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Interesting Times...
February arrived with the threat of recession in the US causing ongoing concern with figures for US job losses continuing to increase. The actual outcome of whether the US enters a technical recession is still up for debate with a number of economists suggesting it may not happen (and about as many saying that it will!).
Australia meanwhile, continues to experience inflationary pressure with demand for goods and services increasing. This puts the Reserve Bank on alert to exert monetary policy and increase interest rates. We have now had 11 consecutive interest rate rises in the current cycle. When the Reserve Bank chose to leave rates alone in their last two meetings of 2007 the trading banks took it upon themselves to introduce interest rate increases of their own with all four of the major banks (plus the St George) increasing their interest rates independent of a rise in official interest rates.
So what does al this mean for investors?
Locumsgroup remains committed to our clients having well balanced investment portfolios spread over the three major assets classes: Property, equities, and cash based investments all managed within a streamlined reporting structure. We are on track and the soundness of our advice is reflected in the performance of our clients? financial management arrangements. This has been particularly highlighted in the recent stock market turmoil where our clients have continued to travel well and margin calls have been minimal.
As we are reminded, the integration of our three divisions: tax and accounting, financial advice and our mortgage services, provides an effective results-focused service for our clients.
Paul Ahearne
Managing Director
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Seminar - Tuesday 26th February 6.00pm - 7.30pm
Suburbs picked to outperform the Australian property market
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Time
Date
Venue
RSVP
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6.00pm - 7.30pm
Tuesday 26 February 2008
Locumsgroup Head Office
Level 3, 20 Loftus Street
Sydney NSW 2000
Larissa Barton
P: 02 9255 8820
E: lbarton@locumsgroup.com.au
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Join us for an evening with Braxton Chase, where we will discuss the Property Hot Spots for 2008.
Braxton Chase lead the field in residential property investment. One of Australias leading property and investment firms, Braxton Chase specialise in sourcing high growth and superior quality residential investment property.
Using a unique research methodology, called the Braxton Chase Investment Performance Index, based purely on investment fundamentals the Hot Spots for 2008 will be revealed.
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Commentary: Financial Markets
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Volatility, volatility, volatility!!
Matthew Bohlsen, Senior Financial Adviser Locumsgroup
January 2008 saw share markets globally smashed as investor sentiment turned nasty. Fear overtook commonsense with most global markets down 10% or more for the month and Black Tuesday January 22nd 2008 saw Australia?s worst down day in a decade and fourth worst day in history. The bout of fear was sparked by further talk of a US recession, further large US bank writedowns, the Society Generale trading scandal and the downfall of some local companies such as Centro, MFS, and Allco along with Tricom Securities forced selling of margin loan clients in margin call. The US bond insurers at this stage have nmaintained their AAA credit rating which at least halts for now the forced selling of bad sub-prime debt.
Finally when our nerves were frayed Big Ben Bernanke came to the rescue with 1.25% of US rate cuts in 10 days – the largest short term cut in history. Meanwhile the US economy weakened further with more dubious job number declines. Dubious, because previous poor numbers have recently been revised up a week or two later. Finally George Bush finally realized the US was in trouble and decided to do a $150b rescue package.
In Asia, apart from markets spiraling downwards the smart money in the form of Chinalco corporation was plotting to purchase 12% of RIO, subsequently purchased in early February.
So while the US continues to deflate it?s housing and credit bubble along with some other Western countries, Asian and Saudi Sovereign Wealth Funds and companies are steadily buying up Western companies at bargain prices.
Expect this trend to continue.
Commodities
World oil prices eased slightly, however Coal prices continue to rise pushed higher by supply shortages from the Queensland floods and strong Chinese demand due to the extreme snow conditions and associated power blackouts.
What?s next?
The Australian Share market PE (Price Earnings) ratio currently sits at around 14 times historical earnings which suggests it is definitely cheap by historical standards, particularly if the earnings side of the equation holds up.
Our current view is it is wise to be bottom trawling at present, purchasing or phasing new money into the market over the next six months. Areas to focus on are stocks with low debt levels, and with low PEs and good earnings outlook.
We still favour the Asian region led by China and India, Saudi Arabia, and the Resources and Infrastructure sectors.
We believe this current market downturn provides excellent opportunities to buy into the booming economies of the world at very reasonable prices and a wise strategy is to phase new money into the market over the next 6 months.
2008 is a year when quality financial advice is of paramount importance.
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Market Commentary - Mortgages
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Sub Prime fallout felt in domestic markets
Francis Raymond, Head of Mortgages Locumsgroup
The mortgage finance sector is experiencing one of its most difficult periods in recent times. All of the major lenders have increased their rates independently of the Reserve Bank of Australia's 25bps increase announced on Tuesday 5 February 2008. Contrary to hopes global funding pressures would ease, costs remain high. Michael Chaney, Chairman of NAB, told shareholders on Thursday 7 February that we've only passed on half of the total cost increase that we have experienced in the past few months'. The major lenders are wrestling with the issue of balancing competitiveness, customer interest and shareholder interest.
