Market Volatility

Here is an insightful quote from Thomas Friedman in a recent New York Times speech...

"When we were young kids growing up in America , we were
Told to eat our vegetables at dinner and not leave them.
Mothers said, think of the starving children in India and finish the dinner.'

And now I tell my children:
'Finish your homework. Think of the children in India
Who would make you starve, if you don't.'?"

With that, here is the latest installement of Dale Gillham's weekly market report:

Given that the volatility in our market has continued to unfold in recent months, many are beginning to question whether the share market is really a good investment. However, as many of you would know with every pull back there are always opportunities that present when the volatility settles. Over the past few months many of the top shares on our market have fallen as much as 30% to 50% in price and while this presents some great opportunities for those who are patient, the question that a lot of investors are asking is when is it time to buy? While I believe there is still some more volatility to come, I expect it to settle in the not too distant future and when it does it will reward those who are patient.

So what can we expect in the market?

In my last report I indicated that if the market fell through 5222 points that it could fall to around 4800 points before rising in the next bull-run. Last week the market fell to 5130.10 points and while it closed higher at 5182 points for the week, the market was still displaying signs of weakness. You will remember in my last report I indicated that the market should rise for at least one to two weeks, and although this was delayed, it looks as though this is occurring now.

While the market has been trading for 13 weeks during 2008, it looks as though this week will be only the second week for the year in which it will close higher than it opened. Whilst this is encouraging, it is not a sign that the down move is over although the strength of the market this week is indicating that the buyers are keen. Given that the market has not risen for more than two weeks since October 2007, I would like to see it trade up for at least two more weeks before I start to change my outlook.

That said I do expect the market will continue to rise over the next one to two weeks before it pulls back once again. I believe the market will bottom out in the not too distant future, and when it does it will reward those who are patient. Remember, the share market is a medium to long term investment therefore as I indicated above, I would recommend sitting back and waiting until the market finds a direction before before deciding to invest.

Dale Gillham is chief analyst of share investment company Wealth Within

Proposed 2008-2009 tax cuts - Are they fair?

From News Limited media reports, here are the expected tax cuts (on average) for next financial year:

- Workers earning $15,000 or less will have their tax rates cut by 75 per cent, to just $150 a year
- Those earning $35,000 a year will get a tax cut of $20.19 a week, equivalent to 3 per cent of their salary
- Those on an average wage of $55,000 are in line for an extra $15.86 a week; and those on $60,000, $11.53.
- At the higher end, those on $150,000 or more a year will get the equivalent to just 0.7% of their pay or about $20 a week.

Australia's lowest-paid workers will be the big winners when $31 billion in federal tax cuts come into effect on July 1. I guess this confirms that the Labour party is back to its roots in helping the low and middle class income families per their election promises. Treasurer Wayne Swan said the previous federal government had turned its back on battlers - "For too long under the Liberal Party, low and middle income earners missed out on genuine relief while the bulk of tax cuts flowed to the top end... Out there in the suburbs and towns hardworking Australians are doing the right thing by their families and their country and we will reward them for their hard work," he said.

Given Australia's economic boom for the last few years, I am surprised the tax cuts were not more broad based. I imagine a number of people in Australia's metro areas are earning more than $35,000 a year , so the tax cuts for them will just be eaten by inflation and the increased cost of living. The government should really focus on improving Australia's education, health and infrastructure systems to keep pace with the rest of the world. What's your opinion?

See related posts here

Photo courtesy Bailey & Muppet

Stock Roundup - BHP, RIO, Babcock and Brown (BNB), Worley Pasrons (WOR) and Centro (CNP)

One stock that I have written about a number of times is Babcock and Brown (BNB) - Australia's second largest investment bank behind Macquarie Bank (MQG). I own this stock (bought @ $27) and even thought it is trading around $15, I am still holding on to it because I believe it is a solid company, well financed and a good long term growth stock. It has been caught up in the global maelstrom of the credit crisis and because it's model uses a lot of debt to fund projects (which is repaid via the steady stream of income these projects generate). I really do believe it is going to be a $40 - $50 stock in 3-5 years time. This was demonstrated by recent news that 25 banks have backed increasing Babcock debt facility by 19 percent to A$2.8 billion. The firm said the renewal, foreshadowed in its 2007 results, reinforced the strength and flexibility of its balance sheet.

``That 20 basis point increase in cost looks to be a pretty good result for them given the tension in markets is clearly very extreme,'' said Adam Donaldson, head of debt research at Commonwealth Bank of Australia in Sydney. ``The ability to lock in funding for a minimal cost......is a major positive.'' The increased cost of funding its debt facility has been offset by a reduction in the cost of drawing on credit in the U.S. and Europe, where benchmark lending rates have dropped. I still think BNB will have some volatile times ahead and is actively trying to restructure or sell a number of the funds and trusts it manages. So any sustained appreciation in the share price won't start till later in the year. So either put it on your watch lists or hold on to what you have (like me) and enjoy the ride.

Onto other company news, what is happening with the BHP and Rio Tinto (RIO) merger? Well, RIO has basically rejected BHPs revised offers. saying a merger does not increase shareholder value. Personally, I think that this merger will not go ahead and if it does, it will take a long time to play out with BHP having to end up paying a lot more than planned. If you want to benefit from this potential transaction, buy RIO shares.

Worley Parsons Ltd., (WOR) Australia's largest engineering company, has long been one of the stocks on my buying watch lists. I just haven't found the right time to get into it. Either it rose too much, or with the credit crisis fell too fast. However, it has continued winning contracts and the underlying business is strong. JP Morgan reaffirmed its ``overweight'' rating on the stock, which enjoyed a 10% share price rise this week. JPMorgan said the company was ``well placed'' to deliver strong earnings growth for at least the next few years. ``The business is highly cash generative and seems likely to continue to deploy capital to strategic acquisitions to complement its strong underlying organic growth,'' the March 26 note said. ``We believe the current price to be an excellent opportunity for investors to get exposure to a high-quality, long-duration growth stock.'' At $34 the stock has dropped about 40% from its high's. I am going to be watching it closely over the next few weeks and look to buy if it drops below $30.

Centro (CNP), previously a ASX 50 stock and now a speculative play I reviewed a couple of weeks ago, has now got more time to repay monies owed to the syndicate of Australian banks behind the embattled group's banking facility. They will extend the debt facility until September 30, contrary to speculation that they might pull the plug when it expires on April 30. At 0.25c it looks an even better "punt" now - providing you believe it will make it through the debt ridden mess it is in now.

Finally, the Australian dollar advanced to the highest levels in a week, reversing part of last weeks steep falls, as rising prices of metals the nation exports boosted the outlook for economic growth. The local dollar is headed for a quarterly gain as traders raised bets the US Federal Reserve will keep cutting interest rates, increasing the appeal of Australia's bonds. ``Metals prices are up so that's supporting the Australian dollar,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia, the nation's second-largest. ``It's difficult to be bearish on the Australian dollar while the U.S. dollar continues to soften.''

