Money Maven's Financial Blog

Who's counting?

2012-01-27T11:34:00.001+13:00

Interesting that the two energy sources New Zealand is not using are the cheapest. Political correctness perhaps?

Why?

2012-01-27T11:32:00.003+13:00

Why are we being forced to use electricity? Is it too hard to attack sectors such as manufacturing, transportation, agriculture and deforestation? This is of particular interest to Christchurch residents who are being forced to use electricity as the main source of heating.

Finance and Investments

2012-01-27T11:14:00.002+13:00

Women in developed economies have made substantial gains in the workplace during recent decades. Nevertheless, it’s still true that the higher up in a company you look, the lower the percentage of women.

Research in Europe and the United States suggests, for example, that companies with several senior-level women tend to perform better financially. Hiring and retaining women at all levels also enlarges a company’s pool of talent at a time when shortages are appearing throughout industries.

Many countries and regions face talent shortages at all levels, and those gaps will worsen. By 2040, Europe will have a shortfall of 24 million workers aged 15 to 65; raising the proportion of women in the workplace to that of men would cut the gap to 3 million. In the United States, the upcoming retirement of the baby boomers will probably mean that companies are going to lose large numbers of senior-level employees in a short period of time; nearly one-fifth of the working-age population (16 and older) of the United States will be at least 65 by 2016.

In recent years, McKinsey has done extensive work on the relationship between organisational and financial performance and on the number of women who are managers at the companies they have studied. The research has shown, first, that the companies around the world with the highest scores on nine important dimensions of organisation—from leadership and direction to accountability and motivation—are likely to have higher operating margins than their lower-ranked counterparts do. Secondly, among the companies for which information on the gender of senior managers was available, those with three or more women on their senior-management teams scored higher on all nine organisational criteria than did companies with no senior-level women.

Work by professors at the business schools of Columbia University and the University of Maryland lends support to this point. demonstrate the “strong positive association between Tobin’s Q, return on assets, and return on equity on the one hand and the [female top-management] participation rate on the other.”

It’s exasperating to see these studies and be aware of the pool of talented women who are not being advanced in their careers either as senior management or directors.

Why are we still stuck in this rut? Changing companies minds about women.

2012-01-27T11:04:00.003+13:00

Despite significant corporate commitment to the advancement of women’s careers, progress appears to have stalled. The percentage of women on boards and senior-executive teams remains stuck at around 15 percent in many countries, and just 3 percent of Fortune 500 CEOs are women.

The last generation of workplace innovations—policies to support women with young children, networks to help women navigate their careers, formal sponsorship programs to ensure professional development—broke down structural barriers holding women back. The next frontier is toppling invisible barriers: mind-sets widely held by managers, men and women alike, that are rarely acknowledged but block the way.

When senior leaders commit themselves to gender diversity, they really mean it—but in the heat of the moment, deeply entrenched beliefs cause old forms of behaviour to resurface. A survey McKinsey conducted earlier this year indicated that although a majority of women who make it to senior roles have a real desire to lead, few think they have meaningful support to do so, and even fewer think they’re in line to move up.

Do women lack ambition? Not on your life.

2012-01-27T10:48:00.002+13:00

Women want to succeed, yet even when they do “all the right things” Catalyst has found that they earn less and progress more slowly than men. The fact that some women adjust their career advancement strategies after crashing into institutional barriers is a rational response to inhospitable workplaces. It is not an example of a lack of ambition.

Women aspired to be CEO in equal proportions as men. But the women—to a much greater extent than men—ran up against barriers, namely exclusion from informal networks, stereotyping, and a lack of role models. Our report found that women and men have similar work values. The problem is this: men find workplaces more aligned with their values, women don’t.

The latest Catalyst report examined the career advancement strategies of thousands of MBA graduates from top schools around the world and the impact of these strategies on their careers. Women and men were equally represented in the two most proactive groups, indicating that ambition ran high among both genders. But being proactive paid off more in promotions and pay for the men.

In Pipeline’s Broken Promise, Catalyst found that among MBA grads who aspired to be CEO or senior executives, women progressed more slowly than men. And parenthood, industry, and previous experience didn’t explain the gender gap. The leadership and pay gaps balloon over time, suggesting that the problem lies with the system, not the women.

The misguided assumption that women are less ambitious than men puts companies at risk of inadvertently underutilising talented women and overlooking, or outright dismissing them, for key roles. This is a real loss for companies. Organisations need to step up and clear a path for women’s success.

Women are ambitious. But systemic barriers in the workplace mean that ambition, even when coupled with talent, isn’t always enough.

How to get to the other side of the debt chasm

2012-01-27T10:42:00.002+13:00

Paying off debt doesn’t require a secret formula: 48% of people who’ve done it said they simply stopped spending on their cards, 28% stuck to a budget, and 15% took a side job.

Living debt-free – what is it like
You’ll live a fuller life. A full 60% of people surveyed felt that being in debt prevented them from really enjoying life. Picture what you’d put your energy into when your debts were paid.

You’ll save money. Using 30% or less of your total available credit.
You’ll feel better. Some 62% of people said debt added unwanted emotional stress.
Your first step: Get debt coaching.

Why?

2011-09-26T10:28:00.003+13:00

Is imposing quotas for women in the boardroom a bad idea? It is according to a recent article in The Economist. The article, as is normal for that August Journal, is reasonably balanced. I say reasonably as it does acknowledge many verities relating to women and work. Some excerpts follow:

There is a powerful business case for hiring more women to run companies. They are more likely to understand the tastes and aspirations of the largest group of consumers in the world, namely women. They represent an underfished pool of talent. And there is evidence that companies with more women in top jobs perform better than those run by men only.

McKinsey, a consultancy, recently looked at 89 listed companies in Europe with a very high proportion of women in senior management posts and compared their financial performance with the average for firms in the same industry. It found that these firms enjoyed a higher return on equity, fatter operating profits and a more buoyant share price. The authors described the correlation between promoting women and doing well as “striking”, though they admitted that they could not prove what was causing what. It is possible that firms that are already doing well tend to hire more female directors.

The evidence from Norway, the first European country to impose strict quotas, suggests that compulsion has been bad for business.

To obey the law, Norwegian firms promoted many women who were less experienced than the directors they had before.

A study found that firms that were forced to increase the share of women on their boards by more than ten percentage points saw one measure of corporate value fall by 18%.

Men do persistently underestimate women, argues Herminia Ibarra of INSEAD, a business school in France. Ms Ibarra looked at more than 20,000 assessments of INSEAD’s executive students. Male work colleagues of the women judged them to be just as capable as the men (or more so) in most areas, but thought that they lacked strategic vision. No such lack was seen when their female work colleagues judged the students.

The way patronage and promotion work within the corporate world may count against women. Nearly all the executives who rise to the top have had a powerful backer.

In all societies, at least for now, women shoulder most of the burden of looking after children and ageing parents. European women devote twice as much time as men to domestic tasks, according to McKinsey. It varies from country to country. Latin men are slacker than Nordics. Italian men spend only 1.3 hours a day on domestic chores, whereas Italian women spend 5.2 hours. In Sweden, the ratio is a somewhat fairer 2.3 hours to 3.4.

Partly because it is so tricky to juggle kids and a career, many highly able women opt for jobs with predictable hours, such as human resources or accounting. They also gravitate towards fields where their skills are less likely to become obsolete if they take a career break, which is perhaps one reason why nearly two-thirds of new American law graduates are female but only 18% of engineers.

Deutsche Telekom, a German media behemoth, has declared that 30% of its middle and upper management jobs will be filled by women by 2015. “We have tried mentoring, coaching and networks, but nothing worked,” says Anne Wenders, a spokeswoman for the company.

The fact remains that promotion and advocating women is in its early years. I am reminded of Kim Campbell the former prime minister of Canada she offers a possible solution to the perceived increase in ethics within corporations – female leaders – in several studies results show that when you have a critical mass of women in an organisation, you have less corruption...lest you think that all we aspire to for the world can be accomplished by male dominated organisations I have only to say to you: Enron, Taliban, Roman Catholic Church.

Finance and Investments

2011-09-26T10:20:00.002+13:00

The acceptable face of Facebook. Few corporate types can charm hardened hacks so effectively. Sheryl Sandberg, the number two at Facebook, the world’s biggest social network, has been glad-handing reporters with spectacular results. The New Yorker says she may “upend Silicon Valley’s male-dominated culture”. New York magazine puts her in line for Secretary of the Treasury. Bloomberg Businessweek speculates that she might one day be the president of the United States.

Her sudden lionisation is well-timed. Facebook is expected to go public soon, perhaps this year. It may be the biggest internet flotation ever, with a market capitalisation of more than $100 billion. Investors might be less bullish if the 27-year-old Mark Zuckerberg, the founder, were in sole charge. Many consider him somewhat socially awkward.

Ms Sandberg, a 42-year-old former Google executive, joined Facebook in 2008; without her, insiders say, it would not have grown from a cash-bleeding start-up to a titan with estimated sales of $2 billion last year. She complements Mr Zuckerberg well. He is technologically brilliant and knows it. She is a good listener with a keen financial brain (she was once an aide to Larry Summers, the then treasury secretary). She provides adult supervision and a professional face to a firm growing so powerful and so quickly that it is bound to clash with governments. Were Mr Zuckerberg to be grilled by senators who have not yet grasped the concept of e-mail, he might let his irritation show. Ms Sandberg would not have that problem.

Since Carly Fiorina and Meg Whitman left HP and eBay, female bosses of big Silicon Valley firms have been rare. Ms Sandberg is doing her part to change this by encouraging women to be more assertive and by building an “old girls’ network”. Thanks to her efforts Facebook has more female executives than the average technology firm.

It is to be hoped she succeeds in forming a powerful “old girls network.”

Everyday Money

2011-09-26T10:15:00.003+13:00

We all know that coping with everyday money in our relationships can be like climbing Everest without oxygen but in Japan it appears that before partners are united in wedded bliss, financial status is the yardstick.

It appears that the most widely cited reason for stalling on getting married for men, and second-highest among women, was anxiety over whether the wedded couple would be economically comfortable enough: It seems 3 million yen in annual income is the magic number.

The marriage rate among men sharply diverges between those who bring home at least 3 million yen per year and those whose income comes in under the bar. The marriage rate soared more than two-fold among men both in their 20s and 30s once they made more than 3 million yen or more. Roughly just 9% of men both in their 20s and 30s who make less than that were married. Meanwhile, 25% to 40% of men whose income exceeds that stratum were coupled up.

