Everybody is a genius, but if you judge a fish by its ability to climb a tree, it will live its whole life believing it is stupid.
Welcome to our November newsletter
Can you believe it’s almost Christmas? I guess the major topics right now are interest rates and inflation. There is no doubt we have reached the bottom of the interest rate cycle, and rates will start to move upwards again.
I see that most major banks are already increasing their fixed interest rates. Maybe that’s something that’s worth exploring if you have a housing loan. Just be aware that taking out a fixed rate is like taking out insurance – there is always a cost. Many fixed-rate loans have heavy fees for early exit so make sure you do your homework if you’re thinking of changing. I am happy to recommend a good mortgage broker if you need one.
What makes predicting interest rates so difficult is the effect that energy prices have on everything. They are an essential input in most businesses, and are taking an increasingly bigger chunk of household expenditure. The price of energy matters for the same reason as tax rates matter. Both are unavoidable costs – and we can produce more of everything if costs are low or at least stable.
Fuel prices have been rising worldwide, and may soon rise further. Last week Bank of America raised its Brent crude oil forecast to $120 by mid-2022. That would be a price unseen since 2012. Natural gas is similarly spiking, as was coal until a recent retreat.
The IMF expects oil prices to increase by nearly 60% this year compared to their 2020 low, while commodity prices like food and metals could climb by almost 30%.
The Association of Superannuation Funds of Australia (ASFA) says accelerating cost of living pressures are impacting on retirees with the highest annual increase in retiree budgets since 2010.Their September quarter 2021 figures indicate that couples aged around 65 living a comfortable retirement need to spend $63,799 per year and singles $45,239, up by 0.9 per cent and 1.0 per cent respectively on the previous quarter.
ASFA points out that automotive fuel prices reached a record level in the September 2021 quarter, leaping 7.1% due to higher global oil prices amid economic recovery and supply disruptions. Over the past twelve months automotive fuel prices rose sharply (+24.6%) with a strong increase in the price of motor vehicles (+6.2%) as well. Property rates rose 3.3%, which is the largest rise since 2016. Many councils increased rates after implementing smaller rises, rebates or rate freezes last year.
Furthermore, the supply chains are in a mess. Apple have reported that supply chain problems have already cost it over $6 billion in revenues and have warned of worse to come. The output of Japanese carmakers fell nearly 50% last month, while Ford has announced a shutdown at a plant in Mexico. Late last month the New York Times reported the global economic rebound is being put at risk because of the “semiconductor crisis, which is forcing many carmakers to eliminate shifts or temporarily shut down assembly lines because of supply shortages. This could be enough to put some smaller countries into recession.”
AlixPartners have estimated that 7.7 million fewer vehicles will be produced this year because of shortages. This will cost the car industry $210 billion in lost revenue.
It’s affecting so many businesses in Australia. Last week Domino’s Pizza shares tumbled because of the impact on the business because of shortages, Ingham’s said rising fees and transport costs meant a possible increase in the price of chicken nuggets and schnitzels, and Reece Plumbing flagged potential rises in plumbing materials. Talk to any builder and you’ll find them battling cost pressures due to material and staff shortages while most restaurants are having great trouble getting staff.
This all adds up to cost pressures everywhere, but I fail to see the point of the Reserve Bank putting interest rates up. After all the purpose of putting rates up is to slow demand, but so much of the present demand is due to supply shortages, while at the same time households are copping a massive hammering due to increased petrol prices. Think how much worse things will get when all the cost increases in the pipeline come through.
It may be worthwhile stocking up sooner rather than later for Christmas. A friend in the wine business tells me that French Champagne will be almost impossible to get in a couple of weeks. If you are an Australian wine drinker, you should be okay – we have a massive oversupply because of the boycotts from China.
As we think about stocking up for Christmas keep in mind that a book is one of the best gifts you can give. It’s an inexpensive present, and if chosen wisely can give benefit to the recipient for many years to come.
Recently I have been receiving emails asking about special orders. One person wanted five copies of Making Money Made Simple as a Christmas present for the tradies working on the their new home. Another person wanted four books as presents to their grandchildren with each one individually autographed. While the book store on my website is comprehensive, it’s not built for individual orders. But there is a way out but it requires you communicating directly with me and not using our website.
If you would like a special bundle, or to have a book specifically autographed to a person as a Christmas gift, I will do that for you. This is how it will work:
- Just go to my website and choose exactly what you want. Do not process or pay for the order.
