Wednesday, 08 July 2015 05:24

Do Franking Credits Matter?

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Dividend imputation has been under scrutiny. The Tax Discussion Paper raises the notion that imputation does little to encourage investment in a small, open economy like Australia, where share prices and hence the cost of capital are set in international capital markets. Imputation is thus seen as a costly tax break for domestic shareholders with minimal associated benefits for the overall economy. The idea is that the removal of imputation could fund a reduction in the corporate tax rate, perhaps to as low as 20%, leading to a surge in foreign investment.

This line of argument has some merit: lowering the corporate tax rate should indeed attract additional foreign investment at the margin. However, this stance is somewhat narrow. To be fair, the Tax Discussion Paper is only airing a view for discussion, not making a policy recommendation. Nevertheless, it is worth asking what may be overlooked in adopting this line.

Mixed evidence on whether imputation is priced

The relationship between imputation and the return on investment required to satisfy the market (which might be called ‘cost of capital’) has been extensively examined in the finance literature. Unfortunately, there is no agreement.

One problem is that investors benefit from imputation to varying degrees. There are two theoretical approaches to solving this. The first involves identifying the ‘marginal investor’ – the last investor enticed to hold a stock, so that demand equals supply. The idea that share prices are determined in international capital markets implicitly assumes a marginal overseas investor who places no value on imputation credits. The second approach views share prices as reflecting some weighted average of investor demands. Here imputation credits would be partially priced, perhaps in accord with the 60-80% held by domestic investors.

Empirical analysis is no more enlightening. Four methods have been used to estimate the market value of imputation credits: analysing ex-dividend price drop-offs; comparing securities that differ in their dividend/imputation entitlements; examining if imputation credits are associated with lower market returns; and establishing whether stocks offering imputation credits trade on higher prices relative to fundamentals like earnings. Results are mixed. The majority of drop-off and comparative pricing studies find imputation to be partially priced, with a wide range of estimates. Meanwhile, footprints from imputation are hard to detect in returns and price levels. In any event, all empirical studies suffer from significant methodological issues.

Another issue is that the pricing of imputation might vary across stocks or time, perhaps due to differing marginal investors. Of particular relevance is the smaller, domestic company segment where investors are substantially local. In this case, it is reasonable to expect that imputation might be priced.

With the finance literature failing to arrive at a consensus, the assumption that imputation does not lower the cost of capital amounts to an extreme position along the spectrum. The possibility remains that imputation credits might be priced either partially, or in certain situations.

Imputation and behaviour

Of prime importance is how imputation influences behaviour, and whether these behaviours are beneficial or otherwise. This matters more than how imputation impacts ‘numbers’ like cost of capital estimates. Many decisions are not based on formal quantitative analysis; and imputation tends to be a second-order influence in any event. Analysis may be used to support decisions, but rarely drives them.

Recognition of the value of imputation credits has influence over behaviour in three notable areas, the first being the clearest and most important:

  • Payout policy – Imputation has encouraged higher company payouts: the divergence in the payout ratio for Australia versus the world post imputation is stark (see chart). Actions taken by companies to distribute imputation credits clearly indicate they recognise their value to certain shareholders, e.g. off-market buy-backs.
  • Where taxes are paid – Imputation encourages paying Australian company tax at the margin (referred to as ‘integrity benefits’ in the Tax Discussion Paper). If the tax rate is roughly the same in Australia and overseas, why not pay locally and generate imputation credits?
  • Portfolios – Australian investors may prefer domestic companies paying high, fully-franked yields, all other things being equal. This preference is more likely to manifest as a ‘tilt’, rather than a dominating factor. There are multiple reasons for home bias, or the historical favour for bank stocks, for instance.

GW Figure1 030715

Would removing imputation matter?

Whether and how removing imputation would make a difference depends on what else happens, especially any concurrent corporate tax rate reduction. For instance, this could dictate the tenor of share price reactions, as effects from loss of imputation are pitted against higher earnings. Rather than delve into a multitude of possibilities, I offer two substantial comments.

First, removing imputation would do away with a major driving force for higher payouts. Higher payouts have contributed to more disciplined use of capital, through reducing the ‘cash burning a hole in company’s pockets’, and creating more situations where justification is required to secure funding. This is a MAJOR benefit of the imputation system: a view also expressed by many fund managers. Hence dismantling imputation could be detrimental to both shareholders and the Australian economy through less efficient deployment of capital.