It may however be that some men are just not that into the idea of getting married. In 2010, the average monthly salary of men up to 34 years old was 313,980 yen, which would be about 3.7 million yen a year, according to the communications ministry.

Womenomics

2011-09-26T10:04:00.003+13:00

Early this past spring, the White House Council on Women and Girls released a much-anticipated report called Women in America. One of its conclusions struck a familiar note: today, as President Obama said in describing the document, “women still earn on average only about 75 cents for every dollar a man earns. That’s a huge discrepancy.”

And it’s the same discrepancy existing ever since women started earning money – it’s well documented through 16th, 17th centuries and beyond.

The facts are that women work fewer hours, choose less demanding jobs, and then earn less than men do? The reason for this is obvious: kids. A number of researchers have found that if you consider only childless women, the wage gap disappears. June O’Neill, an economist who has probably studied wage gaps as much as anyone alive, has found that single, childless women make about 8 percent more than single, childless men do (though the advantage vanishes when you factor in education). Using Census Bureau data of pay levels in 147 of the nation’s 150 largest cities, the research firm Reach Advisors recently showed that single, childless working women under 30 earned 8 percent more than their male counterparts did.

The most compelling research into the impact of children on women’s careers and earnings—one that also casts light on why women are a rarity at the highest levels of the corporate and financial world—comes from a 2010 article in the American Economic Journal by Marianne Bertrand of the University of Chicago and Claudia Goldin and Lawrence Katz of Harvard. The authors selected nearly 2,500 MBAs who graduated between 1990 and 2006 from the University of Chicago’s Booth School of Business and followed them as they made their way through the early stages of their careers. If there were discrimination to be found here, Goldin would be your woman. She is co-author of a renowned 2000 study showing that blind auditions significantly increased the likelihood that an orchestra would hire female musicians.

Here’s what the authors found: right after graduation, men and women had nearly identical earnings and working hours. Over the next ten years, however, women fell way behind. Survey questions revealed three reasons for this. First and least important, men had taken more finance courses and received better grades in those courses, while women had taken more marketing classes. Second, women had more career interruptions. Third and most important, mothers worked fewer hours. In other words, these female MBAs bought tickets for what is commonly called the “mommy track.”

In fact, women choose fewer hours—despite the resulting gap in earnings—all over the world. That includes countries with generous family leave and child-care policies. Look at Iceland, recently crowned the world’s most egalitarian nation by the World Economic Forum. The country boasts a female prime minister, a law requiring that the boards of midsize and larger businesses be at least 40 percent female, excellent public child care, and a family leave policy that would make NOW members swoon. Yet despite successful efforts to get men to take paternity leave, Icelandic women still take considerably more time off than men do. They also are far more likely to work part-time. According to the Organisation for Economic Co-operation and Development (OECD), this queen of women-friendly countries has a bigger wage gap—women make 62 percent of what men do—than the United States does.

That doesn’t mean that the mommy track doesn’t present a problem, particularly in a culture in which close to half of all marriages break down. A woman can have a baby, decide to reduce her hours and her pay, forgo a pension, and then, ten years later, watch her husband run off with the Pilates instructor. The problem isn’t what it used to be when women had fewer degrees and less work experience during their childless years; women today are in better shape to jump-start their careers if need be. The risk remains, however.

In summary the risk to women’s earnings is what we intuitively know: kids! And in a situation where marriage breaks down that earnings gap is further exacerbated.

Who's Counting?

2011-09-26T09:54:00.003+13:00

A recent Wall Street Journal article reports on male selection. Since the late 1970’s, 163 million female babies have been aborted by parents seeking sons.

Mara Hvistendahl is worried about girls. In "Unnatural Selection," Ms. Hvistendahl reports on this gender imbalance: what it is, how it came to be and what it means for the future.

In nature, 105 boys are born for every 100 girls. This ratio is biologically ironclad. Between 104 and 106 is the normal range, and that's as far as the natural window goes. Any other number is the result of unnatural events.

Yet today in India there are 112 boys born for every 100 girls. In China, the number is 121—though plenty of Chinese towns are over the 150 mark. China's and India's populations are mammoth enough that their outlying sex ratios have skewed the global average to a biologically impossible 107. But the imbalance is not only in Asia. Azerbaijan stands at 115, Georgia at 118 and Armenia at 120.

What is causing the skewed ratio: abortion. If the male number in the sex ratio is above 106, it means that couples are having abortions when they find out the mother is carrying a girl.

High sex ratios mean that a society is going to have "surplus men"—that is, men with no hope of marrying because there are not enough women. Such men accumulate in the lower classes, where risks of violence are already elevated. And unmarried men with limited incomes tend to make trouble. In Chinese provinces where the sex ratio has spiked, a crime wave has followed. Today in India, the best predictor of violence and crime for any given area is not income but sex ratio.

A high level of male births has other, far-reaching, effects. It becomes harder to secure a bride, and men can find themselves buying or bidding for them.

Sex determination has been against the law in both China and India for years, to no effect.

Musings and Amusings

2011-09-26T09:40:00.004+13:00

One of my favourite writers Kay S. Hymowitz suggests that the conflict between parenting and career is hardwired in the female brain.

In the struggle for equality between the sexes, it keeps coming down to motherhood, doesn’t it?

If there’s one part of evolutionary thinking that spells bad news for the feminist worldview, it is parental-investment theory, an idea originally proposed by Harvard professor Robert Trivers. Trivers was attempting to clarify Darwin’s theory of sexual selection, which went something like this: females of most species are more particular about their mates than males are. That means males must compete for female attention; hence the colourful tails of peacocks and the lovely songs of many male birds.

But why should females be pickier than males? It is also mostly females who feed and guard the kids. In fact, females do nearly everything that increases the survival, and eventual reproductive success, of their offspring. Trivers concluded that females, as he put it, “invest” more than males—and that includes being cautious about their sexual partners, the fathers of their offspring.

In fact, as neuroscientists and geneticists piece together the human brain’s evolution, it’s becoming clear that, if it’s natural for a woman to go crazy over her babies, it’s also natural for a woman to run the State Department. The same human female brain that’s primed with oxytocin is, like the male brain, a fantastically complex machine, capable of reasoning, innovative problem solving, and manoeuvring through hugely varied social environments.

And so in the twentieth century, the big-brained female—Femina sapiens, ready to use her brain in new ways, coincidentally at a time when the intellectually gratifying jobs of an advanced economy were becoming more plentiful. Men invented the antibiotic and the washing machine; today, women in economics departments calculate the benefits of these discoveries for their sex. Better yet, they themselves can make future discoveries in labs and R&D departments.

If human society can sometimes reconfigure biology—by curing polio and increasing athletic stamina, for example—could it reconfigure sexual selection so that fathers and mothers made equal investments in their young children? We don’t have much evidence for thinking so. Until the mid-1990s, Swedish parents got nine months of leave after the birth of a child. By 2004, only 20 percent of fathers were taking the two months. By contrast, a large majority of mothers made full use of their leave. Iceland launched a similar effort to equalize parental investment; fathers there are doing more, but nowhere near as much as mothers.

How do we make it easier for working women who want more time to invest in their young children to work part time, or to return to their jobs after an extended leave? What is the proper role of government in all this?

Womenomics

2011-04-28T15:50:00.002+12:00

A fascinating article in the Sunday Times recently highlighted readers on how to predict a divorce. It appears that credit card statements tell their own story.

So what are the alarm signals that suggest divorce might be in the offing? "There are many transactional signs," explains Professor Ben Fletcher, head of psychology at Hertfordshire University. "Spending on extra lunches or staying in hotels more frequently may indicate an affair. Perhaps the couple shared one weekly food shop and now buy separately. You'll see people preparing for a split by changing their wardrobe or taking on new financial responsibilities."

Welcome to the brave new world of super-crunching, in which large retailers, credit companies, governments and health providers store tens of billions of our financial transactions in huge data warehouses and send computer programmes scuttling through them like electronic spiders, looking for patterns that might mark individuals out as a health risk, debt risk or even terrorist risk.

It's a multibillion-dollar industry and, appropriately for a nation of net-curtain twitchers, the Brits are market leaders.

For example, the Canadian credit company Tire established that customers who went to sports bars were most likely to miss a payment, while buyers of carbon monoxide detectors and premium birdseed were a safer bet.

Each time you call your credit card firm, a computer rush-analyses every transaction you've made over the past 12 months and displays its assessment to the call centre operator answering the phone. And that's just the start.

Finance and Investments

2011-04-28T14:55:00.004+12:00

The biggest investment we make, emotionally and financially is in marriage. Figures vary but almost half of marriages end in divorce. It therefore makes a lot of sense to sort out financial issues prior to marriage - it should in fact be a priority. Here are four areas that should be at the top of the discussion list.

ANCESTRY
How did your parents deal with money, how does that impact how you deal with it, and how might that impact a couple's relationship?

Because so many of our money behaviours are learned, couples should share their earliest money memories - whether their father hid money from their mother or how either parent fretted over the funds available.

CREDIT
While it's about the least romantic subject imaginable, your credit history holds a chunk of your permanent financial record.
Full disclosure on the credit front is useful for two reasons. It is a good starting point for a discussion about what you've learned (or still need to learn) about handling money.

CONTROL
Figuring out who will pay the bills each month may not seem to be an important conversation or assignment. But it gets tricky when both people want to take it on.

AFFLUENCE
Here's another question that tends not to come up during courtship: Just how rich do we want to be one day?

There is no right or wrong answer, it's just about understanding, going into a marriage, what that would really mean.

More on these sorts of discussions can be found in my book "Girls Just Want to Have Fund$."

Who's Counting?

2011-04-28T14:50:00.002+12:00

"I've done the calculation and your chances of winning the lottery are identical whether you play or not." Fran Lebowitz

Victoria University statistical consultant Dalice Sim crunched the numbers yesterday and revealed the odds of winning the big one where rather long. Per line, the chance of picking all six balls plus the Powerball is 0.000000026064, or one in 38,367,096.

With a $12 Powerball ticket, the odds shorten to a paltry one in 6,394,516.

Everyday Money

2011-04-28T14:38:00.004+12:00

When you analyse a mortgage, there are three components which determine the true cost to you: the principal, the rate of the interest you pay and the total amount of interest paid. The principal is the initial amount you borrow, an amount obviously decided by the borrower in conjunction with the lender.

