Letters: Deposits, An SMSF collective and 'defensive' stocks.

Readers identify another reasonable term deposit rate, write in support of an SMSF lobby group, ask about defensive stocks and say it's not only about the 12-month returns for superannuation.

Deposit rates

Last week’s issue discussed term deposit rates and suggested Rabobank or Ubank. I just obtained a 5.2% interest rate from Suncorp for a six-month term, which they are also offering for two years.

E Laidlaw

Support for Leigh Kealton

I cannot but agree with Leigh Kealton  – it is way past time SMSF trustees started to exercise their very considerable political muscle and form an effective association to represent our views. Not catering to the big end of town, and not just information (as helpful as that is) but a real, hands on, down and dirty lobby group. If the politicians don't come to the party, they just don't get elected. I cannot imagine these views will be very radical, given the demographics. What we could do with is some genuine analysis based on Australia's superannuation needs in the medium to long term, not based on the news or electoral cycles. Some rational thinking to encourage people to look after their own future, not relying on the state to provide the lowest common denominator of existence. It just might demonstrate some level of thinking outside of which wine to choose with the next dinner at Parliament House. The number of positive changes to super over many years is totally gazumped by the revenue ravenous, short term "fiddling" that is the prerogative of those who are laughingly called legislators. I cannot believe they actually have any idea of what the average Joe suffers trying to sort out their super - possibly because they don't have same problems with their somewhat better schemes? Costello got it, and might have been relied upon to improve matters further. For the life of me I cannot understand how governments expect people to save for their futures without becoming a drain on the public purse, yet insist upon on delivering such an intricate, complex and penalty-ridden system that actually does just the opposite. I am sure you all know many others who are as frustrated and ragged trying to decipher the system and yet maintain a little of the savings of a lifetime from politicians, accountants, advisers and tax collectors. Eureka is perfectly placed to take this on board, as they have taken on other crusades in the past (or are they too comfortable in their new found prosperity? – tongue in cheek guys!). We may have to fork over some cash to get it moving, but the situation is nonsensical. We have the numbers and the grunt – let's get around to using it!

M Levy

I refer to Leigh Kealton's letter of July 25, advocating an independent SMSF Association, the general thrust of Leigh's comments I find I am in agreement with. The views of SMSF Trustees/Directors are encouraged to reply to Leigh at leigh.kealton@exandpro.com.au. If there is enough interest in this proposition, or alternatives, then consideration will be given to advancing the proposal to the next level. To strengthen any such proposal, readers are asked to indicate whether they would be prepared to join an existing organisation if a special interest group for SMSF trustees/directors is suitably established. More readers views please.

A Ellis

Magellan score

I am puzzled by the scoring in the article about the Magellan Global Fund in that the 5 star score is discrepant with the 4 1/2 stars which arises from the individual scores below. Also, the new version of the Eureka Report is a great step forward!

N Martin

Editor’s response: This was an inadvertent error, and has now been corrected. Tony Rumble confirms his score is 5 stars for the fund.

In the backline

The categorical sorting of stock used by all writers spill off your tongue and confuse me as do some of the hundreds of acronyms used by those who know more than I do. I am, however, a bit embarrassed to ask: What are 'defensive' stocks?

Thanks for a great job; the new format is neat and easy to use, and to go back to another day. A really worthwhile update from you all.

JC

Editor’s response: The term ‘defensive’ regarding stocks is a bit vague – there’s no hard and fast line between a ‘defensive’ company or otherwise. But the term comes from those stocks that are less exposed to risks, so they’re theoretically better able to preserve capital for investors in a downturn. A stock such as Woolworths (WOW) is often seen as a good example of a defensive stock. It’s not going to strike oil tomorrow and appreciate tenfold in share price, but supermarket shopping has a relatively stable base that’s probably not going to disappear overnight either.

New format faults

So far I’m not impressed with new format. I find it slower to get from article to article and how do I catch up on missed issues when I come back from holidays? I had not finished Friday's issue before the format changed and cannot find it.

R Hyslop

I was away overseas last week and got back on Monday July 23. I have tried to access the July 18 and 20 issues but your new look webpage is proving difficult to navigate to access these two issues. It was so much simpler with your old format.

K Lim

I think the new format is a disappointment. You have spent years teaching us to read a newsletter and now you want us to read an unnavigable web site. We are used to reading a series of articles issued at set times. Now we are faced with archives and ‘related articles’ with no reference to our daily newssheet. I sincerely hope that you improve this quickly.

J Hall

Editor’s response: Thanks for the feedback. We’re continuing improving the search function for all of our archive – whether you’re looking by date or subject – and hopefully this should make finding what you’re looking for even easier and more helpful. We are aware of an issue with a few of the articles from immediately before the change of site, such as July 18 and 20, and we’re working to fix that. Usually articles should be easily searchable by narrowing down the date range checking the boxes on the right hand side of the search page.

