14 Mar 2024
Cryptocurrency: Bitcoin
- Posted by Dejan Pekic BCom DipFP CFP GAICD
The printing of vast quantiles of money (issuing I-owe-you paper called notes, bills, bonds) by Central banks around the World has been the key driver behind Bitcoin and associated cryptocurrencies but remember that Bitcoin price relies on The Greater Fool Theory.
The Greater Fool Theory is where a purchaser/investor buys an item/asset in the belief that the next purchaser/investor will buy it from them at a higher price.
That fact about Bitcoin is that only 21 million can be mined in total and so far 19.6 million have been collected which makes it rare and as long as there is a group who want to trade in this limited edition rarity (think of it as a collator’s item) there will be a price.
Once there is no longer a group that wants to trade in this collector’s item the price will evaporate.
Don’t know how cryptocurrency will end but we do know what Benjamin Graham taught and that was to not speculate. Instead remain invested according to your appetite for volatility and when fear and panic take hold, react by buying more quality assets at discounted prices.
Click to read.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
5 Mar 2024
Australian Residential Property: 12 year low
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Residential property prices (especially Sydney and Melbourne) just keep increasing and everyone without property keeps complaining.
If the Federal Government wants to stop steep rises in residential property prices and steep rises in rents then it will need to either cut immigration immediately or streamline the building of more residential property which is currently at a 12 year low.
Building more residential property (increasing supply) is preferable because it brings economic benefits but it takes years to deliver supply of new residential property.
Click to read.
Ongoing reduction in residential property supply is not good because humans need shelter to live.
If you are not a Newealth client and want to take advantage of this convergence then please contact us.
20 Feb 2024
The Age of AI has begun: The convergence
- Posted by Dejan Pekic BCom DipFP CFP GAICD
There have been moments in history when everything changed.
Right now we are living in one of these moments.
‘Software is consuming the World’ and this software is bringing everything together into a technological convergence that is and will continue to drive economic growth by creating trillions of dollars of sales revenue.
Click for chart.
This is being called the start of the 4th era in computing, Artificial Intelligence.
If you are not a Newealth client and want to take advantage of the convergence then please contact us.
16 Feb 2024
Friday Tidbit
- Posted by Dejan Pekic BCom DipFP CFP GAICD
It is next to impossible to always pick the winners.
This was the explanation that we gave to one of our clients who asked about making large individual investment bets.
This not only applies to individual investments but also to indices.
For example, how many times has the US stock market posted the highest calendar year return in the past 30 years?
The answer is none, not once did it deliver the highest return for investors.
Click for table.
The message, it is smart to diversify.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
12 Feb 2024
Asian Century: China Property Collapse
- Posted by Dejan Pekic BCom DipFP CFP GAICD
This is expected to be the Asian Century given that half of the World’s population live in this region however China may not be as dominant as has been previously forecast for the following reasons.
Firstly, the One-Child Policy implemented between 1980 and 2015 to curb the country’s population growth will have dramatic negative impact on China’s working age population.
Secondly, the unfolding property collapse due to over building. Evergrande Group was China biggest property developer and has been ordered into liquidation by a Hong Kong court owing an estimated US$300 billion. Country Garden owes US$191 billion and is next with creditors applying for its liquidation.
This is a financial disaster for China which will cost in the trillions of dollars making it much larger than the 2008 Global Financial Crisis.
The World is currently holding its breath because financial markets do not know how to price this property collapse given China’s closed financial system.
The upside will likely be for buyers with large amounts of property being sold at fire sale prices.
Click to read.
Just remember, when asset prices fall due to some financial disaster, the outcome is always the same, investors are presented with an opportunity to buy more quality asset at a discounted price.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
6 Feb 2024
Market Metrics: Commodity Prices
- Posted by Dejan Pekic BCom DipFP CFP GAICD
This is another excellent example of why investors should avoid chasing sectors.
Investing in sectors sound sexy and yes an investor can take their block of capital and invest it all in either consumer discretionary or consumer staples or energy or healthcare or information technology or real estate or utilities or financials or industrials or materials or communication services.
This is what happened in 2022 when Russia invaded Ukraine.
Material prices boomed for both hard and soft commodities because of the fear that the reduced supply would be permanent and so investors bought big but this all reversed in 2023 with commodity prices subsequently being crushed.
Click for chart.
The lesson is not to chase sectors and not to invest all the capital in one sector but instead to invest in a number of businesses that repeatedly produce profit from the sale of goods and or services.
That is how you manage risk, that is how Benjamin Graham did it and that is how Warren Buffet has done it.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
1 Feb 2024
US Interest Rates: Down, down, down
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Looks like it is all over for interest rate hikes.
The question now is how much will the Federal Reserve cut?
Market is thinking 2.5% from the current 5.25%-5.50% but it could be bigger if the United States finds itself falling into a deeper recession.
Click for chart.
Just remember, when the United States and or Australia do go into their next recession the outcome will be the same, investors will be presented with an opportunity to buy more quality asset at a discounted price.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
29 Jan 2024
Asset Class Returns: The last 43 years…
- Posted by Dejan Pekic BCom DipFP CFP GAICD
A big welcome to 2024.
The numbers are in for calendar year ending 31 December 2023 and growth assets have won the day.
Specifically, international listed companies topped the chart with double digit returns followed by Australian listed property in second place.
Click for index returns.
Please note that the numbers for 2023 do not reflect the opportunity to buy low and add to an investment holding when an asset class is out of favour which in turn accelerates the rate of return well above the index performance.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
WARNING, past performance is no guarantee of future performance and these index return figures do not reflect the ability of top professional investment management teams to outperform their respective index/benchmark. Most importantly, the above does not constitute Personal Advice.
14 Dec 2023
Capital Markets Expectations for 2024
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Some good news.
Jerome Powell, Chair of US Federal Reserve did not increase interest rates over night in the United States which is another signal that interest rates have peaked and are likely to be cut in 2024.
If we assume that global interest rates have actually peaked then any reduction in 2024 will be good news for all asset classes.
Listed property and listed companies will benefit and are forecast to return 8% to 10% in 2024 if there is a reduction in interest rates because their borrowing costs reduce.
Existing fixed interest securities will gain in value and are forecast to return 4% to 6% in 2024 if new paper is issued a lower interest rate.
CAUTION, please remember that there cannot be any guarantees in regard to these capital markets forecasts because it is not possible to predict future returns with certainty.
Click for table.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.
7 Dec 2023
RBA: Australian Interest Rates
- Posted by Dejan Pekic BCom DipFP CFP GAICD
The RBA (Reserve Bank of Australia) held the Cash Rate at 4.35% per annum on Tuesday.
History implies that the current interest rate hiking cycle is done with this period being the second biggest increase in 40 years.
Click for chart.
What is the evidence for no more interest rate hikes?
Real household spending has fallen, real household disposable income has fallen and GDP growth has fallen due to rising mortgage interest cost, rising personal income tax and the price rise for goods and services.
Will Australia fall drop into a recession in 2024?
Don’t know but even when Australia’s does go into its next recession, the outcome will be the same, investors will be presented with an opportunity to buy more quality asset at a discounted price.
Our business is based on referrals, so if you have family, friends or colleagues that want advice please ask them to contact us.