Becoming who you aspire to be is a journey that you’ll be repeatedly tempted to abandon, don’t do it.
Welcome to our first newsletter of the decade. I am stunned at how quickly time flies – it seems like yesterday when I sent the Christmas newsletter, but it was actually early in December which means almost two months have passed in the blink of an eye. A couple of readers actually emailed me asking me if I was okay, or whether they had missed a newsletter, but the reality was that our son James and his wife and eight-month-old daughter came to stay from Los Angeles, and we have spent the last seven weeks totally absorbed with family.
Our three children are now aged 38, 36 and 34 and between them have produced 11 grandchildren. I guess when you think about it, your family and your health are probably the two most important things in your life.
A New Decade!!
It’s always worthwhile to reflect on what has been – and this last decade has been a year of amazing change. We started in the throes of recovery from the global financial crisis and, on any reasonable assumption, it would seem the world has still not recovered completely. Just recently the International Monetary Fund reported that global debt increased by $55 trillion in 2018 taking total global debt to $188 trillion – equivalent to nearly 230% of the global economy.
Life expectancies continue to rise, which means there are more and more people relying on welfare in retirement, while most developed nations are struggling with a growing debt burden.
In January 2009 the cash rate was 3.25% and mortgage rates were running at around 5.25%. Rates have been on a downward trend ever since with no sign of a bottom in sight.
World markets have performed well in the last 10 years. The decade started with the Dow Jones at 10,600 and the ASX200 at 3090. The Dow Jones is now 28,460 – a much better performance than our own ASX200 which closed at 6816 last Friday. The Dow has a yield of around 3.4% while our ASX yields around 4.2% however we have the bonus of franking credits.
But the ASX has done well. If you had invested $100,000 in January 2009 into an investment which matched the All Ordinaries Accumulation Index, which includes income and growth, you would now have a portfolio worth $309,000. That’s a total gain of 209% or a compound gain of 11.94% per annum. Sure, beats money in the bank.
What does the next decade hold? As always it will be interesting, but the above examples show the importance of having a diversified portfolio. International shares should be a part of everybody’s portfolio, but as always there are advantages and disadvantages. International shares give you access to a much wider range of industries, but they don’t offer franking credits, and there is always a degree of currency risk. For international investing, I think the average person is better off in quality managed funds because the good ones will do better than the index.
Recently I mentioned in a couple of newspaper columns that investing directly in American managed funds or American shares can be a tax nightmare. This did generate several emails asking for more clarification, so I will set out my reasoning in more detail now. Yes, you can simply invest in international funds by using an international index fund, or you can have a go at picking winners yourself – but I really think that people like Magellan who specialise in this area will do better than the average punter. And let me tell you from experience that investing directly in American mutual funds and shares can create a paperwork nightmare.
The headlines for January have been fantastic, with our stock exchange hitting 7000, and the Dow Jones hitting 29,000. As my good friend Dr Don wrote in the Australian this week there is still plenty of life left in the share markets, but it would be unrealistic to think that the fantastic results of the last 12 months would continue this year. Keep in mind that the Australian share market has averaged around 8% per annum over the long haul, and historically there have been four negative years in every decade, which means six positive years.
So, stick with the fundamentals, be diversified, keep at least three years planned expenditure in cash, and review your assets regularly.
This week I celebrate my 80th birthday, so you can imagine that one of my keen fields of interest is how to continue to live a long and healthy life. My main read over Christmas was a newly published book Lifespan Why We Age—and Why We Don’t Have To by David A. Sinclair; an acclaimed Harvard Medical School scientist.
The blurb for the book says “It’s a seemingly undeniable truth that aging is inevitable. But what if everything we’ve been taught to believe about aging is wrong? What if we could choose our lifespan?”
In this groundbreaking book, Dr. David Sinclair, leading world authority on genetics and longevity, reveals a bold new theory for why we age. As he writes: “Aging is a disease, and that disease is treatable.”
This eye-opening and provocative work takes us to the frontlines of research that is pushing the boundaries on our perceived scientific limitations, revealing incredible breakthroughs—many from Dr. David Sinclair’s own lab at Harvard—that demonstrate how we can slow down, or even reverse, aging. The key is activating newly discovered vitality genes, the descendants of an ancient genetic survival circuit that is both the cause of aging and the key to reversing it. Recent experiments in genetic reprogramming suggest that in the near future we may not just be able to feel younger, but actually become younger.
Through a page-turning narrative, Dr. Sinclair invites you into the process of scientific discovery and reveals the emerging technologies and simple lifestyle changes—such as intermittent fasting, cold exposure, exercising with the right intensity, and eating less meat—that have been shown to help us live younger and healthier for longer. At once a roadmap for taking charge of our own health destiny and a bold new vision for the future of humankind, Lifespan will forever change the way we think about why we age and what we can do about it.”
