Questions & Issues
As expected, 2015 proved to be a very volatile year. In summary we expect more of the same for 2016.
Global market conditions will continue to be volatile with Geopolitics, US Interest rates, Currency wars, Commodity / Oil collapses & subsequent recoveries all likely to vie for centre stage, not to mention the USA elections in November.
In addition we expect ongoing terror attacks and cyber-attacks.
We’d like to raise our concerns about highly probable, major cyber-attacks.
Most financial institutions currently experience some form of cyber-attack daily.
When a major attack occurs it will likely paralyse that institution until the non-corrupted backup data can be restored.
During that time it is unlikely that their customers will be able to access their accounts or utilise the Institution’s online facilities.
To safeguard against the above potential risks, we endeavor to ensure that our clients have multiple custodians. We have always encouraged our clients to have multiple custodians, multi-asset class investments, multi-jurisdictions in multiple countries all backed up online, offline & on paper.
The above all generates additional work for BMF, but we believe for our client’s protection and Wealth Preservation it is essential to be widely spread and diversified.
Some 2016 questions & issues which we are currently debating include:
- Is Cash king? Even at 0%? What about negative interest rates?
- What impact will the Energy debt write-offs have on global and local bank balance sheets?
- How many rate rises will the US Fed do this year?
- What will the impact on the USD be as a result of potential Fed rate rises?
- Will the Australian banks be forced to capitalise their hybrid loans into bank capital in the event of a severe property slowdown?
- Will the RBA cut interest rates further? What is the likely impact on the A$?
- Which countries will benefit from the global currency wars?
- Where will Oil bottom? Where will it rally to from there?
- Will Britain vote to leave the EU? Will it be Brexit or Brit-in?
- Will Financial Institutions & their Governments be fully prepared with contingency plans in the event of major cyber-attacks?
- Will gold further rally in 2016? Is gold still a safe haven?
- Does China have more tools in its toolbox to avert a slowdown?
- Next month marks 7 years since the S&P500 low of 666, the high last year was 2,134. Where will it be in 2016?
- How many other countries will adopt negative interest rates?
- Will Australia’s crown of having the most indebted households in the world remain? What impact will it have on our banks, our official interest rate & our currency?
In light of the above and our unrelenting mantra of Capital Preservation augmented by capital creation, we have identified and invested in a number of diverse, multi-custodian asset classes both in Australia and globally.
Our current investment focus list includes:
- International Equities
- International Infrastructure
- International Property
- Local Equities
- Local Property
- Gold bullion & equities
- Australian non-hybrid bank debt
- A$ cash & Term Deposits
- USD cash
Every portfolio needs a solid foundation and the basic building blocks are crucial.
We continue to recommend that our clients own most of the above asset classes in their portfolios, spread across multiple custodians.
Despite all the challenges 2016 may bring, we remain committed & confident of delivering above-market returns across all geographies and asset classes.