong cash flow type stocks.Click on picture to enlarge
More About: Stocks , Australian , Dividend

$Australian heads to US dollar Parity
2007-10-02 20:24:00
Over the next few months it looks like the Aussie dollar will be heading to parity and above with the US$. I wish this were not true, as I am currently living and working in the US, but I think it is inevitable. So pack your bags y'all and come on over for a much cheaper holiday to Disney Land USA. Here some excerpts from a article written in the US Forbes magazine discussing this trend.Australia Waltzes Towards Parity With U.S. Doll ar If you’re in the U.S. and planning a jaunt to Australia, get those tickets fast. By the end of next year, the Australian dollar will have caught up to the American greenback, a new study has said. “Fundamentals suggest the Australian dollar can rise through parity with the U.S. dollar over the next year,” said Stephen Koukoulas, global strategist at the brokerage TD Securities. On Monday, the Australian dollar touched 89.50 cents, its highest level since February 1989. It weakened slightly Tuesday, falling 1.2%, to 88.12 cents, at the end of tra...
More About: Heads

$Australian heads to US dollar Parity
2007-10-02 20:24:00
Over the next few months it looks like the Aussie dollar will be heading to parity and above with the US$. I wish this were not true, as I am currently living and working in the US, but I think it is inevitable. So pack your bags y'all and come on over for a much cheaper holiday to Disney Land USA. Here some excerpts from a article written in the US Forbes magazine discussing this trend.Australia Waltzes Towards Parity With U.S. Doll ar If you?re in the U.S. and planning a jaunt to Australia, get those tickets fast. By the end of next year, the Australian dollar will have caught up to the American greenback, a new study has said. ?Fundamentals suggest the Australian dollar can rise through parity with the U.S. dollar over the next year,? said Stephen Koukoulas, global strategist at the brokerage TD Securities. On Monday, the Australian dollar touched 89.50 cents, its highest level since February 1989. It weakened slightly Tuesday, falling 1.2%, to 88.12 cents, at the end of trade in ...
More About: Heads

Cracker of a day today on the ASX - but wait and watch!
2007-10-01 22:53:00
Should be an excellent day on the market today thanks to the US market performance. After crossing the 14,000-level for the first time since late July, the Dow Jones Industrial Average gained 191 points to close at a new record of 14,087. However I would advise caution as I think this run-up is more due to 4th quarter buying (The first day is Oct 1st) in the US. Most likely there will be a minor pull back in the next couple of days. If you are looking to sell or lock in some profits, this is a good time to do so. Otherwise hold on and enjoy the rise. NB: I still think you should look at some of the stocks I mentioned in the last few posts like BNB and ORI which have already had a nice run since my recommendation
More About: Watch , Today , Cracker , Wait

This will blow you away….Babock and Brown Wind Partners (BBW)
2007-09-30 00:43:00
Babcock and Brown Wind Partners (BBW) is $A1.80 stock which I recommend you get in to soon – it has already gone up 10% in the last 2 trading sessions. It is a longer term investment, but it pays a 6%+ dividend and should appreciate well over the next couple of years. Also it is a good defensive play – which is useful when the market takes downward turns.So what got me interested in this stock? Well, a lot of my ideas come from reading articles in the online media and then trying to see which companies can leverage off the information I find. This time it was easy. The article I mentioned was in the Australian covering the Howard Government's decision this week to lift the nation's "clean energy target" (CET) to 15 per cent of all energy by 2020. This was the first line in the article : AUSTRALIA'S $2 billion wind farm industry is set for exponential growth following this week's release of higher clean energy targets, with investment plans being dusted off around the country...

Cheers...a look at Fosters (FGL)
2007-09-27 23:29:00
Saw a great article in the US wall street journal regarding Foster's group. Here are some of the highlights regarding that Article. I have owned Fosters (FGL) shares for a while now and think they are due for a run up and now is a decent entry point. However, this is a long term buy as it will take 1-2 yrs to see meaningful gains. Apart from wine, Fosters is also a leader in the beer market - which will not be affected by drought as severely as the wine business.Chief Executive Trevor O'Hoy has described the challenges that have hit the company in the past few years as "biblical" in proportion. Australia's wine industry has been hit by drought, fire and frost just as it was emerging from an oversupply that saw cheap wine flood the market and sink prices. Analysts say that if Foster's can mitigate increased grape costs from drought, and continue the recent momentum in its wine business, the outlook is encouraging. "The tentative signs are there; it's too early to say all the dra...

