Posts Tagged 'Superannuation'

The Annual Federal Bludgeon/bludge/budget/lie-fest

I sat and watched it again last night, from a different perspective. The Budget speech handed down (why do they say “handed down” when it is “dished up” to us?) by a rather smug treasurer, knowing that all the bad news had been pre-delivered so there would be no bad headlines from the “budget reviews”… It’s an election year, so bad headlines just won’t do… But what DID we get?

If you tell a big enough lie, the world will believe you, no matter how bad the lie!

Think Bernie Madoff in the USA, now in jail, but for a number of years, he was consulted by many of the best so-called financial minds of the times on matters of top level financial strategy. And the guy was pulling the most outrageous scam ever perpetrated on the public or the American people! But the lie was so huge – into the billions of dollars, that no-one believed he could be telling a lie that big.. So they believed him! Now where was I? That’s right, the Federal Budget, and Mr Swan…

He said “Growth is over 3% and spending is under 2%, therefore we are reeling in the deficit and the country is doing fine…”

The proposal though, is to slam the high earners with a massive tax on profits above bank bill/cash management account rates (somewhere between 6% and 10%) and still expect the growth and earnings to continue… What do they think will be left to tax?

Rather than an omelette, we are having roast golden goose for Christmas Dinner this year!

What is the purpose? Why tell such lies? And that’s not the only one – the whole budget is based on that lie and as such, the forecasts and expectations and promises will again fall over… But it’s an election year, and Kevvy and Wayne are going to make it all right for the poor people out there! Just vote them in again and everything will be OK…

Yeah right… And there’s still some swampland available up here too, if you’ll buy that line..

So how DO we get ahead in this economic climate? There are some things that have been done by governments over the last few decades that if accessed properly, CAN make a difference.

For many people, they are sitting on property and/or equity that they have been terrified into guarding like crazy, in case things ‘go bad’ again. That equity, people, is like a savings account and it doesn’t earn you a great deal. It can be used, very carefully though, to multiply it’s own value, and increase the dollar value of your asset portfolio. There have been laws set up and tested, to make sure that the “negative gearing” principles are secure. No, I don’t necessarily endorse negative gearing, but I love positive gearing – using your assets to create a positive cashflow investment strategy, which by definition is self funding.

The second item of significance is superannuation. It’s only charged tax at 15% so that your tax deductible contributions get a HUGE boost with any profit you make by investing with it! If you choose a Self Managed Super Fund (SMSF), you also get to decide where it’s invested and there are some great opportunities out there now.

In 2007, the law was changed so you could invest into property with borrowings, if done in a certain way so that the super fund assets were protected. Again, a great opportunity for savvy investors. You can invest into certain property within your super fund in a cashflow POSITIVE way, so it pays itself off for you! And after the age of 60, with appropriate advice, you can get your investment out tax free!

You also need to protect what you already have, with risk management and insurance strategies. That can be expensive, but if you have cashflow positive investments, they can pay for it so you get your insurance virtually for free!

Now, you’ll note that Wayne Swan and Kevin Rudd have not featured in the solutions part to getting ahead in this economic climate! And they never will!

Waiting for the government to provide solutions is like wating for the climate to change. It will, over time, in it’s own time, and there’s not a lot we can do about it in the meantime! But we CAN take responsibility for it ourselves…

I’m just annoyed that so few people have recognised the lie of the budget, and are fussing over the details built around it!

Ray Jamieson

NOTE and DISCLAIMER: I am a licenced financial adviser and this post is not, in any way, advice to any person on any strategy. It is a commentary and observation on a current, topical and important situation, and compares the possible opportunities of taking personal responsibility to waiting for a government to make things better. It also conveys, I hope, my professional disgust at what appears to be another great big scam job!



