Monthly Archive: May 2009

May 23

Another financial product rant

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 …

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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 …

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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 …

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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 …

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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 …

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