This page keeps our website visitors and clients up to date with all that is happening in the world of finance today. However, if you are seeking specific information for your circumstances, please contact Talk Financial directly on: (091) 777121 / 776716 or email us to info@talkfinancial.ie

Spring 2010 Newsletter:

Review of 2009:
We predicted this time last year that 2009 would be a bumper year for the aggressive investor. Equity markets gained between 27-35% with some funds gaining much more than others. Emerging markets did well and our own ISEQ performed well (+27%) albeit from a very weakened base. Interest rates fell leading to no value in cash other than peace of mind, but that is a good reason to have held on to some cash. Volatility and Opportunity is what best describes 2009.

2010:

Economic Commentary:
Ireland will continue to struggle this year due to lack of liquidity and confidence along with a banking system still under severe pressure. It is worth noting that talk of banks not lending has largely ceased; because people have stopped asking for money. Unemployment is expected to level off at 13% which is good news in that 87% of the population will remain at work, albeit it at lower incomes and margins. But with low inflation and interest rates, that is a reasonable trade-off.

Elsewhere it is our belief that the first world is already well on the road to recovery albeit it a rocky road. USA, Mainland Europe, China and several emerging markets are growing well with demand for services improving. We should see a gradual pull-back of govt intervention in the second half of 2010 into next year internationally.

Equities:
The best value proposition by a margin will be global equities and in particular in US and Emerging markets. Significant improvement in North America will lead to a drive on demand with emerging markets playing catch-up. Stock holdings in consumables, green energy and commodities are worth consideration. Countries like Brazil will offer real growth as will China, although a concern is that China may again over-heat. Financial stocks will remain unpopular for some time in our view.

Property:
We do not see any recovery in Ireland this year. Rents are under pressure, supply well outstrips demand and interest rates will move back up later in the year, all stopping growth. If interested in buying, buy in Dublin and take your time. Prices in the first half of 2010 will be virtually the same in early 2011 in our view.

Commodities:
Gold will continue to be in demand at least for the first half of 2010; so while its price has soared, there is room for more but be warned: When you see companies offering to buy up your unwanted gold, it is a sign we are close to the top. Other minerals will be in demand as investment in new technology, green energy, hybrid batteries etc comes to the fore. And oil will always be exciting as we know it is a finite resource.

Interest Rates:
We expect US interest rates will start to slowing come back in the summer of 2010 and this will lead to at least 2 Eurozone increases, perhaps of 0.25% per time. We expect any increase to be slow and low so as not to damage growth signs. We also predict that ECB will recover to about 3.5-4% by the end of 2011 or mid 2012 leaving mortgage holders paying a rate of about 5-5.5% generally. Relative to inflation, this will be a moderate interest rate, leading to stable growth and moderate property value.

2010 Opportunities:
- Consider fixing your mortgage rate if not on a tracker
- Expose some of your investment to Latin America
- There will be good growth in US equity markets and stock holdings
- China/Asia will offer growth but beware of possible overheat
- Shop around for everything as businesses compete desperately for your business
- If you have retained cash from the last 2 years, phase into markets over 6-12 months depending on risk profile; By 2011 you will have missed the growth and we will see the usual cycle of fearful investors come back when it is too late. Invest now and have a strategy; do not just buy into an investment fund that is being sold to you.

Disclaimer:

BUDGET 2010 – Your summary is here.

Generic:

Specific Changes:

Public Sector Cuts:

Investment:

No Changes:

Comment by Talk Financial Ltd:

For most people, it seems to be a softer budget than expected. Social Welfare will bear the lowest exposure while those earning significant incomes with strong asset bases and availing of tax incentive schemes will be brought more into the tax net. Public Servants to be hit in line with the 5-7% spin this week & high earners bearing the brunt of cost.

Overall, with child benefit being cut marginally, job seekers cut to specific groups, no cut in old age pension or carers, social welfare recipients generally can take a sigh of relief.

We will all welcome a reversal of the 0.5% VAT increase from April while business in a position to expand can gain from PRSI relief. Tourism, green energy and agri-areas have something to gain while those worst hit by recent floods will be supported.

Did it go far enough?

