Dunotter Strategic Wealth

  For those who remember the 1970s, the thought of inflation may well fill them with fear. Should we be worried now? A common definition of inflation is “too much money chasing too few goods”. If lots of people want to buy a house, then it may be sold by auction allowing for the price to “inflate” significantly above what had been expected previously.  The financial crash of 2009 led to fear that the world’s financial plumbing would seize up completely, resulting in such a collapse in demand that deflation would follow. Deflation is where prices  fall  from one year to the next. This leads to consumers delaying purchases: in the expectation of getting a better deal later. An absence of demand makes it very hard for an economy to grow and develop. An example of this is Japan where the economy has been stagnant for three decades. The central banks of the developed world have therefore spent the past twelve years desperately trying to avoid following Japan in the deflat...

  For decades many Kiwis have relied on term deposits and residential property for their investment portfolios. The share market has been comparatively ignored. Personal finance expert, Mary Holm, attributes this to the damage caused by the stock market crash of 1987. That crash was certainly brutal, and more so here than anywhere else in the world.  The late Brian Gaynor provided an excellent summary of the excesses that led to this crash, in an article in 2017. While the world’s major stock markets fully recovered within twelve months, he states that the New Zealand’s market has never reached that height again. I would suggest that that is hard to conclude this with certainty as the calculation of the index has changed a few times since the crash. None the less it is unsurprising that this crash, coupled with the abject performance of the New Zealand market through the 1990s and 2000s, has made property investment much more attractive for the majority of Kiwis. In addi...

This piece is much longer than our normal blogs.  We hope that you find it of interest of course, however the somewhat technical language and length is makes this quite different to our normal publications. To many Kiwis, the Euro is simply the currency of Europe. Just as the New Zealand Dollar is the currency of New Zealand. There is no fundamental difference. However, this is not the case. The Euro is very much an unfinished project that is held together more by political will than economic norms. Its very structure and system of operating has not only impeded the performance of most member economies, it has already threatened to plunge the European economy as a whole into destructive chaos. With inflation now rising around the world, it could be about to do so again.   The history of the Euro The Euro was launched on the 1 st of January 1999. With the introduction of coins and bank notes on the 1 st of January 2002, a host of currencies ceased to exist. The German Deutsch...

  Having had more than a decade of steady (and at times spectacular) growth in the value of property and stock market investments, low interest rates, low (official) inflation, and low unemployment, 2021 has brought several nasty surprises. Inflation has made a dramatic return. Interest rates are rising. Access to mortgages is getting harder. Property investments are subject to a less benign tax treatment. Stock markets have become more volatile. The COVID pandemic continues to frustrate policymakers the world over. The world is truly a messy place right now, so what can you do to prepare for whatever 2022 may bring? Know your numbers In good times, a lack of knowledge and attention to the details is often masked by rising investment values and easy access to credit. As the great Warren Buffett said "It's only when the tide goes out that you discover who has been swimming naked". So right now it is more important than ever to know your numbers. What do you earn and what d...

  This was the eye-catching premise of a Hatch advert that circulated New Zealand in June of this year. Hatch were not claiming that they had discovered some incredible investment opportunity.  They were simply illustrating the power of compound returns. The article explains that if you invested $2,040 when your child is born, and it grows at 10% per year, by the age of 65 it will be worth more than $1,000,000. There is a famous quote attributed to Albert Einstein:         " Compound interest is the eighth wonder of the world. He who understands it, earns it;              he who doesn't, pays it ." While it is highly likely that he said no such thing, the power of compounding is truly a wonder to behold. As Doug McCutcheon pointed out in an article in the Globe & Mail:  "If you invest a sum of money at 10% for five years, you will multiply your wealth by 1.6 times.  If you invest your capital at th...

  While moderating the Mary Holm event at the Central Hawkes Bay Readers & Writers book festival this year, the topic of educating children about investing came up.  A lady in the audience said that her family had embarked on a competition to see who would pick the best share portfolio. Each member of the family (parents and the young children) had opened a Sharesies account and invested $20 into it. They had then picked which shares they would like to buy. One of the useful features of these platforms is the ability to purchase "partial shares", so if the price is $10 but you only want to invest five, then you can buy half a share. The idea was to see which portfolio had performed the best by the end of the year. We thought that this was indeed a great way of introducing our children to the world of investing. They have often asked me "so what do you actually do daddy?"  Unlike that of their farming uncle, my work must seem completely intangible. While I am no...