On SMSF returns

I always find Bruce's articles informative and easy to understand. His article on July 25 about SMSF growth was a little confusing. Does the return he quotes include contributions? I find it hard to remove contributions from my calculations as they are made many times throughout the year and are put into shares, cash, etc all with varying growth and some have dividends reinvested. It is much easier for me to look at total value of SMSF at year’s end, less tax, account and adviser fees etc which are easy to dissect out. Can you comment please?

Name withheld

Can Bruce Brammall run the returns for five years as I think it is a more suitable time frame, and may also change the returns significantly for a few asset classes which have recovered from a low base over the past three years. I pose the question as most people take a short term view where their super is being invested for periods of up to 50 years or more.

B Broadbent

I really have a problem with Bruce Brammall’s latest column “Are you good enough to run your SMSF”. If you could not beat 3.35% last financial year, maybe you shouldn’t run your own SMSF – what a negative putdown to all those who didn’t beat 3.35% increase. As an SMSF trustee, with a buy and hold strategy, I find his column frustrating to say the least. With a buy and hold strategy, and dividends of around 5%, it’s been a negative financial year. But a buy and hold strategy does not really worry about what happens in a 365-day period, other than for tax purposes.

B Routley

Government business blunders

I had a feeling of ‘shock-horror’ when I read John's suggestion that the government consider buying the failing local operations of foreign owners. Does he have no recollection of the disasters that surrounded former government-owned businesses? To name the more obvious ones look at Australian National Line; Went out of business and technically insolvent for many years.

All state owned railways. Qantas/TAA; profitable only because of government controlled pricing and routing. Telstra as the old PMG Department – doesn't anyone remember how bad that was? The only shining light was CBA and even then it prospered because it operated in an uneven playing field. But remember the State Savings banks of Victoria and South Australia?

There is no comparison to be gained by citing what the USA did in the GFC. Public service and union attitudes in the USA are so different to ours that there is no valid comparison. Subsidies will always be cheaper than public servants pretending to be business people. Do you remember the Victorian Economic Development Corporation of the Cain/Kirner era?

One area where we could usefully mimic the USA is the issue of Municipal Bonds for funding public infrastructure. These bonds pay tax free interest. They are attractive to high income earners and allow the lender to issue at lower rates of interest. If a government guaranteed corporation were established to build a certain project funded by Muni bonds and be responsible to repay its debt directly it would overcome a basic flaw in our present system of funding these projects by government grant and that is no group of politicians has, or ever will have, the courage or honesty to repay debt raised via a common pool thus the national debt is ever increasing. If major projects were funded in this way the project would eventually repay the debt and the government would be relieved of the responsibility to raise the funds in the first place.

The difference between the US system and ours is that we have not been weaned off the hand out mentality. The Yanks were never on it. Keep public servants out of business and all will be well. Greed is good. All we need to do is admit it.

B Rumpf

Small caps of the past?

Robert Calnon reviewed the performances of some small caps that were covered in Eureka Reports "over the past six months", on July 27. Small caps have also been covered by Eureka prior to this. Michael Feller had his 'Under the Radar' articles some little while back and I would suspect many subscribers may have taken up shares in one or two of Michael's suggestions. Is it possible to have a similar reflection/update on some of these stocks please?

R Jenkins

Tax qangos

The current financial shadow created by the launching of the National Disability Insurance Scheme raises the issue of the major parties trying to apparently work in those shadows regarding how taxes are spent. Why hide an issue that takes discipline and raising taxes? The GST could be extended to cover every purchase and health insurance could be run through the hospitals themselves thus creating cash investments behind the hospital ‘business’ which has to wax and wane with demand. It is time to face up to the tax structure nationally and look at taxing Land, Spectrum and Consumption in order vast tracts of land are put into viable economic use and re-vegetated if not under agriculture or requiring environmental revision. Land is taxed at local government and state level by way of levies which could be honestly drawn into a state land tax to include providing public transport, schools and essential community services. The proliferation of qangos could well be reduced with a changed tax system that is open and not hidden behind Levy Committees. Working along these lines may help to eliminate income tax which causes so much economic distortion and waste of human ability.

D Thackrah

Buying bonds

I have been interested to read some of Elizabeth Moran's articles over last few months on bond investments including the most recent one on Envestra ILBs However, I have not invested in these type of bonds in the past and am not familiar with how to go about investing in them. I operate a SMSF and use CommSec for my order placement, but cannot obviously see the ability to access these type of investments within CommSec.

Could you clarify or offer some comment on how one would go about investing in these type of instruments please?

P McKenna

Editor’s response: Bonds of the types Elizabeth usually covers may not be available through the simpler, online brokerages. Most full-service brokers should be able to help you, however, and you should call your preferred broker to ask about what they offer, or look into specialist brokers for fixed interest products.

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