A transfer of powers from the ASX to ASIC (the Australian Securities & Investment Commission), announced last year and effective from August this year, has opened the door to competition from other market operators.

ASIC has been given powers, historically held by the ASX to supervise markets and detect market abuses such as insider trading. Brokers trading on the Australian Stock Exchange and the Sydney Futures Exchange are now supervised by ASIC. The ASX still has control over the listing rules governing companies listed on the Australian Securities Exchange.

One of the hurdles to the SGX-ASX deal is legislation and recently tightened foreign investment policy restricting foreign ownership of Australian companies by a single entity to 15%. A rigorous “in the national interest” test is also applied. Any proposal to lift the threshold must be tabled in parliament for debate. The SGX is partially Government owned which adds a further complication to the mix. The Foreign Investment Review Board has up to 120 days to assess the bid, and make recommendations to the Treasurer.

Should the deal go through, the merged entity would be the world’s fifth-largest stock exchange company by market capitalisation.

The Aussie dollar had a brief encounter with parity to the US dollar on the 15th October. While this may be good news for those travelling abroad, our farmers, manufacturers, tourist operators and education providers are feeling considerable pain. Our strong dollar makes Australia an expensive destination and place to do business with.

On the other side of the ledger, imports become cheaper with an appreciating currency. This does help to keep interest rates in check as cheap imports put downward pressure on consumer prices and hence inflation.

Another driver of inflation is low unemployment (workers can demand higher pay when there is no shortage of work). As Australia’s mining boom continues, employment is heading towards the Reserve Banks “full employment” measure which is an unemployment rate of 4.75%. The estimate of planned private capital investment for 2010/11 released by the ABS in August was $123.3 billion, 24.3% higher than the equivalent estimate made for the 2009/10 year. The estimated planned increase for the mining sector is 48.4%.

However, social and regional issues aside, a high currency can help ease a labour problem in the booming sector by freeing up and reallocating labour and resources from sectors where business has become less viable as a result of currency strength.

So, to some extent, a higher exchange rate is a substitute for further rises in the official interest rate. Enough to keep the Reserve bank from hiking rates on Melbourne Cup Day, remains to be seen.

Disclaimer and Disclosure
This publication has been prepared and issued by Forty Seven Financial Planning. While the information contained in this document has been prepared with all reasonable care no responsibility or liability is accepted for any errors or omissions or misstatement however caused. 

Set Sail on the QE2

In financial markets, QE2 is not a luxury ship destined for an exotic location!

QE2 is the acronym given to the US Federal reserve’s anticipated 2nd round of Quantitative Easing (QE2). “Printing money” is the more colloquially term for quantitative easing. Ben Bernanke, Chairman of the US Federal reserve indicated at the September Federal Open Market Committee (FOMC) meeting that quantitative easing would be used if necessary to help stimulate the US economy. The expectation is that QE2 will be launched at the November FOMC meeting. The extra cash in the system is intended to help address the unemployment problem in the US by increasing cash levels of banks and hopefully providing better access to finance for smaller businesses.

In today’s electronic age, quantitative easing is implemented by the central bank crediting itself with a debt and then using the created money to purchase assets from banks (e.g. bonds and mortgage backed securities). While this practice is typically inflationary and devaluing of the country’s currency, the difference between the US embarking on this strategy and a struggling 3rd world country is that the US Federal reserve will ultimately sell the assets it has purchased and wipe out the paper debt it created (quantitative tightening).

Generally speaking, a country’s central bank will use control of interest rates as a preferred tool to influence unemployment and inflation. In Australia, our official cash rate is currently 4.50% (left on hold after Tuesday’s Reserve Bank meeting). If stimulation of our economy is required, there is plenty of room to reduce rates, as we experienced during the GFC. In the US, the cash rate is 0.0 to 0.25%, there is not much room to drop rates!

Disclaimer and Disclosure
This publication has been prepared and issued by Forty Seven Financial Planning. While the information contained in this document has been prepared with all reasonable care no responsibility or liability is accepted for any errors or omissions or misstatement however caused. 

Yuan-t to trade?

China is under growing pressure to allow the Yuan to strengthen. US President Obama said this week that the Yuan is “valued lower than market conditions say it should be” and that gives China “an advantage in trade.”…

Why are the US and other developed countries putting pressure on China to appreciate the Yuan? A low Yuan helps Chinese exporters as it makes their goods cheap relative to other exporting counties with stronger currencies such as Japan and the US. Conversely however,  the consumer in China is disadvantaged by the low Yuan as it makes ‘nice goodies’ imported into China expensive (like BMWs!). The Chinese are far less focused on consumerism and as a population do not tend to spend as much on foreign products as their western counterparts (although this may change). A culture of accumulating capital at the expense of current consumption allows excess capital to be used to acquire foreign assets, foreign currency and reserves such as gold.

In July 2008, during the global financial crisis, China adopted a policy of “pegging” the Yuan to help Chinese exporters. In June this year, it announced that it would gradually increase the flexibility of its exchange rate. A country pegs its currency to another by the central bank of the government holding foreign currency reserves. Currency is bought and sold by the bank as required to absorb fluctuations in supply and demand that would ordinarily determine the value. This practice counters fluctuations and “pegs” the value.

