The SPIN from TOPS by lindash


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									                                                                                                                        April 2009

                                                 The           SPIN                        from              TOPS
Welcome to our second newsletter for 2009.                             Today‘s economic climate gives you the chance to reassess
                                                                       the quality and the balance of your life and to think how
Since our February 2009 edition the Australian share                   you‘ll feel in the future. As long as you can afford it, it‘s not
market has tested new lows (since 2003) with the All                   a bad thing to be enjoying yourself.‖
Ordinaries (top 500 companies) dropping to 3,115 points
on 6 March 2009. As we write it is testing 3,700 points                ―When you look back at your life, will you want to
(an 18% increase in five weeks). Does this mean we have                remember yourself as happy? -So if it makes you happy,
seen the worst? – Who knows!!!- What is important is                   it‘s worth it.‖
that you stay focused on the long term.
                                                                       In the past, we have tried pointing out to clients that all
Below is an extract of one report from America in early                money not spent by the ‗Greatest Generation‘ will only be
April:-                                                                spent by their heirs — and in not-so-great ways.
                                                                       Remember the old proverb: ―There are no pockets in
Stock Markets Move Past Gloom and Doom in                              shrouds.‖
Anticipation of the U.S Economy’s Recovery
                                                                       When you‘re on your deathbed, how much time will you
The recent stock market rally may not be a bear-market                 spend wistfully thinking, ―If only I‘d bought the smaller
trap or a "dead cat bounce," but may in fact be the first              plasma TV. . . .‖?
signs of dust from an oncoming and unexpected bull
stampede—only time will tell for the long term investor.               Recessions come and recessions go, markets go up (not
                                                                       according to the media) and markets go down.
In the face of gloom-and-doom predictions, rapidly rising
unemployment, and an imploding economy, the market's                   Proper financial advice and structure in planning your long
strong rally clearly anticipates a recovery in late 2009.              term financial well-being is often forgotten in these times.

Is this just a bunch of bull?                                          Why didn’t you warn me 18 months ago to sell
                                                                       shares or investments with share exposure?
While everyone seems focused on the economy
haemorrhaging red ink from the gash in the real-estate                 This question could have been asked in 2004, 2005, 2006
market, the broken bones of consumer demand and the                    and 2007 into early 2008 and the 134% upsurge in the
unconscious state of banking and credit markets, only the              share market between March 2003 to 2008 would have
stock market seems to realise that the patient is being                been cut short or missed.
effectively triaged.
                                                                       It is fair to say that the events of the last 16 months
Investor or Speculator                                                 caught virtually everyone by surprise. A small minority of
                                                                       economic commentators profess they saw it coming, but it
Are you an investor or speculator? Has the media barrage               is easy to say that after the event. If you keep making
on the credit crunch clouded you long term reasoning?                  predictions you eventually might get one right – the other
                                                                       wrong ones???.
―Well do not be too hard on yourself,‖
                                                                       As financial advisers we look to Government institutions
Consumer psychologists call it hyperopia, the medical                  and research organisations to provide economic guidance
term for farsightedness and the opposite of myopia                     including the RBA (Reserve Bank of Australia), IMF
nearsightedness, because it‘s the result of people looking             (International Monetary Fund) and US Federal Reserve and
too far ahead.                                                         16 months ago they did not see the downturn coming. To
They are so obsessed with preparing for the future that                demonstrate this please peruse the data below.
they cannot enjoy the present, and they end up looking                 International Monetary Fund:
back sadly on all their lost opportunities for fun with their
partners and friends in their lifetime.                                    October 2007 the IMF had world GDP forecast at
―Obviously you need to be responsible and conserve your                    July 2008 they forecast 2008 world GDP to be at 4.1%
savings. But there‘s nothing wrong with indulging yourself                  and 3.9% in 2009.
a little.                                                                  At the end of January 2009 they basically said it would
                                                                            be 0.

       Tony O‘Leary is an Authorised Representative (No. 311477) licensed through Australian Financial Services, Licence No.
       297239. Tony O‘Leary is a Director of Tony O‘Leary Planning Solutions Pty Ltd t/a TOPS Financial Planning Solutions.
               The SPIN from TOPS cont’d
                     View our new website—

