Greetings!
Welcome to the June issue of 'MMTalk'.
This year is flying on past at a great rate I can hardly believe it is June already (mid June at that!).
We have seen some correction in the share markets world wide along with interest rates being left on hold here in Australia which is good news in the short term for those with mortgages.
In the lead up to End of Finanical Year if you have any needs for planning taxation especially if you have sold any assets and trigger a capital gain during the year there are plenty of good quality investment options and strategies you can implement to manage your tax position (and this does not involve investments in trees, pearls, nuts, fruit or alpacas!
As always hope you enjoy the content and any feedback please let me know.
Scott
me and response from the Government was
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| Financial Life Planning
Values Based Approach to Financial Planning
|  This month I was interviewed by Anneli Knight who writes for the Sydney Morning Herald and The Age about Values Based Financial Planning.
My belief is that this approach to financial planning is the only way it should be done to ensure integrity and that a financial adviser is in business for their client not for a product provider.
The Money Mechanics fixed fee for advice service agreement means that the fee model used is transparent and clients know what they are receiving from the working relationship and engagement.
Check out Anneli's blog here:
On the Money Blog for Sydney Morning Herald
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| Superannuation
End of Year Super Planning
|  With only two weeks til the end of the 2009/10 financial year, now's the time to examine your personal situation and start planning to manage any taxation position or to boost your superannuation. Here are 6 ways to boost your superannuation.1. Review your salary sacrifice to super2. Contribute extra to your super3. Contribute to your defacto-partner's super and get a tax offset or deduction4. Qualify for a Government co-contribution5. Review your insurances and take them out in your super6. Take advantage of imputation credits within your super strategySo before another financial year is behind us take the time to review your situation before implementing these strategies to avoid common traps and take advantage of some of these opportunities. Check out the full blog article here. No matter what your goals for life, as with all investment strategy and product, seek advice and empower yourself to create wealth through understanding. |
| Wealth Creation
Getting your plans in order
|  When it comes to wealth creation the first part of the discussion should be around "what are you trying to achieve?" The Who, What, Where and When of your goals. My view is that you should never be questioned about the "Why?" so much as the "Why not?"
There are plenty of financial products and options out there which you can use as your method to achieving your financial outcomes.
Depending on your comfort level and interest, property, shares and cash accounts can all provide a different investment option for your wealth creation strategies.
When it comes to share or property investing where you are using someone else's money to invest it is important for you to be aware of the breakeven point or the real cost of the money to you. What I mean here is that if you borrow money at 7% against your home to buy an investment property after rental return, expenses and taxation deductions what is the real cost to you? This calculation can be done in a variety of ways but this is one element which can be used to review the ability of the property or shares to grow enough each year for you to be making money.
I have uploaded a blog I wrote recently around some tools to help you set realistic goals which you can check out here.
These tools will help you to work out what rate of return you need for you goals to be achieved and this then also represents the level of risk you need to take in order to get there. The question you can then take from this is "am I willing to take this risk for the potential reward?"
My tips are:
- When it comes to wealth creation don't just invest for a tax deduction;
- Understand the investment product you are using be it property, shares or cash based investments or managed funds;
- Know your breakeven point if you are borrowing money to invest;
- Know what risks you are willing to take to get the reward you need to achieve the what you want; and
- If you are unsure of something educate and empower yourself and find good quality advice without the tarnish of commissions.
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| Market Update
Impacts of the New Resource Super Tax
| This market update is provided by the research team at Macquarie Equities and should be considered as general information only. If you would like to discuss your personal position and the implications please contact our office.
There have been plenty of notes come across the desk this month in relation to the recent falls in our market. Some of this may sound familiar from previous emails however it does provide a quick summary of our view on the world.
Shorter, sharper cycles
* The world is faced with shorter cycles, those characterised by constant political intervention via regulation, sustained strong public spending beyond the means of the economy to be sustainable, and the resultant increase in taxation.
* If so the reality during this period are lower market Price Earning Ratios (PE) as investors are unwilling to pay for growth beyond a relatively short time horizon. In this case we estimate a possible ASX200 market PE of more like 12.3x as opposed to 14.7x of the past decade. With the market currently at 11.8x and many stocks trading well below this level, valuations are now certainly appealing. Such stocks include all our banks, large diversified miners and key industrial stocks.