For a $230,000 mortgage, assuming an average interest rate of 7.5 per cent (based on the average interest rates of the past 10 years), the borrower will pay $348,950 over a 30-year term and $279,940 over a 25 year term.

Combine this with the principal amount and you have your total repayments: $509,940 for 25 years, or $578,950 for 30 years.

At the end of the day, you cannot influence the interest rate. At best you might be able to negotiate a discount. But a discount does not have a major impact, if you could secure a lifetime discount of 0.2 per cent (so average 7.3 per cent instead of 7.5 per cent), you will save $11,297 in interest.

What you can influence is the total amount of interest you are paying. Channelling your income through your loan to offset the interest cost, reducing your term, and making extra repayments will all have a substantial impact on the total interest you will pay.

Simply channelling your income can save 12 years' interest worth $147,194 on $230,000 borrowed on a 30-year term at 7.5 per cent interest. This translates to a real interest rate discount of 2.75 per cent, giving an effective real rate of 4.75 per cent.

Why?

2011-04-28T14:12:00.003+12:00

Why is nothing in this world constant? Earthquakes, revolutions, and now the news that the lipstick effect isn't working any more. What? You mean you don't follow the lipstick index? Leonard Lauder will be horrified.

The idea of the lipstick index was conceived by Lauder, from that rather famous family, after the September 11 attacks in 2001. The theory is simple - in times of economic and political uncertainty, people don't spend up big on clothes and accessories, but still want to splurge on a little something for that feel-good factor.

Hence lipstick sales go through the roof while other retailers are hurting. This has been correlated from data during the Great Depression as well as early this century.

The problem is, in our current climate of financial and natural disasters, the lipstick slope seems to be stuck at the bottom, and is refusing to rise.

Musings and Amusings

2011-04-28T14:05:00.002+12:00

It was not amusing to read of Saudi Arabia’s decision to ban voting for women – it’s outrageous.

It did however cause me to muse upon the flagrant disregard not just for women’s “rights” but the failure to see women as beings with intelligence, the ability to think, and to be at least equal to men.

I suppose that here in the West at least chauvinism is fairly covert and some effort is made to allow women to join the ranks of voters and workers. Still, women at the top as a matter of course seem to be a couple of decades away.

Who's Counting?

2011-01-25T15:38:00.001+13:00

You could be forgiven for thinking that the health system could save $1.9 billion if tobacco had never existed. That’s what the Ministry of Health says smoking costs the public system. But you’d be wrong. The ministry’s latest estimate of the cost of smoking has nothing to do with the costs that smokers impose on taxpayers or the costs that could be avoided if smoking were to disappear.

After sorting the population by age, gender, income, ethnicity and smoking status, they compared the costs of providing health services to smokers as compared to non-smokers for each group.

But there are two very big problems with this way of estimating costs.

Everybody dies sometime and most of us will incur end-of-life costs that will be paid for by the public health system.

Suppose that a smoker will die at age 65 and a non smoker will die at 75. Comparing 65-year-old smokers to 65-year-old non-smokers and calling the difference the cost of smoking than rather biases upwards the measured costs of smoking.

We ought to be comparing the health costs of a non-smoker dying at age 75.

Finance and Investments

2011-01-25T15:31:00.002+13:00

Money illusion feeds into the kiwi obsession with property but as a recent Sunday Star Times article points out, many factors should be considered when weighing up the rent-or-buy options. The article quotes economist Shamubeel Eaqub from the New Zealand Institute of Economic Research who says the case for "active" renting instead of buying a home is stronger than ever.

"I think house prices are completely unsustainable on pretty much every valuation methodology," he said. "It seems very expensive not only from the perspective of buying an investment, but also from the perspective of an owner-occupier."
There may be no bubble bursting, and it may take a number of years of zero house price growth, but Eaqub has a "strong view" that prices will fall in real terms.
The Retirement Commission’s David Kneebone gives two scenarios:

1. The home buyer
To buy a median-priced home in July 2010, a median-wage earning buyer would have had to pay $350,147 and have a deposit of around 20%, some $70,029.
At a 6% mortgage rate, the annual repayments over 30 years would take $20,153 or about 32% of household income. At an 8% mortgage rate, closer to the norm, it would cost $24,665, or 39% of income.

That leaves the buyer with $756 a week (out of $1231) for everything else a household needs: food, electricity, phone, petrol, clothes, healthcare and so forth.
Plus, homeowners have to pay for rates, insurance for the house and maintenance that goes with it. If nothing goes horribly wrong, then budgeting $4000 a year provides a reasonable estimate.

2. The renter
Median rent in New Zealand is $300 a week, making the annual cost $15,600 – about $9000-$13,000 less than what the homeowner has to come up with for mortgage repayments, maintenance, insurance and rates.

If the renter invested that $9000 that the homeowner is spending every year at 7% (as per sorted.org.nz), he or she would have $50,000 saved in five years.
If house prices are stagnant in the period, the homeowner would be $100,000 behind the renter (that is, the $50,000 that the renter has gained and the $50,000 the owner paid in extra costs).

If the renter then bought a house, he or she would be buying at a lower "real" price, given inflation over the five years, and the price of the home would have fallen in proportion to the median wage.

Ultimately of course each householder must make their own decision. Generally speaking though renting is the most fiscally sensible option.

Womenomics

2011-01-25T15:27:00.002+13:00

As the number of women participating in the workforce grows, their potential influence on business is becoming ever more important. Seventy-two percent of respondents to a recent McKinsey survey believe there is a direct connection between a company’s gender diversity and its financial success.

Yet companies have not so far successfully bridged the gap between men and women in the top levels of management. This is not surprising, since the survey shows that diversity isn’t a high priority at most companies and that there’s great variability in the number of gender-diversity policies that companies, have pursued. For both of these factors, the results suggest that more is better: at companies where gender diversity is higher on the strategic agenda and more related policies are implemented, executives say that company leadership is also the most diverse.

Among respondents at the companies that include gender diversity as a top-three agenda item and those at all companies, there is a 32 percentage-point difference between those who say women fill more than 15 percent of their C-level positions. The degree of support from CEOs and other top managers is another important factor influencing a company’s performance on diversity, respondents say, so it is notable that few companies; top management teams currently monitor relevant programs. The differences executives report at the most diverse companies suggest some ways all companies can improve their gender diversity and, eventually, financial performance.

Looking forward to seeing some action in NZ businesses and boardrooms.

Musings & Amusings

2011-01-25T15:25:00.001+13:00

Marriage is a “public, formal, lifelong commitment to share your life with another person,” as Andrew J. Cherlin defines it in The Marriage-Go-Round: The State of Marriage and the Family in America Today. In the American view, marriage remains the ideal state: only 10 percent of Americans endorse the idea that the institution is outdated, compared to, say, in France, where a third of people think it is. On the contrary, America is seeing a sort of Marriage Renaissance, the impetus for which comes in part from the gay marriage movement, which in itself reflects our reverence for weddings. All the usual explanations for the marrying nature of Americans seem good enough: marriage is seen as a haven in a rough world, an antidote to rootlessness. Marriage says Cherlin is unneeded by people in smaller, more comfortable societies, it developed in response to other historical factors including patterns of life and religion in Colonial America and on the frontier; if is not an innate biological impulse but a socially determined convenience for raising children.

By the time they’re forty, 84 percent of American women have been married, a higher percentage than in other Western nations; and more than half (54 percent) of marriages will have broken up within fifteen years. About the same percentage of “cohabiting relationships” will have broken up even sooner. Americans divorce more often than others do and have more partners, more children out of wedlock, and more abortions.

Along the way, a total of 90 percent of women, almost all of them, will have one partner or more during their lives, and some many, many more. If hypocrisy, as some suspect, is our most salient national quality, Cherlin finds lots of examples in the inconsistency of American religion and law, the one urging us with increasing shrillness to fidelity in sickness and health, the other extending legislation for no-fault divorce.

Cherlin believes that the fragility of the American family is the result of an evolution—an “upheaval”—since the late 1950s, from earlier traditions governing property, progeny, prestige, duty, and God, to a new view that marriage is a “right” on the path to personal fulfilment.

While this an American survey it certainly mimics the Kiwi experience.

Why?

2011-01-25T15:16:00.002+13:00

It is a tragedy, a horror, a crime against humanity. The details of the murders – of the women beheaded, burned to death, stoned to death, stabbed, electrocuted, strangled and buried alive for the "honour" of their families – are as barbaric as they are shameful. Many women's groups in the Middle East and South-west Asia suspect the victims are at least four times the United Nations' latest world figure of around 5,000 deaths a year. Most of the victims are young, many are teenagers, slaughtered under a vile tradition that goes back hundreds of years, but which now spans half the globe.

Consider the young woman found in a drainage ditch near Daharki in Pakistan, "honour" killed by her family as she gave birth to her second child, her nose, ears and lips chopped off before being axed to death, her first infant lying dead among her clothes, her newborn's torso still in her womb, its head already emerging from her body.

Why does this continue?

Just in case you think this is restricted to a foreign country, in NZ, it is feared a woman, Ranjeeta Sharma, 28, was the victim of an honour killing. Her charred body was found on a rural road, near Huntly in the Waikato. Her husband is at the centre of an international manhunt.

Everyday Money

2011-01-25T13:41:00.003+13:00

How do we teach our teenage children how to handle money? The use of money involves logic, facts, and a healthy dose of discipline. These have no place in teenage brains.

If as parents you are over indulging by being the bank of Mum and Dad you certainly won’t inculcate good financial habits so here are some suggestions:

•Give your teenager an allowance after they have completed their appropriate duties, I define these as a contribution to the bottomless well of domestic duties.

•Send your teenager to the supermarket with your shopping list and cash – thus giving them a sharp dose of financial reality.

•Sit down with your teenager and show him or her your budget.

•Suggest that they draft up their own budget – much support will be needed at this point!

•Take your teenager to an advisor and get them started on a KiwiSaver which will give them a kickstart for retirement savings and access to housing finance.

And finally...the best of luck!

Why?

2010-10-01T12:37:00.001+13:00

Why are men and women different – the perennial question!”

Recently, the psychologist David Buss's team at the University of Texas at Austin reported that men, when looking for one-night stands, check out women's bodies. Surprise!

