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Anton Tagliaferro (CEO Investors Mutual) talks about the Australian Share market in April 2013.

He discusses the stocks that he has been taking profit from and the stocks he is buying at the moment.

Anton's fund was one of the best performing Australian Share funds in 2012.

Friday, 12 April 2013 16:42

Australian Banking Sector - Outlook - April 2013

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Paul Xiradis (CEO Ausbil Funds Management) talks with Mark Draper (Adviser, GEM Capital Financial Advice) about the outlook for the Australian Banking sector.


Key points:

  1. Bank Balance Sheets are in good shape
  2. Housing downturn concerns overblown
  3. Banks have grown their profits consistently in tough times over past years
  4. Australian mortgage owners are well ahead in their repayment schedules
Monday, 08 April 2013 13:44

Is the Australian Share market Overvalued?

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Should investors be concerned that the Australian share market has run too far, too fast?

Mark Draper (GEM Capital Adviser) talks with Paul Xiradis (CEO Ausbil) to answer this question.


Paul believes that the share market response is in reaction to the belief that the worst from the Euro Debt Crisis is now behind us (from a financial market perspective).

Monday, 18 March 2013 14:31

Investment Tips For Each Decade

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Investment tips for each decade

Many opinion pieces and financial articles have been written with handy tips to help invest your money. An issue with many of these is that the people reading them are, in all likelihood, of different ages and at different stages of life.

With this in mind we’ve broken down each decade to help you understand some of the financial considerations.

20–29 year olds

Many people have just entered the workforce at this stage and most people will still be renting. While some people in their twenties have formed long term relationships many have not had children. For the majority, home ownership and families are still a thing of the future.

The major financial focus for this group is to eliminate debt that may have been accumulated while at university/college (HECS–HELP, credit card debt, student loans etc.), and to start to save for a deposit on a home.

30–39 year olds

By the time most people are in their thirties, they are in long term relationships and a lot have had children. Many people during this period have bought their first home and some would even be considering renovations.

The major financial focus during this stage is usually on reducing mortgages as much as possible.

People in this age bracket need to be careful not to over extend themselves financially, and aim to keep money available for emergencies that are more likely to occur than when they were renting and had no children.

Those without children or a mortgage, who are looking to get ahead at this stage may consider investing in the share market.

40–49 year olds

It may sound obvious but the financial position in this period will be largely determined by how much spending restraint has been shown during the previous decade. For disciplined savers there is a good chance of being able to upgrade to a bigger home at this stage of life.

In saying that, the forties can be difficult for couples who have children in their teens as they generally incur more costs at that age, especially if they attend private schools. Careful budgeting is required for people in this position.

Those that don’t have children and have enough money for their day to day expenses may start thinking about diverting more of their money into superannuation.

50–59 year olds

By this stage many people will start experiencing more sustained wealth creation due to fewer family costs. The reason for this is because most will have children at an age where they are becoming financially independent.

Generally salaries are also higher in this bracket. Putting more savings in superannuation is very common when people are in their fifties given the current tax incentives that come with it. This is also an opportunity for many to start their own individual business.

60 and beyond

For people past 60, the main financial focus is to invest savings to generate a retirement income and maximise the age pension.

In summary

Regardless of which stage you are at, it’s important to make a financial decision based on the assessment of the risks and opportunities that exist in your life. As you can see, these seem to change with each decade.

We can help you find the right investment opportunities for your individual situation and for each life stage.

This document has been prepared by Colonial First State Investments Limited. This document is not advice and provides information only. It does not take into account your individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement available from the product issuer carefully and assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision.

Tuesday, 29 January 2013 12:15

Reflating the Japanese Economy

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Key points:

  • While it is likely still has more to do,the Bank of Japan is on a path towards major policy reflation for the Japanese economy.
  • This is likely to see further downwards pressure on the yen and strong gains in Japanese shares.
  • It is also positive for the global economy as Japan will likely no longer be a drag on global growth going forward.
  • While Japanese monetary reflation adds to upwards pressure on the Australian dollar, a stronger Japan will be positive for Australia overall as it remains our second biggest export market.
  • Platinum International Fund has significant exposure to the Japanese share market.