Second, imputation probably matters most for small, domestic companies, many of which are unlisted. In this sector, it is more likely that local investors who value imputation credits are the ones setting prices and providing the funding. Any adverse impacts from removing imputation may be concentrated in this (economically important) segment.

Imputation removes the double-taxation of corporate earnings, but only for resident shareholders. The concept of reintroducing double-taxation for domestic investors in order to fund a revenue-neutral switch that provides a net benefit to overseas investors doesn’t seem quite right. The notion that the outcome will be substantially greater foreign investment with limited losses elsewhere appears questionable, especially once the implications for domestically-focused companies and potential behavioural responses are taken into account.



Geoff Warren is Research Director at the Centre for International Finance and Regulation (CIFR). This article draws on a paper titled “Do Franking Credits Matter? Exploring the Financial Implications of Dividend Imputation”, written with Andrew Ainsworth and Graham Partington from the University of Sydney. The paper can be found at:

Sunday, 05 July 2015 05:06

The Greek Conundrum

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Here is an article sourced from Platinum Asset Management, one of the better macro economic fund managers in the country.  It was written by Philip Ingram, analyst on 1st July 2015.

The starting point is that the Greek government has too much debt and it has neither the ability, nor the willingness to repay it after almost seven years of economic contraction.  At the end of 2014, the Greek government owed €317 billion and during the year it took in €81 billion of tax and other revenues and had €78 billion of expenses before interest costs.  The remaining €3 billion primary surplus wasn’t enough to cover its €7.6 billion interest bill, let alone start paying back debt.

Excessive spending doesn’t appear to be the problem.  Stories abound in the press of generous pensions and government wastrels, but the cost cutting has been savage.  During 2009-2013, government expenditure dropped by 31% from €113 billion to €78 billion.  For example, despite unemployment surging from 7.5% to 28%, welfare payments fell by 22% to €38 billion.  Nor does tax collection appear to be the issue.  There are surely loop holes, but tax revenues jumped from 37% of GDP in 2009 to 45% in 2014.  This is higher than Germany at 44% or the UK at 37%.  Greece is only paying a paltry 2.4% interest rate so that’s not the problem either.

The issue is that Greece has too much debt and its economy has already shrunk by 23% since 2009, similar to America’s contraction during the Great Depression.  This is why government revenues dropped from €89 billion in 2009 to €81 billion in 2014, despite the government taking a bigger share of output.

The immediate impacts on Greece of leaving the Euro, which is not tantamount to leaving the EU, will be a much weaker currency and a miss-match between Greek banks’ loans, which will be denominated in New Drachma, and their Euro denominated funding from the European Central Bank.   The European Central Bank funding arose because it has been propping the Greek banks up by replacing money withdrawn by Greek depositors.  For the Greek people, the proximate impacts of a new currency will probably be a significant reduction of their living standards and a period of political turmoil. 

All of this is important, but the immediate impacts on stock and bond markets beyond Athens should be contained.  Europe can contain a Greek default because Greek government debt is only 3% of Euro area GDP and almost €300 billion of the €317 billion is owed to European entities like the European Financial Stability Facility and the European Central Bank, which can print Euros.  Another €14 billion is owed to the Greek banking system and a mere €2 billion to foreign banks.  A Greek default would not surprise Europe or investors.

DISCLAIMER: The above information is commentary only (i.e. our general thoughts).  It is not intended to be, nor should it be construed as, investment advice.  To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.  Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and circumstances.


Monday, 29 June 2015 07:10

Age Pension proposals have been legislated

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One of the key messages from the 2015 Federal Budget was the need to rebalance the Assets Test to help make access to government pensions fairer.  to do this, the Government proposed to increase the Assets Test thresholds and the Assets Test taper rate from 1 January 2017.

Increase in the Assets Test thresholds

The first change to the Assets Test relates to the threshold above which a pensioner's entitlement will start to reduce.  Subject to the Income Test, the proposed increase in the Assets Test thresholds from 1 January 2017 will enable approximately 50,000 part-pensioners to qualify for hte full pension under the new rules, according to the Federal Government.