* US not the problem this time, rather the solution. This time, problems lie in the periphery which although large are less important. With the US recovery well underway, if Europe can stabilise even modestly, then the positive US thematic will take over and restore global risk appetite quickly
* Company balance sheets deleveraged and in much better shape
* Conclusion: Value is clearly evident.
This is not deja vu all over again
* This time the correction is more likely the reversal of large trading and investment positions rather than a full scale capital preservation/market crisis
* Movements in bond and currency markets are laying the foundations for stronger growth. Europe (ie manufacturers/exporters) will get a powerful kick from the weaker Euro. Expectations for rate rises have been pushed back around the world, positive liquidity = positive markets
* Key indicators: Gold - rises historically precede a period of stronger economic growth. Treasury Bill yields have not been pushed down like 2008
*Conclusion: Even modestly positive news could turn sentiment very quickly. Powerful stimulus now being put in place via falling bond yields and currency adjustments in some countries will be nothing but good news for industrial companies around the world.
Aussie dollar falls
* Why has it fallen?
- Key driver: 2 year bond yield has fallen below the cash rate, suggesting interest rate falls
- Chinese slowdown looms over our mining exports
- Rudd government resource tax sees flight out of Australian stocks and thus currency
- European contagion seeing flight to safety and out of risk (ie AUD)
* Possible scenarios:
- RBA cuts rates by 50bps in coming months = 80c
- RBA leaves rates unchanged = 90c
- RBA raises rates = 92c
- RBA leaves rates unchanged, commodity prices fall 20% = 83.5c
* Likelihood of interest rate falls?
- if business investment slows. Mining represents 30% of business investment
- if banking crisis returns, locking up debt markets, increasing funding costs
* Conclusion: RBA to keep rates steady and then possibly increase later in the year. This means the AUD trading up to 90c
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| Education
Courses for Financial Literacy - Canberra | 
To sign up click here to go to the CIT Solutions website.
Financial Wellbeing - Creating Wealth Through Understanding
Starts Thursday 19th August 2010 and 11 November 2010 for 4 Weeks at REID CIT Campus
Cost $135
This four week course is designed for people of all ages and knowledge levels wanting to get a better handle on their financial life.
Demistify the language of money including - 'PAYG', 'super', 'defined benefits', 'debt', 'equity', 'trusts', 'shares', 'SMSF'. 'property', 'gearing', and 'estate planning'.
Learn the key elements of putting together your financial life plan, how your habits and attitudes around money can support or sabotage you.
Bring your calculator to this interactive course that will teach you about different financial strategies and products to get you on the path to a better understanding of money.
Managing on a Low Income
Wednesday 29th September 2010 for one session at REID CIT Campus
Cost $20
Struggling to make ends meet? Sometimes it can be hard to imagine getting ahead, let alone really getting there. Living on a low income can take a lot of energy and require a lot of skill balancing your budget from day to day. Our habits and attitudes have a lot to do with how we relate to our money and making ends meet. You may or may not already have good money management strategies in place. This course is one of the first simple steps to making the most of your money, from getting a greater grasp on your day to day budget and debt strategies, to your longer term superannuation strategies.
Superannuation Demystified
Wednesday 1 December 2010.
Cost $50
This evening will cover the taxation strategy of superannuation including the taxation on contributions while in the scheme, and on the way out of the scheme. Technical strategies such as advantages and disadvantages of salary sacrifice to superannuation and defined benefit superannuation schemes in the context of your financial life and estate plans will be covered. |
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Money Mechanics are specialist financial life planners in the areas of self managed super funds, public sector superannuation, wealth creation, salary sacrifice, gearing strategies, estate and risk management planning.
Our financial life planning approach brings together technical expertise and the human touch to create a solution tailored towards your overall life goals.
We have a unique fee for service advice menu so you can choose how we work together based on a fixed hourly rate. We choose to not take upfront or ongoing commission on financial products, which provides clients with a greater understanding of what fees they are paying and what they are paying for.
No matter what your goals for life, seek advice and empower yourself to create wealth through understanding,
Scott Malcolm
Authorised Representative (No. 262368) Director & Financial Strategist
moneymechanics. |
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 | | Quote of the Month
"The four most dangerous words in investment "This Time It's Different!"
John Templeton
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