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Minimalism – Is less really more?

Minimalism – is less really more?

This month two gents known as The Minimalists, Joshua Fields Milburn and Ryan Nicodemus, bring their “Less is Now” tour to Australia, challenging audiences with the question, ‘How might life be better if you owned less, instead of more?’

Far from simply suggesting chronic buyer’s remorse, the Minimalists pose the question of whether our material possessions really do bring us the happiness and fulfilment we thought they would.  If not, could we actually give them away and find freedom from the ‘stuffocating’ life we’re leading? One suggestion includes packing your things as if to move, and then anything not unpacked in the next month is simply donated to charity.

Could we as consumers really make the switch from the McMansion lifestyle to the tiny house movement?  From fast fashion to sustainable clothing? Can we make purchases more consciously, more deliberately and to state the obvious, more rarely?  And if we did, would it be a life of deprivation or indeed, as they advocate, a life with greater financial freedom, less clutter, and more opportunity to focus on what and who we really value?

Far from imposing a strict set of rules, the Minimalists agree there isn’t anything wrong with owning material possessions, they simply suggest focusing on what’s important, what gives serves a distinct purpose or brings real joy, and then getting the excess out of the way.  It begs the question, is this just another fad, or have The Minimalists seen the proverbial light?

Can less really be more?

 

For more, visit theminimalists.com or see their tour dates across Australia this March.

Economic Update – March 2018

Within this month’s update, we share with you a snapshot of economic occurrences both nationally and from around the globe.

Inflation Jitters

– United States (US) jobs data starts a correction

– Market rally hard on no news!

– Australia jobs data are mixed

We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact your Financial Adviser.

The Big Picture

We ended January on a slight sell-off, arguably because markets ran a little bit too hard at the start of the year. But come February 3rd there was one little number in the US jobs report that caused a stir.The Big Picture

Wage inflation came in at 2.9% – not big in itself, but a little higher than expected. That caused market participants to reprice bond yields and equities dived a little more.

A week later, all was forgiven. When the noise was stripped out of the data, markets rallied hard again. But then they sold off in the last couple of days of the month.

The US got a second bite at the inflation cherry with the mid-February CPI read. Both versions of the index beat by a fraction so market volatility started to fluctuate in normal territory.

We had the local ASX 200 minimally overpriced in January, so it was no surprise that our market didn’t fall as far as Wall Street. And it rebounded sharply!

Our labour force data seemed strong on face value. But full-time jobs growth plummeted, while part-time more than took up the slack. Unemployment is stuck in the mid 5% range.

China produced some stunning trade data. The commodity boom is far from over.

China is also moving to ‘do a Putin’ by removing the restrictions on a president serving for an extended period. President Xi looks set to be around for at least another 5 – 10 years. Not bad for now but how will the next generation be introduced? Of course Australia and the UK have no limits on the tenure of a PM.

Stock market volatility certainly spiked in early February but it has already got back to close to the normal zone.

The fly-in-the-ointment for the next month is how the new US Fed Chairman, Jay Powell, handles himself. He faced his first grilling on Capitol Hill at the end of February. Commonsense dictates he will try to help the market slowly adjust to any new scenario he would like to preside over.

He was quite upbeat on the strength of the US economy. He emphasised that this strength has improved since the December Fed meeting.

The market and the Fed were both pricing in three rate hikes for 2018. But that Powell testimony has pushed up the probability of four rates to 34%.

As new data has come to hand – particularly on inflation – volatility may again spike. But it is our view that, at the end of the year, 2018 will be seen as having been good for equity markets.

Our Reserve Bank seems unlikely to do much for months – if not for the whole year and beyond.

It so happens that many high-profile analysts have called the latest US company reporting season (February) as “excellent” and the Australian season that is just ending as “quite good”.

With global growth converging to a stronger world economy, and US and Australian companies predicting a brighter future, 2018 looks likely to be quite a strong year for investors.

Asset Classes

Australian Equities

Our market was almost flat over the month but the Healthcare sector was particularly strong with CSL leading the way. The market finished February at 6,016 – which is well off the February low of 5,821.

We have the index priced fairly with above average capital gains expectations going forward.

Foreign Equities

The S&P 500 index sold off at the end of the month to finish down by ?3.9% which is about the same as for other major indexes. Australia was the standout!

Bonds and Interest Rates

The RBA did not change rates at the February meeting. It is doubtful that they will raise rates in 2018 and they might even cut.