The current and proposed thresholds are as follows:

Example:  Ben is a 67 year old retiree who is single and owns his home.  he has $10,000 in personal effects, $240,000 in an allocated pension that was created several years ago and he is currently drawing the minimum income from that pension.  Based on current ruiles, he is entitled to an Age Pension of $20,943 pa under the Assets Test.  If he was subject to the proposed thresholds today, he would be entitled to the full pension (currently $22,365pa)

In fact, under the proposed changes, several classes of retirees may receive a higher pension entitlement.

Increase in the taper rate

The other main proposal, which will effectivley reverse cahnges to the taper rate introduced in 2007, increases the current taper rate from $1-50 per $1,000 to $3 per $1,000.  this means that the amount of assets a pensioner can have on top o their familiy home and still receive a part pension (Assets Test upper threshold) will be reduced.  An estimate of the new Assets Test upper thresholds can be found in Graph 1.

The Government will ensure that anyone who is affected by the scaling back of the maximum asset threshold will be guaranteed eligibility for Commonwealth Seniors Health Card for those who are above Age Pension age or Health Care Card for those under Age Pension age.  The Governmentn has not provided grandfathering for the actual Assets Test changes, so those with assets above the new Asset Test upper thresholds will lose their part-pensions and become self funded.

It is interesting to note that the higher taper rate affects homeowners more than non-homeowners and is reflected in the larger proportional drop of the Assets Test upper threshold.  For example, the Assets Test upper threshold for a single homeowner reduces by about 32% compared with a single non-homeowner which reduces by 22%.

Althought the new taper rate will affect some more than others, those affected most will be pensioners with assets around the new Assets Test upper thresholds.  The next chart is another way of highlighting the winners and losers from these changes.  The areas highlighted in red show the the asset levels where pensions will be lower, while those areas in green indicate asset levels where the pension increases.

For example, couple homeowners will be affected the most if they have assets of $823,000 on 1 January 2017.  Under the new rules, the couples pension would reduce to zero based on the Assets Test.  Under the current rules, they would be entitled to Age Pension of $14,467pa.  These retirees may need to withdraw more from their retirement capital to maintain their lifestyle.

Assets Test crossover points

The proposed rules will change the Assets Test crossover points.  The crossover point, which assumes all assets are financial assets, highlights where a retiree's pension entitlement changes from being determined by the Income Test to being determined by the Assets Test.  Graph 1 summaries the crossover points based on current and proposed rules, showing a larger change for couple retirees rather than singles.

Ways to reduce assessed assets (other than additional spending)

Those looking to reduce their assessable assets could consider the following options (in conjunction with professional advice):

1. Gifting within the allowable limits

2. Purchasing Funeral Bond

3. Superannuation contributions on behalf of a spouse under Age Pension age.

4. Capital expenditure around the home


This is a complex area and we recommend those impacted by these rule changes seek professional advice well before 1st January 2017.


Saturday, 27 June 2015 23:18

Soccer Shootout

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This video has had over 25,000,000 YouTube views.

A hilarious soccer penalty shootout.


Saturday, 27 June 2015 21:53

If Greece defaults - the dominoes will not fall

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Jeffrey M. Chwieroth, London School of Economics and Political Science; Andrew Walter, University of Melbourne, and Cohen R. Simpson, London School of Economics and Political Science

How would a unilateral Greek default affect politics and policy elsewhere in Europe? Governments in Ireland, Portugal and Spain have been conspicuously hard-line in negotiations with the Syriza-led government, partly out of concern that accepting Greek demands would strengthen anti-austerity parties at home.

Certainly, a Greek default may lead some voters in other countries to view default as an opportunity to shift resources from well-heeled foreign creditors to struggling public sector employees, pensioners, those on low incomes and the unemployed.

However, a Greek default is more likely to strengthen voter support across southern Europe for existing policies than to precipitate a new wave of defaults. This effect could in turn strengthen the Euro.

Historically, governments that have chosen default have experienced a much higher risk of losing political office – due largely to the unusually sharp economic downturns that typically follow default. Given this high risk, incumbent governments in democracies usually do their best to avoid it, which is why Greece’s high stakes negotiating tactics have been so shocking to many of its interlocutors.

Since 1870, the average number of years between defaults among democracies that have defaulted at least once – even including negotiated debt restructurings – is 42 years. (Note: this has been calculated with the default measure from This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart, and Kenneth Rogoff (2009).)