Like many results in evolutionary psychology, this may seem blindingly obvious, but that does not stop it from being controversial. Earlier this month a neuroscientist in Britain, Gina Rippon, lambasted what she called the "neurohype" about sex differences: "There may be some very small differences between the genders, but the similarities are far, far greater."

She has a point. Compared with, say, chimpanzees, men and women are not very different. Most of the interesting things about people—language, laughter, love, laptops—come just as naturally to both sexes.

It's no zoological accident that in all societies, however peaceful or violent, men are about 50 times more likely to kill other men than women are to kill women, and they do so most in young adulthood, when most actively competing for mates. Likewise, it is no neurophysiological accident that women coo over newborn babies more enthusiastically than men do. Women who showed interest in babies left more genes behind than those who were indifferent; men who turned violent left more genes.
These are the kinds of sex differences that we share with all other mammals. What intrigues me, though, is the possibility that human beings have other sex differences peculiar to themselves and derived from uniquely human habits of more recent origin.

Take the cliché of the golf-playing husband and the shoe-shopping wife. Not even an evolutionary psychologist would claim to find monkey equivalents to this.
In all hunter-gatherer societies there is a sharp difference between the foraging strategies of the two sexes. Men generally travel far in search of mobile prey that they need to bring down with well-aimed projectiles. Women generally go out in groups and search for good sources of roots, ripe berries or nuts, which they use their acute powers of observation to spot and collect.

This sexual division of labor over foraging is not only far more marked in people than in most other animals (it was, arguably, the first "gain from trade" we stumbled upon, benefitting both sides), but it may be a relatively recent feature of our evolutionary history, invented in Africa just 150,000 to 300,000 years ago. Some archaeologists have concluded that Neanderthals did not practice it: that female Neanderthals were co-operative hunters with men, not gatherers.

That still gave the sexual division of labor plenty of time to leave its instinctive marks on the human psyche through genetic changes, raising the intriguing thought that some of our sex differences might be caused by our culture, yet also ingrained in our genes.

From the Wall St Journal

Womenomics

2010-10-01T12:36:00.002+13:00

Human Rights Commission Equal Employment Opportunities Commissioner Judy McGregor says baby boomer women need to step aside to let younger women move up the ranks in both the public and private sectors.

A recent letter to the editor asked if Judy McGregor was joking “Is she planning to step aside herself? Why should any woman give up her job for another? What is gained?How many men are planning to step aside so that younger people, men and women, can take their places? If she is serious, Ms McGregor has undoubtedly disqualified herself for the position she holds as equal employment commissioner.

This is undoubtedly one of the craziest statements I have heard in some time. She would be better off suggesting that baby boomer women move further up the ladder and take over from the world economy and governments which are run by old grey-suited men.

Everyday Money

2010-10-01T12:36:00.001+13:00

They say money can’t buy happiness. They’re wrong. At least up to a point. People’s emotional wellbeing increases along with their income up to about US$75,000 (NZ$103,700), researchers report in today’s edition of Proceedings of the National Academy of Sciences. For people making less than that, “Stuff is so in your face, it’s hard to be happy. It interferes with your enjoyment,” said Angus Deaton, an economist at Princeton University.

Not surprisingly, someone who moves from a US$100,000 a-year job to one paying US$200,000 realises an improved sense of success.

As a financial planner I tend to think money is good for you, and am pleased to find some evidence for that.

Finance and Investments

2010-10-01T12:35:00.000+13:00

It’s long been known that women make better investors than men, although frankly that’s not a particularly difficult thing to do as most males have the patience of a small child with a full bladder and a tendency to hair-trigger trading for all sorts of behaviourally induced reasons. However, what’s a bit more surprising is that this difference is seen in professional investment circles as well while at the same time biases against female fund managers ensure they have less money to manage more wisely.

Female investment managers are more risk-adverse than their male colleagues and tend to stick closer to benchmarks and their own investment styles. Although they also find there are no significant differences in investment returns between the sexes they also note that women achieve greater performance persistence – which is another way of saying that they don’t tend to be amongst the outliers of great success or great failure.

Given that there are essentially no differences in returns between male and female managers you’d assume that there’d be no difference in the relative amount of funds under management but, of course, you’d be wrong as the researchers find that women only attract half the funds that men do. Which leads them to pose the provocative but interesting question: this being the case, why do fund managers bother employing women at all?

In my experience investment industry is rife with gender bias – although it’s no different from most industries in this regard – and it rather looks like our innate stereotyping mechanisms are behind this. We regard money management as a male preserve and regard successful women as odd and dangerous creatures to be avoided. In reality if we want our money managed conservatively with the minimum of fuss and risk we should seek out female fund managers. On the other hand, if we like to see our net worth changing rapidly then a red-blooded male’s the best choice: just don’t bet on the direction of net worth change being in a positive direction.

From the Psy-Fi Blog

Who's Counting?

2010-10-01T12:34:00.000+13:00

Women are poised to claim a majority of seats in Switzerland’s Cabinet, less than four decades after the country became one of Europe’s last to grant women the right to vote in national elections. A four-three split in favour of women today – and outcome favoured in opinion polls – would make Switzerland only the fifth country in the world to have a female majority in government, according to the Inter-Parliamentary union.

Musings and Amusings

2010-10-01T12:33:00.000+13:00

“Good morning, ladies and gentlemen. We are delighted to welcome you aboard Veritas Airways, the airline that tells it like it is. Please ensure you seat belt is fastened, your seat-belt is upright and your table is stowed, as your safety is our first priority. Actually, that isn’t quite true. If it were, our seats would be rear-facing, like those in military aircraft, as they are safer in an emergency landing. But then nobody would buy tickets and we would go bust.

The flight attendants are now indicating the emergency exits. This is where you should pay attention. Knowing where the exits are makes a huge difference to your chances of survival if we have to evacuate the aircraft. Also, please keep your seat belt fastened when seated. This is to protect you from clear-air turbulence, and extremely nasty form of disturbance that can cause severe injury. Imagine food trolleys jumping through the air and bashing into overhead lockers, and you will have some idea of how unpleasant it can be. A life-jacket can be found under your seat. In the event of landing on water, an unprecedented miracle will have occurred, because in aviation history the number of wide-bodied aircraft that have successfully done this is zero. The aircraft has inflatable slides. Please remove high-heeled shoes before using the slides. We could add that space helmets and anti-gravity belts should also be removed, since to mention using the slides as rafts is entering the realm of science fiction.

Please switch off mobile phones, as they interfere with the navigation systems. Well, that’s what you’ve always been told. The real reason is because they interfere with mobile networks on the ground, but somehow that doesn’t sounds so good. On channel 11 you will find a video showing some exercises you can do to reduce the risk of deep-vein thrombosis. We are aware that this video is tedious. It is not meant to be fun, but to limit our liability in the event of lawsuits.

Once we are at cruising altitude you will be offered a light meal. This is partly to keep you in your seats where you cannot harm yourselves or anyone else. Please consume alcohol in moderation so that you become mildly sedated. Or we can always turn the air-quality down a notch or two to ensure that you are sufficiently drowsy. So please sit back, relax and enjoy the flight. Cabin crew, remember to close the doors. Sorry, I mean “Doors to automatic and cross-check.: Thank you for flying Veritas.”

From The Economist

Musings and Amusings

2010-07-13T17:12:00.002+12:00

Is this too good to be true?

Men Having it all in Sweden
Mikael Karlsson owns a snowmobile, two hunting dogs and five guns. In his spare time, this soldier-turned-game warden shoots moose and trades potty-training tips with other fathers. Cradling 2-month-old Siri in his arms, he can't imagine not taking baby leave. ''Everyone does.'' 85 percent of Swedish fathers take parental leave. Those who don't face questions from family, friends and colleagues.

In this land of Viking lore, men are at the heart of the gender-equality debate. The ponytailed center-right finance minister calls himself a feminist, ads for cleaning products rarely feature women as homemakers, and preschools vet books for gender stereotypes in animal characters. For nearly four decades, governments of all political hues have legislated to give women equal rights at work -- and men equal rights at home.

Profound social change.
Women's paychecks are benefiting and the shift in fathers' roles is perceived as playing a part in lower divorce rates and increasing joint custody of children.
In perhaps the most striking example of social engineering, a new definition of masculinity is emerging.

The share of fathers on leave was stalled at 6 percent when Mr. Westerberg entered government in 1991.

Women continued to take parental leave not just for tradition's sake but because their pay was often lower, thus perpetuating pay differences. Companies, meanwhile, made clear to men that staying home with baby was not compatible with a career.
''Society is a mirror of the family, the only way to achieve equality in society is to achieve equality in the home. Getting fathers to share the parental leave is an essential part of that.''

No father was forced to stay home, but the family lost one month of subsidies if he did not. Soon more than eight in 10 men took leave.

Among the self-employed, and in rural and immigrant communities, men are far less likely to take leave. That a mother’s future earnings increase on average 7 percent for every month the father takes leave.

While Sweden, with nine million people, made a strategic decision to get more women into the work force in the booming 1960s, other countries imported more immigrant men.

The trend is, however, no longer limited to small countries. Germany, with nearly 82 million people.

That was a marker of pretty significant change. If Germany can do it, she said, ''most countries can.''

Yet Sweden looks well balanced: at 2.1 percent and 40 percent of G.D.P., respectively, public deficit and debt levels are a fraction of those in most developed economies these days, testimony perhaps to fiscal management born of a banking crisis and recession in the 1990s. High productivity and political consensus keep the system going.

Source: NY Times

Womenomics

2010-07-13T17:09:00.002+12:00

Women claimed three of the top five spots in Forbes magazine’s 2010 Celebrity power list, with singer Lady Gaga making her first entry and Oprah Winfrey retaking her No 1 position. Talk show host Winfrey earned an estimated US$315 million (NZ$445m), putting her stop the annual Forbes’ Celebrity 100 list for the fourth time.

Grammy-winning R & B singer Beyonce rose to second with an estimated US$87 million from a tour and album sales, together with deals in fashion fragrance and other endorsements.

Glam pop star Lady Gaga made the list for the first time, talking fourth place with estimated earnings of US$62m.

But wait there is more – its not just celebrity women who are earning as much as men, according to an analysis of the American workplace, the pay gap between men and women is set to vanish within 14 years among the professional classes, Women will on average earn more than men in careers such as law, medicine and academia by 2024, says Maddy Dychtwald, a Californian expert on demographics.

