Latest News from Newealth

14 Nov 2019

Australian Residential Property: First Home Buyers

The First Home Loan Deposit Scheme has been legislated by the Federal Government and will commence on 1st January 2020.

It is designed to help Australian citizen over the age of 18 buy their first home with a minimum 5% deposit and not pay lenders mortgage insurance which is normally charged if the deposit is less than 20%.

In NSW, specifically Sydney it is capped at $700,000 purchase price.

The NSW Government will also waive (exempt) the stamp duty in full under the First Home Buyer Assistance Scheme if the purchase price is less than $650,000.

But wait, there is more.

If you’re a first home buyer and you’re buying a new home in NSW then you may also qualify for a $10,000 grant under the NSW Government First Home Owner Grant (New Homes) Scheme.

So, from 1st January 2020 an Australian citizen over the age of 18 can purchase a new $650,000 first home in Sydney with $32,500 deposit, pay no lenders mortgage insurance, pay no stamp duty and receive a $10,000 grant.

Yes they would have a $617,500 mortgage which at 3.0% per annum principal and interest would cost $2,600 per month (or $1,544 per month interest only) but they would stop paying rent.

This will present an opportunity for some.

 

WARNING, this does not constitute Personal Advice and to discuss if this is appropriate for your given circumstances please do not hesitate to contact us directly.

 

Click for Federal Government Scheme.

Click for NSW Government Scheme.

 

12 Nov 2019

Purchasing Manager Index (PMI)

The Purchasing Managers Index (PMI) is a measure of the prevailing direction of economic trends in manufacturing through its monthly survey of supply chain managers across 19 industries, covering both upstream and downstream activity.

When the PMI falls it indicates that manufacturers are scaling down production because they are expecting reduced sales which can indicate slower economic growth.

Question.

Is the current falling PMI repeating the past weakness of 2016 and 2012 which means that it is due to turn back up or will it fall further this time?

Click for chart.

The key for investors with all of this market noise is to remain invested according to your appetite for volatility and when fear and panic take hold during the next financial catastrophe, to take advantage by buying more quality assets at discounted prices.

 

7 Nov 2019

Market Metrics: US Listed Companies

IPO stands for Initial Public Offering and refers to the process of offering shares of a private company to the public in a new stock issuance to raise capital.

Seriously, what is going on with US Initial Public Offerings?

Since 2017, the aggregate capital raising (IPO) of unprofitable private companies has exceeded that of profitable private companies coming to market and by a significant margin.

This is not normal when you look back over the past two decades and is most definitely being driven by technology companies coming to market with the promises of future rivers of gold.

Click for chart.

Consider, if a company is not making profit today, how does it make a profit in the future because no way that every one of these IPO’s becomes an Amazon???

We most defiantly live in interesting times.

 

6 Nov 2019

The Wisdom of Great Investors: Behavioral Finance

As Benjamin Graham taught, you are not right because Mr Market agrees with you, you are right because your numbers are right.

Graham and a couple of other great investors went on to highlight a few more truths about investing in growth assets.

  • “Do not take yearly results so seriously. Instead focus on four or five year averages.” Benjamin Graham
  • “Everyone has the brain power to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and [investment] funds.” Peter Lynch
  • “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” John Bogle
  • “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t, pays it.” Albert Einstein

We have attached a chart on the MSCI AC World Index which is comprised of listed companies from 23 developed and 24 emerging countries to provide a broad measure of World stock market performance.

The results have been manic over the past 30 years and this is normal which is why the key lesson to remember is that the best opportunity to buy more quality growth assets at reasonable or better still discounted prices is when fear and panic take hold.

Click for chart.

 

1 Nov 2019

Friday Tidbit: US China Trade War

The US China Trade War began on 22nd March 2018 when US President Donald Trump signed a memorandum under the Section 301 of the Trade Act of 1974 instructing the United States Trade Representative to apply tariffs of US$50 billion on Chinese goods due to Chinese theft of US intellectual property.

Theoretically the purpose of tariffs is to protect domestic business and domestic jobs but in practice everybody loses.

Interestingly, after 20 months US listed companies are posting a positive return for investors while Chinese listed company’s valuations are still negative in aggregate.

Click for chart.

Asia makes up more than half the World’s population and half of global gross domestic product (GDP) which means that China and the rest of the Asian region will not continue to under perform.

It is only a matter of time before performance bounces back and dramatically.

 

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