April Newsletter
In this edition:
Making rational decisions in an emotional time
Help for retirees and pensioners
Cyber crimes on the rise
Working from home threats
Home office tips - not another scan
Rationality in an Emotional Time
I was able to listen to a couple of great sessions this week.
Remember one of my messages to date has been that those individuals and families and those businesses that manage cash flow whilst in the middle of this pandemic will come out the winners.
I know that this is a tough message when so many are losing jobs. However, it is in line with one of the Hell Yes! core beliefs: We manage what we can manage. And that today is cash flow.
We need to acknowledge our emotions but do our best to act rationally. Your feelings are valid, but it’s not always helpful to worry about the things we cannot manage. Today we cannot manage the markets and from there, our jobs. But we CAN choose not to allow fear to dictate our decision making.
I am a great believer in preparing your own current net worth position today and working out how you will make it better, going forward. Below are some factors to consider.
What are economists and market commentators predicting?
Morningstar gave an update around the current positions from the banks and you can see that they will be right onto this question of ensuring that they come out of this pandemic with strong and resilient balance sheets. The general comments included:
Morningstar expect reduced dividends from the big 4 Banks. The research house expects the dividends from the banks to fall around 25% (CBA came off best with a decrease still expected albeit at a slightly lower rate).
Morningstar expects that the housing slowdown and likely price falls will increase the level of defaults on their loan book. The expectation is that the loan losses will continue for up to 2 years. Their expectation is that the loan losses will increase from the current 13 BP (basis points) to around 30 BP. For Westpac Bank this was quoted as an increase from $800 million to $2.0 Billion. All is not bad news however, as Morningstar quoted that the banks have an average LVR (Loan to Valuation Ratio) of 60%. That is, the property prices would need to fall 40% from current levels to bring on any real bad debt crisis and this is unlikely.
As a result – and in line with what I have been saying around Cash Flow being King, the banks are likely to increase capital raisings (as will many more companies). For those of us showing our age, this is not necessarily a bad thing. Some of can recall buying CBA shares in the middle of the GFC at $25.
What does this mean for me?
What is clear to me from this information is that it presents an opportunity to use these Capital Raisings to rebalance our portfolios (and the managed funds will do this as well).
To do this, it is critical:
That those making contributions to their superannuation continue to do so. Many of you will recall me saying that during the GFC, I found many clients ceased their voluntary contributions to super – if you can manage the cash flow, now is the time to put your contributions on steroids.
That those drawing pension, reduce the pensions to the minimum they need for their cost of living. You will recall that in the GFC, I said to draw and do the things you wanted to do in retirement – as what you would lose was time. This time, I am saying, you are in lock-down and so you cannot do much. This is the time to reduce bills and use the funds to buy cheaply.
I am conscious that this may well be more like the Spanish Flu of 1918 which was followed by the Roaring 1920s. We may see this repeated with a Roaring 2020s starting from when we are all released from isolation. The longer this lock-down goes on, the bigger the roaring ‘20s.
Help for retirees and pensioners
These are uncertain times, so it's important to make sure that your financial wellbeing is protected and you're able to continue to pay your bills and stay safe. There are nine things that you can do to help you get through this challenging time:
Reduce your superannuation withdrawals
Access additional social security payments
Access the pension
Use tele-health services
Speak to your bank
Speak to your utility suppliers
Speak to your local council
Speak to your landlord
Speak to your financial adviser
Check out this handy fact sheet for more details.
Cyber Crimes on the Rise
When I read articles like the one below or see in the news that a customer spat on a staff member – I go back to the original quote I gave you. Times of hardship really bring out our character and it disappoints me that we continue to see people who abuse this time of fear and uncertainty.
According to the Australian Cyber Security Centre (ACSC), the last three months have seen a significant increase in the number of individuals and businesses reporting scams and phishing emails. Both it and the Australian Competition and Consumer Commission (ACCC) have received over 140 reports from individuals and businesses across Australia about coronavirus-related scams.
If you receive these types of phishing emails, do not open the attachments and simply delete the messages.
Working-from-home threats
With an increase in the number of Australians working from home, the ACSC highlighted the importance of good cyber-security practices.
It said businesses should include cybersecurity in their contingency planning, including measures such as ensuring virtual private networks (VPNs) and firewalls are up to date with recent security patches.
Read the full article here...
Home Office Tips (even investors need these)
I have been saying to some clients that the list of things you cannot buy today as the work from home option has grown so quickly (along with the toilet paper) includes items such as webcams, printers, scanners and even desks.
For those working from home suddenly and without a printer, at a pinch, I have been trialling ADOBE Scan app for my phone.
You use your phone camera and can scan multiple pages in a row and email as one document. It auto crops out the background for you (for me that's the dining table) and sends in PDF format with some other cool features. Our IT pointed out to consider security/Adobe Cloud but it is a good plan B if you need it.
Read more here...
Stay safe.
Vicki