Rob Coyte's Blog
Recent Blogs
- Prosper or Panic? 06-Oct-2011
- A Revolution Occurring? 13-Sep-2011
- How to Pay Off Your Mortgage 05-Sep-2011
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Whether the strong Aussie dollar is good or bad depends on what side of the fence you sit on.
If you are planning to go overseas no doubt you are overjoyed with the exchange of your Aussie for the Greenback or Euro.
The same cannot be said for our overseas visitors. Visa recently reported that total spending in Australia by UK visitors was down 3% and down 8% for our US visitors. Interestingly, the total money spent by Chinese visitor had increased by 2%.
As far as investments go those companies that need to buy things from overseas are better off whilst those that have things bought from overseas customers are worse off. Markets react to such movements and these are exactly the sorts of things that are built into the share price of companies. This provides an opportunity for those that are willing to take a longer term outlook on these businesses rather than just react to short term foreign exchange movements.
The World’s Greatest Investor – Current Thoughts
Of particular note I believe the following are interesting for anyone investing at the moment.
Commodities and Gold
Buffett answered why he does not own commodities including gold as he said he owns assets based on what they produce not the fact that their rising prices creates excitement itself.
Buffet went onto say investors that are getting into gold are “silly people”. “People like to get in on things that are rising in prices. Over time, it has not been the way to get rich”. Buffet also questioned the utility of gold saying that all you could do was admire it a point which was reinforced by his colleague Charlie Monger who said gold investors “preyed on fear” due to it being a safe haven investment.
Buffet said that over time he believed intelligent people can make more money from productive assets than speculating in commodities.
US Dollar and US debt
Buffett said that the US dollar purchasing power will reduce over time but the question remains at what rate. He said that he would rather invest in the US right now more than any other period of time in history. He said the US will not have a debt crisis as long as they issue debt in their own currency.
Nuclear Power
Buffett believes that notwithstanding the Japan disaster that Nuclear energy will remain an integral part of our energy mix due to the negative factors surrounding the alternatives.
If you want to take a peak of the WSJ live blog of the meeting it is located here http://blogs.wsj.com/deals/2011/04/30/live-blog-the-berkshire-hathaway-annual-meeting/
Commodities – Opportunity or Trap?
The Australian economy sailed through the GFC with not so much as a glitch. Many believe that our commodities industry who had revenues of $187 Billion last financial year is who to thank. Australia’s mining industry contributes 8% of our nation’s wealth as measured by GDP but a staggering 47% of our exports.
Having had a number of conversations at the pub recently with people on the exciting long term prospects of these companies as investments it is probably time to step back and assess.
With all sectors more capacity is coming on stream due to the high prices currently on offer. A perfect example of this in Australia is Fortescue Metals, iron ore producer, who was born in this commodity boom. As well as new players existing players are increasing their investment in other projects and increasing supply. In their last report the CEO of BHP spoke about the difficulty in finding projects at the right price.
In any case Australia is a low cost producer and its proximity to Asia will always mean that it is a competitive force to help sustain pricing. Regardless, it would be a brave call to say that prices will not be impacted downwards at some point and the thing that does vary among such bears is the magnitude of any decline.
To show the difficulty in such factors world renowned investment manager Jeremy Grantham, who correctly forecast the tech wreck and the subsequent decade of US equity declines as well as the large bankruptcy of global banks in GFC, says that long term Asia demand for energy, metals and crops will outpace supply. However he also goes onto say that there is a 25% chance of China slowing considerably due to bank losses and the unwinding of a property bubble which would have a large impact on commodity prices. Hedge Fund Manager, Jim Chanos, who correctly forecast the collapse of Enron said that the property bubble in China is “as big or bigger than we saw in the west” after considering the size of the economy.
The question becomes how do you balance these risks as we assess the world economy going forward? As investors we need to ask what are the opportunities and traps we need to be looking for?
If you have any queries please call me on 1300 132 214.
Energy Mix – The Final Word
As a roundup to my blog's series on our current mix of energy sources and the future problems this will bring there were some interesting releases over the last few weeks on this matter.
The International Energy Agency said that we were over reliant on coal and need to boost incentives for clean coal. Coal whilst being “dirty” produces about 47% of new worldwide electricity in the last decade. They propose energy efficiencies and subsidies to promote new development in renewable energy and concepts such as electric cars. They also addressed recent trouble in Japan with the nuclear reactor saying that nuclear power is still part of our energy mix and needs to increase output by about 30% before 2020.
The IMF this week released a report citing the impact on global growth if a timely alternative is not found to oil. The risk is obvious. As they note some savings will be found in efficiencies others will be found in the development of alternatives such as bio fuels and electric cars. Interestingly, they also talked of taxes on oil which the revenue could be used to research the answers for this conundrum. Interestingly, in Australia we already have a lot of taxes and levies on fuel I wonder what proportion of this revenue going to the government is being spent on the development of efficiencies or alternatives?
Finance - Why use Centre Capital versus Going to the Bank?
Why use Centre Capital versus Going to the Bank
First of all, what’s the difference?
A finance broker/adviser is an independent agent who acts as your representative when shopping for a mortgage loan, and who can guide you through the process, helping you get the right loan and features for your circumstances.
Approximately 40% of home loans secured in Australia have been arranged through brokers/advisers and this statistic will grow. Finance brokers and advisers are not exclusive to any particular bank or lending institution – rather are out to find you the best possible deal on your mortgage
What are the Benefits?
- Saves you significant time and effort sorting through the many lenders, products, structures and scenarios out there on the market
- Unbiased and independent advice to assist you along the way, as opposed to having one bank selling you its own products
- We are highly qualified, and are proud holders of a Australian Financial Services Licence and an Australian Credit Licence
- We’ll evaluate your needs and financial capabilities, including helping to establish your borrowing power, determining the equity you have in existing properties, and the most tax effective strategies
- Save you money by sourcing the best deal, structure, and at times better than market offers due to our volume and relationships with Lenders
So give our team a go, you won’t be disappointed.
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