Noel News 
Merry Christmas!
Most investors have great intentions. So why is it so many fail? Simple. They lack the long-term perspective needed to help get them through short-term chaos.
KEITH FITZGERALD
Welcome to our last newsletter of the year!
And what a year it’s been. Volatile share markets, property markets in a downturn, inflation roaring, a war in Ukraine, interest rates going sky-high and a change of government. That’s just a bit of it.
There is so much to talk about, which I will do in various newsletters as 2023 goes by. But today, because this is our last newsletter for the year and it’s a bit late to be putting new strategies in place, I will focus on two topics – both of which could have a huge effect on your finances:
The first is the psychology of investment, and the second is the huge increase in scams which are getting more plausible by the day.
Understand the markets
For years I’ve been putting out the message that growth investments are a long-term strategy and that the share market, while giving the best returns available, is volatile. This means that in some years the returns will be negative. The historical average is six good years and four bad years every decade.
I have followed this strategy with my own investments, which are 85% in shares even at my age. Yet, every time the market falls, I get bombarded with emails asking me whether they should cash out. Even worse, some tell they have cashed out and are waiting for the market to turn. It’s not that simple.
The chart below shows superannuation returns to the end of November. For a Balanced Fund in accumulation the return was 2.6% for the month – for Pension Funds, 3% for the month. That takes the return for the year to -1.3% and -1.8% respectively which is not too bad for the turbulent year we have been through. The difference in returns is that accumulation funds pay 15% tax on their income, whereas pension funds pay zero tax.
Stay the course
I started this newsletter with a quote from American money man Keith Fitzgerald. The information that follows is a direct quote from his recent newsletter. I’m a subscriber, and I love his material.
“We’ve talked about the importance of having long-term perspective before, but recent trading conditions make it abundantly clear that we need to revisit the subject. There’s just too much opportunity out there not to! I know that’s hard to imagine with the markets down again this morning. That’s exactly why you should! The smartest money in the world plays the “long game,” not the short-term fear that’s roiling headlines. In fact, I’ll bet you dimes to dollars they’re snapping up shares right now rather than running in the other direction. Billionaire Warren Buffett has made no bones about “being greedy when others are fearful.”
The late Sir John Templeton, who is widely regarded as one of the most successful stock pickers ever to play the game, said simply “to buy when others are despondently selling.” Lord Nathan Rothschild, an 18th-century nobleman and scion of the House of Rothschild who made a fortune buying during the panic of the Battle of Waterloo, reportedly said, “Buy when there’s blood in the streets,” to which I’ve added, “even if it’s your own.”
Buy low, sell high is how you play the game. Admittedly, it’s not easy. The headlines are filled with reasons to give up. Inflation rages, the threat of a recession is very real, Russia refuses to back down in Ukraine, China’s got it out for Taiwan, politics… you name it. Many people are tempted to bury their head in the sand with a sign on their rear end saying, Kick me when it’s over. Yet, that’d potentially be one of the most expensive mistakes any investor can make.
Again, I know this is hard to imagine. Emotions are running high. Fear is creeping in around the edges. That’s a problem because emotions lead to suboptimal decisions. Usually, the unprofitable kind. Here are two simple ways to play the long game… and why you’ll want to.
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More thoughts on living with a disability
Thank you all so much for the emails of support you have sent me since my last newsletter. I have always regarded my subscribers as family, and it’s great to know there is so much family support out there. It’s now three weeks since the accident and progress has been slow but steady. The plaster has been replaced by a moon boot, and I’m getting more mobility each day. It’s also continued to teach me more about the problems faced by people with a disability.
Last week we had an appointment with the ankle doctor at 9:30 AM, and because I was unsure of my ability to get into a car, I booked a maxi taxi with wheelchair access. I booked it for 8:45 AM to give us plenty of time. When the time came there was no maxi taxi. I rang the taxi company who told me there were ‘none available’.
This threw us into a tailspin, but the ever-resourceful Geraldine decided we would just have to go in her car. We quickly worked out how to fold up the wheelchair, used the walking frame to get me into her car, and set off for the hospital. So far so good. When we got to the hospital at 9:15 AM we discovered there were just three lifts, and two were out of order. Imagine all the people waiting outside. To make it worse, when the lift did arrive it was already full of people on walking frames and wheelchairs.
Of course, this begs the question as to what would a person have done if they had a critical appointment and had no facilities to get there because there were no taxis available. As we all know, specialist appointments can be hard to get, and you often wait a long time when you do get to their surgery. The final challenge was the ‘ambulant toilet’ on the same floor as the doctor’s surgery. This was a joke – it was just a normal male toilet with three urinals plus one toilet bowl in a small room with rails at the site. The wheelchair wouldn’t even go in!