Australian Stock Market Newsletter Reviews - Part 1 of 2

This is a 2-part post looking at some of the leading Australian stock market newsletters, or stock reports as some are called. In these volatile market times it is more important than ever to spend more time researching market trends and related stocks before buying or even selling. Having a detailed review and recommendation done by professionals that provides in-depth objective analysis on the facts and figures is very useful. Also, it provides a way to stay in touch with some of the smaller and up and coming stocks which have strong growth potential. These reasons are what got me to start looking at some of the leading newsletter and reports covering the Australian stock market. This article provides a summary of my findings and basis for my future subscription decision.

So how did I find the “leading” stock market newsletter and reports? I already knew of a few from being an active investor for a number of years and also did various Google searches around the keywords “Australian stock reports and investment newsletters”. Further, I did some research across the leading finance/business publications and media to see which newsletters were the most prominent. I then picked the Top 6 from a list of about 15. This post looks at the first three newsletters, with the second post looking at the remaining three. I will provide recommendations at the end of the second post as well and perhaps another reader poll to get your opinion.

Disclosure: This is an independent review. I have not got a paid subscription with any of the newsletter/reports and am not affiliated with any of the reports and their employed staff as of the publishing date of this article.

Eureka

Report Review (based on sample provided): This report is headed by Alan Kolher, one of Australia’s most well known commentators and journalists. The team is also comprised of other notable writers with considerable experience. From a sample report I reviewed, (Best of 2007), the analysis is presented by the various contributors who talk about general market trends or factors around a particular stock. Given the caliber of people they have on the team, they also have managed to get interviews with leading analysts and senior management at a variety of the ASX companies. They also cover a broader range of topics, like superannuation and managed funds, compared to other newsletters that focus on specific stocks. I found they have excellent commentary on a variety of topics, but wish they had a summary of specific buy/sell stock recommendations and price targets.

Free Stuff Available online: The Eureka website is well laid out, but most of the news items are for subscribers. However, there is “Finance Television”, available for free which provides streaming audio and video market updates. This is a good link to add to your reading/viewing list. There are also some links to externally sourced investment articles.

Trial Subscription Available: Yes a 21-day free trial to the report is available. You can also sign up (via email) for the free Daily Market Report.

Newsletter Frequency and Cost: Three times a week, with a weekly PDF roundup. Annual subscription is $A 295 p/annum & monthly subscription is $A29.95. You also get access to the website which contains various market resources, stock information and investor education articles.

The Intelligent Investor

Report Review: The newsletter focuses on a value based investing approach. The team behind the report is not as well known as some of the other newsletters, but has some experienced staff that know what they are talking about. I signed up for a trial subscription (in under 2 minutes) and was able to get a recent report, which was the basis for this review. The report was about 20 pages and easy to read. It contained overall market/investor news and about 12 specific stock reviews. For the stock reviews, each one is around 1 to 2 pages long and provides an insightful view into the stocks past performance, economic factors impacting the stock and future upside/risks. They complete the review by providing a trading recommendation and include their past recommendation and stock price at that time. This is a good sign of transparency. Another notable item was the investor education articles, which are great for beginners.

Free Stuff Available online: The website is well designed and there a number of free articles, based on past newsletter content, available for downloading.

Trial Subscription Available: Yes, you can sign-up for a free 2-week subscription.

Newsletter Frequency and Cost: Bi-weekly newsletter which can be delivered online or via post (slightly more expensive due to postage). 12 issues (6 months) cost $345 & 24 issues (1 year) costs $545. With a paid subscription you also get access to the website which has stock recommendations, Q&A forums and various other investor resources.

Fat Prophets

Report Review (based on website sample): Fat Prophets is probably one of the better-known names in the stock market newsletter world. Founder and CEO Angus Geddes has made regular media appearances and along with the rest of the team have a solid investment market background. They tend to pick out-of-favour and/or small mining stocks that they think have significant upside potential. The weekly report I reviewed (Fat 332, available on the website) looks at 3-4 stocks, plus an overall market theme (like Gold and Oil prices in this newsletter). The stock reviews were pretty good and they have a unique rating system for stocks (Great White, Signature dish). I felt that they could provide more information on the risk factors for the stocks they have a buy recommendation on. For those who like trends, they provide some detailed charts showing price movement and indicate where they previously had a buy/sell recommendation for that stock (good transparency). Overall the report is concise and easy to read on a weekly basis.

Free Stuff Available online: Sharp looking and well organized website. They actually have a “Free Services” menu item available. If you register your email address you can get access to their market reports and a selection of stocks they review. Worth getting this even if you don’t sign up.

Trial Subscription Available: No trial subscription available, but you can see sample newsletters on their website to get a flavor of their writing style. They do provide a 30-day money back guarantee for any paid subscription.

Newsletter Frequency and Cost: Weekly newsletter with a 1 year Australasian subscription costing $695. 2yr option is also available for $995. A mining and resources add-on is also available.

The following are newsletters I will review in the second edition of this post.

- The Rivkin Report
- Huntleys Newsletter
- Invest4Profit

I have purposely not talked about performance of the above stock reports/newsletters. One is because the only performance figures I have would be what I see on their websites – which is not going to be entirely objective. After all who will subscribe to a report that said last year our performance was negative 10% compared to the index. Secondly, and more importantly, the newsletters should be used to improve and/or augment the information you have available for making your investment choices. They should not replace your own research and decision making process. So pick the newsletter where you feel that the writing style is something you can understand, adds value to your decision making process and provides a thorough analysis (pros and cons) of the stock you are interested in.

I will look at this list in a few months again; so if you have any comments on the above newsletters (based on your own or others experience), please do leave a comment. Let me also know if you have any other newsletters worth looking at.

Photo courtesy epidenver

The big banks are at it again - more interest rate rises!

The National Australia Bank (NAB) has broken ranks with major banks and lifted its standard variable home loan by another nine basis points (0.09%). From Wednesday, NAB's standard home loans will attract a 9.36 per cent interest as the bank seeks to cover the increased costs it is paying for wholesale funds.The move equates to about an extra $15 a month on an average $200,000 mortgage for NAB customers. It is a worry for the RBA (Reserve Bank of Australia), in terms on monetary policy control, when the big retail banks act independently of the RBA. The RBA sets the official interest rates, but it is the banks who execute the actual rate changes from a consumers perspective. So if the banks start going out on their own and changing interest rates, the RBA's influence over monetary policy is greatly diminished.

NAB Australian head Ahmed Fahour said the latest rate hike reflected "sustained increases to short and long term wholesale funding costs". The reason behind this is the US driven credit crisis which has increased the cost of funds to banks worldwide. However, don't feel too sorry for the banks, they are just passing on their increased funding costs to their customers so that bottom line profits are protected. With inflation still running high in Australia, it looks like more interest rate rises are on the cards, so it wouldn't surprise me to see a 10% variable home loan rate by mid-year.

I was talking to friends back in Sydney over the weekend about this topic and was surprised at the huge interest rate differential on home loans between Australia and the US. I know Australia's official interest rates are higher than those in the US (which has lowered rates substantially to fight off a financial crisis), but I was stunned to here that home loan variable rates are at around 9.3% nowadays. They are about 6% here in the US for those with good credit. This is equivalent to $300 per/month differential on a $250,000 mortgage. On a more typical $500,00 mortgage in Sydney, it would equate to about $800 a month differential - a lot of money by any standards. If I return to Australia anytime soon, I should ideally get the loan for my Sydney property via a US bank - but unfortunately I don't think the banks in the US would allow that!