Default is thus a once-in-a-lifetime experience for most voters; many will never experience it. Compare this with voter experience of standard economic recessions, which have occurred about every five years since 1870 in advanced economies.

The main reason why a Greek default is more likely to strengthen support elsewhere for current policies follows directly from voter inexperience with default. Psychologists have shown that people focus strongly on rare and vivid events. They are also more sensitive to the costs than to the potential benefits of policy change.

A Greek default and its immediate aftermath would be followed closely in all European countries. Voters elsewhere would be strongly inclined to view the accompanying chaos and economic disruption in Greece as highly relevant to their own national situation. Some voters would also view continued good behaviour by their own country as a useful and attractive counterpoint to economic misbehaviour in Greece.

Our research points to the empirical importance of this “network” effect. Since 1870, governments that opted for default against private foreign creditors were far more likely to lose elections when significant numbers of their trading partners had also defaulted. That is, voters punish their own governments much more severely when witnessing default by apparently similar countries.

Rather than break a social taboo, a Greek default is therefore likely to instead reinforce voter concerns in southern Europe that such policies are accompanied by unacceptably large costs.

Some historical examples illustrate this effect. When a number of other Latin American countries were defaulting in the early 1980s, Venezuela initially appeared as if it would be able to ride out the financial storm that hit the region and avoid the fate of its peers. After a series of bungled negotiations with its external bank creditors, the incumbent Christian Democratic government led by Luis Herrera Campins succumbed to an avoidable default. In 1983, it suffered a landslide election loss.

In the early 1930s, another peak period of default in the global economy, Australia also came close to default when prices for its commodity exports collapsed. A populist state Labor government led by Jack Lang in New South Wales unilaterally suspended interest payments on its large foreign debts in 1931 and demanded that the federal Labor government do the same. At the end of 1931, a newly formed United Australia Party government led by “Honest Joe” Lyons was elected on a platform of honourable repayment of all Australia’s foreign debts and severe austerity at home. Lyons was strongly rewarded by voters, being re-elected twice before he died in office in 1939.

In a similar fashion, the British Conservative Party since 2010 used the Greek example as a counterpoint to reinforce political support for fiscal austerity at home. The comparison was of doubtful economic validity, but it was politically effective. There were also overtones in this case of one of Joe Lyons’ most effective rhetorical devices – his claim that “British peoples”, unlike those in less sturdy countries, always honoured their obligations.

Contrary to Lyons’ claim, there is little evidence that cultural factors play a powerful role. Rather, voters become more cautious rather than more adventurous in the presence of extreme economic misbehaviour abroad. All of this suggests that a Greek default and possible “Grexit” would be more likely to lower rather than to raise the political incentives for other European governments to follow, contrary to the expectations of many commentators and political leaders.

This article is based on Networked Default: Public Debt, Trade Embeddedness, and Partisan Survival in Democracies Since 1870.

The Conversation

Jeffrey M. Chwieroth is Professor of International Political Economy at London School of Economics and Political Science.
Andrew Walter is Professor of International Relations at University of Melbourne.
Cohen R. Simpson is Doctoral Candidate in Social Research Methods at London School of Economics and Political Science.

This article was originally published on The Conversation. Read the original article.

Wednesday, 17 June 2015 11:28

Greece - Is the market too complacent?

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Mark Draper recently met with Nik (Portfolio Manager, Platinum Asset Manager) to ask him whether he believed the market is being too complacent about the risks in Greece.
















Mark : Mark Draper here with Nik Dvornak, portfolio manager of Platinum Asset Management. We’re talking about Greece today. Now Nik, the market is incredibly complacent at the moment, everyone seems very relaxed with the situation in Greece. Do you think the market is right to be relaxed about Greece or how do you see it?

Nik: Well indeed they are very relaxed perhaps surprisingly so given how much turmoil there was two years ago when it seemed like the exact same things was playing out. Look, so a few things have changed. So what has changed? Number one, the exposure of European banks and other financial institutions to Greece is significantly diminished. This partly because government institutions like the stability funds taken on and have taken on some of that debt from the banks and certainly because Greece had worked out some of its debt in the past and those banks have already worn those losses, so their exposure to Greece is minimal. The exposures now lie predominantly with European Central bank (the ECB) and the European governments.