In parts, the book is quite technical, but I guess the main message is that we can possibly delay ageing by stressing the body by aerobics exercise, cold showers or jumping in a cold pool, and intermittent fasting. It’s really not difficult to work 20 minutes of aerobic exercise into most days, and Geraldine and I have now devoted to days a week where we finish our evening meal by 6 PM and don’t eat again until 10 AM. It’s really not hard to do once you decide to do it. Instead of getting up, having breakfast and then writing columns, I now get up, write columns then have breakfast. The activity of work takes your mind off food.
Toxic fixed reverse mortgages
In my last newsletter I wrote about older vulnerable people who’ve been trapped in fixed interest rate reverse mortgages and asked for examples. I received a number of them – the worst case was where the debt plus the break free was more than the value of the house. I have discovered details of pending legal actions but because of confidentiality I won’t disclose them. If you do have a fixed rate reverse mortgage, or know anybody who has one, make sure you understand the consequences of the potential break fee before signing a contract to sell the family home.
But please, if you know anybody who still has a fixed rate reverse mortgage could you please ask them to get in touch with me at email@example.com.
Scammers seem to be more active than ever. At least once a week our phone rings with someone allegedly from the NBN who wants to start a conversation. Of course, we hang up straight away. When I was talking to a woman aged 82 about the reverse mortgage she is stuck with, she told me that just two months ago her best friend emailed her about a fantastic deal, but which required her to go to Westpac bank and deposit $4800 in a specific account. She tells me she did that and the money vanished. She rang her friend to ask what was going on – you guessed it – the friend knew nothing about.
A favourite trick is for a “family member” to email you, or contact you via Facebook, telling you they are in trouble and the urgent financial assistance. It will always be from someone who you think you know. If this happens, make sure you telephone the person and speak to them – odds-on it’s another scam.
Saving on Petrol
We all know how petrol prices fluctuate and how often the prices are down when you don’t need petrol, but skyrocket just before the tank hits the empty mark. Take control by downloading the 7-Eleven Fuel app. Once you have it, you can ask it to search all available 7-Eleven petrol stations in your area and display the best price on offer.
If you like the price you can simply lock it in for the fuel you require – that will be your fixed price for the next seven days. There is nothing to lose, because if the price at the pump on the day you fill up is cheaper than your locked-in price you can elect to use the pump price. After seven days the locked-in price expires and you can start the process all over again.
Last week in Brisbane Super petrol was selling at a $1.99 a litre but I had $1.50 a litre locked-in.. I thought prices may be cheaper around Noosa where we were heading, so figured I could take advantage of the cheap price, and lock in again. The 7-Eleven petrol station in Noosaville was advertising $1.99 leader and by using my locked-in price of a dollar $1.50 I saved over $12 – almost 25% of what it cost to fill up the car.
After filling up I hit the “find my best local price” button and discovered that somebody somewhere still had petrol at $1.50. I then locked in that price and saved another 25% of the full tank price later in the week.
From the Mailbox
I wanted to write you a note of thanks. I read Making Money Made Simple back in the eighties. The one comment of yours which made a huge impression on me was that, historically, only 8% of people ever become financially independent.
That insight has stayed with me all my life, and I’m happy to say I have managed that in spades, retiring at 57 with enough money to keep my grand-children in clover.
I was recently asked what accounted for my success, and after a great deal of thought, I gradually worked my way back to this comment from your book, because that was what most influenced me in my subsequent life, career and investment decisions.
So, thank you! You have been a great help at least one person, although I am sure there are thousands more.
Declining Bike Sales
Some of the reasons for the slump in sales at Harley Davidson are as follows –
Apparently the Baby-Boomers all have motorcycles. Generation X is only buying a few, and the next generation isn’t buying any at all.
A recent study was done to find out why Millennials don’t ride motorcycles.
- Pants won’t pull up far enough for them to straddle the seat.
- Can’t get their phone to their ear with a helmet on.
- Can’t use two hands to eat while driving.
- They don’t get a trophy and a recognition plaque just for buying one.
- Don’t have enough muscle to hold the bike up when stopped.
- Might have a bug hit them in the face and then they would need emergency care.
- Motorcycles don’t have air conditioning.
- They can’t afford one because they spent 12 years in college trying to get a degree in Humanities, Social Studies or Gender Studies
- for which no jobs are available.
- They are allergic to fresh air.
- Their pajamas get caught on the exhaust pipes.
- They might get their hands dirty checking the oil.
- The handle bars have buttons and levers and cannot be controlled by touch-screen.
- You have to shift manually and use something called a clutch.
- It’s too hard to take selfies while riding.
- They don’t come with training wheels like their bicycles did.
- Motorcycles don’t have power steering or power brakes.
- Their nose ring interferes with the face shield.
- They would have to use leg muscle to back up.
- When they stop, a light breeze might blow exhaust in their face.
- It could rain on them and expose them to non-soft water.
- It might scare their therapy dog, and then the dog would need therapy.
- Can’t get the motorcycle down the basement stairs of their parent’s home.
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.