The US Fed and the market seemed in lockstep at the beginning of February expecting three hikes in 2018. But Jay Powell’s first appearance on Capitol Hill was read as being quite bullish on the economy. The odds of four hikes rose to 34% on this testimony.

This change in sentiment nudged the 10 year US Treasury bond rate to almost 3% – the highest in 4 years.

Other Assets

The price of iron ore had a particularly strong month. Oil, gold and copper prices were all down a fraction in February.

Regional Analysis

Australia

16,000 new jobs were created in January – the latest published data point – but full-time jobs fell by ?49,800 and part-time increased by 65,900. The unemployment rate came in at 5.5%.

China

China had another spurt in trade volumes. Imports were up 36.8% and exports were up 10.5%. However the China manufacturing PMI missed expectations at 50.3 from 51.3 the month before. The non-manufacturing PMI was also weaker than expected at 54.4 from 55.3 but it was still very much higher than the value of 50 that divides contraction from expansion. Some experts said that the Lunar New Year celebrations may have adversely affected the data.

The authorities are moving to remove the current limits on the tenure of the President. As a result, President Xi looks set to steer the ship for at least another 5 – 10 years.

On the short-run, an extension for Xi is a positive but the danger is that a lack of new blood in his inner sanctum may make the eventual transition to a new President less smooth.

US

The US started February with a strong jobs report. 200,000 new jobs were created and unemployment was 4.1%. The wage rate grew by 2.9% which caused a change in expectations to a faster rise in interest rates.

Fourth quarter GDP growth was revised down to 2.5% from 2.6%.

Importantly, the wage data contained a significant change to the minimum wage that might only have given a temporary boost to wage inflation.

The US CPI data produced a headline figure of 2.1% and a ‘core’ rate of 1.8%. It is the latter that is favoured by the Fed and its target rate is 2%.

Bloomberg TV reported that Trump has already decided to run for re-election in 2021.

Europe

German inflation slipped in February but not by enough to cause concern.

Brexit negotiations continue to attract attention but again progress is being made but not rapidly enough for many members of parliament across party lines.

Rest of the World

The Winter Olympics concluded in South Korea with apparent harmony between north and south. But the star of the Olympics must be the woman – born and raised in the US – who represented Hungary by virtue of her grandparents. She came last in her event as she did not perform any tricks on her skis that characterise the sport. She qualified by coming in the top 30 in the required number of world cup events. She managed that feat by only entering competitions with less than 30 entrants and coming last in each!

It was reported on Bloomberg TV that the North Korean president, Kim Jong-un, and his father used false Brazilian passports to travel in the 1990’s.

Financial Planning Week: Why Financial Advice is for everyone

Planning is not everyone’s forte, especially when it comes to money and budgeting. So it’s no surprise that new research from the Financial Planning Association of Australia suggests that 80 per cent of working-age Australians are stressed about money and finances.

Other research shows the number of Australians living from paycheque to paycheque is on the rise from 29% in 2015, to 32% in 2017, while the National Debt Helpline is struggling with the volume of calls flooding its call centre. And official data published by the Reserve Bank in July showed that Australian household debt was at new all-time high.

But it’s not all doom and gloom. A common misconception is that only those with high incomes can benefit from financial advice. In fact, everyone can benefit from meeting with a financial adviser. From consolidating your superannuation accounts to selecting the most appropriate insurance options for your lifestyle, a financial adviser can be your one stop shop to freedom by having your finances sorted.

Once you’ve made the decision to seek financial advice, it’s important to find someone you trust – after all, they will be handling your finances and sensitive information. Ask friends or family if they have any recommendations, or Google advisers in your local area. Most should offer a free introductory meeting where you can get to know them and ask about the process and any fees involved.

Because everyone’s goals are different, a financial adviser is able to tailor the plan to suit your needs and lifestyle. Whether it’s to buy your first home, take your family on that dream holiday or to retire early, your adviser is there to help you with the right products and path to get you where you want to be.

It’s important to meet with your financial adviser regularly, so they can adapt your plan to suit market trends or your changing goals.

Ready to start your path to financial freedom? Infocus has a large and growing network of advisers around Australia – so there’s a good chance there’s one near you. Find your nearest adviser at www.infocus.com.au or phone 1300 463 628.