Tax Rebate checks won't get spent

The majority of Americans say they plan to put their $300-$600 tax rebate checks in the bank or use it to pay off debt, according to a recent CNN poll. Perhaps, the IRS/Government should send out gift cards instead of cash checks, so that consumer spend the rebates and pump up the economy? $50 gift cards for each of the major retailers could be the go.

Also, the rebate is not really free money. Apparently it will be added to your taxable income next year (in 2009) - a fact not publicized too much. The rebate is just a band aid solution by politicians in an attempt to buy votes and show that they are doing something to save the economy!

Recovery Stocks worth looking into

From the latest Aegis equity newsletter, here are the stocks that they think have potential to recover (potential buys). I have covered two of them on this site before - Centro Property group(CNP), Babcock and Brown (BNB), which I would still say are risky for now. BNB is one that I do own and like for the longer term. Do you fancy any from the list?

Click on the picture to expand.

Per some of my previous posts, I am still staying away from buying right now. However, I always am on the lookout for quality stocks that could be great buys when the markets stabilizes in a few months.

Carnivals and Festivals

(April 1) - stocktradingtogo.com has hosted the carnival of finance and my post on preparing for a potential job loss is there. Check it out.

(March 24) - Check out my post on " Will America drive the rest of the world to a recession" at Can I Rich on a Salary. G Blogmaster, hosts the 81st Festival of Stocks, with many other great articles there. The blog is also quite interesting and worth reading.

(March 18). I was also recently featured in the Carnival of Personal Finance #144- St. Patrick’s Day Edition hosted at beingfrugal.net. My article on tipping - "thoughts on tipping " was the featured article. Lots of other great posts there.

Thanks to the Quest For Four Pillars blog for hosting the 143rd Carnival of Personal Finance and for including my article on those pesky bank fees and how to avoid them. There a bunch of other great personal finance articles available there worth checking out. For blogs that I read regularly, check out my Aussie and US/Canada Blogrolls at Finance ViewPoint.

Want to know more about Australia?

Happy Easter everyone. Unfortunately here in the states, there is no long weekend with Friday and Monday being working days. So while my friends and family in Australia are relaxing in the southern hemisphere sunshine, I thought I would take this opportunity to provide some historical background and facts about Australia to my American, European and Asian readers. If you have any questions about Australia, just leave a comment on this post and I will try and get you an answer.

Historical background : Aborigines probably first settled in Australia around 40,000 years ago, having moved down from South-east Asia. A British settlement was established at Port Jackson (now Sydney) in 1788. Initially, the settlement was intended to be a penal colony only, but free settlers soon began arriving in substantial numbers. The transportation of convicts from Britain to New South Wales continued until 1840. Sustained UK investment in urban development, farming and mining resulted in rapid economic growth during the second half of the 19th century. Further impetus was provided by several gold rushes in the 1850s, which boosted immigration. Individual states established their own constitutions and democratic forms of government.

The Commonwealth of Australia (a federation of the states) was established in 1901. Its legislative, constitutional and financial structures were developed in the years leading up to the first world war. A mass immigration programme commenced in 1947, focusing on the displaced peoples of Europe. The result was sweeping demographic, cultural and social change. Defence ties between Australia and the US were deepened, leading to Australia's involvement in the Vietnam war during the 1960s and 1970s and the Gulf war during the early 1990s. More recently, Australia has participated in the US-led war in Iraq following the terrorist attacks on the US on September 11th 2001. Over the past few decades Australia has also tried to forge stronger commercial and cultural ties with its Asian neighbors. Australia has been enjoying sustained economic growth for the last 15 years.

Country Statistics

Land Area : 7,682,400 sq km (61% agricultural, 5% forest) - This is larger than mainland America!

Population : 21,017,200 (June 2007)

Population by Major City in '000 (June 2006):
- Sydney 4,284 - Still the biggest!
- Melbourne 3,471
- Brisbane 1,629
- Perth 1,393
- Adelaide 1,108
- Canberra (capital) 319

Climate : Temperate in the south; subtropical or tropical in the north; hot and dry inland. Hottest months, January and February, 13-28°C; coldest month, July, 0-11°C. Best times to visit are March - Jun & September - December.

Official Language : English

Currency : Australian dollar=100 cents. Current Exchange Rate : $1A = $0.90 US (or A$1.11:US$1)

Public holidays : January 1st (New Year's Day); January 26th (Australia Day); March 21st-24th, (Easter), April 25th (Anzac Day); second Monday in June (June 9th 2008, the Queen's Birthday, except Western Australia); December 25th (Christmas Day); December 26th (Boxing Day,)

Fiscal Year : July 1st-June 30th.

Political Landscape : Australia is governed by the Labor Party, which came to power in a federal election held on November 24th 2007. It replaced a coalition of the Liberal and National parties that had been in power since March 1996. The main opposition party is the Liberal Party.

Education Levels: In 2006, 24% of Australians in the 25-64 age group held a university-level qualification, while 30% of Australians in their late teens and early 20s attended universities.

Related Posts :
Australia Day Statistics

What started this bloody recession?

The New York times today provided one of the most succinct summaries of how the subprime contagion and ensuing credit crisis has caused the global economic mess that we are seeing today. The writer David Leonhardt has done a great job synthesizing a complex topic into a simple essay. So if you don't understand why we are having the financial crisis or just want a quick re-cap, here are the key points from the article that explain it all:

- It all started at the beginning of the US economic boom in 1998, when large numbers of people decided that real estate, which still hadn't recovered from the early 1990s slump, had become a bargain. At the same time, Wall Street was making it easier for buyers to get loans. It was transforming the mortgage business from a local one, centered around banks, to a global one, in which investors from almost anywhere could pool money to lend.


- The new competition brought down mortgage fees and spurred some useful innovation. As is often the case with innovations, though, there was soon too much of a good thing. Those same global investors, flush with cash from Asia's boom or rising oil prices, demanded good returns. Wall Street had an answer: subprime mortgages. Because these loans go to people stretching to afford a house, they come with higher interest rates — even if they're disguised by low initial rates — and thus higher returns. The mortgages were then sliced into pieces and bundled into investments, often known as collateralized debt obligations, or C.D.O.'s. Once bundled, different types of mortgages could be sold to different groups of investors.


- Investors then goosed their returns through leverage, the oldest strategy around. They made $100 million bets with only $1 million of their own money and $99 million in debt. If the value of the investment rose to just $101 million, the investors would double their money. Home buyers did the same thing, by putting little money down on new houses, notes Mark Zandi of Moody's Economy.com. The Fed under Alan Greenspan helped make it all possible, sharply reducing interest rates, to prevent a double-dip recession after the technology bust of 2000, and then keeping them low for several years.

- All these investments, of course, were highly risky. Higher returns almost always come with greater risk. But the powers that be and American homeowners decided that the usual rules didn't apply because home prices nationwide had never fallen before (people have short memories!). Based on that idea, prices rose ever higher — so high, says Robert Barbera of ITG, an investment firm, that they were destined to fall. It was a self-defeating prophecy.