As I said in my last newsletter, I am now learning first-hand the challenges for anybody who has any sort of disability. I had no idea how difficult and frustrating their life must be at times.
From a reader – accidents do happen quickly
‘We had planned to go out. My wife was already in the car and as I went to get in, I noticed bird droppings on the car’s roof – I grabbed a hose and cleaned up the mess. As I turned to go to the car, I tripped over the hose and landed very heavily on the lawn. I hollered to my wife for help but there was no answer.
I gradually got to my feet checking for any injuries. As I walked to the car, I discovered to my horror that she was lying on the cement. Apparently when I called out, she tried to get out of the car quickly, got tangled up with the seat belt and her handbag and landed headfirst on the cement path. Luckily, apart from shock, there were no serious injuries, except for two black eyes. Just shows how quickly accidents can happen.’
I think one of the lessons here is the danger of quick movement as you get older. I fractured my ankle because I was walking very quickly in the garage – a friend of ours broke her hip when she ran to answer a telephone. Better to go slowly and safely.
Keep your guard up – Scammers abound
The scammers are getting smarter and smarter, and seldom a day passes without another sad story being revealed in the newspapers. The latest one involves people receiving a phone call claiming to be from Suncorp, and which comes from a number which is the same as Suncorp’s main number. The victim is told that their account has been compromised and they need to transfer their funds to a new account that Suncorp has just happened to set up for them. Naturally, they need access to the victim’s computer to do this. Quickly, the payee limits are increased, and the accounts sucked dry.
In the several cases reported recently, the funds were transferred to a Commonwealth Bank of Australia account, but neither Suncorp nor CBA were interested in rectifying the matter.
I think that’s pathetic. Australian banks operate under a know-your-client rule which is the reason for the hundred-point ID to open a bank account. Obviously, the scammers must’ve had a CBA bank account as the funds were transferred to it – why can’t the Fraud Squad or the Federal Police and the Commonwealth Bank get together to find out the identity of the scammers?
Just recently one of my golfing mates ordered a new Mercedes. For some reason it was all done by email, and you can guess what happened. He transferred $85,000 by bank transfer as requested and it went straight to the scammers bank account. Once again, the banks declined to be involved.
So the first rule is never to get involved in a conversation with any cold caller no matter where they say they are from. If they claim to be from your bank, don’t accept the number you are being called from, use the official bank number from your own contact list or from their website.
Last week we were having trouble with our home internet with Aussie Broadband, which has an unbelievably good service level. It turned out that my own internal hardware was causing the problem and my friendly IT man came out and replaced a dud part – problem solved. During that time, I got a ring from a woman who claimed she was from Telstra. She told me there had been internet troubles in our street, and she needed to check my computer to solve them. I couldn’t hang up quickly enough.
And I’m sure like us, you’re getting heaps of text messages along the lines of “it’s your daughter here I’ve broken my phone and I need you to help me.” That’s an obvious one, but apparently quite a few people have been conned.
Recording assets for capital gains tax purposes
This is from Julia Hartman of Bantacs. She writes following on from last newsletter’s estate planning section, ‘Have you got your capital gains tax records in order?’ Only your own home and your pre-1985 assets can be sold by your beneficiaries or executor free of capital gains tax or continue to be owned by them with an opening cost base of their market value at the date of your death. All your other assets will be subject to capital gains tax when they are sold by either your executor or beneficiary.
Capital gains tax is also triggered if you or your beneficiary gift assets. In order to calculate the capital gains tax liability, your beneficiary or executor will need to know your cost base. That is how much you originally paid for the asset plus ongoing expenditure such as holding costs, improvements and dividend reinvesting. In the event of your death, is this information available?
If you think this is a big job, think about how impossible the task will be for your executor or how much they will spend in legal and accounting fees. Your heirs could end up paying tax on the full sale proceeds because they have no record of your original and ongoing costs. Don’t make the ATO a major beneficiary of your estate. Every detail you can leave behind will help.
If you don’t know where to start, Julia has created a great tool. You can check it out at https://www.bantacs.com.au/
Full details are in that link.
Noel Whittaker Ebook Store News
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And Finally
Honouring Charles Darwin, the father of evolution, the Darwin Awards commemorate those who improve our gene pool – by removing themselves from it in the most spectacular way possible. The awards are given out every year; these are the latest:
Nominee No. 1: [San Jose Mercury News]:
An unidentified man, using a shotgun like a club to break a former girlfriend’s windshield, accidentally shot himself to death when the gun discharged, blowing a hole in his gut.