Nik: As for whether people are right or wrong to be worried, well clearly they are not very worried at all at the moment.

Nik: Where you might have some concern is if a group default does damage the financial standing of some of the European sovereigns that they owe money to or alternatively , you can see Greece is essentially the microcosm for many countries in Europe and what we are seeing here could play out in other countries and I think the market is assigning a very low probability to that, if that probability begins to change and increases in the investor’s minds as we go through subsequent elections in Europe, we could see a period of a lot more volatility ahead.

Mark: And we were talking before, off camera, about the effect of quant easing, over in Europe with all of what is playing out in Greece, how does that actually reduce the risk, if you like, of what is going on at the moment?

Nik: Yeah, so one of the risks of course will be that Greece defaults, they owe 320 billion dollars to investors and their current debt. A lot of those other investors are other European governments who have very stretched balance sheets to begin with. So the risk is of those investors reassessing the financial stability of some of those European countries and they are reluctant to enter them again. Now what QE does is create a buyer of last resort in for the European central bank which buys these bonds, and you can see that even with all the turmoil in Greece, the Portugese government can still borrow half of a percent cheaper over 10 years than the US government and they borrow it in Euro which is a currency investors don’t really want to hold so the US government is borrowing in US dollar, investors want to hold that currency and they still demand half a percent more of holding US government then the Portugese government did.

Mark: And the Italian Government can borrow less than the US, and at this moment as well.

Nik: So you know, that just kind of keeps this down with pressure on yields and keeps pressure off the governments and so the idea is that they take out additional loss from Greece, well this buyer of last resorts keeps the fund flowing and the market open, so it stops the knock on effect.

Mark: So quantitative easing is a positive thing for controlling the situation but the risks are that politically it could escalate in other countries with extreme political parties getting into power, that would be one of the things to watch.

Nik: And that is very much the risk in the background and you are seeing it in France and you are seeing it in Spain but also other countries like the UK which is also part of the zone, so there is that border risk and I guess a lot of it depends on how Greece plays out. If the Greeks give Eurozone and as result their debts get written off and the economy recovers and they have a weaker currency and are able to trade their way out, it may encourage other voters to be tempted to follow the same path. If things turn out very horribly for Greece, if it worked the other way, pushed people back to the political centre, away from the extremes, it might actually be good for.

Mark: So it’s being controlled at the moment, in this certain situation, it is definitely worth monitoring from an investment perspective and Nik, thank you very much for your time.

Nik: Thank you very much

Monday, 15 June 2015 10:48

Are you investing in a Tyrannosaurus Rex?

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The Montgomery Fund provide some interesting insights into the impact of changing technology when considering investment.


thinking aboutAustralian small businesses should double check suspicious emails because they may contain destructive ransomware, The Australian Competition and Consumer Commission (ACCC) has warned.

The warning follows the ACCC’s latest Targeting Scams Report that found almost $1 million was lost to ransomware attacks last year. My Business reports ransomware is a malware variant that restricts access to an infected computer system unless money is paid to the scammer to remove the infection.

ACCC deputy chair Michael Schaper said the watchdog received over 2,500 ransomware complaints last year, with over $970,000 reported lost by small businesses. Some individual businesses reported losing over $10,000 to the scams.

The ransomware infected most systems by email. Victims reported opening an email which claimed to be from a reputable source like FedEx or Australia Post.

“Ransomware can see your business losing all of its business and financial records, which may be catastrophic,” Schaper said.
“Many small businesses and consumers have reported that their computer has been frozen, with a pop-up alert that claims to be from the Australian Federal Police stating the computer has been locked because they have visited an illegal website or breached various laws.”

“Scams like this often succeed because they look like messages from a government agency or reliable large corporation. It’s important that small businesses are aware that government agencies will not send these demands and they’re dealing with a scammer.”