- And it largely explains why the mortgage mess has had such ripple effects. The American home seemed like such a sure bet that a huge portion of the global financial system ended up owning a piece of it. Last summer, many policy makers were hoping that the crisis wouldn't spread to traditional banks, like Citibank, because they had sold off the underlying mortgages to investors. But it turned out that many banks had also sold complex insurance policies on the mortgage debt. That left them on the hook when homeowners who had taken out a wishful-thinking mortgage could no longer get out of it by flipping their house for a profit.

- Many of these bets were not huge, but were so highly leveraged that any losses became magnified. If that $100 million investment described above were to lose just $1 million of its value, the investor who put up only $1 million would lose everything. [Recent statistics point to potential exposure that could run into the trillions, so you can only imagine how deep the impacts of these losses will be]

- This toxic combination — the ubiquity of bad investments and their potential to mushroom through leveraging — has shocked Wall Street into a state of deep conservatism. The soundness of any investment firm depends largely on other firms having confidence that it has real assets standing behind its bets. So firms are now hoarding cash instead of lending it, until they understand how bad the housing crash will become and how exposed to it they are. Any institution that seems to have a high-risk portfolio, regardless of whether it has enough assets to support the portfolio, faces the double whammy of investors demanding their money back and lenders shutting the door in their face. Good-bye, Bear Stearns.

- The conservatism has gone so far that it's affecting many solid would-be borrowers, which, in turn, is hurting the broader economy and aggravating Wall Streets fears. A recession could cause credit card loans and other forms of debt, some of which were also based on over exuberance, to start going bad as well.

Many economists, on the right and the left, now argue that the only solution is for the federal government to step in and buy some of the unwanted debt, as the Fed began doing last weekend. This is called a bailout, and there is no doubt that giving a handout to Wall Street lenders or foolish home buyers — as opposed to, say, laid-off factory workers — is deeply distasteful. At this point, though, the alternative may be worse.

Bubbles lead to busts. Busts lead to panics. Panics lead investors to sell and markets to fall and that's why we are in the situation we are in now. Got it?

The full article, which is definitely worth a read, can be found here.


Pictures courtesy of Jeremy Brooks

A temporary reprieve and a time to sell

The American Federal Reserve's three-quarter-point cut in its key lending rate extended a stock-market rally that began after a pair of investment-banking giants (Goldman Sachs and Lehman Brothers) reported earnings results that, while weaker than a year ago, were free of nasty surprises.  The Dow was up by more than 400 points and the S&P 500 rose 4%.

The Australian, Asian and European markets should rally as well and most likely the euphoria will extend for a few days and perhaps to the end of the week. However, I think this would be a good time to "sell into the rally" rather than look for buying opportunities. The credit crisis is still around and it will take 3-6 months more before all the bad/dirty news is out. Also, a looming threat on the US economy is Inflation. Due to the aggressive interest rate cutting by the Fed, 2% this year alone, inflation is rearing its ugly head again. This could reduce consumer spending power, increase the cost of living and overall be a major impediment to the US economy's recovery.

Professional investors remain wary of calling an end to the Wall Street's credit woes. A series of Fed moves has not eased the crisis, and stocks have remained stubbornly volatile from day to day, never establishing the kind of firm upward trend that generally benefits everyday investors. Until investor fear subsides and optimism returns about the markets (stock and credit) future, we are in for volatile times with a marked downward trend.

Am I being too pessimistic?

Are you prepared if you lose your job tomorrow?

You get into work tomorrow and you are told that your position has been made redundant. Are you prepared for this scenario and its likely impacts on your financial security?

In these volatile times with company profits on the way down, layoffs being announced every other day and a general economic malaise you need to be prepared for adverse circumstances such as losing your job. Whether you are in a dual income or single income household, you need to have contingency plans in place if your one or more of your main sources of income goes away. Here are four key items to plan ahead for.

1. Get your financial house in order

Emergency Fund - have at least four to six months of living costs close at hand to whether the drop in your household income. If you don't have that kind of cash available keep other accessible sources like your home-equity line of credit untapped. It's a lifeline if you ever need it, and it costs nothing if you already have a mortgage. Pay-off any credit-card debt - normally the most expensive - if possible ahead of time while you have an income.

Here's one tip that a number of others will think is crazy -get more credit cards while you have a job - but don't use them! It is always much easier to get approved for credit cards when you have a job and income. The credit cards would then provide a last resort source of funds. Again I repeat, they are to be your last option, but they could give you some valuable breathing space before you get the next job.

Start keeping a budget so you know what you are spending money on, and where you can realistically afford to cut back. To state the obvious, now is not the time to make nonessential big-ticket purchases or taking that family holiday. Having a budget can provide you key information like how long you can manage with the funds you have and what mandatory/discretionary expenses you need to make allowances for.

2. Update your Resume & Networks - Make sure you keep your resume and networks up-to date. In times like these, using your networks to find new jobs is key. 70% of jobs are not advertised so knowing the right contacts in the industry you are in or want to move to is critical. If you have not been keeping up with your networks, start asap. You can also used social media sites like Linkedin for maintaining and extending your professional networks. Don't wait until you lose your job to start networking. This should be an ongoing thing and if you know you are going to potentially lose your job then start the search for a new job well in advance. Not only will you be in a stronger negotiating position, you will give yourself some time to evaluate options. Remember the benefit of networking is based on the old adage - It is not what you know, it is who you know.

Some people have also used losing a job as an opportunity to start their own business or to change career tracks. This is may be great for some people, but remember to have your financial house in order before you do this.

3. Family Plan & Support - Be prepared ahead of time. If you are in a job, discuss or think about how you would manage without one. If you have a family, make sure everyone is involved in these discussions because if the worst happens, then everyone will be impacted directly or indirectly. Family can be your best form of support and talking about these issues ahead of time will reduce the stress on relationships when/if times get tough.

4. Know your rights - If you are expecting a lay off or retrenchment, make sure you know what you should be entitled to. Know if and when you will have access to any unemployment benefits. In the US, most people's medical benefits are tied to their jobs, so understand your coverage costs under the COBRA policies (it's in those documents we get when we get hired, but never read). Review your employment contract for relevant termination clauses, notice periods and what payouts (like long service leave) you could be entitled to. Administratively, get direct phone numbers and names of people in your HR, Payroll and benefits department as you may need to contact them after you have left the company and getting to them via your company switchboard/operator can be very difficult.

I currently work in the financial sector and with the turmoil and mass layoffs across a number of companies, I have to be prepared. Even if you are in a relatively safe job, it makes sense to take some of the above steps because there could be other unforeseen circumstances that result in a job loss or big drop in income that you need to be able to manage.

Feel free to comment and suggest any other tips on this topic.

Fallen share prices drive dividend yields up

Here is the second installment of Dale’s weekly market report. Dale Gillham is chief analyst at share investment company Wealth Within and provides his perspective on what happened in the markets over the last week and what’s ahead.

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Depending on where the economy is in regards to the business cycle, there will always be those who will win and those who will lose. In today’s current economic conditions the winners are those who are generating a high income from their investments as interest rates continue to rise while others are struggling to meet their mortgage repayments.