In our view, it is a balanced budget; not as severe as some may have expected & perhaps it could have hit some areas harder. It is not the most employment-focused budget and lacks creativity but with their backs to the wall, govt. options are limited.

No doubt it will be criticised by trade unions, opposition & lobby groups for welfare recipients, especially the younger but as an overall account, the hardest hit, and those who can carry that hit are the public sector in guaranteed jobs and the highest earners with strong asset bases.

From that perspective it is well-targeted and if the figures come to pass, will deliver on the €4b in cuts that is required. By not damaging industry and the private sector or income tax rates and bands, it may help bring a little confidence to the market and with the appeals board for SMEs, it will remind banks that they are in the lending business.

The question now is: Will the public sector trade unions take this on the chin and show what partnership is meant to be about in good AND bad times, or will they be on the streets in weeks to come? Time will tell…

Want to find out how the budget affects you?
Please call me on (091) 777121 or (086) 2997524.

Disclaimer:

Autumn/Winter 2009 Newsletter

Economic Commentary:

Global:
It seems the lowest point of the recession was February 2009. Since then, France and Germany have exited from recession while Australia and Canada avoided recession. However, it is our view that a global sustainable recovery is some way off yet. A lift in consumer confidence thanks to Thanksgiving (USA) and Christmas globally could be counter-balanced by profit taking from fund managers.

Ireland:
Our own economy is weaker than the global position. This is due to well-documented issues. None of these issues can be resolved quickly and we predict the Irish economy will remain very volatile until at least 2011 and only then will recover slowly, lagging behind global performance.

The 2010 budget to be announced during this quarter will likely retain income tax rates but we will see new taxes in all things but name – water charges, property taxes, health levies, tax relief cuts, means-testing/taxation of social welfare, etc. The budget will lead to extended economic challenges for Ireland if it does not address VAT, employer PRSI and clarify the govt position on property tax and Capital Gains Tax.

Investment commentary:

Equities:
The six months from March to date has seen a strong rally. We predicted last March that 2009 would be a bumper year for aggressive investors and that has been proven. We now predict a second equity market correction before year-end as institutional investors liquidate some of their profits to close out their year with strong yields. If you have made good margins this year in equity, it may be time to cash-in that profit.

Property:
Outside of Ireland and USA, property did not collapse to the same extent; due largely to more prudent lending and investment assessment. Property in UK fell by approx 20% and has recovered 6% so far this year for instance. In Ireland, we will not see any recovery in property until 35,000 empty homes wash through the system and until we witness the extent of property tax and likely reduction in tax relief for investors. We predict prices will fall further and as NAMA takes hold, banks should be forced back to the business of lending if the investment is to work and stabilise the market.

Commodities:
Oil prices are creeping back up. Commodity funds are perhaps over-valued at present because of this along with significant inflation of late in Gold. This reflects on-going lack of confidence as investor’s hedge against volatile markets by buying gold. At over $1,050.00 an ounce at the time of this update, demand may see its value go up quite a bit further yet. If you have exposure to generic commodity funds, you should bear in mind that positive values are driven by these two holdings.

Financial Opportunities:

Quarter 3 2009 - Summer Newsletter

Economic Commentary

Property Commentary

Interest Rates Commentary:

Equity Commentary:

Opportunities:

Disclaimer:

The above views are the opinion of Talk Financial Ltd and should not be constituted as advice. We encourage all visitors to our website to seek direct advice before taking any financial action.

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Quarter 2 2009 - BUDGET; Economy, Rates, Opportunities, Client Developments

Supplementary Budget April 2009 – Key points:

Email info@talkfinancial.ie or text (096) 2997524 for a copy of our Budget Summary

Economy:

Globally, there are early signs that the worst may be behind us. US housing picked up in February and mortgage lending in UK jumped in March. Credit is still the issue along with trust in banking regulation. In Ireland, we are too small, exposed and lacking critical mass of population, services and goods to be at the front of any recovery. And flaws in regulation mean our reputation has been damaged badly. We have a way to go yet...

