The QE blues
I’m seriously concerned about so many countries printing money in that it is unprecedented and economically "unnatural". In ecology if there is disequilibrium, consequences soon become evident and, being a forward thinker, I’m foreseeing inevitable serious consequences which nations will struggle to manage or control. I don’t yet know what form these will take although wild inflation is perhaps the most obvious. As an investor nearing retirement age (I’m 56) I’m getting concerned about wealth protection. Any chance of looking a few years down the road to forecast what outcomes we might anticipate from all this (competitive) money printing?
Editor’s note: You may be interested to read some of Adam Carr’s articles on this topic, such as QE plug won’t get pulled.
Making sense of NABHA notes
Thank you John Abernethy for your informative article on NABHA. I followed most of it!! Could you please expand on the likely outcomes. Should I sell now or wait?
John Abernethy’s response:
The range of potential outcomes, without considering commercial logic, are actually quite broad. By that I mean that these income securities could be subject to a renegotiation tomorrow or literally never.
The commercial consideration for National Bank is that its ability to include these income securities as tier 1 capital is diminishing over time under the Basel rules. If these notes become fully taken out of tier 1 capital, then they become relatively expensive high-ranking debt with terms that may inhibit future capital raisings.
The decision for an investor to hold and wait should really be based on the yield generated and the alternatives that you have for that part of your portfolio. I do not know your personal circumstances, so I will give you the reason that we hold them in our portfolio.
First, there is the possibility of a renegotiation at some point. Second, the yield is much higher than term deposits and third, we regard these securities as an attractive cash alternative for a yield portfolio. Based on an assessment of risk and return, the NABHA at around $72 represent reasonable value for our income fund with not many better alternatives.
A large number of Eureka Report readers have written to us in recent days seeking clarification around the recently announced proposed changes to superannuation legislation. To explain the changes proposed by the federal government, we will be conducting a special Webcast at 12.30pm (EST) tomorrow (Thursday April 11) to be hosted by Managing Editor James Kirby and superannuation and tax expert Max Newnham to discuss what they mean for SMSF trustees/ members and individual accountholders.
To register for this Webcast, please click here.
In addition, Max Newnham’s regular questions and answers column this Friday will be specifically devoted to the announced changes and what they mean.