Falling share prices in recent months has caused dividend yields to rise considerably, and it should come as no surprise to find Centro and Allco with the highest yields at 128.55% and 127.54% respectively. That said I am not suggesting you buy these shares to capitalise on the income, as the risk to your capital is likely to be much higher than the potential return right now. But it does highlight that there are some great opportunities for those seeking higher income with a longer term outlook.

Of the banks Suncorp pays the highest dividend at 8.9% followed by St George at 7.5% whilst the best of the big 4 is NAB at 6.97%. All of the banks are paying fully franked dividends, which means the actual return is much higher and with returns like this you can bet there are many retirees are smiling all the way to the bank.

So what can we expect in the market?

The market fell away earlier this week and instead of finding support at 5222, price continued down to form a new low at 5164 points. Right now the market is very sensitive as it continues to over react to any news, which makes it very difficult to determine with any sort of accuracy what will unfold in the short term.

That said I believe the market will be up over the next one to two weeks as many bargain hunters come in to buy what is perceived to be cheap shares right now. While this strategy is fine if you take a long term view of 3 to 5 years, it is not the smartest strategy if you are seeking quick returns as the market is yet to define a direction. If the market does rise over the next two weeks, I believe it will reach a target of between 5500 and 5700 points but only time will tell.

Related Posts :
Dollar cost averaging and market expectations from Dale Gillham
Aussie Banks Taking a Hit
Top Australian Dividend Stocks

Look out for an upcoming give away related to this report next week!

A conversation between Warren and Bill

So Fortune, published it's latest - Richest People in the World List - and after 13 years there is finally a change on top. Thanks to the decline in Microsoft shares (along with the rest of the market) and increases in Berkshire Hathaway stock, Warren Buffet is on top of the list. Bill Gates drops to number 3, after Carlos Slim. Now Bill and Warren are friends, so here is an imaginary conversation they may have had over the phone when the list was released:

Warren : "Morning Bill, Have you seen the latest list?"

Bill : "What list?"

Warren "Why, Fortunes Richest in the world list"

Bill : I don't pay attention to lists

Warren : Come on Bill, for 13 years you have been goading me about being the second richest man and now that you have been knocked of your pedestal, you are changing your tune. Not fair - why don't you "Google" the list now [Laughs].

Bill : Well....I have discovered my inner zen and that's why I am giving away all my money to charity and hedge funds shorting Microsoft stock. I now only focus on making the world a better place to live and work in through the use of Microsoft Productivity tools.

Warren: Come on Bill, you are taking all the fun out of this. But I guess you are getting used to being No 2 with Google, Apple, Nintendo and other companies overtaking Microsoft.

Bill : Hold on now, that is below the belt. I am sure we have a multi-year strategy to get back to number one...., but Steve [Ballmer - CEO of Microsoft] is not returning my calls.

Warren: Enjoy retirement Bill. See you at our Thursday night cards' game. Dinner and Drinks are on me, after all I am the richest man in the world...

Bill : [Mutters a profanity].....Wait till Microsoft takes over Yahoo, then we'll see.

Warren: Ha, Ha,,,,,You really are in the charity business.

Bill : Bye Warren, I've got some work to do.

Warren: Bye. Do you have Carlos' number by any chance?

Bill : [Hangs up]


Another interesting thing to note about the Top 10 (see list below) is the diversity. 7 out of the 10 people are non-American and most have made their fortunes outside of America.. This confirms the ongoing redistribution of wealth across the world. In a few years I wouldn't be surprised to see no Americans on the list.

1. Warren Buffett 2. Carlos Slim Helu 3. William Gates III 4. Lakshmi Mittal 5. Mukesh Ambani 6. Anil Ambani 7. Ingvar Kamprad 8. KP Singh 9. Oleg Deripaska 10. Karl Albrecht

The full list can be found here

Tipping Point - How much is enough?

Having grown up in Australia and now living in America, it is always interesting to note the subtle difference in cultures between the two countries. One clear example is when it comes to "tipping". This is how a tip is defined : "A small monetary amount left to show appreciation for a service rendered  above the norm".  In America the standard tip is 15-20% of the bill, In Australia it is normally 1-!0%. The reason for the difference in tipping standards between America and most countries is due to the fact that American workers in the services sector are paid close to minimum wage (around $A7 per hour), whereas in other countries the minimum wage is much higher (In Australia it is about $A14). So the low minimum wage in America is justification for the large tipping component. In the restaurant and many other service based business, workers make more than half their wages from tips.

I am not against tipping, in fact after being here for one year the service you receive at American establishments is generally much better than you would receive in Australia, Europe or anywhere else in the world. I also think that given the minimum wage is so low compared to the cost of living (especially in bigger cities), that tipping has its place. What get's me annoyed is 2 things, One - everywhere you are provided a service (not just dining) a tip is expected and secondly, what's worse is when the service provider (in certain cases) automatically adds the tip onto your bill taking away your right to decide how much to reward the service.

I get a haircut and I have to leave a tip, I get a card in the mail from my newspaper delivery guy for a tip (what has he done that is so exceptional?), Tip the taxi driver when going to the airport - he didn't even bother to take the  bags out, and the list goes on. You go to a restaurant with more than 6 people, a 15+% tip is automatically added to the bill and you are encouraged to contribute more! So where do you draw the line?

Should I stop tipping in protest? That would be "un-American" as I have been told. Seriously though, I have seen how hard some people work for what they are paid and I do believe tipping deserves its place in American society. I have just adopted a simple "Aussie based" philosophy when it comes to tipping which can be summarized in 3 points

1. Where a service is provided that meets expectations I will tip between 10-12% based on the bill.

2. If the service is excellent and above the norm, I will tip between 15-20%.

3. If the service is really bad, yet they still expect a tip, my tip will be $0. That's right - I will not tip for bad service. If this is automatically added to the bill I will ask them to remove it because of the poor service.


What are your thoughts when it comes to tipping?

Desalination in Australia

In the WSJ today was an interesting piece on the desalination plant built in Australia's largest west coast city - Perth. Desalination is the process of removing salt from sea water. Coming from Sydney which went through a big desalination debate (still going on I hear) during the worst of the drought in 2006, I did not realize that other cities in Australia were well ahead in using desalination to provide part of their water needs. What was especially insightful was the environmentally friendly manner in which it was being done. Here is a video review by Patrick Barta of the WSJ that talks about the story behind the desalination plant:

Points of note from the article were:

- Opened in late 2006, Perth's $360 million desalination plant sucks in roughly 50,000 gallons of the Indian Ocean every minute. It then runs that water through special filters that separate out the salt, yielding some 25,000 gallons of drinkable water -- enough to meet nearly a fifth of Perth's current demand (city population is 1.3 million).

- Perth's facility squarely tackles both environmental and financial concerns. It gets around the issue of noxious emissions by harnessing power from a wind farm. By relying primarily on renewable energy -- a recent trend in desalination -- the plant releases fewer dangerous greenhouse gases into the atmosphere. Upgraded systems remove salt more efficiently than past processes, making operating costs less daunting.

- Several Australian cities are adding massive desalination plants. The largest, near Melbourne, carries a price tag of more than $2.5 billion. Similar facilities are envisioned in Spain and India. And London is planning a $400 million plant along the River Thames.

