Aussie News 30 June 2005

The start of the financial year began with a slew of better than expected data on the Australian economy this morning.

Retail trade surprised on the upside, rising by a strong 0.9% in May ahead of market expectations of 0.4% and a fall of 0.5% in April. Lower petrol prices in the month, "good-feel" spending, spurred by the impending tax cuts and more generous family payments announced in the May budget, and the early start to the mid-year clearance sales helped to boost sales. All sectors except food, recreational and other retailing posted positive growth in May. Department store and clothing sales recovered strongly in May, after falling sharply in April, as aggressive discounting appeared to prompt strong volume turnover.

The housing market was the other sector to deliver an upside surprise with building approvals rising by 4.5% in the month of May, above median expectations for a flat result. The rise was driven by a sharp 5% increase in building approvals for houses, with approvals for 'other' dwellings ticking up by 1%. This is the second consecutive monthly rise in building approvals.

Implications: The rebound in retail sales shows that, while spending has clearly slowed from last year's heady pace, the Australian consumer is not yet dead. Our expectations for a slight pick up in retail sales over the second half of this year, partly due to the impact on income tax cuts (which come into effect today), remains in tact. Meanwhile the second consecutive monthly rise in building approvals provides some tentative evidence that the market has bottomed, notwithstanding the prospect of a renewed fall in activity once the full effect of the March interest rate rise comes through the market. In other words, today's data supports the view that housing still looks on track for a soft landing.

As for monetary policy, today's upbeat data does little to add to the case for further tightening, but importantly it also suggests that any rate cut is still some time away. Banks continue to expect rates will remain on hold over the rest of 2005.

Bourse follows dip in banking sector

Today share close slightly higher 13.3 point to close at 4229.9 (June 30,2005)

The return without dividends from the ASX 200 was 21.06 per cent at the close of business yesterday.

Overall returns for the major sharemarket index, the ASX 200, are predicted to drop to a more normal levels of between 8-10 per cent in the next 12 months.

This is down on the "super strong returns" of 24 per cent return produced from capital returns and dividends for this financial year, which ends today, and returns of 22.4 per cent for 2003-04.

"This year has been another super strong year for the Australian stockmarket, making it the best back-to-back year for investors in 18 years," Mr James said.

The ASX 200 index tracks the performance of 10 industry groups listed on the stock exchange. The main industry groups are energy, information technology, health, materials, industrial, utilities, consumer staples, financial, consumer discretionary and telecoms.

The best performing sector was the energy index with a rise of nearly 63 per cent on surging interest in uranium.

China's runaway economic development provided a strong push for commodity producers on the sharemarket. Combined with soaring demand and increased prices for metals, minerals, chemicals and forestry products, this led to a 34 per cent leap by the materials sub-index.

The telecom and consumer discretionary indices, which rose 2.06 per cent and 2.66 per cent respectively, were the worst performing sectors.

Uranium miner Paladin Resources is positioned to finish 2004-05 as the hottest stock, after a landmark year which has lifted its market value to nearly $500 million.

Economists are split on whether interest rates will next move up or down, but are united in their belief interest rates won't move before the end of the year.

A 53 per cent plunge by automotive parts maker Pacifica Group, largely the result of a bleak profit downgrade, ranked it as the worst performing stock of companies listed on the Australian Stock Exchange at the beginning of this financial year.

too many buybacks are tax scams

Quoted from SMH 29 Juni 2005

The Tax Act permits companies to "deem" that most of the payment for shares that it buys back is a franked dividend. It's up to them.

It is not really a dividend, of course. It is simply the payment a company makes to its shareholders in return for buying their shares from them. Companies, however, have been "deeming" that most of the payment is a franked dividend and only a small amount is capital.

The winners of this little lottery get a cash rebate of the franking credit plus a nice "deemed" capital loss, which is not necessarily a loss at all.

For example, the recent BHP Billiton buyback at $12.57 per share included a fully franked dividend component of $10.47. The capital component was $2.10, so everyone made a huge capital loss and got a big franking credit. Super funds (15 per cent tax) and charities (zero tax) got cash rebate cheques.
That's how come the company got the shares 13 per cent below market - which means the $2.3 billion buyback was subsidised by taxpayers to the tune of $340 million.

With a heavy heart I picked up Division 16K, Subdivision C, Section 159GZZZP of the Australian Income Tax legislation, which deals with share buybacks.
The Tax Act does indeed permit such a thing.

Quote:
"The Commissioner of Taxation is a very great functionary. This is a world in which the Commissioner can find a final capital component of $4.04 and a dividend of $10.47, all inside a payment of $12.47! Truly a Magic Pudding."

In fact, the companies themselves get to determine how much of a buyback is dividend and how much is capital, and the Commissioner waves an omnipotent hand to bless the scam.

There are two, related, things wrong with it:
capital is artificially "deemed" to be dividend for tax purposes, which might be fine except that this method of distributing franking credits is discriminatory. Super funds and charities that pay less than the company tax rate of 30 per cent get the full benefit of the credits, often in the form of a cash rebate. Those with a marginal tax rate above 30 per cent, according to S. E. K. Hulme, get no imputation benefit at all.