The announcement that the Bank of Japan (BoJ) is raising its inflation target to 2% and adopting open-ended quantitative easing is very positive.

Options for further fiscal stimulus in Japan are severely limited
by an already world beating budget deficit and public debt levels. Currently, the budget deficit is running around 10% of gross domestic product (GDP) and net public debt is around 135% of GDP compared to 73% in Europe and 84% in the US. Half-hearted monetary stimulus from the BoJ has played a major role in driving the deflationary malaise the Japanese economy has been in for the past two decades. So, apart from structural reform, it is really all up to monetary policy in Japan to pull the economy out of its long-term malaise.

The BoJ’s move reflects ongoing pressure from the new Japanese Government under Prime Minister (PM) Abe, which received a resounding mandate to reflate the economy at last December’s election. This is now resulting in aggressive action from the BoJ and highlights that Japanese economic policy is undergoing a dramatic turn for the better. Key to this change is PM Abe’s comment that the Japanese economy is not going to change “unless we display a firm commitment to escape deflation.”

While some quibble that the pressure from the new government has violated the BoJ’s independence I view this as entirely appropriate. Central bank independence should be conditional on the central bank achieving stable prices and thereby contributing to economic growth and full employment. However, the BoJ has failed in this regard overseeing years of chronic price deflation. As such, it is entirely appropriate that the Japanese Government intervene to refocus the BoJ on achieving an inflation objective.

More to do

The big news from the BoJ was its adoption of an official ‘target’ of 2% inflation agreed with the government. This is a far more substantive commitment than its previous ‘goal’ of 1% inflation.

Having boosted its monthly asset purchase program (basically buying government bonds and other assets using printed money) for 2013 to levels that matched the US Federal Reserve at its December meeting, it also announced the program would become open ended starting in 2014 with ¥13 trillion in asset purchases a month.

On the downside though, with no increase in the size of its 2013 program and the 2014 program focused on short-term bills and likely to be diluted by redemptions, the BoJ will probably still need to do more if it is to achieve its 2% inflation target.

However, the move by the BoJ should be seen as another step along the way to much more aggressive policy reflation. The first step was the big expansion of its quantitative easing program at its December meeting. This has now been followed by the adoption of a firm 2% inflation target. Further easing is likely once a new more dovish BoJ governor takes over in April and finds that he has little choice but to further ramp up quantitative easing if the agreed inflation target is to be met.

Global implications

The adoption of aggressive monetary reflation in Japan aimed at exiting deflation has a number of mostly positive implications globally:

  • TheJapanese yen is likely to fall another 10-20%,after the current short-term correction runs its course. This would take it to around ¥105 against the US dollar and to around ¥110 against the Australin dollar ( just surpassing its 2007 high of ¥107.8). Such a fall in the yen will be necessary if Japan is to achieve its 2% inflation target in the next few years and this in turn means that Japan will need to continue its open-ended quantitative easing for quite some time.
  •  Japanese shares are likely to perform well. A 30% or so gain is feasible this year. As can be seen in the next chart the relationship between value of the yen and the Japanese share market has been inverse over the last ten years, so a weaker yen will provide a big boost to Japanese shares. This largely occurs because a weaker yen provides a huge boost to Japanese exporters.

Japan Yen and sharemarket

  • A strongerJapanese economy helped by a weaker yen and an end to deflationary expectations.
  • Japan will no longer be a drag on global economic growth.
  • Easier monetary policies in Japan will add to ultra easy global monetary conditions.
  • Yen weakness will put more pressure on competitor countries, notably Korea and Taiwan, which may in turn put more pressure on their central banks to further ease policy too.
  • Aggressive easing from the BoJ adds further fuel to the global carry trade of borrowing cheap in Japan and investing in higher yielding currencies like the Australian dollar.While the immediate reaction to the BoJ’s announcement has been for Japanese shares to fall a bit and the yen to rise this looks like a classic example of short-term profit taking after the strong moves in both markets over the past few months. As the pace of BoJ easing continues and probably steps up the rising trend in Japanese shares and falling trend in the yen will likely resume.