If there is any good news to come our of this for Locumsgroup Mortgage holders its is that our fully featured home loan variable interest rate has only increased by the RBA increases which has seen our product become even more competitive in the marketplace.
As always, we are constantly on the lookout for innovative ways to help our clients. If you are aware of anyone whose budget has been stretched we will be happy to speak with them to explain how we can help.
Email: mortgages@locumsgroup.com.au
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Hervey Bay - Where else but Queensland!
Paul Ahearne, Locumsgroup
The renowned demographer, Bernard Salt, the Author of the best selling book: The Big Shift, has identified Hervey Bay as the fastest growing region in Australia with a population growth of 5.4% per annum. We have identified Hervey Bay as a high capital growth area. The focus of our analysis has involved there key considerations:
(i) The population growth
(ii) The infra-structure development
(iii) The employment opportunities
The Hervey Bay region satisfies all three aspects of our analysis.
The forecast growth by Braxton Chase, one of Australia?s leading property research firms has forecast capital growth at 5-7% per annum over the next five years.
We have identified two developments in the region of high quality high yielding assets. The properties are due for completion in the next 18-24 months and can be secured now. If you would like some further information on the property opportunities or research on Hervey Bay email mortgage@locumsgroup.com.au.
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Personal Protection - The different life stages
Hugh Keenan, Head of Risk Insurance Locumsgroup
I see so many clients at various stages of life. Everyone fall's into one of the categories I have listed below and require a comprehensive assessment of their personal insurance cover:
Young and free – The beginnings of responsibilities such as cars, credit cards and living expenses may trigger the need for a protection plan. Such a plan would be used to cover lifestyle expenses, debts and treatment options if a major illness or injury strikes. You are young and indestructible and you are sure nothing is going to happen to you. This is the best time of all to obtain insurance. You are fit and healthy and if you arrange level premium cover now you will save tens of thousands of dollars over the length of your policies.
Settling down – Relationships, starting a family and buying a home may quickly change priorities. Protection should be in place for the new responsibilities, such as higher living expenses, mortgages and to secure family income. This is often the time when family budgets are most stretched, however this is probably when insurance cover is most important, particularly if there are young children around. Arranging cover at this stage is still usually fairly cheap and easy to arrange.
Getting on – Household income may be starting to peak, with the possibility of a partner?s return to work. The majority of income is still committed to living expenses, so risk protection may be a major priority. The amounts of cover may need to be increased in line with lifestyle changes, higher income and the increased chances of major illnesses. You may also wish to protect children?s education expenses. It may already start to become more difficult to obtain insurance at standard rates as you may have had some health issues which can affect your insurability however life companies will look at your medical history and most applications will be accepted.
Free again – Children are becoming independent and expenses are tapering, but substantial commitments are still to be protected as health may become a greater concern. Protection for remaining mortgage debt, income protection and cover for major illnesses or injury may still be required. Now is when you may receive the benefit from cover you have previously arranged. It is still possible to arrange top up cover at this age if you feel that you are not fully covered.
What life stage are you?
Most of us have insure the car, house, and even our health each year without question. But do you have enough insurance in place to protect you and your family if the worst were to happen?
If you feel that you are not fully covered and would like to discuss your situation, please contact Hugh Keenan on 02 9255 8811 or hkeenan@locumsgroup.com.au to help you get cover in place to protect you and your family.
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Special offer - Last Chance!!
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Anyone that becomes a new client to any one of our divisions, Financial Advice; Accounting; or Mortgages, during the monthFebruary will receive a $100 Myer Gift Voucher
To take advantage of this special offer please contact Larissa Barton 02 9255 8820 or email lbarton@locumsgroup.com.au to schedule your appointment.
Conditions apply: a new client to a division is one that has not transacted with that division on any prior occasion, voucher is issued on settlement/invoice date and you must mention this offer to claim your voucher.
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Friends of Locumsgroup...
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Executive Relocations
Personalised assistance in relocation for executives and their families to Sydney
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Companies are increasingly recognizing the benefits of offering relocation to its corporate transferees knowing that it increases the executive's ability to adapt to a new environment and focus on the new role from day one. Each programme is tailored to the client's needs and covers requirements such as housing, budgets, schools, preferred suburbs and local facilities. Our consultants have an in-depth knowledge of the Sydney Metropolitan area and provide a one-stop source of information on all aspects of our way of life.
Being a Locumsgroup client enables you to a 20% reduction on our daily rate until end June 2008.
www.exec-relocations.com.au
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Note to the reader:
The Locumsgroup message is sent to you as either a client or someone who is interested in our products and services. We are against the sending
of unsolicited mail. If you have received this email in error, or would like to unsubscribe, please click here and simply click "send".
Information contained in this message is of a general nature only and does not constitute formal advice. Everyone's financial situation and lifestyle
is unique and we recommend you contact your financial adviser prior to making investment decisions. Locumsgroup does not accept responsibility
for any inaccuracies or errors that may appear in this publication.
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