On the face of it, this constitutes "dividend streaming", which is where some shareholders receive a greater benefit from dividends than others.
Section 254W of the Corporations Act outlaws this practice, but the Australian Securities and Investments Commission, apparently, is unconcerned. Certainly it has done nothing.

Share buybacks structured this way clearly are discriminatory. They are open to all but they suit some more than others; some accept and get the tax benefit and the capital loss, while others do not.
It is true that all shareholders benefit to some extent if a company is able to buy its own shares at a discount to the market, but for those who do not participate it is a bird in the bush, rather than a couple in the hand.

Companies are under intense pressure from institutional shareholders to announce share buybacks structured in this way because it means they will produce superior investment returns to individuals, who will therefore be more inclined to give them their money. Most companies can resist anything but pressure from institutional shareholders.

If the Commissioner of Taxation feels powerless to do something about it, then ASIC should step in and apply the dividend streaming provisions of the Corporations Act.

Failing that, directors are vulnerable to class litigation. This might seem a long bow, but some people are getting angry.

Oil Price reach $62 this week

The sharemarket closed lower yesterday, with investors nervous as the oil price hit a record high.
The fear is that higher oil prices will translate into higher petrol prices and dampen consumer spending in Australia.
The ASX 200 index closed down 14.4 points at 4231.2 and the All Ordinaries index fell 12.6 points to 4191.2.

"Investors are fearful that higher oil and more particularly higher petrol prices will cause the consumer to shut up shop."

Most sectors were in the red, though oil stocks benefited, as the benchmark New York oil contract hit a record high of $US60.45 a barrel.
It touched $US60 for the first time during New York trading last Thursday.

Bersambung dengan buku Investment Lessons

6. Think Independently
Being independet mean having the courage to invest in stocks that no one else wants.
It takes independence and courage to buy real estate during recessions or move to cash in the middle of Bull Market.
But if you're right, you will be richly rewarded.
It is easy to invest with the crowd but not very profitable.

7. Prepare for the Worst
Realistic Investors know that no matter how bad things get, they can always get worse.
Investors should focus on the downside because the upside will take care of itself.
If you hope for the best but prepare for the worst, you will take the necessary steps to avoid losing any or all of you money.

Mastering Your Emotions

3.Stick with your strategy
"Discipline"
It means you have a plan and you stick to it no matter what.
You have a system that controls your emotions that would otherwise be destructive - Fear, Greed, Anxiety.
You need to have the self-discipline to stick to the strategy and follow the rules.

4. Don't let emotions ruin your portfolio
The Two most common emotional reactions to the stock market are fear and greed.

5. Learn from your mistakes
We should learn from the mistakes of others. We don't have time to make them ourselves.
Jack Schwager, Author of Market Wizards, says that just because you lose money on investment doesn't mean you actually made a mistake.
You can won on a bad trading decision and lose on a good trading decision.

101 Investment Lessons

Saya ingin mengutip dari buku 101 Investment Lessons (by Michael Sincere)

1. choose a successful Investment Strategy
All the pros, have reasons to believe a particular stock will go up or down in value.
This reasons make up their Investment strategy, and every decision they make in the market is based on this strategy.
A Strategy helps you limit the number of stocks you will look at, because you will be careful about the stocks you buy.

Value Investing.

Growth Investing

Contrarian Investing

Quantitative Strategy.

Dow Strategies.


2. Create a written set of rules.
For example, that many Growth Investors have a rule to buy stocks that are growing more than 20 percent per year.
Many Value Investors may have a rule not to buy a stock with a P/E ratio higher than 15.
Consider developing rules for buying, rules for selling (it helps you make the toughest decision: When to Sell), and this rules will not totally eliminate losses, but should help you to trade more objectively.
By relying on a set of rules, you will prevent fear, greed, and hope from clouding your judgement.
It is essential, says Martin Pring (Investment Psychology Explained), that you regularly review your rules as your financial position, investment philosophy, or market conditions change over time.

Selamat Datang di Superannuation

Hari ini tanggal 25 Juni 2005, saya ingin mulai mempelajari Superannuation (semacam dana pensiun) karena mulai tanggal 1 Juli 2005 ada peraturan baru mengenai Super Funds.
Saya akan tulis semua bahan yang saya dapat dari koran dan majalah

How to start your own fund

- Buy a trust deed from an accountant, adviser or lawyer, or at www.onlinesuper.com.au or www.fundbroker.com.au
- Appoint up to four trustees who must be members
- Set up a bank account in the name of members "as trustees for" your fund
- Apply for a Tax File Number and an Australian Business Number from the Tax Office, There's "an application to register for superannuation entities" at www.ato.gov.au.
- Write down an investment strategy which takes into account risk, liquidity and diversification.
- Go for it.

Biayanya? Ngak murah
Set-up and Advice, antara $2500- $5000 (One-Off)
Trust deed, $400 - $1100 (at start, then every five years)
Administration (no pension) $2500 - $5000 (Annual)
Administration (with pension) $3500 - $6000 (Annual)
Auditor $400 - $1000 (Annual)
Valuation (if have property) $500 - $1000 (Every three years)
Adviser (if needed) $3000-$6000 (Annual).