Concluding comments

Japan takes 19% of Australia’s exports and is our second largest trading partner, so notwithstanding the risk of more upwards pressure on the Australian dollar, an exit from deflation and stronger growth in Japan will be positive news for Australia.

This year has already seen a number of positive developments for the global economy, including: the avoidance of the fiscal cliff in the US; indications that the US debt ceiling will be extended; the relaxation of the Basel bank liquidity requirements; and solid data releases from the US and China. Aggressive Japanese policy reflation just adds to this list. As such it’s little wonder that share markets have started the year on a strong note.

Investors in Platinum International Fund have significant exposure to the Japanese share market and are therefore potential beneficiaries of this course of action from the Bank of Japan.

This material has been provided for general information purposes and must not be construed as investment advice. This material has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Investors should consider obtaining professional investment advice tailored to their specific circumstances prior to making any investment decisions and should read the relevant Product Disclosure Statement.

Thursday, 21 February 2013 06:59

Five Reasons I'm Bullish for 2013 by Alan Kohler

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good times ahead optimistic yellow road sign being positive and optimism for a bright future and great time Stock Photo - 14852055


This article has been reproduced with permission from Alan Kohler.

I returned to work last week even more optimistic than I was before I went, and not just because I was still glowing from the Bali sun.

While I was away the market rallied 2 per cent and although it’s looking ‘toppy’ and looks due for a pullback, I think we are now in the situation where buying on the dips is the best idea. The global recovery is on and, as I explained before Christmas, money is shifting back into equities around the world.

So bearing in mind Nassim Taleb’s dictum that “the only prediction one can safely make is that those who base their business on prediction will eventually blow up”, there are five reasons I am optimistic about 2013 without exactly predicting anything: China, America, Europe, Japan and Risk.


To start with the last of those, in my view 2013 will be a 'risk-on' year. Well to be honest this started half-way through 2012 when it became clear firstly that the global economy was recovering and secondly that the European Central Bank, with German support, really would do whatever it takes to keep the euro intact. The Fed was already doing whatever it takes to get the US dollar down, and the Reserve Bank was doing whatever it takes to get the Aussie dollar down (not that that’s working yet).

All of which means the returns from cash are miserable and falling. Time to invest then, which means taking more risk, but not too much – thus, bank shares returned 25 per cent in the second half of 2012.

In my view this trend has just begun. For five years investors everywhere have been more concerned with not losing their capital than with making a return and gradually that is changing; they are moving out along the risk curve.  Obviously taking more risk means just that, and the world is not yet a safe place (is it ever?). I think the greatest danger has passed, and while deleveraging will continue to hamper growth there are many positives offsetting that.


Sam Walsh must be the luckiest man alive. Not that he doesn’t deserve to be chief executive of Rio Tinto – of course he does, in fact he probably should have taken over years ago (I’m sure he agrees) – but because he takes over just as China’s economy bottoms and turns around and with $14 billion in writedowns tied to Tom Albanese’s tail. All new chief executives would dream of having their troublesome assets all written off and their main customer on the improve.

The data on China that came out last week contained several positives, apart from the fact that growth, at 7.9 per cent, was better than expected. The transition towards greater consumption and less reliance on investment has continued, with consumption now accounting for 4 per cent of GDP growth in the fourth quarter, higher than gross capital formation (3.9 per cent). Growth in retail sales improved from 11.6 per cent to 12 per cent in 2012 and car sales grew 6.9 per cent (5.4 per cent in 2011). The acceleration in consumption happened because income growth, at 9.6 per cent in the cities, was greater than GDP growth for only the third time in a decade.