Interest rates:

Interest rates are at an all time low at 1.25% since the start of April. But our banks are not releasing funds, despite their rhetoric. Government must use their weight to insist that banks support SME’s; the driving force behind our economy. Until then, low interest will only benefit debtors but not stimulate growth or confidence in Ireland.

We predict rates of 1% (ECB) during this second quarter. We also believe these rates will be short-lived. So fixing your mortgage over the next 6 months is worth consideration.

Investments/Opportunities:

The public have lost faith in investment funds and who could argue? Consolation is that this is a global experience. More positively everything is cyclical and it is likely we are close to the bottom of the bear run. The opportunity for many is over the next few months. Qtr 2 has already opened with significant rally in Irish financial stocks.

Industry developments:

There are too many banking institutions in Ireland with little differentiation. This must change. We have seen merge/acquisitions happen in the broker community of late in Galway and further afield. Will these changes enhance clients? In our view, the answer is NO. The focus is on cost and margin, not advice and support. The happiest and best serviced financial clients are those who enjoy strong 1-2-1 relationships with their adviser and company. The future for independent brokers must be to deliver exceptional service and constantly add value to clients. Mergers and acquisitions will do the opposite.

Client support developments:

Talk Financial Ltd is delighted to expand its service to you, our valued clients as follows:

• We have secured our link to Hibernian-Aviva Health for your private health care needs. If you have no private health care, have you considered the implications of medical care costs? We can sort this for you.
• We have developed a service with Merrion Stockbrokers to facilitate clients who wish to buy stocks with immediate access. We can buy immediately on your instruction thus ensuring you can buy at the value you see.
• Talk Financial is in the final stages of developing a service for clients that is completely unique to us. Once finalised, we will be the only professional advice company to offer this service to the public. And by giving it first to our own clients, you will benefit even more by having Talk Financial Ltd as your financial planning partner. More later...

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Quarter 1 2009 - Financial Commentary

Economy:

Global economic activity has clearly suffered over the last 18 months and many countries are in recession. The fall is expected to last longer in Ireland due to our small open economy, significant indebtedness and over dependence on FDI (Foreign Direct Investment). Un-employment is expected to hit double figures in 2009 in Ireland.

Opportunities will be in buying into business at low prices, securing deals on retail/office space and in most commodity markets it will be a buyers market. Value will have to come back to markets during 2009 if we are to avoid a longer-term and very damaging economic climate for all.

2009 is a time to protect what you have - your income, your health, and your business or employment. But it is also a time to be open to recognising opportunity within your threshold of risk and circumstance. There will be many winners in the next 24 months, much more than after the recovery has started.

Financial Regulator:

The financial industry will most likely see a considerable overhaul at regulation level over the next year or so. Financial institutions - especially banks - will have to be treated the same as smaller practices and be given more scrutiny as many have contributed enormously to our current crisis. Until now the regulator and related bodies seemed to focus primarily on documentation and due process but this will have to shift much more into the financial prudence of product, marketing and complete and full transparency.

Short term outlook:

2009 will see further property falls in Ireland in terms of both rent and capital value. We will see change of use of partially-completed developments and perhaps local authorities will take up some vacant residential units. The investor will not return to the market in 2009 unless there are true bargains. We predict a further 10-12% fall in 2009.

Interest rates will fall to 2% and perhaps even lower by summer 2009. Talk Financial predict rates will not fall below 1.5% meaning home owners could consider fixing mortgage rates around April-June 2009.

Equities globally will remain volatile because there is significant indebtedness in the markets. In Ireland, ISEQ will remain volatile but less than 2008. This is simply because the Irish financials that lost upwards of 85% of their value in 2008 no longer represent a significant proportion of the stock market.

Opportunity will be in driving a hard bargain on property in late 2009 for purchase and rent/lease while pharmaceutical and food stocks should be stable. Green stocks and commodity research may do well and there will be certainly be a few equity rallies in 2009. Timing them is impossible and dangerous but there will be good equity opportunities relative to today's prices. In the first quarter, a US equity rally may be seen following the swearing-in of President-elect Barrack Obama.

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Disclaimer
These are the views of Talk Financial Ltd only. We strongly advise you take no action without a full financial consultation in advance and we accept no liability for these expressed views.

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