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Change of season – change of economy...
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Unwitting investors must have hoped that the collapse of Opes Pime brokers, was a continuation of an April Fools Day joke. Sadly it wasn't.
Once again we are reminded of the importance of clients obtaining professional advice from an accountable firm of financial advisers. The Supreme Court judge involved in the early proceedings commented that there was little resemble between the promotional material produced by Opes Prime and the actual contract. The message there is, read both! Or have a professional read both documents for you!
The bailing out of Bear Stearns, the Wall Street giant, by the US Federal Reserve has some informed economists marking that event as a turning point in the systemic problems of the global financial infra-structure. While we still don't suggest that the market is going to swing back up again in the immediate run, we do see excellent buying opportunities with certain key companies having been over-sold.
Our position on the resource sector, with Australia supplying a significant portion of global (read emerging economies) has served our clients very well. We have been recommending Rio Tinto since it was $80.00.The price at the time of writing is $146.00. Not bad in a market that is melting down!
We have recently appointed a new Head of Accounting, Andrew Campbell. We intend to take a very pro-active role as we approach the end of the financial year to ensure that our clients take full advantage of early tax planning.
Our mortgage products remain some of the most competitive in the market and we continue to work with our clients to transform wherever possible their non-deductible borrowings into tax-deductible debt.
Remember the three divisions of Locumsgroup are accessible to you: Our accounting practice; our financial advisers and our Mortgage Centre.
Paul Ahearne
Managing Director
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Emerging Economies:
The Greatest Investment Opportunity of this Decade
Matthew Bohlsen, Senior Financial Adviser Locumsgroup
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The investment theme this decade will be the rise of the BRIC and Emerging Market economies. BRIC stands for Brazil, Russia, India, and China.
This is possibly the greatest investment opportunity of the decade.
This investment theme incorporates the massive boom in emerging markets infrastructure due to the urbanisation of the developing countries of the world. Emerging markets are expected to spend US$21.7 trillion on infrastructure in the next 10 years; most of which will be funded by the massive foreign surpluses in emerging economies.
To understand this, here are some staggering facts:
Emerging Markets (Asia, South America, Eastern Europe)
- The UN estimates that the urban population of the emerging markets countries will grow at about the size 4 million each month for the next 25 years. This is about the size of Sydney!
- Emerging markets represent 80% of the worlds population, 75% of the land mass, 66% of foreign exchange reserves and 50% of world GDP. Yet they account for only 7% of the MSCI global share market capitalisation.
By 2025 Emerging Markets are expected to account for two-thirds of world GDP (based on ppp).
- These facts indicate that the Emerging Markets are where all the growth is. There are 3 billion people that at this moment are striving to have the life we take for granted. They are rapidly urbanizing and getting richer by the day. China now has the largest foreign reserves at US$1.7 trillion, and growing by US$1 billion each-and-every day!
This means, that as the wealth rises rapidly in these countries, so will their share markets, their currencies, and the value of companies that do business within this region.
So how do you access this amazing chance too benefit from a once in a lifetime boom where the two most populous countries on earth (China and India) are urbanising at the same time?
How can you get money quickly into these hot regions whilst the market is currently cheap due to the USA's housing woes? But first a few more reasons to invest in emerging markets:
China
- China plans to urbanise 400 million people over the next 10 years.
- China currently builds a city the size of Brisbane every month.
- Between 2008 and 2020 China plans to build a further 97 new airports.
- China currently builds 40,000 kilometers of roads and bridges every year using 48% of the world's supply of cement, and 34% of the world's steel supply.
- In China a mobile phone is sold every 3 seconds, China Mobile adds over 5 million new customers every month.
India
- India plans to spend US$500 billion on infrastructure over the next 5 years.
- Hero Honda in India builds a new motor bike every 18 seconds.
- India has a staggering 8 million new mobile phone subscribers per month
Middle East
- A US$1 trillion construction boom feed by the profits from oil.
- In Kuwait they are currently building a 1km high tower in "Silk City", amidst a new $US150 billion city.
- 25% of the world's cranes are currently situated on the strip between Dubai and Abu Dhabi.
- The International Monetary Fund forecasts that the oil states to continue to rack up current account surpluses in excess of US$500 billion p.a. They will spend a large portion of this building their cities.
The best way to access these amazing opportunities is to use well structured products that allow you maximal exposure with minimum risk. For those with no spare cash, there is an opportunity to borrow 100% of the investment upfront - with no chance of a margin call!
The product that we have at the moment that does all this is called Macquarie reFleXion Fund.
- This investment can be accessed by anyone who has a salary or ability to meet the "carrying costs" of the investment. On a $100,000 investment, typical carrying costs are $3,000 - $4,000 per annum.
- You need zero money upfront as you must borrow 100% of the funds at interest rates between 6.95%p.a. and 8.5 % p.a., and your investment is capital guaranteed if you stay the full 7 year term. If you wish to exit early you can. Minimum investment is $20,000. The interest costs are tax deductible.
