Wednesday, September 20, 2006

God Bless America, Or China, or India...

Invest News #65, 2006


God Bless America, or China
Investing into China & India, safely, via Australia
Are Africans the next Arabs?


Question 1 Who in the world uses the most oil?
Question 2 Where do the oil users get the oil from?


If you answered, 1) “The western countries”, and 2) “The Middle East”, you would be fairly close to the truth… or the truth, as it was, for most of the last century.

In the last few decades we have seen the USA and the western nations using most of the world’s oil, and sourcing it from the Middle Eastern countries.

In more recent years, the amount of oil being used by China is on the rise. Soon, your answers to the above two questions will be “China”, and “Africa”.

Be prepared for a world-wide shifting of the scales.

Seasons change!
For most of the last century, we have seen “the world’s oil” coming from the Arab nations, and consequently, much of the world’s petrol dollars flowing to these nations. There may be sheiks who used to ride camels who now ride around in a Merecedes-Benz, and there may be ex-goat-herders who are now among the wealthiest people on the planet.

If you have a few grey hairs, you may recall the days when Japan was a poor nation, or when Singapore and Malaysia were poor nations. You may recall Arabs who lived in tents and not mansions. Twenty or thirty years ago, some of the wealthiest countries, and some of the wealthiest people, were virtually unheard of by many of us.

Where does China source her oil?

The Middle East has been fought over for centuries, with or without the issues of oil, religion or the western world. While the rest of the world is sourcing their oil from an area that has been fought over for hundreds of years, what is China doing?

Ignoring the western demand and the Middle Eastern supply, China is quietly and carefully drilling for oil in Africa… Shh!

The Chinese are making friends in Africa, building infrastructure, creating jobs, buying oil. The Chinese are sourcing oil to infuse into their growing economy. African people who used to till the soil are now drilling for oil, on larger wages. Their once uneducated children, who were destined to work farms, are now studying to become geologists and engineers for the oilfields.

The Chinese are adding value to Africa in the form of sending in new currency and cheaper imported goods. Just as the Chinese bought plenty of Australian steel and coal, then gave Aussies cheap plasma screen televisions, the Chinese are now doing similar things with the African nations to get oil.

Thank God and watch the destination of your dollar.
The Chinese economy is booming, India is coming second, and Australia is coming along for a ride on the coat-tails of our Asian neighbours. We are making money, creating jobs and things are looking good.

Next time you go shopping, you may make a conscious effort to “Buy Local” to keep jobs here and to support your immediate neighbours inside of your country. Or you may have a broader mind and realize that some of your neighbours are a thousand miles away.

“Buy Local” when you can and when you want to support locals. Buy Asian sometimes without feeling guilty. After all, they are our neighbours and they buy our stuff too! It is possible that your job ultimately depends on a product, service or raw material being sold in Asia.

Show your support for your country, just invest into it. Or invest into other countries that invest into your country.

Think Global, Act Local
Be alert and not alarmed. Learn the “destination of your dollar”. Know that much of China’s and India’s wealth is spent in Australia. Imagine if you bought shares or real estate in Japan or Singapore before they become a wealthy nation. Now think of China and India and imagine how much money you can make in the next few years…

To find out “who’s taking your money” and where it ultimately ends up, call a good financial planner and ask them. To find out which companies or countries will make money from the changing world economy, call a good financial planner and look at which is the safest way for you to profit from the change in global tides.

(Good financial planners are always obligation-free: www.invest.org.au)

Jeremy

Disclaimer
The information contained herein is of a general nature only, does not take into account your particular objectives, financial situation or needs. Accordingly the information should not be used, relied upon or treated as a substitute for specific financial advice. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Professional Investment Services nor its employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information. Jeremy Britton is an Authorised Representative (#298825) of Professional Investment Services, ABN 11 074 608 558, AFSL 234951. Approval #H629

Sunday, August 13, 2006

Get a Bank Boost, claim a tax deduction on life insurance

INVEST NEWS #71

A fundamental rule of Investing
One of the fundamental rules of investing is "buy low, sell high". It was stated by legendary investor Sir John Templeton half a century ago, and sung by the Rogue Traders in their 2006 hit, "Way To Go". Templeton bought stocks at the start of WW2 when markets were low and turned a $10 000 investment into $4 million. The Rogue Traders turned a bunch of other people’s songs into a goldmine…

20% discount plus free steak-knives
Alright, so you may not receive free steak knives with your next property purchase, but you may well receive a price discount of 10% to 20% if you are patient. With property markets slowing down, it represents a great time to buy. Sellers are more motivated to haggle and the number of places for sale means that you may take your time to look around for the best deal.

