Think Global, Act Local

By Jason Fittler

Emissions Trading Scheme (ETS), is going to be a big part of our lives and economy in the future. Regardless of your views on global warming, the reduction of pollution is a good thing.

But what is the best way to achieve this?  I believe in thinking global and acting local. Do what you can in your world, at home in the office or within community groups to reduce pollution.

When we move to the world stage my thoughts turn to investing, there is no doubt that an ETS will be brought in, but how is this going to affect your investments? What we do know is that the cost of living will increase, there is no way around it and here is why.

To produce a Mega Watt of electricity via a coal power station costs $25, via a gas power station costs $40 and wind costs $100. The government has already passed the CPRS (Carbon Pollution Reduction Scheme) where by 2020, 20% of the electricity sold needs to be sourced by renewable energy. If the supplier of the electricity can not do this, then they will need to purchase credits to offset the non-renewable energy they’re using above 80%. At present these credits cost around $30 per mega watt, I would expect this to increase to $40 over time.

By doing this the government is making Wind Power more competitive with coal, keep in mind that the government is giving wind farms $30 credits to sell for every mega watt of electricity they produce, this reduces the cost of a mega watt of electricity from a wind farm down to $70.

So how do you position your portfolio to benefit from this change? 

The two key picks are Origin Energy and AGL Energy, they are both well invested in Gas and Wind farms.

Next stock I like is a company call Infigen Energy which is focused in the wind farm sector. The Geothermal sector is a more speculative play, it has the potential to produce base load electricity something which wind can not do right now, the problem with this sector is that they are unable to prove the technology, if they do, great gains will be had.

The carbon storage sector is also a good play, you can gain exposure here through CO2 Group Limited, this is where they store carbon in trees. Origin and AGL have contracts with this company.

What about Nuclear energy?  This is by far the most efficient way to produce electricity, however, the government is determined to exhaust every other avenue before going down this road. It will also take 10 years from commission to product of a Nuclear power station and the cost for construction is much higher than a coal fire power station. The best play in the sector is Paladin Energy Ltd.

As for Coal, the three best things are it is cheap, cheap, cheap but I suspect that these companies will have major capital costs in the future. As such hold these for the income, as it will take a decade before the real impact of the changes are felt by these companies.

For more information on any of the above companies, give us a call (07) 4771 4577.

Shareholders Benefits

By Jason Fittler

Some listed companies offer shareholder benefits as a means of attracting new investors whilst fostering loyalty and support from existing shareholders.

The benefits  schemes  are  welcome  but  should  not  outweigh  the  more  important considerations of the risk of the investment and future growth potential.

Below we list some of the companies that are offering shareholder benefit schemes.

To see if you are entitled read the attached PDF.

2009 Financial Year

By Jason Fittler

Last financial year will not be forgotten quickly.

Let’s take a few moments to review how we performed overall.

On a global scale we were the sixth worst performing market with a overall drop of 24%, the worst hit was France with a drop of 28% and the best performing was India with growth of 9.7%.

Interest rates fell from 7% back to 3%, the worst performing sector was the materials sectors which lost 35% over the year, the best performance was information technology up 1%.

The aussie dollar closed lower at 80c but did recover from its mid year lows of 65c, however it did out perform most of the major world currencies.

Oil prices fell 49% closing around $70 US a barrel, copper closed down 40% while gold held up closing around $950 a ounce, about where it started the year at.

For Australia it was indeed the worst year in the last 27 and certainly ranks as one of the three worst Bear markets in our history.

Let's look at the best and worst performing stocks.

In the ASX 20 the best performer was Woolworths up 7.8% for the year with Fortescue Metals being the worst at a loss of 68%.

In the ASX 50 the best performer was Lion Nathan up 35.3% for the year with BlueScope Steel being the worst at a loss of 72%.

In the ASX 100 the best performer was Karoon Gas up 100% for the year with B&B Infrastructure being the worst at a loss of 90%.