She says women are more ambitious, going for the top jobs, and younger women would find pay disparity with their male peers a joke.

If this trend continues, women in middle-income jobs such as teaching, healthcare and the arts will start overtaking men shortly after 2024.
The predictions mark a startling break with official estimates at the start of the century, which suggested the pay gap would persist for another 40 years.

Declining birth rates, a growing number of female-friendly posts and the “mancession” – where more men than women lost their jobs in the US recession – have since helped to shatter elements of the glass ceiling.
The “motherhood penalty” remains the biggest obstacle to female advancement, experts say. This may change as the birth rate fails and educational opportunity trickle down.

Why?

2010-07-13T17:03:00.003+12:00

From the New York Times by Maureen Dowd.

I had tea and sweets with a group of educated and sophisticated young professional women.

I asked why they were not more upset about living in a country where women’s rights were strangled, an inbred and autocratic state more like an archaic men’s club than a modern nation. They told me, somewhat defensively, that the kingdom was moving at its own pace, glacial as that seemed to outsiders.

How could such spirited women, smart and successful on every other level, acquiesce in their own subordination?

I was puzzling over that one when it hit me: As a Catholic woman, I was doing the same thing. I, too, belonged to an inbred and wealthy men’s club cloistered behind walls and disdaining modernity.

I, too, remained part of an autocratic society that repressed women and ignored their progress in the secular world.

I, too, rationalized as men in dresses allowed our religious kingdom to decay and to cling to outdated misogynistic rituals, blind to the benefits of welcoming women’s brains, talents and hearts into their ancient fraternity.

The Catholic Church took its moral codes and orthodoxy to extremes not outlined by Jesus. In the New Testament, Jesus is surrounded by strong women and never advocates that any woman — whether she’s his mother or a prostitute — be treated as a second-class citizen.

Negating women is at the heart of the church’s hideous — and criminal — indifference to the welfare of boys and girls in its priests’ care.

“In the Roman Catholic corporation, the senior executives live and work, as they have for a thousand years, eschewing not just marriage, but intimacy with women … not to mention any chance to familiarize themselves with the earthy, primal messiness of families and children.”

Finance and Investment

2010-07-13T16:53:00.004+12:00

From one of my favourites; the Psy-Fi Blog:
Geography Is Wealth

Summarising briefly, the peoples of the European-Asian land mass were favoured because the East-West directionality of the continents meant that people and animals could spread without encountering hugely unfavourable climate conditions. In Africa, for example, spreading North-South meant overcoming widely different temperature conditions, a malarial zone and the Sahara Desert.

Europe and Asia were favoured by access to the widest range of domesticatable animals and plants, and furthermore then benefited from natural selection in favour of those people best fitted to survive the diseases which could jump species.

Persistent Institutions

Robust institutions – many of today’s economic success stories are those countries where European colonisers laid down roots and established lasting institutions, while many of the basket cases are places where expropriation of resources was the main, lasting accomplishment of the colonial powers.

Property Rights Rule

In particular there appears to be a link between property rights and economic growth which seems to make intuitive sense. If you believe you’ll be allowed to reap the rewards of your labour you’re more likely to work harder and re-invest earnings. If you expect your profits to be expropriated then you’re more likely to bury them in the back garden or hide them in Switzerland where they won’t help local economic growth.

History Matters

Decisions made centuries ago are still influencing the differences between the haves and the have nots of this world. For instance, the way that revenue collection in British controlled India was performed, can predict multiple economic factors in different regions: direct revenue collection by British officials has led to better levels of education and health.

It’s not the precise economic or political system that matters but the infrastructure supporting the rule of law. Corruption and a disregard for property rights is the enemy of economic advancement, not lack of freedom. Of course, all too often these go hand in hand but it ain’t necessarily so...

Who’s counting?

2010-07-13T16:44:00.003+12:00

Elizabeth Barrett Browning once wrote How do I love thee? Let me count the ways?
One assumes she would write a simple numbered list. Easy to read and understand mathematically.

Sometimes however we are presented with statistics which on the face of it look impeccable but which are wrong.

A recent example caught my eye – abortions for girls have doubled since 1991! The headlines shrieked, the moralists pontificated. But allow for population growth of 2-3% from 1991 til’ now and yes, you would expect the figures to double. In effect then there has been no change.

Everyday Money

2010-04-09T15:30:00.006+12:00

If anything underlines the need most New Zealander's have to take financial advice, a new survey has found that 60% of Kiwis are financially stressed - but most don't plan to change the way they spend or invest.

The survey, undertaken by the Financial Services Institute of Australasia (Finsia), found that 60% of women and 55% of men say the global financial crisis has made them feel financially stressed.

"The sudden collapse of finance companies, the significant loss incurred by investors and the notable rise in unemployment has left many New Zealander's grappling with spiralling levels of household debt, inadequate savings and the prospect of an uncertain environment," according to Finsia CEO Dr Martin Fahey.

The opportunity for financial advisers is clear - some 23% of Kiwis are saving nothing from their income while 36% are paying interest on credit card debt and 15% don't know what interest rate they're paying on their credit card debt.

Other key findings:

• 38% of respondents said they feel slightly worse off than a year ago.
• 12% feel significantly worse off.
• 41% say they're no better or worse off post GFC.
• 8% say they're better off since the GFC, due to lower interest rates

So what to do? Meet with a Financial Planner.
Source: Financial Alert, 2010.

Womenomics

2010-04-09T15:27:00.004+12:00

Few young women enter the trades where there are good career opportunities and it is possible to earn-while-you-learn.

Many jobs remain dominated by either men or women. While 99 percent of all plumbers, builders, and mechanics are men, over 90 percent of people working as caregivers, registered nurses, and secretaries are women. Male-dominated jobs tend to be higher paid than female-dominated jobs.

MWA commissioned research in 2008 on the factors that influence young people when they are deciding on a career and in particular, why so few young women enter the trades. The report Trading Choices: young people’s career decisions and gender segregation in the trades is available on the website: http://www.mwa.govt.nz/news-and-pubs/publications/trading-choices.

The overall objective of their women in trades work is to figure out how to promote the trades as a career option and remove barriers to women in trade training. They are looking across the trades where women are under-represented, and at emerging industries to see how they might prevent occupational segregation from repeating the patterns of history.

Why?

2010-04-09T15:25:00.003+12:00

Why am I reading yet another article telling me it is good business to have women in senior positions as well as fair! I have to say it exasperates me when I look at the management of the companies I work with – they are all men. The argument I get when I query this is the old “we cannot find women for senior positions” has worn thin.

Half of The National Australia Bank leadership are women; they have a programme of hiring 200 bankers this year, setting themselves a goal of 50-50 women and they say there’s no shortage of women! The talent exists but for most men, and companies, it doesn't make it on to their radar. Extraordinary!

Finance and Investments

2010-04-09T15:11:00.002+12:00

My favourite emerging market fund is managed by Dr Mark Mobius. He recently visited New Zealand. Some highlights from this presentation;

The Emerging Markets fund has performed exceptionally well. It has appreciated 18 fold since listing, which equates to an annual return over the past 21 years of around 15 per cent. Over the past decade it has gained 12 per cent a year in NZ dollars, trouncing both the emerging markets index which is up 6.5 per cent a year and the broader global markets MSCI index which has fallen 3.0 per cent a year over the past decade.

But 50% declines are almost ‘normal’

Emerging markets have indeed been the place to be over the past decade and Mobius and his team of 40 analysts and managers have delivered returns well about the market. But Mobius is the first to point out that this extra performance comes at a price.

Emerging markets can experience ferocious bouts of volatility. In 1994, 1998 and 2008Emerging markets, and the Templeton fund, fell by 50 per cent in a matter of months as global market weakness hit Emerging Markets hard.

Market outlook dominated by two issues: Money-printing and Derivatives

The first is the vast growth in money supply. Central banks around the world have addressed the financial crisis by slashing interest rates and pouring money into their respective economies. This has driven share markets upwards for two reasons.

First, the dramatic reductions in deposit rates mean many investors have exited their cash investments and shifted their money into shares as they seek higher returns and more income.

The fact that many central banks have effectively been printing money has raised concerns with many investors that inflation could rise sharply. These people are again buying shares as, like property, shares have historically provided a degree of protection against inflation.

The second elephant Mobius identified was derivatives contracts. Derivative contracts are investments like futures and options and other synthetic instruments. He sees the dramatic growth in the use of these investments as a major threat to the stability of markets.

For the record, he is relatively positive on the outlook for the global economy and believes the worst of the crisis is behind us. He does though continue to believe share markets across Emerging markets will continue to outperform the developed markets.

Musings and Amusings

2010-04-09T15:06:00.003+12:00

It amazes me that so many Kiwis are reluctant to write financial plans – only around 30% of us do so. Perhaps my profession needs to take a more creative approach. Consider the following as a base for your plan:

Write a mission statement for your life. What are you dedicated to? What can people count on from you? Leave this exercise for a day or two, then re-read it. Did you learn something about your goals and dreams? Can you incorporate what you have learned about who you are, and where you want to go, into an action plan that begins today? Keep the notes you make in response to this exercise – they will be a great source for you to refer to when you come to write your financial plan. Your goals will already be established.

Imagine your future – think about your goals, dream about your goals. The philosopher Henry David Thoreau writes in Walden, “If you built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.”

Everyday Money

2010-04-09T15:03:00.001+12:00

A recent survey undertaken by the Financial Services Institute of Australasian found that 60% of women and 55% of men say that the global crisis has made them feel financially stressed. The obvious response to this is simple; have a financial plan, accept that the best laid plans “gang aft agley” to quote the bard Robbie Burns. This means that once you and your financial planner have created a plan it needs to be revisited. Just as sometimes we have to detour to reach a destination. Be prepared to change your financial strategies to achieve your goals.

Who's Counting?

2010-04-09T14:57:00.002+12:00

Susan Pinker is counting. Women are 2.8 times more likely than men to leave science and engineering careers for other occupations and 13 times more likely to exit the labour force entirely.

Pinker makes it a point to show how males are genetically at a disadvantage; prone to disease, accidents, ADHD, autism, Asperger’s, dyslexia, and others. Many males experience an overlap, getting hit with two or three of these disorders throughout their development. Without political or social posturing she lays out case after case of genetic vulnerability and learning, behavioural, and social differences. All of which creates a wide range of male ability with huge numbers of both extremely low and high achievers. Boys are three times more likely to be placed in special education classes, twice as likely to repeat a grade, and a third more likely to drop out of high school. However, males also dominate the highest percentiles of achievement, from math competitions to scrabble tournaments.