Nominee No. 2: [Kalamazoo Gazette]:
James Burns, 34, (a mechanic) of Alamo, MI, was killed in March as he was trying to repair what police describe as a “farm-type truck.” Burns got a friend to drive the truck on a highway while Burns hung underneath so that he could ascertain the source of a troubling noise. Burns’s clothes caught on something, however, and the other man found Burns “wrapped in the drive shaft.”
Nominee No. 3: [Hickory Daily Record]:
Ken Charles Barger, 47, accidentally shot himself to death in December in Newton, NC. Awakening to the sound of a ringing telephone beside his bed, he reached for the phone but grabbed instead a Smith & Wesson 38 Special, which discharged when he drew it to his ear.
Nominee No. 4: [UPI, Toronto]:
Police said a lawyer demonstrating the safety of windows in a downtown Toronto skyscraper crashed through a pane with his shoulder and plunged 24 floors to his death. A police spokesman said Garry Hoy, 39, fell into the courtyard of the Toronto Dominion Bank Tower early Friday evening as he was explaining the strength of the building’s windows to visiting law students. Hoy previously had conducted demonstrations of window strength according to police reports. Peter Lawson, managing partner of the firm Holden Day Wilson, told the Toronto Sun newspaper that Hoy was “one of the best and brightest” members of the 200-man association. A person has to wonder what the dimmer members of this law firm are like.
Nominee No. 5: [The News of the Weird]:
Michael Anderson Godwin had spent several years awaiting South Carolina’s electric chair on a murder conviction before having his sentence reduced to life in prison. While sitting on a metal toilet in his cell attempting to fix his small TV set, he bit into a wire and was electrocuted.
Nominee No. 6: [The Indianapolis Star]:
A Dunkirk, IN man, using a cigarette lighter to check the barrel of a muzzleloader, was killed Monday night when the weapon discharged in his face, sheriff’s investigators said. Gregory David Pryor, 19, died in his parents’ rural Dunkirk home at about 11:30 PM. Investigators said Pryor was cleaning a .54 caliber muzzle-loader that had not been firing properly. He was using the lighter to look into the barrel when the gunpowder ignited.
Nominee No. 7: [Reuters, Mississauga, Ontario]:
A man cleaning a bird feeder on the balcony of his condominium apartment in this Toronto suburb slipped and fell 23 stories to his death. “Stefan Macko, 55, was standing on a wheelchair when the accident occurred,” said Inspector Darcy Honer of the Peel Regional Police. “It appears that the chair moved, and he went over the balcony,” Honer said.
Nominee No. 8: [Arkansas Democrat Gazette]:
Two local men were injured when their pickup truck left the road and struck a tree near Cotton Patch on State Highway 38 early Monday. Woodruff County deputy Dovey Snyder reported the accident shortly after midnight Monday.
Thurston Poole, 33, of Des Arc, and Billy Ray Wallis, 38, of Little Rock, were returning to Des Arc after a frog-catching trip. On an overcast Sunday night, Poole’s pickup truck headlights malfunctioned. The two men concluded that the headlight fuse on the older model truck had burned out. As a replacement fuse was not available, Wallis noticed that the .22 caliber bullets from his pistol fit perfectly into the fuse box next to the steering wheel column. Upon inserting the bullet the headlights again began to operate properly, and the two men proceeded on eastbound toward the White River Bridge.
After traveling approximately 20 miles, and just before crossing the river, the bullet apparently overheated, discharged and struck Poole in the testicles. The vehicle swerved sharply right, exited the pavement, and struck a tree. Poole suffered only minor cuts and abrasions from the accident but will require extensive surgery to repair the damage to his testicles, which will never operate as intended. Wallis sustained a broken clavicle and was treated and released. “Thank God we weren’t on that bridge when Thurston shot his balls off, or we might be dead,” stated Wallis.
“I’ve been a trooper for 10 years in this part of the world, but this is a first for me. I can’t believe that those two would admit how this accident happened,” said Snyder.
Upon being notified of the wreck, Lavinia Poole (Poole’s wife) asked how many frogs the boys had caught and did anyone get them from the truck?
Let me conclude by wishing you all a very Merry Christmas and a healthy and prosperous New Year. Like all previous years it will be a challenging one but we will get through it together.
Thanks for all your kind comments. Please continue to send feedback through; it’s always appreciated and helps us to improve the newsletter.
And don’t forget you’ll get much more regular communications from me if you follow me on twitter – @NoelWhittaker.
Noel Whittaker
