Skip to main content
rss feedour twitterour facebook page linkdin

Financial Happenings Blog
Wednesday, October 31 2012
The Nielsen Global Consumer Confidence Index has released data for the third quarter of 2012.   I read these numbers with interest as stronger consumer confidence is pretty important if we are to see a sustained and strong recovery.

The confidence of consumers across the globe edged up in the third quarter of 2012 to a level of 92.
  Unfortunately a score of 92 still sees the average consumer as pessimistic.  A score of 100 would see them as neutral.

Confidence is weakest in East & South Europe along with Japan.  Western Europe is also amongst the least confident areas of the world.

Confidence in the US is just below average at 90 with Australia at a higher than average 98.

It is the nations on South East Asia, notably Indonesia, India, Phillipines, Thailand, Malaysia along with a sprinking of nations in the Middle East along with China and Switzerland where confidence is at its highest.

Let’s hope that the confidence of the consumers in these nations can lead to a stronger world economy in the years to come.


Posted by: Scott Keefer AT 03:57 pm   |  Permalink   |  Email
Wednesday, October 31 2012
Technology is definitely bringing the world closer and closer together.  Aspects of the investment world highlight this point.  Investors can be sitting in the comfort of their own home trading seamlessly across markets right round the world.

As with many other areas of technological development, new capability does not always bring beneficial results to the masses but can lead to areas of exploitation and danger.

Jim Parker in his latest Outside the Flags posting, highlights this when it comes to currency trading.

I often reflect with clients that if they think equity markets are tough to gauge currency markets are much more difficult and hazardous.

Please take a look at Jim's insights in his article that has been reproduced below.

October 30, 2012
Dollars and Sense
Vice President
"Making money in the global markets is just a click away", the commercial promised, without mentioning that losses are just as instantaneous.

For many people, one consequence of poor investment returns over prolonged periods is that the lure of the easy-money, quick-fix trade becomes even stronger.

This is how marketers of foreign exchange trading programs – betting on currency movements "from the comfort of home" – are finding such a ready audience right now.

Despite horror stories of people losing fortunes in high-speed, leveraged and extremely speculative activity, the appetite for this casino approach seems stronger than ever.

In one case, an Australian online entrepreneur is being sued by US regulators over an allegedly fraudulent forex trading scheme that cost investors in the US, Australia, the UK, Germany and other countries more than $50 million. 1

According to the US Commodity Futures Trading Commission, the company 'Investment Intelligence' used online marketing to solicit clients worldwide to open currency trading accounts, lured by promises of a 9% monthly return and low-risk.

In one night in May, the CFTC said clients awoke to discover they had lost more than 60% of their investments. This occurred when the company entered more than 200 trades in each client's account, violating representations made to them earlier.

Of course, not all such online currency ventures are fraudulent. But there is often a large disconnect between the promise and the reality. Many ventures tell individuals that just by attending a short course and learning a few trading techniques, they can make substantial money via trading currencies from home.

But the reality is that even the most highly skilled and knowledgeable investors – including global banks with hundreds of analysts – have difficulty predicting movements in currencies with any consistent success.

In fact, none other an authority than the former chairman of the US Federal Reserve Alan Greenspan once said that predicting exchange rates has a "success rate no better than that of forecasting the outcome of a coin toss".

So if global institutions and central bankers say it's an impossible task, what are the chances of an ordinary person, working on their own at home with a software program and a few charts, making a living out of currency speculation?

Recognising this threat, the Australian Securities and Investments Commission has issued a warning to retail investors to exercise extreme care before committing to get-rich-quick, currency trading schemes and courses.

"Forex trading is very risky even if you have years of skill and experience in this type of trading," the commission says. "You will need plenty of spare money if you have to cover a margin call. Risk management systems such as stop loss orders, will only give you limited protection by capping your losses."

As well, ASIC warns of the dangers of 'counterparty' risk if the forex provider can't fulfil its obligations. Liquidity or technology issues can stop you being able to make a trade, margins or spreads can eat up any profit you make and promotional offers of trading being "free" or "no loss" inevitably have strings attached.