It’s Australia Day, 2009.  America has a new president, a go-ahead young guy, a new generation, and the first African American president who wasn’t in a movie role…  A lot has been written about him, but what does it mean for us, in Australia?  Quite a lot actually, in more ways than you might think…


When America elected an African American president, around 20 years younger than his opposite number, from the other side of politics, and with a very healthy margin, it sent a huge message around the planet.  Even during his two year election campaign, the American people chose him over the very popular and well known and respected wife of the former US President, Bill Clinton, and Hillary was a seasoned campaigner, a very astute and polished politician.  But they rejected her and chose him.


The message that the American people sent to the world was simple – they had put up with enough for far too long and they wanted some real change.


They wanted an end to the war.  They realised that had been lied to since 9/11 and the weapons of mass destruction, and they were mad about it.  They were lied to about the state of their economy, and facing foreclosures on their homes, they were mad about it.  They were abandoned when Hurricane Katrina hit New Orleans and they were disgusted with the federal response.  Year after year, they were lied to, and they could see their reputation as a proud nation sliding into disrepute around the planet, and they had tolerated enough.


Americans are a very proud people and they saw their pride being destroyed by a guy who couldn’t demonstrate even a serious command of their language.  They said enough is enough, and booted that team out.


That told the rest of the world that a new America was being reborn, and the world stopped and took notice.


When President Obama came into office, soon after he swore the oath of office, he told the army to get their guys out of Iraq.  Then he told the CIA to close all their secret jails and stop those covert operations.  WOW!  Heady stuff for day one!  However, he wasn’t speaking to the CIA or the Army Chiefs; he was speaking to US, the people around the planet.  He was telling us that a new American era was beginning.  He was telling us that the Texan ways of diplomacy were over, and that a socially responsible era of US world influence was beginning.


All the same, he told the terrorists and non-aligned powers not to mistake this as weakness, he still had the six-guns his Texan predecessor had been playing with; he just wasn’t going to be the one to start the war next time…


The economic implications also are huge!  The sub-prime crisis of 2007/08 has shaken the global financial institutions to their foundations and rocked many of them to piles of rubble.  For many, that was a good thing.  Corrupt businesses based on corrupt strategies have no place in our civilisation, and we have a few less of them now.  Not all are gone, but the shake-up also saw a lot of the rules these shady characters play under changed so that those remaining crooks have to do things differently now.


The economic crisis also made people aware of what is going on out there.  In my last blog, “How do you love your country?  How would we know?” I posed the question to those people who didn’t watch the news, who did they delegate to watch over the country while they had their heads in the sand?  Well, this financial crisis has slashed at least 20% of the value of the retirement funds of every Australian with an investment in an industry super fund and it has hit them hard.  Very few are now unaware of the financial crisis and they are all taking note of what is going on around them.  That alone has got to be a great thing.


Governments globally have been restructuring their financial institutions to ensure that they are up to the challenges of the times.  Many banks have collapsed; some very large banks have collapsed and lost fortunes larger than many national economies.  Seven hundred billion dollars in one case, more lost than some countries earned in a year.  Gone.  Nothing left but the lessons we learned.


Again, this global financial awareness is also a good thing.  With all governments recognising the need to restructure their financial systems, the opportunities are there to radically change the corrupt practices that had set in and replace them with new and more socially responsible structures.


I hear the cries, “But what about the global recession?”  “What about China’s growth slowing?”


There is a lesson here in discernment about what is said in the media headlines and the truth.  If you study China and her growth over the last decade, you will see that it has been phenomenal!  A new international airport every month, 30,000 kilometres of new highways, thousands more kilometres of railways, huge super cargo ships constructed and most importantly, 300,000,000 people came out of poverty and became consumers.


This figure is important.  300 million people, who had been raising just enough food to survive on, started producing and contributing to the national economy, and earned enough to have discretionary spending in addition to their basic survival needs.  That is the equivalent of the whole of the USA population starting to spend money.  It is fifteen times our own population.  Those people are now buying cars, mobile phones and gadgets faster than any other group on the planet.