Beat the banks
Contrary to popular belief, banks do not like to repossess people’s houses. Have a look around the branch: it is quite small. There is no place for them to store houses, cars or office blocks that they repossess from tardy payers. The banks do not have room to store physical "stuff"; what they do like to collect is money…

As recently as 1999, one of Australia’s largest banks sold a man’s business premises for 40% of its true value. (Do not ask "which bank?"; the more important question is "Why?") The reason why they sold his premises for 40% of its market value was because he owed the bank 40% of the value.

The bank was not interested n selling the premises for the best price; they were not interested in holding the property and waiting for the market to surge before selling it: they just wanted their money. They did not want land or profit, they just wanted the tardy loan off their books.

Plan ahead for the worst case scenario
As the bank would prefer to receive money rather than land, do yourself a favour and ensure that you can repay the loan, whether you are alive or dead. The bank will give you a loan if you can work and repay the money while you’re vertical, but do not overlook the inevitable. One day you will die, and if you die before you repay the loan, the bank would like to have money, not the building.

If you would like to get a loan for $500 000 and repay it over 20 years, then invest into a $500 000 life insurance policy before you visit the bank.

The bank manager will want to see the income sheets to see if you can pay for the premises or home while you are still alive and working. Show him the figures.

They will also need to conduct due diligence to ensure that the loan will be repaid when you die. Show him your life insurance policy.

You are now prepared for any eventuality and you will have cash to repay the loan, not assets. This ensures that the bank is protected from forced sale and that your family is protected from losing the asset to repossession. Be prepared to answer any question the bank throws at you and you will win.

Claim a Tax Deduction on your life insurance
If you are a self-employed person, there are many tax deductions available to you which are not available to your employed peers. (See "Is my Pizza Tax Deductible?")

While your friends may have a superannuation fund that is paid into by the boss, they cannot normally claim a tax deduction for paying into their own super*.

A self-employed person can claim a tax deduction for payments made to their own super fund. Your employee friends will not normally be able to claim a tax deduction on their life insurance cover*. A self-employed person can often claim a tax deduction on their life insurance...

You have already seen why the bank would prefer your debts to be secured with cash rather than with hard assets. The bank can actually insist that you obtain life cover in certain situations and make it a mandatory part of the loan conditions. The bank cannot insist which company you obtain the insurance with, and they cannot tell you whether you can claim a tax deduction or not. Call a good financial planner or life broker and find out what else you can claim (apart from the pizza).

Jeremy

Jeremy Britton DipFA SA(Fin)
Ph: 07 5443 5577 Mobile: 0410 INVEST
www.invest.org.au

(*There are certain situations where an employed person may be able to obtain tax-effective super contributions or government assisted life insurance premiums. It is far easier to achieve if you are self-employed, but still possible for employees. Call your financial planner to see if you qualify.)
PRIVACY
This article is for general information only and is not intended to constitute any form of financial advice or recommendation of, or an offer to buy or offer to sell, any security or other financial product. Jeremy Britton is an Authorised Representative (#298825) of Professional Investment Services Pty Ltd, ABN 11 074 608 556, AFSL # 234951. Approval #H488
We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision, including purchasing, disposing or holding, of an asset, policy or investment.

Tuesday, August 08, 2006

What's in a name?

"Invest In Australia" (would you change your name for money?)

For several years the message has been simply "Invest"; forget what anybody says about "buy property", "buy shares", "bank your savings" or even "supersize me"... The best advice was always a one-word phrase, "invest".

It covered all of the relevant areas and was sure to make you rich.When people ask, "Should I buy ostriches?", the answer was "invest". When people said "Should I join this new multi-level marketing company?", the answer was the same.

True investing is not the same as merely "buying". It involves research and due diligence. It implies a serious consideration.

People "buy" stereos or clothes; they "invest" into property, stocks or businesses.

Inspired by Nike's "just do it" and by our new best friend, US Marine Cody Baker, we have changed our mantra from "invest" to "Invest in Australia".

The "lucky country" which has been called "the energy superpower" of the Asian region has already benefited greatly from world demand for gold, steel, uranium, copper, gas, coal and oil.

As China increases consumption of energy and raw materials, Australia will continue to prosper. In the last five years, Australian markets have been buoyed by China and enjoyed average growth of over 10%, whilst the US markets have performed under 5%.

Imagine what will happen in the next few years when India arises as an economic power to rival China...

Australia is an English-speaking country in the heart of Asia-Pacific, close to the growing economies of China, India & Brazil. It holds massive reserves of energy and raw materials. Billions of dollars pour into Australia from China constantly, and this is just the beginning...

Our advice to serious investors is to "Invest in Australia". We are even going so far as to suggest that our new best friend change his name from Cody Baker to Ian..... Ian Vestinaustralia.... We kid you not. Check out the story here.