On top of all that, you are expected to remain constantly on top of what is going on in the 24-hour global forex market – a market where turnover totals $4 trillion each day, according to the Bank for International Settlements. And you must be aware of all this while living your non-trading life – sleeping, eating and seeing your family and friends.

It just defies logic that anyone could do all of this without going either broke, bewildered or insane - and perhaps all three.

1. 'Foreign Exchange Trading: Money Smart', ASIC, April 23, 2012

Posted by: Scott Keefer AT 12:00 pm   |  Permalink   |  Email
Wednesday, October 31 2012

For the past 6 years the Legatum Institute based in London has ranked the world’s nation in terms of 8 criteria : 

Entrepreueurship & Opportunity
Safety & Security
Personal Freedom
Social Capital

Using these criteria the institute then provides an overall Prosperity Index.

Top of the rankings for the 2012 rankings were again the Scandinavian nations of Norway, Denmark and Sweden.  Australia and New Zealand then followed in 4th & 5th.

We often hear the phrase the “Lucky country” and this prosperity index provides some interesting insights into why this might be the case not only for us who live here but for those looking in from the outside.  The areas of particular strength were deemed to be Education, Personal Freedom & Social Capital.

An interesting aspect of this year’s report is the highlighting of the rise of the Tiger cub nations – Indonesia, Malaysia, Thailand and Vietnam - over the past 4 years.  This is particularly interesting given the background of Australia’s recent white paper on engagement with Asia but also our close geographical links to this part of the world.

For me the key take aways are to reflect on and be proud of the prosperity we have in Australia but to continue to work hard and smart to keep this prosperity in place including strong engagement with nations in our own back yard.

As an investor, it suggests that placing confidence in our own Australian companies is warranted with the index also speaking to the grower prominence of not only China and India but also the ASEAN region of nations.  A well diversified portfolio  should be including exposure to this area of the world.  We suggest clients do so through investing in the broad Emerging Markets asset class.
Scott Keefer

Posted by: Scott Keefer AT 07:00 am   |  Permalink   |  Email
Tuesday, October 30 2012
Click on the link to be taken to a PDF version ofthis blog including diagrams

A lot has been written and served up to us through advertising channels about the benefits of the low cost industry super fund network.  At A Clear Direction we think that some industry super funds offer a good option for clients especially with low balance beginning their superannuation savings journey.

However, a major issue I have with the “Big Bucket” investment approach offered by these and other superannuation offerings comes to when you want to start drawing down on the balance to sustain your cost of living and lifestyle in retirement.

By Big Bucket approach I mean whereby you have a range of investment choices which hold a diversified pool of assets and you get to choose one or two of these choices.

The problem comes once you start to draw down.  A few years ago you did not have the choice of targeting where to draw your payments from so you were forced into selling down a percentage of all the asset classes held in the fund.  This thankfully has improved so now a member could have a cash option and draw all payments from there along with a balanced, moderate or conservative diversified option.

So a suggested structure within these big bucket fund is to have a holding of cash alongside a diversified investment option matching your required asset allocation.

This all sounds pretty reasonable.  The problem in the structure is that the investment earnings generated by a particular investment option are not able to be directed back into the cash option to top it up.  Rather they get automatically re-invested back into the investment choice from which they were generated.  The end result is that you quickly see the cash component dwindle.

So what this means is that a member has to manually sell down assets from the diversified balanced, moderate or conservative option to top up the cash account.  What you are doing is selling a range of asset classes.  This includes selling down growth style assets such as shares and property.

If those investments have been steadily growing this is not a problem as we would be undertaking effective rebalancing.  Unfortunately when growth asset markets are struggling, selling down these assets is locking in the losses or poor performance that has occurred.

Take the past 5 years as an example.  We are still well away from seeing shares and listed property assets regaining the levels of late 2007.  If we are forced sellers now we are locking those paper losses into real losses.

In my opinion a much more effective arrangement is to take control of where the income generated by assets is invested and in doing so reducing the need to be forced sellers of assets at a point in time.