Who's Counting

2010-01-21T11:23:00.003+13:00

According to a recent blog on fortune.com, Sharon Meers is.

Meers co-wrote a book called Getting to 50/50. Lots of fascinating stats, but some of the most intriguing revolved around the male-female balance of work at home. Meers mentioned that when couples share housework, the risk of divorce drops.

Divorce risk drops sharply when the wife has a job. The ideal set-up is when the man earns 60% of the income and does 40% of the housework. That’s when divorce risk is lowest of all.

(The sex is also better then, by the way. When men do substantial housework, couples have more frequent and satisfying sex. Meers shared this factoid privately, and she lays it all out in her book, in a section called “When He Does Windows...”)

And where in the world do men do the most to help their wives at home? Meers doesn’t have those stats, but I found them, coincidentally, yesterday in a preview of another book due out in September, Women Want More, by Boston Consulting Group senior partner Michael Silverstein, is a marketer’s guide to capturing “the world’s largest and fastest-growing market”. As part of the research for the book, BCG asked 12,000 women in 22 countries a battery of 120 questions. And among the rich findings...

“At least one-third of men never help their wives/partners with chores,” according to the BCG survey. Where do men do the least housework? Japan. Indian men to the most. And American men? They come somewhere in between, though closer to India than Japan.

By the way, chores cause more domestic arguments than anything else except money – at least in the U.S., the BCG survey suggests. In Europe, BCG found, chores are the No. 1 trigger of domestic arguments. That doesn’t surprise author Meers, “Among people over 40,” she says, “two-thirds of divorces are initiated by women. And studies show that 80% of the fights are about housework.”

Everyday Money

2010-01-21T11:21:00.002+13:00

If you haven’t yet managed to save for your retirement you could be facing an uphill battle when it comes to your financial future.

Many of us don’t feel able to save for retirement until we have our kids off our hands and our mortgages either paid off or at a manageable level. Don’t ever think it is too late to start, there are still ways you can achieve a comfortable retirement.

No matter how little working time you have left you should be investing. Even if retirement is just around the corner.

Remember you aren’t just putting money away for the day you retire but for the rest of your life. If you are healthy and likely to live more than five years in retirement, invest accordingly; it will be the share market will give you the most growth.

While you are creating your nest egg exercise some discipline and identify which parts of your lifestyle are really important to you, and which ones you are willing to live without.

Next identify your priorities, can you downsize and release some capital and lower your monthly expenses? Does retirement mean you will quit working? Could you work part time or switch to an employer where your pay might decrease but so will your stress ?

Finally, work out a plan and invest accordingly.

Finance and Investments

2010-01-21T11:19:00.001+13:00

Most of us have heard the saying ‘it’s time in the market, not timing the market that’s important’. During the turbulent times of 2008 and early 2009, however, it was difficult to believe.

When the global share markets (as measured by the Morgan Stanley Capital Index) fell by 54% from the peak in 2007 to their nadir this year, everything looked, sounded and felt extremely gloomy. We didn’t know which overseas bank was going to fail next and unprecedented emergency measures were being taken by governments around the world.

Our instincts were to cash up and run for the bank – and many investors did just that. Those who managed to time the market, selling all their shares at the end of September 2008 as investor sentiment began to crumble, did well if they bought into the market again in March 2009. The ability to pick the top and then the bottom of the market took extraordinary investment acumen... or two strokes of extreme good fortune!

Of course, picking the right time requires precise timing. Sell a month or two early or late and the consequences can be dire. For example investors who stayed out of the market from the lows in March this year would have missed the significant and speedy rebound of 55% in the MSCI by the end of September.

Compare this with the investor who chose to sit tight, and stayed fully invested throughout this tumultuous time. Had they invested only in shares (a high risk/high growth investment strategy), they would have suffered the initial 38% loss but then would have recovered substantially with only a small loss of 4% six months later, at the end of September. An untimely exit from a depressed market would have been costly.

Who stayed the course? Those with a plan – yes I know you have a budget, a house, a job and an investment portfolio, but that does not really mean you have a plan in the sense that I mean.

If you want to build wealth and security a financial plan is essential – I am not making this up, there is research to prove it.

You know if you are focused on a goal you are more likely to achieve it – and nothing brings goals into focus like putting them in writing. A plan will also help you identify your wildest dreams which may turn into achievable goals. It will also help you identify what risks you are taking and work out an exit strategy if the risk becomes unbearable for you.

Womenomics

2010-01-21T11:15:00.001+13:00

Some excerpts from a Women on Boards Report:

BETTER COMPANY PERFORMANCE
International research shows a positive correlation between women in leadership and business performance.

The Catalyst report (The Bottom Line: Corporate performance and women’s representation on boards, 2007) found that in all measures the companies with the most women board members outperformed those with the least.

CRITICAL MASS
While women can add value to boards individually, critical mass is better.

The McKinsey study looked at the performance of companies with various numbers of women on their boards and found the largest gap in performance existed between those companies with no women on the board (poorer performance) and those with three or more (better performance).

WHY DO WOMEN IMPROVE BUSINESS PERFORMANCE?
Fresh perspectives
Boards with a balance of men and women tend to consider a wider range of issues and options, resulting in commercial decisions that are more in touch with customer needs.

Effective leadership
The McKinsey report, Women Matter 2, found that women are more likely to apply five of the top nine leadership behaviours that correlate with organisational excellence. These five leadership behaviours are those particularly linked to innovation and staff management.

Role Models
Further research by Catalyst shows that having women on boards leads to more women in senior management.

A competitive edge
Whether in times of growth or contraction, there will always be a need for the best talent possible in company leadership.
Recent economic turmoil has caused many to rethink traditional views on company membership. In late 2008, a group of 17 chief executives and heads of FTSE 100 companies in the United Kingdom wrote an open letter to the Daily Telegraph calling for gender equity in the country’s boardrooms – because “extraordinary times call for innovative solutions”.

Investor confidence
Increasingly shareholders and rating agencies are factoring into their assessments of company performance the number of women on boards.

HOW BUSINESS CAN BENEFIT
• Research shows that women on the board can be good for the bottom line. Companies with women board members outperform those with no women.
• Teams with a mix of men and women generally work better.
• Groups with more diverse skills, knowledge and experience are likely to consider a greater range of perspectives and make higher quality decisions.
• Women may help businesses avert and solve problems more effectively. For example, having women on boards can assist companies to manage key constituencies including shareholders and employees.
• Women in corporate leadership provide good role models for other women entering the workforce. They provide a goal for others to aspire to.
• Research shows that the presence of women at board level strengthens the company’s customer base and connections to markets.

Why?

2010-01-21T10:48:00.002+13:00

Why is there still a gender gap when it comes to earnings? We are no longer expected to be nurses, teachers and social workers but are now accountants, doctors, lawyers – and financial planners. We now hold close to 50% of the available jobs, but according to a report from the States, during the last recession 78% of the jobs lost were held by men.

Why? Because women are cheap; we earn around 77-80 cents to every dollar earned by men. Women returning to work or wanting to work part time are particularly cheap. Additionally women are still in feminine occupational ghettos.

It’s not good news when women retain positions simply because they are cheaper than men.

Musings and Amusings

2010-01-21T10:41:00.001+13:00

I have often amused myself by musing upon the GFC (Great Financial Crisis). Musing on how events would have unfolded if there was less testosterone driving our financial markets. I am not particularly original, many pundits have elaborated on this theme.

An article on the money making activities in Sicily caught my eye. It appears that the Mafia charges a 10% levy on all businesses. Not surprisingly a group called Addiopizzo (goodbye pizzo – a reference to the levy)has formed. The group of around 300 businesses in and around Palermo, have until recently remained anonymous however women, who make up around 60% of the group are among the most vocal and courageous members. Despite threats ranging from kidnapping to property damage and death, the women are rapidly becoming a thorn in the Mafias side.

Ah, if women ruled the world!

Who's Counting?

2009-10-19T16:06:00.001+13:00

I am! I am counting the efforts of Hilary Clinton in advancing the cause of women; and I have to say I am full of admiration. She has met with:
• Women South Korean students
• Talked with women chicken farmers in Kenya
• Listened to excruciating stories of rape victims in Congo.
• In South Africa visited a housing project built by poor women.
• Met with women Israeli entrepreneurs
• Met Iraqi war widows
• Met Chinese Civic activists
• Mentioned women at least 450 times in public comments in her first 5 months as Secretary of State.
• Helped found Vital Voices which has trained more than 7000 emerging leaders worldwide.
• Her trips are packed with town hall meetings and visits to micro credit projects and women’s dinners.
Now here is a worthy recipient of the Nobel prize.

Womenomics

2009-10-19T16:04:00.000+13:00

Recently the executive director of Unifem, the United Nations Development Fund for Women visited Australia. The director, Ines Alberdi discussed with Australian women the inertia surrounding the deteriorating level of women in senior positions. She stated that there are broadly similar problems in developed countries but in nations such as Rwanda there is still a fight to get women into higher education. In her native Spain as here and in Australia, women are well represented in academia but not many are climbing the ranks of business. Historically the path to equality was thought to be education but in Western societies where women are well educated we still don’t occupy senior roles to any great degree.

Consider these points relating to women’s roles in Japan.
One of the longest-running discrimination cases in Japan concerns six women. They were forced to work as secretaries and watch as men who joined the company at the same time with the same backgrounds went on to become managers. The case has run for 14 years.
• Shintaro Ishihara, the Governor of Tokyo, once told a women’s magazine that women who had lived beyond their ability to produce children were of no use to society.
• There are no female chief executives of Japan’s largest 225 companies listed in the Nikkei Index.
• In one case of workplace discrimination in Japan it was found that a woman would have to work for 32 years at the same company to earn the same as a man who had been there for six years if the two did exactly the same job.
• Only 9.4 percent of parliamentary seats are held by women, ranking Japan 131st in political participation out of 189 countries.
• Only 2.5 percent of professional posts in science departments across national universities were occupied by women.

Unifem should encourage companies to adopt the mandate Norwegians enjoy; organisations are required to have 40:60 per cent ratio of one gender.

As I’ve said before, if Lehman Brothers were Lehman Sisters the worst of the recent financial crisis could well have been mitigated – or even avoided.