So the project of converting China from an export and investment driven economy to one that is based on domestic consumption is intact. Income growth is being helped by the remarkable fact that the working age population actually fell in 2012, by 3.5 million – the first such fall ever.

This brings its own challenges of course. It makes it even more imperative that the Chinese authorities reform the economy to promote the return on capital, otherwise economic growth will stall. The state owned enterprise system is deeply inefficient, as you’d expect, which has never mattered too much while the labour force has been growing so rapidly. As it declines, productivity must rise.

But while the long-term picture is clouded, it’s clear that 2013 will see China’s economy continue to accelerate, which should support the iron ore price – if not at $150 a tonne, then certainly above $120. Happy New Year Sam!


China is recovering and so is the United States, with housing leading the way. The National Association of Home Builders Housing Market Index is at a six-year high and double the level of January 2011. The “prospective buyer traffic” component of the index is at the highest level since January 2006. The median house price is up 10 per cent year on year, as is the volume of sales. Residential construction has bottomed and the vacancy rate is heading down.

Thanks largely to housing, the US private sector is growing at a pretty rapid clip – about 3 per cent if the government sector is removed from GDP calculation. State and local governments are starting to join the private sector in recovery, with only the federal government continuing to shrink. Moody’s expects local and state governments in the US to expand employment by 220,000 in 2013, a huge turnaround from the previous three years of job losses.

Manufacturing has been slow to move, but that seems to be now happening as well. Industrial production expanded 0.3 per cent in December after a rise of 1 per cent in November. But the December number was held back by a fall in utilities generation: factory output jumped 0.8 per cent in December. As for this year, cheap energy is expected to produce a resurgence of US manufacturing.

There’s a lot of talk that the budget deal will create a big headwind, but that seems to be overdone. There are two main elements to the deal that will produce fiscal drag: the payroll tax increase, which will cut
GDP by about 0.7 per cent, and the spending cuts due to be implemented in March – another 0.6 per cent of GDP. That 1.3 per cent of GDP fiscal drag seems large compared to 2.2 per cent average GDP growth since 2010, but as Anatole Kaletsky points out the IMF calculates that US fiscal drag on the economy was 1.3 per cent in each of 2011 and 2012. In other words, fiscal drag in 2013 will be no greater than the previous two years.

That is, as long as the politicians don’t snatch defeat from the jaws of victory by sending the US into default because of the debt ceiling. They have about six weeks to raise the limit, since the government will run out of money on March 1. Surely they will, although as usual it will probably be at the last minute.

Paste the below link into your web browser to read the full article.

By Alan Kohler - from Business Spectator - 23rd January 2013

This material has been provided for general information purposes and must not be construed as investment advice. This material has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Investors should consider obtaining professional investment advice tailored to their specific circumstances prior to making any investment decisions and should read the relevant Product Disclosure Statement.



Monday, 11 February 2013 14:38

Investing in Bonds - the Safety Trap

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Following the Global Financial Crisis many investors have fled share markets for the safety of Government Bonds and now safety has never been more expensive, or dangerous.

This can be seen in fund flow figures that show (blue bars) that investors have withdrawn money from share markets since 2008 and heavily invested into bond funds since that time.

Bond Fund Flows

In Australia the 10 Year Government Bond yields are around half of what they were before the GFC, as is the case in the US.  The chart below shows the income yield for 10 year Australian Government Bonds.  The key point here is that there is an inverse relationship between bond yields and bond prices, in that as yields fall, bond prices rise.  Conversely as bond yields rise, bond prices fall.

10 Year Govt Bond rate

In other words, as interest rates on Government Bonds rise, investors in those bonds stand to lose capital.

How much do interest rates have to rise before investors start losing money?  The table below is sourced from the Wall Street Journal and shows that investors in US 10 year Government Bonds (yield at the end of 2012 was 1.84%) would receive a negative return this year if the yield rose to 2.23%.


