I hope this meets you all well.
As some of you know my mother in law recently passed away. She was a strong woman who overcame the gender bias during the early years of her career to become a success in her field. Stringent in process, she achieved everything she wanted to, whilst raising a family and lived a full life. Of course, at this time, I have been providing the support for my wife and children and my wife’s family at an upsetting time.
These events remind me of the need of a trusted third party to assist in the processing of financial matters at hand in order to take stress away and allow time to recover without financial concern. I just wanted to let you each know I am there for you and your family if anything arises. It’s my promise to you.
We are working on portfolio construction in the background for our client benefits. The process is continuing and I hope I can inform you of something in a few months. We continue to look at advances to process and structure to benefit clients to ensure the best result.
As always, take care and feel free to call or e mail me with any questions you may have.
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The markets have surprised many including me. The upside has been far longer and gone far higher than anticipated. The US employment numbers have been good and inflation is finally ticking up, and Europe is improving. It’s easy to get caught up in this momentum but unfortunately it looks as though valuations of shares and other assets like property are getting bubbly. This is all due to cheap debt, it is simple as that.
I refer to some graphs below that may be of interest. I have many and these are just an example:
The first chart is a representation of household debt in Asia, with Australia winning (or losing depending on how you see it). The comparable benchmark line represents the debt levels of the US in 2007, just before the Global Financial Crisis struck:
The below shows household finances in Australia. Current debt levels are unbelievably high and continue to rise with the low interest rates only leading to many households barely able to repay their mortgages:
The chart below shows the levels of US credit card debt – we are currently looking at similar levels seen prior to the GFC. As an addition (but not included) the subprime default rate on car loans is rising in the US, and we expect this to continue.
The levels of US sharemarket capitalisation, as a percentage of GDP, are beyond previous highs which led to sharp corrections in the sharemarket.
Expensive housing in Australia’s capital cities has led to many young adults living at home longer with their parents despite the construction boom. Properties for rent are going north while yields on property head down despite being extremely low in Sydney and Melbourne already. The Victorian Government recently announced a vacant property tax as well which may release more properties on the rental market.
I guess you can understand my concern and appreciate that having a truly diversified portfolio is essential. One journalist calls the US recovery a “bubble recovery” because it is simply financed by debt. While I do not advocate the avoidance of equity markets, we need to maintain some caution.
One table to remember at these times is outlined in the below:
The above assumes that no income is taken out of the investment. Of note for those retirees that are taking income from super, the result of the above would be worse.
Shopping and Disruption
An interesting aside of the disruption around the globe regarding shopping. The online phenomenon is increasing in penetration, and there are obvious results in the US. I have read a few stories about malls across the US shutting down as retailers continue to struggle. The default rate within the sub-sector is on the rise. It’s certainly an area to watch although far smaller than the GFC and defaults on home loans.
With other disruptions like driverless cars and new energy taking hold the future is very interesting.
Share Insights – Mesoblast
I thought I would outline a particular company that some of you have and more may have in the future. Mesoblast is a speculative stock with enormous potential should its medical solutions become commercial. Of course, if they do not, the worst case could be your money is worth nothing. I have chosen this share as it offers some insight into the medical research area which I believe Australia has a high level of competency.
Mesoblast describes itself as being involved in the development of innovative cellular medicines. In other words, it is involved in stem cell research. The most widely used form of stem cell therapy is the use of bone marrow for the treatment of leukaemia and lymphoma. Other studies have occurred into the benefit of stem cell research including the following areas:
- Brain and Spinal cord injury
- Heart (disease)
- Missing teeth
Hair cell regrowth
- Wound healing
Mesoblast explores the areas of Chronic Heart Failure, Chronic Lower Back Pain, Chronic inflammatory conditions like arthritis, diabetic nephropathy and Graft Versus Host Disease (aGVHD) following allogeneic bone marrow transplantation.
After a rocky 2016 where a financial backer was lost, some buying support has come back to this share. To repeat, this is a speculative share and should be treated as such.
Health and Fitness
Keeping your health and wellbeing in good shape is always a topical and trendy lifestyle goal, with new diets and fitness crazes popping up every year or so. It is important in any stage of your life, to maintain a balanced diet and exercise routine, although more often than not, life’s little obstacles get in the way.
The wide offering of websites and phone apps are readily available, some quite handy, and others sometimes difficult to help with forming good habits. From mindful eating to having a personal trainer in your pocket, there’s plenty of tech to help you be a better you.
Below are five phone apps that are available to download to your smart phone or utilise online to help you track your health and wellbeing goals, across nutrition tracking and cooking, exercise and fitness, and goal setting and tracking.
I currently use a combination of my FitBit watch and app, my membership to AIA Vitality to keep me motivated as well as my wife’s healthy cooking to moderate my eating. Having reviewed the apps below, I believe they could become very useful:
- Streaks – The to do list that helps you form good habits.
- My Fitness Pal – A food and exercise database to help you to track and manage your daily nutrition intake.
- 8fit – A health and fitness app that tailors meal plans and workout schedules to help you meet your goals.
- StickK – A tool to help you to set your goals and commit to them so you can achieve success.
- The Healthy Chef – An online resource filled with healthy and nutritional recipes to enable healthy living.
This information was provided to us by AIA Insurance as part of the AIA Vitality loyalty program, which offers members rewards for living an active and healthy lifestyle. AIA Australia regularly provides good information on health-related issues and assistance.
From Our Investment Partners: Fund Manager – DNR Capital
In the below video, CIO, Jamie Nicol, and Portfolio Manager, Scott Kelly from DNR Capital (one of the fund managers in use by CPW), outline the interesting start to 2017.
Cambridge Private Wealth Pty Ltd (ACN 607 806 244), Authorised Representative and Credit Representative of Charter Financial Planning, Australian Financial Services Licensee and Australian Credit Licensee.
General Advice Warning – This newsletter contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider you financial situation and needs before making any decisions based on this information.