Musings and Amusings

2009-10-19T15:57:00.001+13:00

A branch of psychology – positive psychology has been researching happiness on our behalf. Happy people, they say, form stronger social bonds, are healthier, are more creative and effective at work and are better citizens. And no – winning lotto does not make us happier what seems to matter more than wealth is “psychosocial prosperity;” characterised by social support, public trust, safety and tolerance in a society combined with individual feelings of being competent, leaning new things and being satisfied with your job and health. So how can you attain happiness? The researchers found that subjects who mediated daily reported more experiences of loves, joy gratitude and other positive emotions. Over time the meditations reported grater self acceptance, better relationships and better health. Can’t hurt to try this.

Why?

2009-10-19T15:55:00.001+13:00

Why do apologists for the Islamic burka claim it relates to piety and religious faith. The wearing of the burka is a reflection of political and male power. It dehumanises the wearer by isolation her from normal human interaction. She cannot see clearly and her ability to hear is muffled. She inhabits her own personal cell.

It saddens me that Muslim women don’t revisit their imprisonment at mans behest, part of the male quest to keep women ignorant and housebound. And in case you think this attitude is restricted to those far off Islam nations in the Middle East reflect on the comment made by mufti Taj Din al-Hilali in Australia recently; he excused the rape of a group of unveiled women as an attack on “uncovered meat.”

Finance and Investments

2009-10-19T15:53:00.002+13:00

Is the recession over? Economists and pundits world-wide are pontificating – while I might add most of us are getting on with our lives.

According to Warren Buffet, the world’s most successful investor the economy has “sort of plateaued at the bottom.” The Federal Reserve Chairmen Ben Bernanke has said the recession “was very likely over.” The recent surge in the S&P500 (the American Share Market Index) of 58% is certainly impressive as has been the growth in other markets. In addition to this consumer confidence is up, indicating consumers are spending again – and like it or not spending is the pump which primes economic growth; production then increases, profit comes back and investment returns.

There are still signs of doom and gloom the economy is still ailing and unemployment is still high here and offshore. Offshore banks are still very much in recovery mode but, to quote Warren Buffett again the “economy is now out of the emergency room and appears to be on the slow path to recovery. So financial Armageddon did not occur. Well the recession may be over but that is no reason to invest indiscriminately. Buying value is still the key.

Everyday Money

2009-10-19T15:41:00.003+13:00

You and I both know that it is easy to make mistakes – we learn from them and some of them are expensive – toy boys for example! But, if you are planning on being financially secure there are some money mistakes you cannot afford to make.

1.) Paying the minimum on credit card balances. I’ve calculated it would take 19 years to pay off a balance of $3,300.00 at 17% annual interest rate. Pay those cards monthly.

2.) Not developing a budget. A budget is a financial road map that lets you see what's coming in and going out. They say women can’t read maps – we can! So take a deep breath and do it. The goal is to live below your income – if you aren’t, look for areas to cut back (sorry) like dining out or buying clothes. The best budget allows for savings and investments.
3.) Not having a superannuation plan. Everyone needs one; don’t be Scarlett O’Hara (I’ll think about that tomorrow) or Cinderella (My prince will come).

4.) When you do invest don’t only utilise a savings account – if your time frame is 5 years or more there are better alternatives for growth – especially now at sale time!

5.) Don’t pay full price for goods like clothing, travel or cars – pre-owned and pre-loved gives better value for money – buy at sale time!

Who's Counting

2009-07-29T12:06:00.002+12:00

We like odds of 50 per cent more than probabilities of 25 per cent or 75 per cent. This is why we buy lotto tickets.

What are the odds of dying in a plane crash compared to dying on the roads? Twice as many people die on the roads during a year than the total of those who have died in air accidents. Yet we fear flying more than driving. Air fatalities evoke shock but road deaths are simply another standard news item. We are drawn to the most astonishing event regardless of its probability.

Consider the following odds:
• Being killed by terrorists while travelling: 1 in 650,000.
• Royal flush opening hand: 1 in 649,739.
• Winning anything on a Lotto Lucky Dip: 1 in 20.
• Winning Lotto Division One on a Lucky Dip: 1 in 373,838.
• Winning on one Lotto ticket bought weekly for 50 years: 1 in150.
• That you’ll keep buying and not win the jackpot after 50 years: 149 in 150 (99.33 per cent).
• Winning Powerball Division One on a Power Dip: 1 in 3,070,704.
• Winning on one Power Dip ticket purchased weekly for 50 years: 1 in 1,250 (99.92 per cent don’t win in all that time).
• Being hit by lightning during your life: 1 in 7500.
• Getting cancer sometime in your life: 1 in 9.
• Suffering an unprovoked shark attack: 1 in 6,000,000.
• Drowning in your bathtub: 1 in 685,000.
• Dying in a car crash in New Zealand: 1 in 9000.
• Dying from slipping, stumbling or tripping: 1 in 6548.
• Dying from fireworks discharge: 1 in 615,488.

Obviously the chances of winning lotto are not high, but people still persist in buying tickets.

Everyday Money

2009-07-29T12:01:00.001+12:00

A paper presented at the Australian Social policy conference at the University of NSW found that divorce had a substantial impact on women’s incomes and almost none on men’s. But, it appears that men are not happy! Could it be that they are used to having someone doing the cooking, cleaning and organising their social life? Or could it be that they don’t want to pay child support?

The study found that divorced men’s average income after they had paid child support was A$33,356; while women’s incomes after child support was paid to them averaged A$26,512. Tellingly, the fathers reported feeling more prosperous when married...Perhaps the answer for men would be to keep the children...? Organise their own lives...?

Why?

2009-07-29T11:29:00.001+12:00

Why is it still acceptable to subordinate women to men? Well, the religions of the world respond, because religious tenets tell us so.

In Northern Nigeria a pregnant 13 year old girl, Bariya, received 180 lashes of the cane after being pimped by her father. The State’s Attorney General who, one presumes, has a smattering of education, said “It is the law of Allah”. In Jerusalem “modesty police” terrorise women who talk to men or show ordinary parts of their body. In some parts of India women are still expected to commit suicide on their husband’s death or go to an ashram.

The Qur’an says “If you fear highhandedness from your wives, remind them (of the teachings of God), then ignore them when you go to bed, then hit them.”
Muhammad actually married a prepubescent child and upon being given two slave girls, gave the ugly one to a friend and kept the beautiful one, Maryam to use sexually (this is according to the Hadith, the sayings and traditions of the Prophet).
And worshippers at a Church of England cathedral are being offered a two track communion service with a separate supply of “untainted” communion bread for those who object to its being consecrated by a woman priest.
In Malaysia a Muslim model is being whipped for drinking beer. Her conviction caused a furore in the country where Muslims are rarely punished for consuming it.

We routinely read of women being imprisoned in their homes, having their genitalia cut, being stoned for having sex or being expelled from their family to fend for themselves in a culture which precludes female emancipation.

This level of bigotry of women deserves at least as much attention as global warming, but appears to be well and truly under the radar as far as the world is concerned.

Musings and Amusings

2009-07-29T11:23:00.003+12:00

The Tao of Pooh suggests that ideas float around the universe and pop into the nearest head on a random basis – the latest findings in neuroscience validates this theory.

It appears that our brains operate on the edge of chaos. Most of the time our brains operate in an orderly fashion, according to the New Scientist article, “Disorderly Genius: How chaos drives the brain, but every now and then lurches into a blizzard of noise.” The technical term for systems on the edge of chaos is “self organised criticality”. A growing sand pile demonstrates this perfectly. Imagine sand pouring from a large container into a pile – it grows uniformly and predictably until it hits a critical point and collapses forming a new temporarily stable state.

The brain has much in common with this behaviour. Networks of brain cells alternate between periods of calm and periods of instability. It might seem a bit precarious to have a brain that plunges into periods of instability but the article suggests that this disorder is actually essential to the brains ability to transmit information and solve problems.

So the next time you feel confused, muddled and disordered you could simply be an avalanche away from your next best idea!

Finance and Investments

2009-07-29T11:22:00.002+12:00

So what is the key to financial success? To make wise decisions you must have the right information, and combine and weigh its various components correctly. You must not ignore valid information in favour of thinking and judgemental tendencies that are dangerous in the investment world; for example, weighting the most vivid and recent information more strongly than heeding the lessons of history. Investors must develop a mindset that helps them understand and adapt to the financial environment. Money is an emotional currency that relates to our individual need for security, power, respect, love, esteem and self-determination. If you don’t know who you are, the investment world can be the most expensive place to learn. The psychic conflict between the temptation of profit and fear of loss makes investing a dangerous game for many people.

To change our financial behaviour we must learn new skills, moulding the knowledge of behavioural finance and neuroscience. Investors must focus on imperatives such as motivation, knowledge and understanding, wisdom and discipline – the focus is not on how to pick shares, get rich in the property market or get rich quick – the focus is on the psychology of investor success.

Womenomics

2009-07-29T11:15:00.003+12:00

There have been many articles and even some discussion at the Economic Summit in Davos, over whether the financial meltdown would have been so severe, or would have occurred, if Lehman Brothers had been Lehman Sisters. It’s certainly pretty clear that business culture is overwhelmingly male and fuelled by testosterone.

In Iceland, officially a bankrupt country, women are cleaning up the mess. Iceland with a population of just over 300,000, has had the Krona collapse, interest rates and inflation have soared, companies and households which have borrowed in foreign currency are overwhelmed by debt, and unemployment is at record levels, reports the Guardian. Over the last decade Iceland had adopted a new economic order reinventing itself as an Atlantic Tiger, enthusiastically adopting free market reforms and financial engineering. The crisis led to the government’s downfall, the new government is led by an elegant 66 year old lesbian Johanna Sigurdardottir.

And it is women now who are heading up banks and companies. Prominent among the forty-something women is the singer Bjork who, with two other women, has set up an investment fund to boost the economy by investing in green technology. They state they have five core feminine values:
1. Risk awareness, they don’t invest in things they don’t understand.
2. Profit with principles, that is not just economic profit, but a positive social and environmental impact.
3. Emotional capital, they do an emotional due diligence.
4. Straight talking, the language of finance should be accessible not jargon infested.
5. Independence, they want to see women become financially independent which gives women the greatest freedom to be who they are.

Exactly the values we adhere to at Women’s Financial Strategies.

