This is a reissue of my newsletter, the original has been sent in early July, if you want it please subscribe via my website http://www.scalaprivate.com
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Welcome to the newsletter of Scala Private Wealth called ‘Beyond the News’ where you will gain some insight into what is really behind the news that could impact your investments.
The new year has start and so the Scala Private website www.scalaprivate.com
Macroeconomics
Europe
Brexit did happen! The British Pound took a beating and it is down – but the rest of the market recovered all the losses in a week. The funny cartoon above explains it better than me. The markets believe that there will be plenty of “friends with benefits” to save the markets – from accommodative stances of the EU powers to Reserve Banks interventions. If this will happen for real, it is a different story.
While the Reserve Banks always saved the markets, the politicians are quite successful in making a mess. Good recipe for volatility.
The worst market post Brexit has been Italy, especially its banking sector, so let’s keep our eyes open.
The main volatility has been in currencies (or pseudo currencies such as gold and silver).
The main issue is that a good outcome for the UK, is a bad outcome for Europe and vice versa. And the EuroSkeptic parties are emboldened.
Not at the centre of attention, Austria is going back to election (with the risk of having the first right wing President, in the birth country of Adolf Hitler!) as the previous election have been proven to be rigged as I had picked up immediately in my blog…in the middle of the European democracy!
United States of America
All the talks of the Reserve Bank rising interest rates went literally off the window with Brexit -provoking a boom in gold, infrastructure and US Dollars Vs Euro. Meanwhile the economy is performing quite good.
Asia
Asia again has been off the focus of attention. Japan has been severely damaged by Brexit as the Yen soared as a ‘risk off’ refuge. There are several call of the Bank of Japan to intervene. The Chinese Yuan devalued, but eyes were pointed somewhere else – so. a present in disguise for the People Bank of China. Still nothing changed and there are starting to be calls for a massive Chinese banks bailout within two years.
Australia
Astralia had practically a vote of NON-Confidence against both Liberals and Labor Parties. Most probably we will have a hung Parliament with 3 years of paralysis – in a world where we should be fast and nimble. A negative watch and then downgrade of our AAA rating is almost sure with consequences in the interest rate (going up, possibly counterbalanced by the Reserve Bank in August) and Australian Dollar (going down).
Rest of the World
In my previous newsletter I warned of a potential terror attack from IS – and correctly came in the form of an attack to the main Turkish Airport, Ataturk (3rd Europe largest airport). This attack and a few facts before it, are changing the dynamic in Syria with a realignment of the great powers – Turkey, USA, Russia and Israel. Once the realignment will be completed the Syrian war will finish (factions will still fight, but the main war will be over) and Syria will be probably split in zones of influence.
Markets – where we are now
We went from oversold to almost overbought in a flash. This week, helped by the 4 July Independence Day, the market will take stock of what happened. The Brexit consequences are so far and large that no model can capture everything. The markets are now watching if really the Reserve banks will come to the rescue. We will do the same for a short while.
Our Key Investment Changes – Why?
Before and just after Brexit, we bought gold and, for sophisticated investors only, a few exporters in the UK. The strategy paid handsomely as we are up +10% on a few positions. Time will tell, but the selected businesses are, in the long term, winning businesses so we are just happy to have got them at a good price.
On the Australian side, our old acquaintance RCG (Athlete shoes franchise) increased of another 17% due to a new premium shoes store acquisition (Hype chain).
Insurance fact
Income protection pays you a monthly amount directly to you while you are unable to produce an income due to illness or injury. Many policies will cover up to 75% of your salary if you are totally or partially disabled. By replacing your regular income, Income Protection payments can help you and your family maintain a level of financial normality. It seems easy, but there are a few traps inside it, so always best at least to talk to a specialist advisor. Scala does not do insurance, but we have the right connections for your need.
AND FOR SOME FUN….
Sporting fact
Wimbledon is the only Grand Slam event to be played on grass courts. The grass is tended to year-round. And during the event, it’s cut to a height of exactly 8 mm. It is currently mid swing with final match on July 12, 2015.
Curiosity
Google has been acquiring, on average, more than one company per week since 2010.
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The information contained in this newsletter is general advice only. It does not take into consideration your personal financial situation, goals or needs. You must consider the appropriateness of the advice prior to acting on this information. Please seek advice from us or your financial adviser and read the Product Disclosure Statement/Financial Services Guide of the product you are considering prior to investing in that product
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