SCAMwatch offers business owners the following tips to guard against ransomeware:

  • Ensure your computer has a firewall and up-to-date anti-virus and anti-spyware software.
  • Do not click on links or download files in emails you receive out of the blue; especially if they are executable (.exe) files or zip files. These files are likely to contain malware.
  • Use a pop-up blocker as a lot of ransomware is delivered after following links in pop-up alerts.
  • If there is any doubt about the legitimacy of an email supposedly from a legitimate business, do not rely on contact details or links provided or open any attachments – contact the organisation using the number in the telephone directory or on their official website to verify.
  • Regularly back up your computer’s data on a separate hard drive so this can be easily re-installed if your computer is infected by malware or ransomware.
Saturday, 30 May 2015 04:45

Navigating expensive Australian share market

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Transcript from video


Mark Draper: Here with the Roger Montgomery from Montgomery Funds. Roger thank you for joining us.


Roger Montgomery: It is a pleasure mate. Great to be here.


Mark Draper: Share market looks its best, pretty expensive at the moment, certainly no bargains or not many bargains out there. What would your advice be to investors on how they should be thinking about the share market right now?


Roger Montgomery: Well look, it is one man’s opinion. I concerned that if you’re buying today the gains that might be made from a continuation of this chase for yield would ultimately be wiped out. We are now getting to the riskier end, more speculative end for yield so when the United States Federal Reserve first cut rates to zero, people were scratching their heads, wondering what would happen next and historical the whole point of quantitative easing was to get people to stop saving and force them into buying riskier assets so that the wealth effect would take, would have an impact on people’s consumption and what happened is there hasn’t really been that much improvement in consumption but asset prices have gone up, namely, the shares of property, so as the prices started to move up, that dragged in more and more people and that migration turned into a stampede and the last phase is obviously the panic, a fear of missing out, and the very real concern is that what happened is share prices have disengaged from the profit performance of the underline businesses. The top 200 companies, the half year fifteen, their profit, their revenue went up by 0.2% for the half and compared to previous corresponding period and reported profits went down 26% for the ASX200 companies but share prices went up so there has been disengagement. Prices are no longer engaged to or connected to the reality that our economy is doing poorly. Now, there is no relationship between the economic, the economic growth and the share market in any situation. If the stock market goes up, sorry no, if the economy grows faster than trend 50% of the time the market goes well and 50% of the time the market does badly, similarly when the economy does poorly. So there is no relationship there but the economy does drive profits for companies and company profits are falling but because interest rates are so low, share prices have gone up so if the market simply turns its attention to the poor state of the economy and investors who have been chasing yield are simply sated, in other words, it is not because they are selling stocks, they are just no longer buying them because they have bought enough, they feel like they have taken on enough risk and what you might find is that attention turns to the economy and Hilary Clinton steps on a landmine, heaven forbid, you know something weird and leftfield and blackswan happens and that causes people to want to get out of stocks and the whole thing unravels and now we can predict with some confidence the profit of companies, we can predict with less confidence the economic outlook, we can predict with no confidence the sentiment shifts.


Mark Draper: Yes.



Roger Montgomery: and we rely on sentiment and as long as sentiment remains positive, everything will be fine but if sentiment shifts everyone will be in a lot of trouble.



Mark Draper: What is your advice to someone sitting in the living room at home watching this, what would your advice be to them in terms of their share portfolio or their investment portfolio.



Roger Montgomery: So if your time frame is a short time frame and you believe that you’re going to need all the money you have got in the stock market within two years, then I would suggest starting to liquidate the portfolio, believe it or not, and that just means raising some cash. If you are fully invested in the market looking for the most expensive companies or the poorest quality companies in your portfolio and realising some gains on those and now that is sacrilege to financial planning because you do not want to pay tax but I would rather pay some tax than have a carry forward tax loss which seems to be all the rage in Australia, you wait for a tax loss, you wait for a capital loss then you can carry forward that tax loss and that is when you sell. You don’t sell when there is profit. That is not how you should invest. You shouldn’t invest based on tax, so you take your most expensive companies of the table, so to speak and I hate using that expression, and the poorer quality companies. They are the things you might want to think about selling and that doesn’t mean the share market won’t keep going up, it is just like what I said earlier sentiment can shift very quickly and I would rather be six months early than six minutes late.



Mark Draper: Roger that is good advice. Thank you so much for your time and I appreciate your comments.



Roger Montgomery: It is a pleasure.

Friday, 29 May 2015 05:05

Australian Housing in One Chart

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We sourced this chart from our friends at the Montgomery Fund - it is self explanatory in our view.


We are recommending caution with investments that are leveraged to the housing market in Australia which would appear at extreme levels.