Latest News from Newealth

17 May 2022

Decarbonisation: Wind

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.

 

12 May 2022

US Interest Rates: Consumer Debt

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.”

 

11 May 2022

Decarbonisation: Base metal stockpiles

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.

 

6 May 2022

Recession Indicator: US interest rate cycles

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.

 

4 May 2022

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

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.

If your total
annual
income is:

…and you make
personal contributions of:
…then the maximum Government
co-contribution is:

$41,112 or less

$1,000 $500

$44,112

$800 $400

$47,112

$600

$300

$50,112 $400

$200

$53,112 $200

$100

$56,112 or more $0

$0

 

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.

 

29 Apr 2022

Friday Tidbit

Given the current rate of coal consumption pictured above, the required spend to achieve net-zero by 2050 is going to be in the tens of trillions of dollars which presents investors with an investment opportunity over the coming decades.

 

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

 

28 Apr 2022

China: Supply, supply, supply

The past 5 months have been bad for financial asset prices.

The Dow Jones Industrial Average and the S&P500 have both corrected (meaning a 10% plus fall from recent peak) while the NASDAQ index has crashed with a fall beyond 20% from recent peak.

Why had this happened? Because the United States Federal Reserve has started increasing short term interest rates.

Why? Because inflation in the United States has jumped to 40 year highs.

Why? Because even if demand remained the same, the supply of goods has reduced which causes prices to increase due to scarcity.

Why? Because China’s manufacturing output has reduced.

Why? Because China has decided to pursue a zero COVID-19 infection policy which has completely failed and continues to fail.

This is the challenge because with large segments of the Chinese workforce quarantined for COVID-19, supply of manufactured goods has dropped which is very bad economic news for China and bad news for the rest of the World.

China needs to get producing and moving goods otherwise inflation will remain high.

Click to read.

Please remember that as this economic violence continues, investors need to remain invested according to your appetite for volatility and when fear and panic take hold, react by buying more quality assets at discounted prices.

 

22 Apr 2022

Australian Residential Property: Housing Affordability

According to the just released Demographia International Housing Affordability 2022 Edditon, Sydney and Melbourne residential property markets are ranked in the top 5 most unaffordable cities in the World.

Sydney came in second after Hong Kong and Melbourne came in fifth (refer table on page 15).

Click to read.

How is this good news for our children and grandchildren?

The recession in 2020 was expected to deflate residential property prices by a forecast 20% or more but it failed to deliver.

Just like an elastic band, if you continue to stretch and stretch, the elastic band will eventually break and that also applies to asset prices.

Please remember to remain invested according to your appetite for volatility and when fear and panic take hold, react by buying more quality assets at discounted prices.

 

21 Apr 2022

Update- Australian Household Wealth: AU$14,000,000,000,000 (that is AU$14 trillion)

Australian households have amassed AU$14 trillion in wealth which is 25% higher than pre COVID-19 Pandemic levels (see chart above).

Most of the wealth is made up of residential property with the primary residence being the foundation over the past 3 decades and likely to continue while the taxation benefits make it so advantageous.

Further research has segmented Australians into four distinct wealth groups-

  1. Emerging Affluent
  2. Established Affluent
  3. Emerging Mass Market
  4. Established Mass Market

This type of profiling is always interesting however the challenge with using averages is that you almost always find yourself meeting the criteria for more than profile.

Click for charts.

Just remember, if you have family, friends and or colleagues that need financial advice please ask then to contact us and we will know how to best help them.

 

14 Apr 2022

Collectables: Masterworks

Bitcoin has become the 10 most valuable asset globally.

The cryptocurrency market is valued at US$1.9 trillion and Bitcoins makes up about 41% of the cryptocurrency market.

If you are a student of Benjamin Graham and his Value Investing principles then you will quickly come to understand that Bitcoin is in fact a collectable and thanks to technology, this collectable has been able to be divided into tiny units which can be bought and sold for a price.

The concept of Bitcoin has now also helped traditional collectables such as paintings to be unitised into a market just like cryptocurrency trading.

Click for art.

The thing to remember about buying collectables is that they rely on scarcity and as long as there is a group who want to trade in this limited item there will be a price.

Once there is no longer a group that wants to trade in this collectable the price will evaporate.

 

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