Latest News from Newealth

Friday Tidbit

• Posted by Dejan Pekic BCom DipFP CFP GAICD

The 2022 Rich List is out today and Gina Rinehart tops the list with $34.02 billion.

Interestingly their biggest challenge will end up not actually making the money but the question of succession given that $4 trillion will need to transfer over the next 20 years.

And that is definitely a challenge that we can help solve.

Click to read.

The Wealth Report 2022

• Posted by Dejan Pekic BCom DipFP CFP GAICD

Just amazing numbers.

You will meet the definition of Ultra-High Net Worth (UHNW) if you have over US$30m (AU$42m) in assets including your primary residence.

In the 10 years to 2026 the number of UHNW is estimated to more than double from 348,355 to 783,671 which is truly rarefied air when you consider that our planet hosts 7.9 billion people.

Click to read.

Decarbonisation: Wind

• Posted by Dejan Pekic BCom DipFP CFP GAICD

The electricity derived from Wind is clean however after 20 years of investment which has grown Wind to outputting 743 gigawatts of electricity it still only delivers 1% of global energy needs.

This fact points to it being a failed alternative solution to fossil fuel produced energy.

Click for chart.

Transitioning to Net Zero by 2050 will require even more energy volume than being produced today because the Emerging Worlds energy requirement is rising rapidly to fill the gap between it and the Developed World.

Solution, we need a game changer and that game changer is nuclear fusion.

If the human race is going to survive on this planet then we need clean energy and nuclear fusion is definately the solution if we can get it to work.

Talk of successfully delivering fusion has been ongoing since the beginning of my career but they are close now and Commonwealth Fusion Systems just might be first to deliver fusion.

Imagine, fossil fuel energy production would become almost obsolete and the financial chaos that it would cause in asset prices would be unimaginable but it must come otherwise we are going to pollute ourselves to extinction.

US Interest Rates: Consumer Debt

• Posted by Dejan Pekic BCom DipFP CFP GAICD

Yes, US interest rates are rising and that impacts the rest of us but seriously, how high can they go?

2% to 3%, probably but 5%, 6%, 7% or 8% is highly unlikely given that the US Government debt has breached US$30 trillion and US consumer debt has almost reached US$16 trillion (see above chart).

Put simply, the US is awash with debt, that is the elephant in the room and it is that fact that will limit how high interest rates will rise in this cycle.

Remember these words from Warren Buffett if the current correction in asset prices turns into a asset price crash…“Be fearful when others are greedy and greedy when others are fearful.”

Decarbonisation: Base metal stockpiles

• Posted by Dejan Pekic BCom DipFP CFP GAICD

As we progress through the current unpleasant correction in asset prices it is important to keep focus on what is ahead for investors this decade.

Not only is ‘software consuming the World’ through advances in artificial intelligence, battery technology, blockchain, robotics, gene sequencing but the World is also electrifying.

Transitioning to Net Zero requires more base metals than our current reliance on fossil fuels and these same base metal stockpiles have fallen 75% over the last decade because demand for electrification is outstripping supply.

For example, electric vehicles are 6 times more metal intensive than combustion engine vehicles.

Again the same also applies for renewable energy- nuclear is 2 times more metal intensive than coal, solar is 3 times more metal intensive than coal, onshore wind is 4 times more metal intensive than coal and offshore wind is 6 times more metal intensive than coal.

Click for charts.

These megatrend investment opportunities are already in place which is why it is most important to remain invested according to your appetite for volatility and when fear and panic do take hold, react by buying more quality assets at discounted prices.

Recession Indicator: US interest rate cycles

• Posted by Dejan Pekic BCom DipFP CFP GAICD

Economic history tells us that every time the United States begins a new interest rate hiking cycle a recession follows more than 50% of the time.

The same applies for Australia except that we have managed to avoid following the United States into a recession on 3 previous occasions.

Click for chart.

The United State has now started its 14th interest rate hiking cycle since 1955 and the question being asked is whether a recession will again follow in the United States.

Jerome Powell, Chair of Federal Reserve of the United States is saying that a recession is not coming and the increase in interest rates is required to slow down the rate of inflation.

Whether he is right or wrong should not be an investor’s focus.

Benjamin Graham taught that it is the buy price that matters when investing and today we are at correction levels becasue financial asset prices have fallen by 10% plus from recent peak and that is always a good time to buy.

Is it the best time to buy?

No, the best time is when we are at crash levels which is when financial asset prices have fallen by 20% plus from recent peak but they occur far less frequently and can be years away. For example, we had to wait 12 years after the 2008 Global Financial Crisis for the next crash which was 2020 COVID-19.

The point, there is a 10% plus financial asset prices discount on the table today and so yes, today is a good time to buy more.

If a recession does follow in the United State and or Australia due to this interest rate hiking cycle then it will become an even better time for investors to buy more because the discounted will be even greater.

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

Up to a 50% guaranteed return: Superannuation Co-contribution for 30 June 2022

• Posted by Dejan Pekic BCom DipFP CFP GAICD

The Federal Government Co-contribution was introduced from 1 July 2003 as an initiative to encourage low to middle income earners to save for their retirement within superannuation.

If you make a contribution of up to $1,000 into your superannuation account before 30 June 2022, the Federal Government will add an additional sum provided that you are earning less than $56,112 this financial year.

The table below shows you how much the Federal Government will contribute for various amounts.

Yes, there are always additional eligibility conditions and so call us when you have quesitons.

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