The take away from this is, the best performing stocks in 2010 will come out of the worst performing stocks 2009.

There are a lot of good companies out there which have been sold down over the past 18 months and will in the near future recover to show extra ordinary gains.

The next couple of years will be a stock pickers market; there will be plenty of opportunity. I do not advocate a return to being bullish but certainly now is the time to start buying with a long term view.

There will be a lot of millionaires made over the coming year, although you may not realise it for 2-3 years.

Now the good news!

2010 will not be a bad as 2009, here is why, the government acted quickly, pumping money into the economy. This action will get the machine working again, due to the quick response, a lesson they learnt from the Great Depression as such the recover will be shorter.

On average it will take the market between 12-20 months from when the market bottoms to recover in a bear market. If you believe, as I do, that March 2009 was the bottom then this would indicate that the market will have recovered by December 2010. Not long in investing terms.

If you are thinking of waiting until December 2010 to start investing, you will be to late. Act now.

Like to know more? Give us a call 07 4771 4577.

A Check List For Storm Clients

Click here to download PDF of below article.

Please Visit: Storm Client Collection Data for the Financial Planners Association

Please Note: This is not advice to anyone affected by the current issues with Storm Financial. Below is merely a check list of things you should do to make sure you are fully aware of your current position and the options which are available to you.

If you are concerned about your personal financial position please collect the information out line in section A and then seek your own financial and legal advice. In part B we have included some people who you should contact in regards your position as they are already dealing with a number of Storm Clients.

Section A

1.    Obtain up to date statements from all of the managed funds you have invested in, the common ones are Macquarie Bank, Commonwealth bank, Colonial First State and MLC. Please note you should go directly to the Fund Manager for this information. The contact details will be on your last statement, so will your account number.

2.    Chase up an up to date statement from your Margin Lender.  Please note you should go directly to the Fund Manager for this information. The contact details will be on your last statement so to will your account number.

3.    Statements of Advice - before any action is taken on any of your accounts you should have received a statement of advice from Storm. Make sure you have these if not follow up with your Storm adviser to obtain a copy of these.

4.    If money has been taken out of your super and put into geared products you will need the Statement of Advice which Storm provided to you to seek approval to do this.

5.    Colonial Margin loan - you need to get in contact with them and find out two things,
Are there any fees to pay out the loan, if so how much and can these be waived? (My view is that any fees should be waived and I am sure that if pressed hard enough they will waiver the fees) Second find out how much they will rebate you for the prepaid interest for early pay out of the loan. This is real cash which will come back to you.

6.    Once you have all of the above information make clear notes on the progression of how your account got to such a state, the information you need will be in the Statements of Advice.

Section B

1. Contact FICS, the web site is below, the number is  1300 78 08 08. They will let you know if Storm has a case to answer and as such if you have a chance of receiving some funds back.
http://www.fos.org.au/centric/home_page.jsp

2. Connolly Suthers are lawyers who already are acting for Storm affected clients, contact them. They are local and situated in Flinders Street. Their contact number is 07 4771 5664
http://www.connollysuthers.com.au/

Finally

The above actions are not in vain, if you have been given wrong advice which has in turn caused you a loss, you have the right to seek compensation. Licensed securities dealers must have insurance to cover them for such losses to their clients.

Second, if you have prepaid interest on your margin loan you will be entitled to a refund on paying out the loan; under the circumstances I would also expect that your margin lender would waiver any pay out fees. Again this is real money in your hand. So now is the time to act quickly.

Getting back into the market

At present the clients I have spoken to have all of their investment in cash, the amount they hold in cash is the same as the amount owning on their margin loan. In this situation you are unable to reenter the market unless you put in more capital.

Eg: If you have a $100,000 in cash and a $100,000 margin loan you would need to put in capital of $35,000 if you wanted to buy back into an index fund. At this level you would still be very close to another margin call.

When you need advice, we are always ready to listen and help.
Give us a call (07) 4771 457 

Click here to download PDF of above article.