- Perth's plunge into desalination comes at a critical time, when water is emerging as the world's next major natural-resources challenge. Water use, like oil, is surging as economic growth takes off in China, India and elsewhere. According to the International Water Management Institute in Sri Lanka, about a fifth of the world's population, or more than 1.2 billion people, already lives in areas with insufficient supply.

It is worth reading the full article for the background and details on the desalination process works. I'll be looking into how I can possibly invest in the above trend and provide an update in a future post.

Reader Poll - Decoupling and Will America drive the rest of world into a Recession?

Decoupling. Not a rude word, but one that is being used to discuss the financial and economic separation between the United States and the rest of the world. In particular, economists argue about whether or not the world will follow America into recession, based on the strength of the interdependence or lack thereof between the new growth economies like China/India and America.

Click here to vote on the US recession reader poll (left pane) at Finance ViewPoint.

Decoupling does not mean that an American recession will have no impact on countries around the world. Just look at the current credit crisis and US recession which has been reflected in falling share markets all over the world. The point is that their GDP-growth rates will slow by much less than in previous American downturns. Most developing economies like China and India, enjoyed strong growth during the fourth quarter of last year, and some speeded up, even as America's economy ground to a virtual halt and its non-oil imports fell.

There is also growing evidence supported by hard data that decoupling is no myth as published in a recent Economist article. Indeed, it may yet save the world economy.

- China's growth in exports to America slowed to only 5% (in dollar terms) in the year to January, but exports to Brazil, India and Russia were up by more than 60%, and those to oil exporters by 45%. Half of China's exports now go to other emerging economies - so they are far less dependent on the US for its exports.

- Emerging markets domestic consumption and investment quickened during 2007 - showing the rise in consumer wealth in these countries. Their consumer spending rose almost three times as fast as in the developed world. Investment seems to be holding up even better: according to HSBC real capital spending rose by a staggering 17% in emerging economies last year, compared with only 1.2% in rich economies. It also looks like capital spending growth will continue for many years as these countries modernize and spend billions on infrastructure and related services.

- The four biggest emerging economies, which accounted for two-fifths of global GDP growth last year, are the least dependent on the United States: exports to America account for just 8% of China's GDP, 4% of India's, 3% of Brazil's and 1% of Russia's. Over 95% of China's growth of 11.2% in the year to the fourth quarter came from domestic demand. China's growth is widely expected to slow this year but to a still boisterous 9-10%. The data here is the key support for the decoupling argument.

For the first time ever, developing countries would be able to make full use of monetary and fiscal policy to cushion their economies from a US recession. In the past, when they were net foreign borrowers, capital inflows tended to dry up during global downturns as foreign investors shunned risky assets. This forced governments to raise interest rates and tighten fiscal policy. Economies with large external deficits are still vulnerable, but most emerging economies now have a current-account surplus and large foreign reserves; many have a budget surplus or are close to balance, leaving ample room for a fiscal stimulus if necessary.

Looking at Australia in particular, it seems we are now far less dependent/linked to the US economy than we used to be. Normally when the US economy entered a recession, Australia was not too far behind. Yet the Australian (and New Zealand) economy is booming and interest rates are rising to control inflationary growth (unlike the US where interest rates are falling to stave off a recession). This is probably due to the fact that China and India are becoming much more significant trading/export partners for Australia, thanks in large part to the demand for our resources and related services. A sharp slowdown in China would hurt Australian much more than an American recession will.

Perhaps the best support for decoupling comes from America itself. Fourth-quarter profits of big companies, such as Coca-Cola, IBM and DuPont, were better than expected as strong sales growth in overseas markets offset a sharp slowdown at home. Bits of American business are rising above their own economy. With luck, the world economy can rise above America's.

What do you think - Which parts, if any, of the world will follow America into a recession? Click here to vote on the reader poll (left pane) at Finance ViewPoint - You can select multiple answers. I will publish the results in a comment on this post.

Dollar cost averaging and market expectations from Dale Gillham

I would like to introduce a new guest contributor at Finance ViewPoint - Dale Gillham, who is chief analyst at share investment company - Wealth Within. Given his presence across a number of publications and media in Australia, I thought it would be worthwhile to get his views on various financial concepts and weekly perspective on what we can expect from the financial markets.

So here is his Weekly Market Report for the week ending March 7th 2008.:
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Dollar cost averaging seems to be a hot topic within the industry of late. For those of you who may not understand this concept, it basically means that you continue to buy more shares in companies that you already own as they fall away in price in order to achieve a lower average purchase price. Now I don’t know about you, but I struggle to understand why anyone would want to buy shares in an asset that is falling.

If you dollar cost averaged Centro and ABC Centres in the past 6 months you would most certainly be questioning whether this was wise given both that shares had already fallen significantly prior to the recent falls. I am sure those who employed the dollar cost averaging strategy to Telstra as it fell 62% over 6 years from $9.20 to $3.43 would still be regretting their decision as they could have made far more money in many other shares during this time.

In my opinion dollar cost averaging or buying shares as they fall away because they seem cheap is not smart investing for the simple reason that most investors do not know where the bottom is and to buy without knowing is speculating.

So what can we expect in the market?

Just when I thought our market was settling and would confirm a direction soon, it has once again behaved erratically, and fallen away over the past week. This erratic behaviour makes it very difficult to determine the short term moves in the market, although as I mentioned last week I believe the medium to longer term will be bullish. The only question that remains is when this will occur.

There is a high probability that the next bull-run will commence before the end of June and when it does it will produce some great gains in many top shares. In the short term we need to be patient as it is possible the market will pull back to the low of 5222 that occurred in January although there is a small possibility that it could also fall to around 4800 points. That said I believe the market will start to rise over the next one to two weeks, which if correct could be the start of the new bull-run. Again it pays to be patient because right now is the perfect time to ready yourself to enter the market when it does confirm a direction.

Middle Class Millionaire Habits

Marketwatch.com had an interesting article today on the views of America’s “Middle Class Millionaires” (MCM) - Those with net worth of $1 million to $10 million.

What was striking to me was that these MCM’s thought that you need $13 million plus to be considered rich! I would think $4 - $5 million would put you in the rich category – but then again I am not a MCM.

Here are some the findings from the Prince and Schiff report:

- 7.6% of American households, or 8.4 million households are middle-class millionaires

- The average middle-class millionaire works 70 hours per week

- Middle-class millionaires are five times more likely than the average worker to say they are always available for work

- 89% believes that anyone can attain wealth through hard work

- 62% believes that networking, or knowing many people, is the key to financial success

- Nine out of 10 middle-class millionaires say they made a bad career or business move, but almost three-fourths say that was crucial to their business success

- They are five times more likely than the average middle-class person to continue on in the same business course in spite an earlier failure

- 65% of middle-class millionaires characterize their approach to negotiating as "doing whatever you need to do to win"

- They say they need a net worth of $24 million to feel wealthy, and $13.4 million to be considered rich.

- Almost half of middle-class millionaires believe a child's academic achievements reflect one's success as a parent.

I think the findings and percentages would be consistent across most developed economies around the world. What are your thoughts on the above?