BHP - Wait for the pullback to buy
2007-09-26 18:50:00
With the recent news grabbing headlines of BHP's massive Olympic Dam resource increase, the shares ran up close to 15%. However, when the actual results were released in their annual report, it was a major anticlimax and the shares subsequently fell. As analysts said, "The expanded production won't come online until the middle of next decade so overall it is not increasing the value of the company for now. The Share price spike was on the hype of the upgrade, but the significance of this is a long way down the track in terms of developing the project."BHP Billiton's stock price is headed higher long term, so wait for the expected further pullback to around $40 and buy the stock as a long term investment. No need to rush in now and get it at the high prices. Longer term the picture is still excellent for BHP primarily due to its exposure to the growing Chinese and Indian economies and their ravenous demand for resources. Then there is the big untold story of BHP's petroleum divis...
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Superannuation Information
2007-09-25 00:08:00
On the topic of Superannuation, a topic which I am looking into for my parents, I am going to provide a link to a few good resources. It is a well discussed topic with a lot of expert analysis and recommendations out there. So I am just going to aggregate some links that you may find useful. Scroll down and on the Right Pane you will see a "Superannuation Info Links". Hope these help and if you find any useful ones let me know and I will add them to the list.Like I said in my previous post - Super is one of the best investments you can make because it is taxed much lower than your average personal tax rate. For those in the higher 40%+ tax brackets, you get a straight 25% return on your investment (40-15)! Can't beat that.
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Updates on some stocks I recently reviewed - ORI, BHP, BNB
2007-09-24 23:59:00
Orica (ORI) just announced the $775m purchase of Excel Mining and was up 5% on the announcement to 29.30. This purchase should help grow earnings by securing a larger slice of the growing underground mining segment. I recommended the stock last week at $28.20. I am forecasting it to close at $32 by year end , so continue to buy. Rumors in the press are that BHP is going to announce a huge gold find . The stock had a nice 5% jump yesterday and could go higher in the next few days. However, I think the stock is already priced for the announcement so I would hold what you currently own now and look to buy on weakness. BNB jumped 5% after I recommended it on a post yesterday. This is thanks to Goldman Sachs Group Inc., the world's largest investment banking company, which reported a 79 percent jump in profit, easing concern that a rout in global credit markets hurt industry earnings. Nice to see a quick return - thanks K for the tip.
More About: Stocks , Updates , Recently , Some

Babcock and Brown (BNB) - This one's going to run up!
2007-09-24 02:43:00
Had a talk over the weekend to a good friend of mine who recommended I look into Babcock and Brown (BNB)- An Australian based Investment Banking company. Well I did and I think it is poised to really take-off and benefit from the recent market volatility (in which it dropped 40%+, but is now only down 20% or so from it's high).Here is a great video clip I saw about the recent results and comments from the company's management - BNB Results VideoSo why do I think it is a buy:1. It has exposure across various industries and excellent geographic distribution of it's earnings. It is predicting continued growth in it's earnings, with 2008 earnings pretty much locked in. 2. Fundamentals are great. It's PEG is less than 1, a sign that it is undervalued. 3. Average analyst rating is Strong buy 4. Management has a strong record of delivery, is compromised of the original founders and has a strong stake in the company. The risks are obviously continued global turmoil, but overall the co...
More About: Going , Goin

Why diversify?
2007-09-22 18:30:00
Saw a nice article by a leading American mutual fund company about diversification. Here are some good part of it which I found interesting and a good reinforcement for why diversification is key for a balanced portfolio. This is relevant for investors anywhere in the world, including Australia. Why diversify? Because foresight isn't 20/20 and "The less diversified you are, the more pain your portfolio will feel"Sometimes, it's possible to have too much of a good thing. That's especially true when strong performance in a particular market sector causes one part of your investment portfolio to bulge while other parts shrink or grow only modestly.In such situations, instinct may tell you to celebrate your good fortune and leave your portfolio as is—or even to load up on the investment that's doing well. But according to Donald G. Bennyhoff, CFA, an analyst in Vanguard Investment Counseling & Research, in most cases a smarter approach is to take a close look at your long-term inv...
More About: Dive