Reserve Bank of Australia:                                      Some clients obviously handle negative markets better
    February 11 2008 in the RBA Statement of Monetary          than others (it is never comfortable).
     Policy GDP was forecast at 3.25% for 2008 and 3%           Our portfolios for those of you in the retirement phase
     for 2009.                                                  have been designed to allow you to draw funds from the
    August 2008 the RBA upgraded the March quarter             conservative area of your portfolios in most cases
     GDP to 3.6% which was revised for 2009 to 1%.              thereby, leaving growth funds (shares and property)
Australian Treasury:
    May 2008 Treasury GDP Forecasts 2.75% for the              The superannuation and allocated pension vehicles with
     08/09 period.                                              their low or no tax structures and commensurate
    December 2008 changed to 2%.                               Centrelink friendly treatment alongside their many other
    February 2009 changed to 1%.                               features are still valid vehicles in this environment. We do
    Now we are looking at 0.5% if we are to believe            not want to throw the baby out with the bathwater.
     It is most likely we are heading for a recession now.      Your portfolios like mine and anyone else invested in
                                                                Australia and globally have reduced in value on paper as
Ben Bernanke:                                                   share prices and listed property prices have dropped in
                                                                the short to medium term.
February 18, Ben Bernanke, chairman of the US Federal
Reserve, in a speech said                                       Where you have managed fund options in your portfolios
                                                                the units remain the same in growth funds only the price
―The Fed expects US GDP to decline to 1.3% in 2009‖
                                                                of a unit moves up or downwards (since middle of 2008
In the 4th quarter of 2008 US GDP fell 3.8%. This has           downwards).
now been only recently revised to negative 6.2%.
                                                                Do not be mistaken, share markets are never expected to
Japan                                                           go up in a straight line every year (otherwise, no one
                                                                would ever work). Volatility is part and parcel of owning
    Japans GDP in the Dec quarter of 2008 was negative         shares. This means in the short to medium term owning
     12%.                                                       shares whether directly or through managed funds and or
    In December 2008 Japan‘s exports were 35% below            through super or pensions can become an emotional and
     the level of the previous December.                        financial rollercoaster when the markets turn negative.
    In January 2009 they were 46% lower than in January
     2008.                                                      Where to from here

Australia                                                       The most common questions we are receiving at the
                                                                moment are:-
    The federal government will go from a forecasted $20
     billion surplus (May 2008 budget) to a massive deficit.         Have we got to the bottom yet?
    Queensland government in June 2008 predicted an                 When will things start to turn around?
     $809 million surplus.                                      As we do not have a crystal ball that tells the future we
    In December 2008 they revised this to a surplus of         are not able to answer these questions with any certainty
     $54 million.                                               – unfortunately as human beings we do crave certainty.
    In February 2009 they expect it to be in deficit by
     $1.57 billion.                                             In this newsletter we have reviewed the last 16 months
                                                                and also taken a longer look at history to allow us to pos-
In a speech on February 18 2009 from Malcolm Edey, the          sibly look forward.
Assistant Governor (Economic) of the RBA said,
                                                                What short memories we sometimes have – the Austra-
―For the world economy as a whole, 2009 is shaping up as        lian economy bounded along uneventfully for almost 17
a very difficult year. IMF forecasts released in late January   years without any serious recession. Unfortunately
are for world growth of half of one per cent this year, with    economics move in cycles and it is normal for share prices
the G7 economies contracting by 2 per cent. If these            to move both upwards and downwards.
forecasts are realised, it would amount to the weakest
year for the global economy, and for the advanced               The share market is driven by the performance of listed
industrial countries, in the post-war period.‖                  companies and their profitability is driven by the state of
                                                                the Australian and world markets. We have shown below
Everyone believes there is recovery in the markets,             a brief history of bull and bear markets from 1970 to now
unfortunately there is no magic wand that makes it              to put the current downturn in perspective. There have
happen on song. The various Government‘s stimulus               been nine bear markets (negative growth) in the last 29
packages have yet to be felt in America (which is crucial to    years. You will notice that the share market rose 134%
the world) and in Australia.                                    (blue line positive growth) from March 2003 until the
                                                                subprime and subsequent credit crunch resulted in
    Page 2                                                      negative growth over the last 16 months (red line).
            The SPIN from TOPS cont’d
                  View our new website—
                                                                                              Newsletter Title

One thing to take from this table is that bear markets do       A new word?
end and in the past have been followed by strong bull
markets    with    returns    that    have    significantly     How quick are the              pundits with        a    new     word
outperformed the negative returns from the bear                 ―Obamanomics...‖
                                                                President Obama's plan for achieving growth and
Client briefing day—Brisbane                                    prosperity is now known as ―Obamanomics.‖

As previously advised we have organised a client briefing       Obamanomicsts believe that an economy grows best
day at Carina Leagues Club at 1390 Creek Road, Ca-              from the bottom up, making innovation paramount.
rina on Monday 11 May arrive 10.45am for 11am start.            Innovation, by its very nature, creates jobs and, thus,
We have presenters from both Colonial First State Fund
Management and Perpetual Fund Management to                     Will this happen - time will tell.
provide a view on the market where we have been, were
it is at and what is in store for 2009 and beyond.
                                                                Upcoming events
You will also receive an invitation in the mail, we would
appreciate if you could confirm you attendance as soon          Toowoomba client briefing date claimer -16 July 2009.
as possible.

We encourage you to bring along friends that may be             On behalf of the team at TOPS.
uninformed on the market or who would like to obtain a
better understanding of what the current economic crisis
means to investors.

 How economists predict the simple!
                                                                Tony O‘Leary PNA
                                                                Certified Financial Planner
                                                                Authorised Representative No 311477
                                                                Australian Financial Services Ltd AFSL 297239

                                                              The information contained within this newsletter is of a general nature only
                                                              and should not be relied upon as advice for your individual circumstances.
                                                              We rely upon fund managers for the provision of graphs and all statistics of
                                                                historical returns in this newsletter. We take all care in preparing the
                                                              contents of this newsletter. Neither TOPS Financial Planning Solutions nor
                                                               Australian Financial Services Ltd Number 297239 accept responsibility for
                                                                                       any inaccuracy or omission.

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