| Welcome to the August issue of the Select Wealth Management Dashboard Newsletter. Firstly, a massive shout out to all the New Zealand Olympic athletes who delivered our best ever result at an Olympics. For a nation of 5.3 million people, to finish 11th in the world is quite remarkable. This is something we should all be celebrating as a nation.
There's been a lot of noise in the markets over the past month, with the Japanese Nikkei having its largest 1 day fall since 1987 (it fell 12% on 5 August). I'll fill you in more on that a bit later. But first, I want to share an article which I read recently which really resonated with me. It's titled "Fill the Bathtub" and is written by Ted Lamade, Managing Director at The Carnegie Institution for Science. The opening line "Despite being awash in information, it seems harder than ever to uncover the truth" had me hooked. I often feel this way - not knowing exactly what information to trust, and second guessing the ulterior motive. This is particularly true in finance, but I imagine equally as relevant in many industries (politics, legal, advertising, medical, you choose...). Ted explains a lesson his father taught him at a young age. He says: "My most vivid memory of this lesson came after one of us lost something that was important to my father. When he got home from work, he was clearly disappointed, so he sat us down and said, "Alright boys. Imagine you have an empty bathtub and an eyedropper filled with water. How long do you think it would take to fill that bathtub if you added one drop at a time?" Confused, and likely a bit scared, we replied, "Uhhh... a long time?" My dad replied, "That's right. A long, LONG time, but if you have enough time, you will eventually fill that tub." The two of us nodded in agreement as he continued, "The same goes for trust. Each time you two do something trustworthy, you get to add a drop. Over time, those tiny drops accumulate until the bathtub is full. And, when the bathtub is full, you will have earned my trust." I remember thinking to myself, "Got it dad. Makes sense." But he wasn't finished. His lesson had another leg to it, "However, boys... when you do something that is significantly untrustworthy, you pull the plug and all that water you've earned over time goes down the drain." This is a concept that I very clearly identify with. At Makowem & Isaacs Financial Planning, our mission statement is to manage our client's financial affairs as if they were our own. "Investing your money like it's our money" - it's on the brochure. It's in our DNA. This means a couple of things:
We are also constantly aiming to build trust in our actions - one drop of water at a time. This means no grandiose claims or false promises, just consistently trying to do the right thing over and over again, and avoiding pulling the plug. It's pretty inconspicuous and unremarkable, but hopefully over time we reach our goal of filling the tub. If as a firm we manage to get this right, then all stakeholders (our clients, our partners, and ourselves) will benefit. In terms of the markets, the past 30 days have been a rollercoaster ride. As I mentioned, the Japanese Nikkei fell by 12% in 1 day, only to bounce back 10% a few days later. All major share markets displayed significant volatility with trading days of greater that 2% (either positive or negative) on several occasions. But once you look through all the noise, you'll find that there hasn't been much change at all over the past month. Most markets are within a 1% range of where they were a month ago - the outliers being Japan and Hong Kong down 5% and 2% respectively, and New Zealand up 3%. Locally, the Reserve Bank of New Zealand met on 14 August, and reduced the Official Cash Rate (OCR) by 0.25% to 5.25%. Finally! This will be some extremely welcome relief for mortgage holders who have been under pressure from steep mortgage rate increases since July 2021. The average 1 year fixed mortgage rate has risen from a low of 2.13% in July 2021 to a high of 7.35% in January 2024. I can't overstate how much money this has sucked out of the real economy as households divert all their usual discretionary spend (a meal out, a holiday, a new appliance) into mortgage payments. There is now a pathway forward for this phenomenon to reverse - an extremely positive development for both households and business. The flip side of this coin is that term deposit rates have also responded to the reduction in the OCR and are coming down quickly. So savers will be less happy with the recent developments. House prices continue to slide downwards, but this tide may start to turn now that mortgage rates are turning. Here are the numbers for the past 30 days: |
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In terms of your Select Wealth Management portfolio, we have our quarterly review with researchers JMI Wealth next week. I am interested in their views and outlook given the change in stance from central banks and the outlook for interest rates globally. Returns have been very good so far this quarter (since 1 July) from all sectors - fixed interest, property and shares. Listed property leads the way, with Australasian Equities delivering strong performance too. Finally, a quick update on our Giving Back program. It's been a bit of a slow start to out campaign for Life Flight, but the pipeline is full so I am confident that we will have a good campaign for them. As always, thank you so much for the introduction to your family and friends to allow us to continue this initiative - we really appreciate it. Feel free to visit https://mifinancialplanning.co.nz/giving-back.html if you want to keep track of the Giving Back program. That's all for now. Chat again soon Warm regards Dave and the team at Makowem & Isaacs Financial Planning dave@mifinancialplanning.co.nz |
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This newsletter is intended for general distribution and does not constitute personal financial advice.