Macquarie reFleXion, which closes 30 June 2008, allows you to invest in one or more of the following options;
- BRIC and Emerging Markets Trust
- Asia Property Trust
- Middle East Trust
- Japan Trust
- China Trust
- Commodity Trust
- Europe Trust
- Renewable Energy Trust
Other great products with similar features that we have identified are:
Macquaire Global Themes 100, which closes 30 June 2008, allows you to invest in one or more of the following options:
- CFS Global Resources
- CFS China Fund
- Aberdeen India
- Credit Suisse Asian Property Fund
- Merryl Lynch World Gold Fund
- ASX 200 Fund
- Eastern Europe / Russia Fund
- Emerging Markets Infrastructure Fund
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- World Food and Agriculture Fund
- Climate Change and Global Warming Fund
Macquaire reFleXion Select, which closes 30 April 2008, allows Self Managed Superannuation Funds to invest using 40% cash and 60% limited recourse loan. Minimum contribution is $20,000.
We are inviting clients to attend a seminar to learn more. Please click on the link or call 02 9255 8820 to register. If you would like to meet with Matthew Bohlsen to discuss these investments email mbohlsen@locumsgroup.com.aumbohlsen@locumsgroup.com.au or telephone 02 9255 8843.
Happy investing!
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Locumsgroup Mortgage Centre
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Prepayment of Interest - Investment Loans
Larissa Barton, General Manager
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It is possible to reduce your tax bill and interest rate at the same time creating a double savings!
It's not breaking news that the ATO allows for interest incurred and paid on an investment loan to be treated as a tax deductible expense but a lot of people don't use this to its full capability to get maximum deductions from their total income. In particular, claiming maximum deductions in the years when income is higher than other years, by claiming two years worth of loan interest deductions from their taxable income.
The ATO allows tax deductible expenses incurred in both the financial year gone by and also any expenses paid for in advance for the coming financial year. For example investors can pre-pay the interest on their investment loan for the next financial year and claim it as a deductible expense in the current financial year. The claiming of loan interest from a future financial year helps to reduce the taxable income and thus tax payable by the investor.
What does this mean?
The investor brings forward expenses from the future year to the current year so as to minimise the tax payable. This 'double interest deduction' can only be done in the year in which you first decide to pay interest in advance. This is because in the year you first pay interest in advance you will be claiming both the current and the future year's expense.
In subsequent years if you continue to pay interest in advance you will only ever be claiming one year's worth of deductions.
What happens when you decide to stop paying interest in advance?
The financial year you decide to stop prepaying the interest on your loan you will have no interest deductions for that financial year since the interest would have been pre-paid and tax deducted in the previous year.
Think strategically
You can decide to start paying interest in advance in a high income tax year (thus claiming two years worth of interest deductions in one go) and stop paying interest in advance in a low income tax year. By doing so you minimize your tax bill in a high income year and maximize your cash in hand in a low income year.
A further advantage to pre-paying interest on your investment loan is that your interest rate can be cheaper than when paying interest when it becomes due. This is because the lender is collecting the interest a year in advance and they will generally discount that interest rate. The amount they will discount by will vary from lender to lender.
If you would like to investigate the prepayment of interest strategy please email info@locumsgroup.com.au or call 1800 24 86 86.
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Locumsgroup Mortgage Centre
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Discover your credit history
Francis Raymond, Head of Mortgages
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A blemished credit file often sees all lenders running for cover.
It makes life very difficult when applying for finance, especially in the current climate of the sub prime fallout. Those willing to lend to individuals with an imperfect credit history are charging high premiums for the perceived risk.
Privacy laws stipulate that no company can view or touch your credit file without obtaining signed permission from the individual first. Each time an organisation views your credit file their name is embedded in your file for five years. Even if you don't transact business with them!
It is recommended that you request a copy of your credit report every 12 months to ensure that it lists only the companies you have authorised to view it. Most importantly you want to check that it is free of credit default listings.
To obtain a free copy of your credit file click here and you will be redirected to the My Credit File website.
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Friends of Locumsgroup...
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Out of Africa - Indulge your senses with the cuisine of Morocco
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Out of Africa and Restaurateur Hassan M'Souli invites you to indulge your senses with the cuisine of Morocco . Artistically prepared, delightfully served, steaming Tajines, fluffy couscous, taste sensations like no other. Hassan arrived in Australia in 1985 from Casablanca, Morocco. His passion for cooking evolved in his mother's kitchen at a young age and he pursued that passion along with those of acting and teaching.
In addition to the Out of Africa dining experience and cooking classes Hassan shares over 100 of his favourite recipes in his recipe book Modern Morocco. Learn how to cook using traditional recipes creating fabulous flavours of Morocco. Feast on favourites such as fish or chicken tajine, learn the secret of making perfect couscous, experiment with the new spice blends and mixes, create salads using ingredients such as dates, almonds and oranges, along with fabulous Moroccan desserts and cool drinks.
Mention Locumsgroup to receive 25% off the RRP of Hassan's Moroccan Modern recipe book
www.outofafrica.com.au
43-45 The Esplanade, Manly NSW 2095 T: 02 9977 0055 F:02 9977 2606
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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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