Rod Bristow
Managing Director and CEO

Speedy lender could shake up the mortgage market

After more than two years of research and development, an Adelaide fintech says it can approve a home loan online in just 22 minutes.

Tic:Toc Home Loans launched this week, with a purely online business model which it says lowers overheads and fees, while speeding up the approval process.

Founder and CEO Anthony Baum says that while other lenders offer online application options, ultimately the application moves offline for the approval process.

“So while their application may begin online, it ends in the exact same way every other traditional home loan process does,” he told Business Insider.

So how does Tic:Toc knock down the typically tedious task of applying for a home loan to a 22 minute online process?

Mostly by utilising online verification processes. Firstly, the property needs to be located in a capital city or major regional area. At this stage Tasmania and the Northern Territory are excluded, but the team say they are working on it. You’ll need to verify your identity with a Medicare card, driver’s licence and/or passport. You’ll need to have at least 20% of the deposit plus fees and stamp duty saved, and you’ll need to demonstrate a regular income to cover the minimum loan amount. Tick all those boxes and you could be instantly approved for a home loan.

The great part about a purely online system is that it eliminates many of the fees related to a person processing your application. So say goodbye to valuation fees, establishment or application fees, settlement fees, service fees and redraw fees.

Tic:Toc have teamed up with Bendigo and Adelaide Bank to underwrite variable and fixed rate loans, offering a comparison rate of 3.69%, beating all the rates listed on Canstar’s Home Loan comparison service. While the rate is great, this kind of loan won’t be for everyone. So do all the necessary research or talk to your financial adviser before applying.

How likely is it to shake up Australia’s ever-competitive home lending market? The big four are always keen to slash costs from their bottom line, so no doubt they’ll be keen to investigate Tic:Toc’s business model and find ways to implement it themselves. Perhaps first as a no frills, entry level option to get first home buyers on the property ladder.

While they’ll be wary of approving a loan with so few details, as the technology progresses and the banks put their own development teams on the model, they’ll be able to extract more information from customers before approving loans. The major downside will be job losses after the Commonwealth Bank slashed 150 jobs in Brisbane in June, ANZ cut 200 jobs in May and NAB shed 100 staff in March.

Rod Bristow
Managing Director and CEO

Happy new financial year!

The end of the financial year heralds a flurry of squeezing of final deductions, finalising accounts and collating group certificates and receipts…then what?

If you have a straightforward return, you might be able to navigate your way through the Australian Tax Office (ATO)’s online system myTax through your myGov account. If your complete your return yourself online, you will need to lodge it by the 31st of October.

However, if you use a registered tax agent, you may be able stretch past this deadline. Tax agents will charge a fee to compile and lodge your return – but the good news is, generally this fee is deductible in the next financial year. The benefit of using a tax agent is they keep up with tax law reforms, and can advise on what you can and can’t claim, while maximising your deductions and expenses. Always make sure your agent is registered with the Tax Practitioners Board. They should display the TPB symbol and their number at their practice, or you search online at tpb.gov.au.

Different tax agents will charge different rates and the way you pay may also vary. Some may charge you up front irrespective of whether you are expecting a refund or not. Others may take their fee out of your expected income before it hits your bank account. Always be sure to read the fine print and make sure you are comfortable with how your refund is handled. Once you find a tax agent you trust and works well for you – stick with them! It could be a very prosperous relationship.

For convenience, some tax agents will set up kiosks at shopping centres through until October 31. This can be a convenient way for those who don’t have a lot of time to lodge their claims. While established names like H&R Block will run some of these, others may be run by individuals or companies you’ve never heard of before.

In some cases, you may owe the tax office money. In these cases, it’s important to make contact with your agent or the ATO to work out a payment plan.

If you are lucky enough to receive a refund, it’s important to put that money to good use. Many of us think of it as ‘free money’, and in a way – it is. But think of all the good (albeit practical) uses to put that money towards. Could it pay off a credit card (or put a dint in it)? Could it pay next semester’s school fees? Could it top up your home deposit and get you that much closer to buying a house? Or would it be more useful in your superannuation, growing for the future?

By all means – if it’s been a while since you’ve had a holiday or a splurge, then your refund is a great way to indulge without affecting your normal budget. But if it’s extra money, think of all the good it could do in the future. An Infocus Adviser can help you figure out the best place to park your refund and any other ‘spare’ cash to grow for the future.
Rod Bristow

Managing Director and CEO

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