And just how much could investors lose long term interest rates rise on Government Bonds?  The chart below calculates the impact on bond prices of rising rates in various scenarios.  The dark blue bar shows the value of a bond at current interest rates.  The mid blue shows the value of the bond should rates rise by 2% and the lightest blue shows the value of the bond should rates rise by 4%.

Bond Loss

The message is clear - investing in bonds right now has never been more dangerous and now is the time for investors to review these investments.

This material has been provided for general information purposes and must not be construed as investment advice. This material has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Investors should consider obtaining professional investment advice tailored to their specific circumstances prior to making any investment decisions and should read the relevant Product Disclosure Statement.


Monday, 26 November 2012 16:47

US Fiscal Cliff - Should We Be Worried?

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Mark Draper talks with Jack Lowenstein (CEO Morphic Asset Management) about the most likely outcome from what is known as the US Fiscal Cliff.

1. What is the US Fiscal Cliff?
2. What is the most likely outcome in the short term?
3. Is this the last we will hear of the fiscal cliff?

Wednesday, 28 November 2012 13:57

Life Insurance for young families

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Young family having a baby

New priorities and responsibilities

As a 'young family' you have a natural instinct to care, nurture and protect those you are now responsible for. It isn’t just about you anymore, it is about your responsibilities and knowing that your family is secure in your care. You are thinking about the things you are currently providing but, more importantly, you are already planning for the future-such as education for your children; a safe and comfortable home; and family holidays and recreational activities.

As with all life stages, you like to think that you will always be there for your family, and be able to work and provide a steady income. There is nothing stronger or more compelling than the natural instinct of a parent wanting to ‎protect their family.

Why you need life insurance to protect your family

No one plans to get sick, injured or to die unexpectedly and we all have a tendency to think that it won’t happen to us. ‘I’m too young to get cancer or have a heart attack’ and ‘I’m the safest driver on the road,’ are common misconceptions.

The first step in addressing your family’s financial security is to become aware of the risks you and your family are exposed to. One of the greatest risks you may face in your life is losing your ability to earn an income and to provide a secure and comfortable lifestyle and future for your family. Despite this being the case, many people don’t insure themselves for this risk, whilst almost everyone insures their car!

It’s worth taking a moment to consider what would happen if an extended illness or injury or premature death stopped your ability to work and provide an income. This could have a devastating impact to your family’s financial security and long-term lifestyle choices. It’s hard to imagine losing your health and your ability to go to work or even losing your life, but it is easy to imagine the practical impact the lack of an income would have.

The perfect time to put in place a life insurance plan

It is so important to consider your life insurance needs while you are relatively young and healthy, before you have any health scares and while there are still a range of options available to you. Too many people only realise the need for life insurance once they begin to experience health problems and it is often too late.

Wednesday, 07 November 2012 17:04

How long before share market beats its previous high?

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We recently celebrated the 5th anniversary of the high point for the Australian share market that occurred in November 2007.  The value of the market remains 30-40% below this peak.

History tends to repeat itself so lets compare the last 5 years to other large market downturns in history.

The chart below shows the value of the Australian share market many years after a large drop such as the 2008 drop.  The blue line is the journey investors have witnessed over the last 5 years and plots that journey against other times in history when the market fell heavily.

The question on most investors lips is when will the market recover to new highs?

The chart above shows that it took around 4 years for the market to reach new highs after the 1980 downturn (purple line) and around 5 years after the great 1929 crash (green line). This makes the current downturn one of the most severe in history.

The 1973 and 1987 downturns took 6 - 7 years to recover the previous high.  From the current level the Australian share market would need to rise by around 50% to move back to the previous high.

Bear markets do end and can move quickly when they do.

This material has been provided for general information purposes and must not be construed as investment advice. This material has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Investors should consider obtaining professional investment advice tailored to their specific circumstances prior to making any investment decisions and should read the relevant Product Disclosure Statement.