Centro - Worth a Punt @ 0.35 cents?

One of my readers emailed me asking "What are my thoughts on Centro shares (CNP) which have a had big fall of late....and is it good value at $0.35c?". I had been reading about the plunge in Centro stock, an Australian property trust which invests in and manages retail properties, but not really paying much attention as I don't own its shares and the property management sector has not been one of the areas I have been following. However, armed with the question and after doing some research, here is what I found.

At 35 cents the shares could present a good, albeit very risky, buying opportunity. The low share price (the stock was trading close to $10 a year ago) and potential developments could present a good entry point now. However, I reiterate, this is a very risky investment and you could just as easily make significant losses. So read this article to get my views, but do your own homework as well.

First some background on Centro and how it got to this stage -

Yesterday Centro Properties Group announced a $1 billion-plus loss in the first half of this year, wiping $100 million of its already diminished market value and making it more difficult for the company to refinance its multibillion-dollar debt obligations. Its shares have tumbled more than 92 percent since December, valuing the company at A$380 million. Centro, which has funds under management of more than $26.6 billion, had made a profit of $157.276 million in the previous corresponding half. The turnaround in fortunes made Centro one of Australia's biggest casualties of the global credit crunch

Centro, which in addition to being second- biggest manager of retail property in Australia, is the fifth-largest shopping mall owner in the United States, controlling more than 800 shopping malls in all. It became heavily indebted after it made a series of aggressive and highly leveraged acquisitions in the U.S. market over the past two years. Its 674 U.S. properties account for 62% of its total portfolio by value under management. It owns 128 shopping centers in Australia and New Zealand.

The main reason for the loss was the impairments to its U.S. properties where the company had to write down $278 million worth of direct U.S. property investments and $578 million of its investment in the U.S.-based New Plan Excel Realty Trust. Centro failed to attract investors quickly enough to buy the New Plan properties off its books before the debt came due. In contrast, rental income grew by 10 per cent in a virtually fully occupied Australian portfolio. Australian sales were more than $10.5 billion, underpinned by improving supermarket and specialty sales growth, which together make up more that 70 per cent of Centro's total portfolio sales.

Centro is trying to refinance $3.9 billion of its own maturing short-term debt by April 30, but remains under pressure to raise fresh capital through asset sales or an equity injection. It has initiated a strategic review and opened up its data room for interested parties. There is speculation that Australian property company Mirvac Group, US-based private equity firm Blackstone Group, the Malaysia's Mulpha International and General Electric may bid for a controlling stake in Centro. Other bidders are also likely to bid for Centro as well as its various interests. Formal bids are expected within weeks

Centro Chief Executive Officer Glenn Rufrano said the company's operations and business model were sound. "The current issue facing the company is one of capitalization. Our review is focused on recapitalizing the Centro balance sheet." He is "convinced" the US portfolio will increase in value over time.

``It's a very daunting task given that the outlook for the U.S. economy is grim,'' said Winston Sammut, managing director of Maxim Asset Management Ltd. in Sydney. ``I'm leaning toward the plug not being pulled on Centro on the basis that the banks would prefer a solution to be found rather than them take total control.''

In Conclusion

The biggest risk with this stock is that there could be further write-downs or creditors may not extend the loan payback period which means the company could go into receivership or forced to sell its profitable Australian fund and assets, and you'll end up with almost nothing for your shares. However, if you are willing to take some risk, I think you could make some money in the short term - particularly if potential buyers inject cash into the company. I would only put in between $2000 - $3000 , which you could easily double (or lose) in a few months. Here's what I think the stock has going for in the near term which could lead to some significant share price appreciation:

1. It has a number of global and well-funded buyers interested in its assets, which means that external investors see value in the company. If one of these buyers take a stake in the company it will reassure a lot of people about the company's future and confidence it will be able to meet its upcoming debt obligations.

2. It's Australian and NZ (ANZ) operations are going well and are profitable. Write-downs are on the US side only. So if they get extra funding and manage their US exposure they should still be making decent profits on the ANZ operations. In time, if the US recovers, they should return to strong growth given the good quality of their asset base.

3. US retail sales are starting to show early signs of recovery and with further US interest rate cuts on the way, this could be a positive for the retail sector and for companies like Centro which manage and purchase various retail sites/shopping malls.

So there you have it - my view on the stock. In answer to my readers question - the stock is worth a punt for the risk-loving investor and could have significant upside.However if the credit markets get worse, especially in Australia, then all bets are off. I would also say take profits when/if the stock goes up by more than 50% - which it could easily do if the funding issues are resolved. Good luck!

Avoiding those Pesky Bank Fees

We have all read about the ever increasing fees and charges that banks and other financial institutions charge us on our everyday savings and checking accounts. But how well do you know the various bank fees and how much you could be charged? A recent government study on bank fees revealed that consumers are ill-informed about the fees they are paying on their accounts and tend to pay more than then need to. In the US alone, $36 billion in bank fees were charged last year to consumers. In Australia, the estimate is about $3 billion. While bank fees are not going to go away or lessen anytime soon, savvy consumers can avoid a number, if not all, of these fees by being informed and shopping around for the best deals. Here are some of the more common bank fees/charges and tips to avoid them.

Monthly Account Keeping or Service Fee : The most common fee you pay for an organization to manage your bank account. Generally runs anywhere from $3 to $7 per month ($36 - $84 annually). However, you can search around and find ways to avoid this fee by finding a zero fee account or meeting some no-fee requirements like having a certain account balance or home loan with the bank. For example, I have a transaction account with HSBC Australia that does not charge a monthly fee and offers a high rate of interest. I can also withdraw money for free from any ATM up to 5 times a month. In the US, I have a bank account where if I directly deposit my paycheck I get my monthly fees rebated back to me. I have found that the mid-tier or newer market entrants have the lowest or no fee accounts.

Internet Banking fee : A fee may be charged for doing transactions over the Internet (0.50c to $1 per transaction). If you are paying this, then choose another account or bank. Most banks do not charge a Internet fee for transaction accounts, especially if you are already paying a monthly account keeping fee. In fact banks are encouraging consumers to use the Internet as it is the cheapest and highest returning channel for them.

ATM transaction fee : When using your ATM card, you may be charged a fee if you exceed the number of transactions nominated for a particular time frame (e.g. per month) or use an ATM from a different bank.The fee for this can range from $2 to $5. Again, this is an easy fee to avoid with some forward planning or withdrawing cash via free EFTPOS when doing your grocery shopping or at the fuel station. You can also select an account that allows some non-bank ATM usage or rebates you for any ATM fees incurred. There are plenty of options out there.

Foreign ATM fee : If you use an overseas ATM, you may be charged $3.00 to $7.00 for withdrawals. This one is especially applicable to me as I work/travel and live overseas. Ironically, the cheapest way to get money overseas is to use an ATM withdrawal. You get the best exchange rate and even with the ATM fee, this is cheaper than any other currency exchange method out there (more on this in another post). So I would say this a fee worth incurring when travelling overseas, and one you really can't avoid.