If China’s growth slowed to only half, instead of the 6.8% growth forecast, that is still more than treble what Australia is expecting and we have a basically sound economy!  But that’s not all.  Look just over the Chinese borders to the north and south.  Russia and India.


Russia is making the move to capitalism in a big way and the separate states that were the former USSR members and now independent economies, some even applying for membership to the European Community, NATO and so on, earning their way in the world, bringing their national infrastructure up to modern standards.


To the south, India is now developmentally where China was a decade ago, poised to make that huge leap into growth that China made, but with a difference.  India is now a global technology leader and in many ways, very advanced and well primed to move.  When the momentum gathers, with a decade more advanced technology and communications abilities behind her, the Indian growth could well eclipse China’s phenomenal success stories, and at least parallel our resources boom again with this much nearer neighbour!  With a population of a billion also, and most of them in abject poverty while being surrounded by advanced technology, it’s likely at least as many as with China’s population will also become consumers instead of subsistence farmers in the next decade.


This phenomenon is occurring around the planet too.  Technology is enabling countries with low budgets and weak economies to tap into the knowledge boom and think smart, to work their way out of financial crisis with technology, rather than with third world labour strategies.


What are the implications for us?  Quite simply, our financial crisis here is short term, although the doom and gloom merchants would have you believe otherwise.  Some predict years of financial crisis, but the reality is that the world needs what we have.  People need to replace the “stuff” in their lives, they need roads and bridges and houses built, they need steel and coal and other resources and our country is in a perfect situation to be suppliers for all those needs.  Before the end of 2009, we can be fairly sure that a definite up-trend is evident in our markets overall, and some companies will have made phenomenal gains.


Further, the rental market in Australia is very tight and with developers holding off building new homes for a while, the rental crisis is going to get tighter and harder before it gets better.  Even if a developer decides to start building and finds a block of land, by the time they get the various approvals in place, and then build, it can be 4 years before there is a house ready to live in!


How do we take advantage of these situations?


Firstly, understand that there are investment alternatives.  As a general rule, the managed fund industry is rotten to the core at the moment.  It always was pretty rotten, with big fees charged for little result and virtually no responsibility by the fund managers.  All the super funds managed by the big insurance companies and the industry funds are investing primarily through a variety of managed funds, most of which have dropped by 20% in the last year, and more pain is to follow.


However, taking personal responsibility for your finances and your super can make a huge difference!  Self Managed Super Funds (SMSF) have generally performed well over the same period, especially if they had investment property in them, as the rents increase when the market tightens.  In September 2007, the government changed the rules to enable SMSF to borrow to invest in property.  I am part of Allied Financial Planning, the only firm in Australia that we know of that has a turnkey program for investors to set that SMSF Property Investment Program in place, from initial meeting to set up the SMSF through to having a tenant paying rent.  Depending on your starting point, it has the potential over 15 years to add half a million dollars to your fund balance, and your current superannuation deductions from salaries are enough to fund it!  It is this type of strategy, combined with other diversified investments, that enables the investor to take control of their money and their financial futures.


Outside of Superannuation, there are other investment strategies, both linked and non market linked that can and have reliably returned at least 4 times what the banks have returned, even through the crisis.  We also pioneered the development of one of those strategies, now a finely tuned and totally passive investment strategy that can turn lazy assets or managed funds into investment powerhouses.  We have never sold managed funds or regular financial products; instead, we created new products and strategies for the changing Australian financial environment.


As a financial planner and business strategist, I can teach and present those strategies to anyone who wants to take back control of their finances, from this crazy mess the economy has suddenly turned into. 


As an Australian, I want YOU to prosper, so that through your successes, this great nation can regain the place it has lost in the global village.


A final note, I have been asked by the AGMATES Online News Service to write a column on business, finance and investment.  Feel free to log onto there, subscribe and get the truth about what is really going on behind the hype of the regular news service media hype headlines.  I look forward to seeing you there.


Ray Jamieson