- Email me at firstname.lastname@example.org telling me exactly what book or books you want, where you would like the books sent to, and how you would like them to be autographed.
- I will then send you an invoice, you can bank the money in our bank account.
- I will prepare and post the books from my home.
Just keep in mind that shipping costs are high, and we do offer free postage on orders over $35 within Australia. However, I can’t give you free postage if you want books sent to multiple addresses.
The main books I would see as Christmas gifts are:
…which is the perfect book for people who need to learn about money.
…which really is about success principles and how to live a successful life.
…which is designed for anyone contemplating retirement.
Making Money Made Simple and Beginners Guide To Wealth are the perfect fit.
In the next section I give an example of the powerful effect a book can have on somebody’s life. This is something you can do this Christmas if you wish. Remember the old saying “if you give a person a fish you feed them for a day – if you teach them how to fish you feed them for a lifetime.”
The following email I received recently is a good example of the huge effect you can have on people’s lives by introducing them to good books:
My wife and I attended one of your seminars at the University of Queensland in 2011/12 – we were 18 years old. We then read both the Beginners Guide to Wealth and Making Money Made Simple.
These books have acted as our authoritative guide to personal finance with great effect. We are on track towards owning our home within 10 years, own a share portfolio and have more or less implemented the majority of your recommendations.
Many of our family and friends have purchased your books following our recommendation. So thank you for helping us to achieve financial freedom so early in our lives.
Estate Planning Matters
As the population ages, new relationships between seniors are becoming common. As a result, I’m regularly asked what steps to take to prevent your assets going to the wrong person. There is no easy answer, and a further complication is that estate planning rules vary from state to state. However, if there is any chance of problems on the horizon, take expert legal advice sooner rather than later. Good advice now can save a fortune in costs down the track.
In any event, it’s useful to know some basic estate planning principles.
Assets in joint names, such as property, will usually go to the surviving partner irrespective of the terms of the will. One way around this is to hold any properties as tenants in common – you are then free to bequeath your share to a person of your choice. Though of course this is best implemented at purchase.
Next, you need to understand that your superannuation is not necessarily disposed of by your will – it is the trustee of your super fund who usually determines who gets the money. So consider a binding death benefit nomination, which specifies your chosen beneficiaries. Do take advice, as done wrong they can lead to unnecessary tax bills, and can still be challenged.
One super solution is to withdraw your money tax-free before you die, and deposit it in your bank account. This prevents possible challenges, and eliminates the possibility of the 17% death tax (levied on the taxable component of your fund left to a non-dependent). If this is your plan, you’ll still need good advice about what to do with the money. Options include making an absolute gift to someone of your choice, or investing the money in insurance bonds, which also sit outside the will and can be left to a nominated beneficiary.
Think about Harry, aged 85, a wealthy retiree now happily re-married after a nasty divorce, who wants to leave bequests to his children from both marriages. He is aware that there is acrimony between some family members, and it is important to him that his assets be split as he wishes, not eroded by family legal battles.
He invests $250,000 in his own name in each of five separate investment bonds, naming each of the five children as the beneficiary of one bond upon his death. Because an investment bond is technically a life policy, the distribution of the proceeds cannot be challenged. Harry can sleep soundly, knowing he has solved the potential problem in advance.
Another option is an Inter Vivos Trust. This is a vehicle created by a living person for the benefit of another person. Also known as a living trust, this trust has a duration that is determined at the trust’s creation and can entail the distribution of assets to the beneficiary during or after the deceased’s lifetime.
A related possibility is to leave the money via one or more testamentary trusts. When the will-maker dies, the assets go to a testamentary trust (or trusts) and are not held by any of the beneficiaries personally. This keeps the assets separate in the event of divorce or bankruptcy, and has taxation advantages if everything goes well.
As beneficiaries of the testamentary trust, there is no restriction on using the trust’s money for the benefit of grandchildren, including expenses such as school fees and uniforms. That means the first $19,200 of such non–tax-deductible items could be paid from pre-tax dollars from the trust, instead of from after-tax dollars. Furthermore, when the children die, the grandchildren can continue to be beneficiaries of the trust.
Covid Tests for Travel
Pre-departure Covid tests
As the world begins to reopens, many countries are making it a condition of entry that visitors show a negative result from a Covid-19 PCR test taken 48 to 72 hours before your flight to that country. That list includes Singapore, Thailand, Canada, Ireland, the UAE, Italy, Denmark, Switzerland and over a dozen other European countries.
