As I sit down to write another article, Great Southern has just collapsed and I have been asked to speak to some Financial Planners about structured products. If the Global Financial Crisis has taught us anything or confirmed what we already know, it’s that we must avoid investing in anything we don’t understand and avoid …
Monthly Archive: May 2009
pub-5731955080761916
May 16
Default Super Funds
There’s been a little bit of publicity lately about the makeup of default super funds. I don’t have any statistics but my understanding is that most default super funds are the balanced fund which, strangely, is 70% invested in growth assets like shares and property. Given the overall lack of understanding of investment risk in …
pub-5731955080761916
May 15
Thought of the Day
If the risks of investing in the sharemarket are supposed to be lower the longer you invest, then why does it cost more to insure the same sharemarket portfolio (using put options) the longer your timeframe? Answer…because the first part of the statement is false and sharemarket risk does not decline over time Send …
pub-5731955080761916
May 06
Market Valuation Update
Source: RBA The rise in global sharemarkets in the last 2 months has seen the PE Ratio increase from its bottom at around 10 to around 12 to 13. As the above chart shows this ratio valuation level is not too different to the average PE Ratio in the 1970s and for Australia, the 1970s …
May 05
Today’s RBA Rate Prediction
The current September 2009 government bond is yielding 2.77% indicating the market is expecting (most likely) only one more 25bps rate reduction over the next few months. Most economists expect the RBA to stay steady today and given the RBA reduced rates last month by 25bps I also expect it to stay steady as they …