Forbes 2000 List and the Top Aussie companies on it
2007-09-22 03:57:00
Just saw the recent release of Forbes 2000 global companies (I had an earlier post with Fortune's List ). For a solid and safe portfolio (especially in these turbulent times) I would make my stock selection from the Australian companies on the list. If you are interested in investing overseas, this is also a good place to being your research.The full list can be found at : Forbes 2000 List An interesting point to note is that NAB was ranked higher than BHP. This is interesting, but is based on the 4 measures used -- sales, market value, assets and profits. Also, it shows the quality of Aussie banks from a worldwide perspective given that they make up 4 of the 5 Top Aussie companies.I did get a response that I was only focusing on safe stocks. Well, I have invested in penny stocks and while I have made some money, overall it is a much sounder investment to focus on the top 200. Apart from sleeping easier, the long term returns are the same, so why take the extra risk. I have only go...
More About: Companies

Stock of the Week : Oxiana (OXR)
2007-09-21 21:25:00
Recommendation : Buy on Weakness. Average Analyst Recommendation : Buy @ $3.70Oxiana Limited is a an emerging Australian resources company, focused on copper, zinc and gold production.Reason to Buy:PE is 14.7 (as of Sep 23) and is one of the lowest compared to it's competitors. Other fundamentals and has a strong balance sheet with Net cash balance over $70 million (ie no debt)Good Projects Pipeline which should provide increases in production from 08/09. This should drive future revenues and share price.With Gold prices going up (in US$ terms) and spectre of rising real inflation, gold provides a good hedge. OXR is set to become one of regions larger junior gold producers with the new projects coming on line.Cash in hand makes it ready to make an acquisition or become a target. Either way, this augurs well for the share price.Has exposure to Uranium related growth through 40%+ holding in Toro Ltd.Risks- Increasing $A reduces foreign revenues- Increasing costs to build projects, w...
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Australian Fortune 500 Companies - Which ones to buy
2007-09-19 21:18:00
Here are the companies, in order, that made the Top 500 worldwide companies (according to Fortune Magazine). I have also put my recommendation next to them.BHP Billiton (BHP) - BUYWoolworths (NAB) - BUYNational Australia Bank (NAB) - BUYColes Group - SELLCommonwealth Bank of Australia (CBA) - BUYAustralia & New Zealand Banking (ANZ) - Buy CBA insteadTelstra (TLS) - BUYWestpac Banking (WBC) - BUY NAB insteadThe above are world class companies and should be part of a balanced portfolio. The only change I would make is to exclude Coles and 2 of the banks, per the sell recommendations above.
More About: Companies , Fortune 500 , Australian

Online Credit Card processing
2007-09-19 01:14:00
Ever wondered how people/business get online credit card payments processed on their websites? There are many vendors that offer these services and with a few clicks and Google searches for words like Card Processor Merchant you can find one. If you are an international business, make sure select one that can handle international payments and transactions.The key things to check for in a Merchant Processor is that they have low costs, convenience and they accept all major credit cards - Credit Card Accepting is a thing most of the main players do now. In terms of costing, volume is important. If you plan to undertake a number of transactions, then you can get volume discounts. Either way do your own homework, know where your transactions are being processed - alot of Merchant Services Off Shore their transaction processing centres to get lower costs - so check their security procedures.
More About: Online , Credit Card

Fed cuts rates by half percentage point to 4.75 - expect a bumper day on t
2007-09-18 20:19:00
The Federal Open Market Committee cut its benchmark federal funds rate by a half percentage point to 4.75%. In an effort to ease the credit crunch, the Federal Reserve also reduced its discount rate in lockstep to 5.25%. This is the first cut in the federal funds rate since June 2003. In a statement, the FOMC said the action "was necessary to forestall some of the adverse effects on the broad economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time." The Fed said that some inflation risks remain. It said the credit crunch could hurt the economy. Should be a great day in the US and Aussie Markets!
More About: Bumper , Expect , Point , Rates , Half

What's going to happen to the Aussie Dollar?
2007-09-18 19:58:00
With the up and down movement of the Australian (aussie) dollar over the last month, it'd be a brave man to predict the future. Luckily I happen to be a brave man. Here is my take based on what I have been reading...The aussie has risen back above 84 USc since it fell to 77 USc last month as thefallout from the US subprime mortgage mess widened and sparked a squeeze in globalcredit markets. But it still remains below its July 25, 18-yearpeak of 88.70 USc. Why I think the $A will go up and down in the short term, but finish around $85c by year end: - Better sentiment on carry trades (This where investors borrow the low-yielding Japanese unit to invest in assets in high-yielding currencies like the aussie andkiwi dollars) underpinning support for the aussie and kiwi as rate differentials and outright yield become more potent market drivers in an environment where stock markets are more stable. - Currency analysts expect it to hit 86c by year end, though it will be a volatile journey....
More About: Dollar , Aussie , Doll , Going , Goin

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