It’s a Covid-19 PCR (polymerase chain reaction) test administered by a pathology clinic – one generally listed by clinics as an ‘international travel Covid test’, and which provides the results as a document that’s recognised both at the airport checkin desk and on arrival at your destination. While being highly accurate, PCR tests are also highly expensive. In Australia, regardless of which pathology service you use, the tests all cost around $150 per person.
Not all countries require a Covid test to enter; and some will accept a cheaper antigen or lateral flow test, including the United Kingdom (which last month switched from PCR testing) and the USA.
While Australians travelling overseas are not required to present a negative COVID-19 PCR test at check-in to meet Australian outbound travel requirements, some countries and airlines do require the presentation of a pre-departure test result at airport check-in before you will be allowed to board your flight. This is why it is vital to check before going to the Australian airport.
On-arrival Covid tests
Your destination may also require that a test to be taken on arrival. For example, in Singapore the going rate right now is $160. The test is done at Changi Airport after which you must go straight to your accommodation and self-isolate until receiving a negative result.
Another Covid PCR test before you fly home
Even when visiting a country which doesn’t need any form of Covid testing to enter, you’re still up for a test before returning to Australia. The Australian Government currently requires that all travellers from overseas – including fully-vaccinated Australian citizens, residents and their families – take a Covid-19 PCR test 72 hours before the departure of their flight home.
“Passengers travelling to Australia must be tested for Covid-19, 72 hours or less before the scheduled flight departure, and display evidence of a negative test result at the time of check-in,” the Department of Health says, specifying that “Covid-19 PCR testing is required.”
The cost of Covid-19 PCR tests varies not only from country to country, but in some cases depends on how quickly you need the results.
For example, test centres at San Francisco airport can charge US$90 for a 24-hour turnaround to $250 for a result in 90 minutes.
In London you could be looking at £65-85, and upwards of $120 in Singapore.
The cost of Covid testing for international travel
In a three-test scenario, with tests needed for flights there and back, as well as on arrival at your destination, the cost of Covid PCR testing can be close to $500 per passenger.
A holiday for a family of four could see almost $2,000 added to the bill – all before airfares, accommodation, meals, activities and general spending money are taken into account.The more common two-test scenario – one ahead of the flight there, another before the flight home – could be close to $300 per passenger.
It’s obviously hoped that 2022, with increasing vaccination rates around the world backed up by booster shot programs and a continued drive for travel to bounce back, will see many PCR tests replaced by rapid antigen tests which are both quicker and less expensive.
But, at least for now, the cost of Covid testing looks to be an unavoidable part of the new norm in post-pandemic travel.
With acknowledgment to Executive Traveller – a great free online resource.
Dad, are we pyromaniacs? Yes, we arson.
What do you call a pig with laryngitis? Disgruntled.
Writing my name in cursive is my signature move.
Why do bees stay in their hives during winter? Swarm.
If you’re bad at haggling, you’ll end up paying the price.
A commander walks into a bar and orders everyone around.
I lost my job as a stage designer. I left without making a scene.
Never buy flowers from a monk. Only you can prevent florist friars.
How much did the pirate pay to get his ears pierced? A buccaneer
I once worked at a cheap pizza shop to get by. I kneaded the dough.
I lost my girlfriend’s audiobook, and now I’ll never hear the end of it.
Why is ‘dark’ spelled with a k and not c? Because you can’t see in the dark.
Why is it unwise to share your secrets with a clock? Well, time will tell.
When I told my contractor I didn’t want carpeted steps, they gave me a blank stare.
Prison is just one word to you, but for some people, it’s a whole sentence.
Scientists got together to study the effects of alcohol on a person’s walk, and the result was staggering.
I’m trying to organize a hide and seek tournament, but good players are really hard to find.
I got over my addiction to chocolate, marshmallows, and nuts. I won’t lie, it was a rocky road.
What do you say to comfort a friend who’s struggling with grammar? There, their, they’re.
I went to the toy store and asked the assistant where the Schwarzenegger dolls are and he replied, “Aisle B, back.”
What did the surgeon say to the patient who insisted on closing up their own incision? Suture self.
I’ve started telling everyone about the benefits of eating dried grapes. It’s all about raisin awareness.
I hope you have enjoyed the latest edition of Noel News.
Thanks for all your kind comments. Please continue to send feedback through; it’s always appreciated and helps us to improve the newsletter.
And don’t forget you’ll get much more regular communications from me if you follow me on twitter – @NoelWhittaker.