US Treasury Secretary Timothy Geithner said last week the U.S. will use every available tool to urge China to let the Yuan rise more quickly. Calls to let the currency strengthen will grow as China faces swelling trade protectionism against its exports in response to its policy on the Yuan.

“We are going to continue to insist that, on this issue and all trade issues with China, it’s a two-way street.” said Obama.

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We attended one of their seminars at a local hotel and were immediately impressed by the depth of information they had and the simple way they were able to explain what it all meant. They do a  range of things, including Retirement Income Streams and Pension; Tax Planning; Budgeting; Redundancy Planning and Managed Investments.

We’re only really interested in managing our Super, but it’s clear Forty Seven are experienced in a whole range of financial areas.

John is very professional and honest and has that rare skill of explaining complex financial matters in simple layman’s terms both of us can understand. He is discreet and has always treated us with total

confidentiality. John listens clearly to what we want and advises accordingly. Nothing is too much trouble. In our meetings he has all the up to date technical apparatus, and graphs etc and takes the time to go through them so we really understand what they mean and why they are relevant to our investment strategies. All of this he explains in very simple terms, advising where he plans to invest our money, why, how etc.

While we would never try to influence people in a choice of financial advisor as we feel it is a very personal thing, we are happy to relate to family friends the positive experience we have had with John and Forty Seven and are pleased to be given the opportunity to provide this testimonial.

Even now, more than five years down the track, we feel comfortable asking questions, and never feel stupid.  There’s been a lot of upheaval in the market over the last couple of years. It’s been a great relief to us to be with a company we trust completely during this time. It is an added bonus to know we can always get an answer if we have a question – that’s important when you want to make sure you’re making the right decisions with your money.

Forty Seven looks after our superannuation for us. With the difficult economic conditions the country has faced over the last couple of years, and the low interest rates, competent management of our super with someone we trust has been even more important.

The other thing we really like is that they don’t try and sell us products we don’t want. Theirs is a highly personalised service and they focus on giving us what we need. They aren’t always trying to get us to spend more money, which some other companies do. Of course, if we ask or need other help, they are happy to provide it, but they don’t push us into it. They really are very professional, trustworthy and capable.

The greatest advantage for us is that we have total peace of mind. Someone we trust is looking after our money and we don’t have to worry about it everyday.

We would, and have, recommended them to anyone who is serious about their superannuation.  In particular, we recommend going to a seminar – they are free, easy to understand and a great introduction to a highly professional and personal company.

We saw an advertisement in the paper for a free seminar that was being held by Forty Seven and decided to go along. We had been to some other seminars, but this one stood out. The presentation was clear, concise and easily understood. We were impressed and decided to go the next step and had a private consultation with Lindsay. We felt comfortable with them right from the start.

Forty Seven manages our super fund and some other investments we have. Since we joined up with Forty Seven the market has been through some very challenging periods. Everything was easy for the first year or so, but the last two years have been very difficult and it has brought us both great peace of mind knowing our money is as safe as it can be and that we are with a company we trust completely.

We meet with Forty Seven on an as-needs basis. They spend as much time as we need with them, explaining the intricacies of the ‘super’ world and keep us up to date on the broader economy. The main benefit for us has been the way they appreciate our needs and advise accordingly. They don’t try to sell us plans and programs we don’t need or want. They show integrity and respect and are always sincere. Nothing is too much trouble.

We have been with Forty Seven for four years now and we remain as impressed with them now as we were then. I would happily recommend them.

While we were specifically interested in superannuation advice, it is always good to have the bigger picture, so that you know what will effect or impact your investments. That has been particularly important over the last few years, which has been a very difficult time for self funded retirees. We still wake up every day and worry about the economy – we’re lucky things in Australia are better than elsewhere, but of course we are impacted by world events and you never know what tomorrow might bring.

Having Forty Seven on our side has brought us a great peace of mind. They take a personal interest in us and offer us good advice which is backed up by knowledge and expertise on legislation, the economy, new products and recent trends. They are organised and efficient and always run on time. They’re easy to get on with, speak in simple language and when we meet up with them the meetings are always productive. We’re never rushed, or rushed out and they are happy to spend us much time with us as we need.

When we meet, all our details go up on a screen, so everything we do is very transparent. We can ask as many questions as we need and they are skilled at making a complex world easy to understand. They always follow up in a timely way and nothing is too much trouble.

Of course, the best service in the world would mean nothing if our money wasn’t well looked after. Fortunately, that’s not a worry.  We’re doing OK and are completely confident that we are in safe hands.

We would certainly recommend them to others.

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Our clients are empowered to make informed decisions through expert advice, education and information supported by our technical resources, investment research, technology and professional networks. We can show you strategies to reduce tax, increase savings and pay off debt. And, by working with preferred suppliers and partners we are able to deliver comprehensive financial product solutions.

We take the time to really understand our clients needs, goals and aspirations. Each client situation is totally unique. We build affordable, customised financial plans around our clients goals and objectives.