Branch withdrawal fee : Dealing with a person face-to-face can sometimes cost you money ($5 - $10). This one is for those folks who like personalized service and are willing to pay for it. For most of us, we can avoid this by doing most of our banking on-line or via the telephone. If you do want the face-to-face interaction choose a bank account that provides a certain number of these interactions for free.

Cheque withdrawal fee : A fee to produce a cheque is often charged. Find out how much this is before you need to do this so you are aware of this cost. Generally runs from $0.50c to $1 per cheque. With a host of other payment options out there like BPay or direct transfer, paying by cheque is getting obsolete - as should the fee for you.

Dishonour fee (or Overdraft fee) : The fee you pay when the balance in your everyday transaction account goes below $0.00. Example: Your phone provider debits $150.00 for your monthly bill but you only have $100 in your account at the time. You may be charged anywhere from $30 to $50 by your bank. I have been hit by this one - so make sure you keep a buffer (e.g. $500) in your transaction account so that you have sufficient funds to cover these situations. If you are expecting a big debit, make sure you transfer money into your account well ahead of when its due.

Exceeding your credit limit fee : A fee may be debited from your credit card account every time you exceed your credit limit during a statement cycle e.g. $35 per statement cycle. Another bad fee which you can avoid by watching what you spend. At worst case increase your credit limit or get multiple credit cards so that your credit limit is higher - but higher credit has its own inherent dangers.

I am sure there are many other fees out there, but these are the most common ones consumers face. It would be interesting to hear of any adverse fee experiences you have had and/or lessons learnt by leaving a comment on this post. My worst one was paying a $30 overdraft fee when I forgot to move enough money from my savings account to my transaction/checking account before a big bill came through. That was $30 wasted, which with a bit of forward planning I could have avoided.

Financial institutions must provide information to their customers on these fees and charges. So if you are getting charged for something you did not know about, make sure you raise this with your bank. With the credit crisis causing a lot of pain for bank earnings, they will look to other ways - like bank fees - to make up for these losses. So be on the watch out for increasing fees and shop around to get the best deals that suit your banking needs.

Photo from thinkpanama

About Finance ViewPoint

Well, I have just completed over 6 months on Finance ViewPoint during which time I have learnt a lot about the world of blogging, on-line commerce and web page development. However, the best aspect has been the feedback I have got from readers, family/friends and other bloggers who read this blog. Thank You. A number of people I have talked have asked me various questions about this blog, why I blog, how did I start, how much do I make etc. So I thought I would take this opportunity to answer some of these questions in a FAQ (Frequently Asked Questions) format.

Q: Why did you start this blog?

A: I started after reading about the "blogging" phenomenon in various articles that talked about the growth and potential in blogging. I also read a number of prominent blogs and thought this is something interesting and productive I could do in my spare time. If I was to select the top 2 reasons, among many, to start this particular blog they would be:

1. Living overseas, I wanted a way to keep in touch with the Australian share market and be more disciplined when investing. I figured if I had to write about why and where I would like to invest, I would be more structured and organized in my investing process. This blog also provided me with a channel to talk about various general economic and finance concepts and useful resources that I and hopefully my readers would be interested in. As time grew, I expanded my focus to also cover personal finance topics and financial aspects of other related areas in technology and entertainment.

2. Make money. Yes, greed played a factor. Reading some of the more popular blogs, I saw that the writers were making $5000 - $20,000 a month passive income and had given up their day jobs. This was very appealing as it would be great to do something I enjoyed and get paid for it. However once you start blogging, reality hits you soon and per my next point, the money ain't what it is cut out to be. I would say that only small number of blogs out there (less than 1%) make substantial amounts of money.

If you do want to start blogging, first read all about blogging at these two sites - Problogger, and Skelliewag. I think these are the top ones out there on the subject of blogging and can provide you with lots of useful tips and advice. Setting up a blog is free and simple at blogger.com (I use this platform) or wordpress.com. If you want to get serious about it sometime in the future, then register your own domain name as soon as possible.

Q: Do you make any money blogging? How much?

A : On average over the last 6 months I probably made about $40 to $50 per month. In my first month I made $2 and last month (February 2008), I made more than $150. Most of my blogging revenue comes from sponsored posts and ads on my site. I probably spend about 40 hrs a month on this blog, so that works out to about $1 per hour. As you can see, if I was doing this for money, I would have quit a few months ago. For disclosure I have a list of the main affiliate programs I participate in on the bottom left hand pane of my blog (under Affiliate links!). Ones that I recommend for new and smaller blogs are - Pay Per Post and Linkworth (for Sponsored posts) and Adbrite and Bidvertiser for site ads. Google Adsense is probably the main game out there in terms of on-line advertising, but this hasn't provided me with any significant income yet.

Q: Where do you find content to write about?

A: Surprisingly this is not a problem for me - I always seem have a lot of ideas. The key thing for me to keep in mind as this blog grows is to keep the content interesting and informative for my readers. The world of finance is dynamic and diverse so there is always something interesting going on and worth writing about. I also get good ideas from readers of this blog. My personal experiences also provide a lot of the source material. I try and write 3-4 posts a week and like to write and refine posts over a few days as and when I get the time.

Q: Are there any other good blogs out there?

A: Lots. According to the latest research there are 2.9 billion blogs out there. Probably only 25% of those have been around for 6 months or more, but there is no shortage of good blogs out there. In terms of finance blogs, I have for 2 recommended blogrolls - one for Australian focused blogs and one for US/Canadian blogs. These can be seen on the right hand pane of the site.

Q: Do you exchange links with other sites/blogs?

A: Sure. If I like the content, I am happy to add them to my Blogrolls. Just send me an email or leave a comment on this post. Apart from helping fellow bloggers out there, the more quality links you have coming into and out of your site, the more well ranked your site will be. Also, it is always fun to discover other like minded or well written blogs.

Q: How popular is your blog?

A: Very popular - I get a million visitors a day. I wish. In reality I have about 45 readers subscribed via RSS and get about 60 unique visitors a day on average. So I would still be classified as a "niche" blog. But, the good thing is that I am growing every week and a number of my articles are coming up on the first page of relevant Google searches. I seem to also be getting more requests for advertising etc, so I take this as a positive sign of visibility and growth. You can see all the statistics and readership for this blog at the bottom of the right pane on this blog.

Q: What don't you like about blogging?

A: Writing what I think is a good post and then realizing (based on page views) that not many people have read it. Ironically the most popular posts, based on page views and comments, are very rarely the ones that take the most effort. So it is important to find the right balance. Also, given I am not a web developer, I hate when there are bugs in the pages and I can't fix them and have to then spend hours on the web searching for a potential solution.

Another challenge is writing about Australian finance and not living there. However thanks to the information now available online, I think I am able to keep on top of most of the new developments. The only real issue has been writing stock reviews on smaller and/or emerging companies that don't get much exposure in the on-line media. Also, one thing I have found which makes writing content for this blog easier is that American finance issues and topics are easily transferable to an Australian context.


That's it for this round. There are a lot more questions/answers I could have added, but this post is getting too long. So I'll do another FAQ post in the next few months and if you have any feedback on the above, feel free to leave a comment and I'll get back to you. Once again, thanks for all your support and feel free to share this blog with others. If you are not a subscriber and enjoy reading this blog, click here to become one!