Another interesting side issue is to know where administrative fees are being taken from in “Big bucket” accounts.  Most likely it is across the investments proportionately.  Here is another situation when you can become forced sellers when ideally it would be better not to do so.

At A Clear Direction we believe that you can have the benefits of a low cost superannuation service along with the necessary control to make sure you are not forced into making poor investment decisions along the way. 


Posted by: Scott Keefer AT 07:00 am   |  Permalink   |  Email
Monday, October 29 2012
I read with interest a Sydney Morning Herald article that looked at a range of investors who had chosen to go down the DIY Self Managed Superannuation path – Master of Your Own Destiny.

One participant to the article suggested they had $7.6 million in their fund and were paying fees of approximately $100,000 per annum.

So I decided to look at what the fees would look like in 2 superannuation accounts of $3.8 million each using the cheapest available administration service I have at my disposal for that amount. 

The following table sets out the total fees for the combined $7.6 million portfolio across a range of asset allocations:


60 / 40

50 / 50

40 / 60

30 70

Administration Service





Investment Managers















These numbers are based on using the standard investment philosophy suggested by the firm.  If a client wanted to through in a direct shareholding component to the portfolio the investment manager costs would fall further.

Keep in mind that the members no longer have the responsibility of being trustees of their own fund plus they have shaved off more than $65,000 from their cost base. 

I think this shows that the cost basis of A Clear Direction’s approach is extremely competitive for large portfolios and also puts into question the oft quoted perception of lower fees in SMSFs.

If you think you are paying too much please get in contact.


Posted by: Scott Keefer AT 12:15 am   |  Permalink   |  Email
Friday, October 26 2012

Alan Kohler through his Eureka Report enterprise has today commenced a Save Our Super campaign.  I imagine that the campaign will be taken up by the News Corporation suite of newspapers in due course as News now owns Eureka Report.

The launch piece for the campaign has some compelling arguments:

  • fees are still too high, and
  • there are way too many vested interests in the management of the funds under management including within the “Industry Funds” sector that we hear about so often on TV.
So good on Alan for taking up the cause.

Unfortunately I have a few problems with the launch piece in the Eureka Report.

One problem I have with the launch is the innuendo that Self Managed Super Funds are the saviour of the superannuation industry.  I have come across many SMSF holders who have been advised into this structure but it is really not in their interests because:

  • fees are actually higher than they could be with other solutions thanks to high accounting and administration fees,
  • they are not investing in asset classes that are only available to SMSF members such as direct property, (and could be investing in what they are invested in much more cheaply)
  • they actually don’t want the responsibility of being trustees or directors of a corporate trustee
  • they have not been made aware of the implications once they arrive at the latter years in life – i.e. key man risk
Please don’t see this as saying SMSFs are bad, they are definitely the right structure for some.  Let’s just not promote them as the only alternative.

Members of my family have been the recipients of such advice in the past so I speak from personal experience.

Another problem I have is the broad brush attack on the financial service industry as a whole.  There are a growing number of practitioners out there doing the very best for clients, including superannuation members, through offering low cost strategically positioned portfolios with high quality ongoing advice and service.

The final issue I have is the broad based attack on Australian equities as a culprit for the woes of super.  Were experts making this argument in 2006 and 2007 after years of uninterrupted growth?

I agree there needs to be a greater focus on broadening the base of asset classes away from cash and Australian shares especially into high quality fixed interest but is now the right time for investors to be making wholesale changes?  History tells us that when asset classes have experienced tough times that is the exact time to be sticking with that asset class as it will rebound.

The other aspect of the debate around Australian shares in superannuation that is often overlooked is the growing income stream that is being provided by this asset class through time, even including the past 5 years.  This is exactly what investors in retirement or who are reliant on there investments need to keep pace with inflation.

There is no doubt that Australian shares have struggled of late but it still remains an important asset class for all of us into the future.

Time for me to get off my band wagon and head into the weekend.  I wait with interest to see how the Save Our Super campaign gathers momentum.


Scott Keefer

Posted by: Scott Keefer AT 05:06 am   |  Permalink   |  Email
Request for Information 
If you have questions, or would like more information, please go to our Contact page and leave your name and contact information.