Finance and Investments

2009-07-15T10:31:00.002+12:00

I am amazed at the number of investors who are pouring money into two of the worst investments in the last 50 years; cash and bonds. If you are thinking of pulling out of the share market I beg you, reconsider.

Sure we don’t know about the markets future but this last period, and currently, is the best buying opportunity I have seen in the last 25 years. The media headlines, as usual, do not reflect this reality.

So don’t stick your money in a sock if you truly believe the end of the world is nigh you are best to use it to buy bottled water, tinned goods, seeds, fortify your home and lock the door.

Everyday Money

2009-07-02T15:27:00.002+12:00

You may think that in these straitened times philanthropy is the first thing we should reduce or cut out as we attempt to make ends meet. But, in an article featured in Portfolio, it was demonstrated that “... people grow wealthier when they give more.” The study from the Social Capital Benchmark Survey examined philanthropic behaviours and household income plus other factors such as age, religion education and more. It found that higher income related to higher charitable donations and that “more giving doesn’t just correlate to higher income; it causes higher income.”

This sounds crazy I hear you expostulate, but giving is usually linked with other behaviours. For example, donors are usually confident in their financial situation, have some level of knowledge regarding tax and most likely have a financial plan. Secondly donors are generous people, a characteristic which others find appealing. It is likely therefore that these generous people attract higher salaries or are more successful in business.

Maybe there is a kernel of truth in that old saying; you get back what you give out.

Why?

2009-07-02T15:24:00.002+12:00

Why don’t we spare a thought for those collectors of contemporary art who are now inhabiting a classic investment bubble. Forget about the share market, the sub prime crisis, the tottering financial system and the world economy.

A recent article by Ben Lewis claims the bubble is about to pop. He cites the example of British house prices which took six years to double at the start of this century, contemporary art managed it in one, 2006-2007. Over the same period old masters only went up 7.6% and 17th to 19th Century watercolours actually lost value. In emerging economies the growth was eye watering; China was up 983 per cent in one year, in Russia 2,365 per cent in five years, while its stock market only increased by 300 per cent.

So spare a thought for the nouveau rich who fuelled the bubble and who have seen the value of their other assets go into freefall, their art collection is due to follow.

As Lewis puts it “like the Dutch merchants and their tulips, the obsession of the new rich with contemporary art is likely to be remembered as the epitome of the vanity and folly of the age. The bulbs are still in the ground but the spades are poised.”

Musings and Amusings

2009-07-02T15:20:00.002+12:00

Following in the footsteps of Grecian courtesans that notorious woman Catherine d’Medici introduced Italian style by wearing high heels (she was rather short). Since then women have been crippling themselves in the search for the advantage kick-arse shoes give the wearer.

Latterly nine inch heels with four inch platforms have been gracing the feet of the ultra thin models we are supposed to emulate. What is it about our shoe fetish? Many of the most seductive styles can only be worn safely when lying down; a prophetic position perhaps? Feminism surely takes a back seat where high heels are involved. I was interested therefore, to read some comments from an article by Germaine Greer on this fashion which is surely not a fad:

Vivienne Westwood, fashion designer – “One can’t help but feel powerful, beautiful when wearing them.”

Alexandra Shulman, editor, British Vogue – “Men do find them attractive – wearing heels is certainly not all about women and other women.”

Plum Sykes, novelist and fashion journalist – “It’s really only for gay men and other women.”

Camille Paglia, academic and author – “It’s a shrewd social strategy to see and be seen. But long term mutilation of a crucial body part is inevitable for the compulsive fashionista.”

Womenomics

2009-07-02T15:16:00.002+12:00

There have been many studies demonstrating the earnings gap between men and women; however a recent study by the Department of Sociology at Queens College in New York showed that full time female employees in their 20s were earning more than males same age, in large cities like Chicago, Boston, Minneapolis and New York. In Dallas 20% more than men, in New York 17% more.

But, and you knew there was a but, after age 30 women were no longer ahead.

The growth in women’s earnings has only occurred in the last 7 years, that the average earnings reduce after 30 is probably caused by women reducing or ceasing work to bring up families.

Still, these results augur well for our daughters since there is a definite narrowing of the gap and an increase in education for all women.

For more on women in NZ and the gender gap refer to page 3 of my latest newsletter by clicking here.

Who's Counting

2009-07-02T15:11:00.002+12:00

I am pretty sure it was Winston Churchill who, when confronted with statistical proof growled; “There are lies, damned lies, and statistics.” His assertion is still pretty valid many decades later. Statistics are supposed to define what is true, false or merely anecdotal but; statistics can fool us. In fact as Nassim Taleb, author of The Black Swan points out, it is probably fooling governments right now.

When he talks about the limits of statistics he becomes outraged, “My outrage” he says, “is aimed at the scientist-charlatan putting society at risk using statistical methods. This is similar to the study of the doctor putting the patient at risk.” His view is that those who are putting society at risk are “no true statisticians” merely people using statistics either without understanding them, or in a self serving manner.

I fully endorse these views and exhort you, next time you are presented with ‘definitive statistics’ look very carefully and cynically at who is using them, and for what purpose. And if the mathematical or statistical analysis eludes you take comfort in the words of Einstein “Do not worry about your difficulties in mathematics. I can assure you mine are still greater.”

Womenomics

2009-04-07T11:40:00.003+12:00

As the French say everything changes, everything remains the same. A recent headline in the Sunday Star Times caught my eye “DIVORCE LAW: MOTHER’S DON’T GET A FAIR DEAL.” Law Professor Mark Henaghan says that stay at home mothers left with little earning power when their marriages break up are not getting a fair deal from the courts.

As one English judge famously put it: “The cock bird can feather his nest precisely because he does not have to spend all his time sitting on it.”

Henaghan explains; “If one party goes on earning $500,000 a year and the other is on a benefit then even if you’ve got 50% of the property you’re still quite a long way behind the eight ball, in terms of economic equality.

After divorce women come off second best financially. A woman’s income drops 24% on average; a man’s drops 6%.

This is simply one of the the areas where women’s economic power is repressed. For more on this read Girls Just Want to Have Fund$.

Musings and Amusings

2009-04-07T11:37:00.001+12:00

I am certainly amused. It appears that the myriad of studies advising women not to drink for fear of increasing the risk of getting cancer, especially breast cancer, are based on questionable research.

The leading study was one created by one Naomi Allen of Oxford University. There are, it appears, several flaws in her results.

Firstly, her study is an observational one; that is it is based on self reports about the drinking habits of women. Thus it relies on women’s recollections of their drinking habits.

Secondly the study is weakest kind and not in any way close to a randomised controlled trial. None of the reports were checked thus the study can’t verify its data is accurate.

Thirdly consider the results; cancer in non drinking subjects was 5.7%, and those women who had at least one drink a day and up to 14 drinks a week, 5.3%. The teetotallers had a higher incidence of cancer than the drinkers! Even women who had 15 or more drinks a week had a cancer incidence of 5.8%! These figures are hardly statistically significant.

I’ll raise a glass to that!

Why?

2009-04-07T11:27:00.002+12:00

Why when talented successful women flourish are there those who are ready, to pull them down. Are they a perceived as a threat? Or is it simply envy which motivates the detractors. The term "successful woman," it seems to me embody a conundrum; success may lead to exclusion by peers; and if success is eschewed ones own personal and professional fulfilment is put at risk.

Finance and Investments

2009-04-07T11:18:00.004+12:00

The fund promised high and unwavering annual returns, but you had to know someone to get in on it. And that was really all it took to attract credulous investments, that and the sterling reputation of the banker behind it, a financier revered in privileged circles.

“I’ve looked into it” is how one investor reassured a friend who wondered what would happened if the fund should fail. “Name up everywhere, immense resources, high connections, government influence – can’t be done.”

It’s not Bernard L. Madoff’s fund, it’s the one created – and wrecked – by Mr Merdle, the legendary London Banker who brings masses of wealthy, well-meaning people to ruin in Charles Dicken’s classic “Little Dorrit.”

The picture Dickens drew is one which has been repeated throughout history. I am guessing that you gentle reader don’t want to appear in this scenario. Here are some suggestions for you which should make you pause before you jump in.

Generally Accepted Investment Principles
1. Investors should establish an emergency fund invested in short-term safe assets and not held in retirement accounts.

2. The percentage of assets invested in stocks should decline as an investor ages. A popular rule of thumb is to subtract a person’s age from 100 and invest that percentage of total assets in stocks.

3. The percentage of assets invested in stocks should increase with wealth because wealthy individuals can generally tolerate greater risk.

4. All investors should diversify their portfolios across asset classes, and the equity portion should be well-diversified across industries and companies.

5. The optimal asset mix might differ from standard recommendations because of risk preferences.

6. Time horizon, risk tolerance, income stability and other factors influence asset allocation.

The term ‘Generally Accepted Investment Principles’ derives from the term ‘Generally Accepted Accounting Principles’ or GAAP, which refers to accounting standards or rules used in preparing financial statements.

Who’s Counting?

2009-04-07T11:06:00.004+12:00

I am counting – but only to five. Here are five simple rules for asset allocation (The jargon for not putting all your eggs/investments in one basket).

Rule 1: If you need money in the next 12 months keep it on term deposit or in a savings account.

Rule 2: If you need money in the next 5 years put it in a safe investment like government stock or corporate bonds. If you can’t do this directly use a managed fund.

Rule 3: Any money you don’t need for the next 5+ years should be invested in the share market. Shares, on average, have returned over 10% annually from 1926 to 2007 so try not be frightened.

Rule 4: Always own shares. Over the long term equities are the best hedge against inflation.

How much should I invest in shares you say - use the following guide from William Bernstein’s The Intelligent Asset Allocator:

For example if you can tolerate losing 35% of your portfolio in the course of earning higher returns, 80% of your portfolio should be invested in stocks; 30% loss = an exposure of 70% to shares; 25% loss = an exposure of 60% to shares; 20% loss = an exposure of 50% to shares; 15% loss = an exposure of 40% to shares; 10% loss = an exposure of 30% to shares; 5% loss = an exposure of 20% to shares; 0% loss = an exposure of 10% to shares.

Rule 5: Don’t hide in a cave (even if your gut is instructing you to do so) until someone sounds the all clear on the economy – it won't happen and you’ll miss out on the profits a recovery will bring.

Everyday Money

2009-04-07T11:01:00.004+12:00

According to economists we are all supposed to be rational about money; to see it as “fungible” a medium which we can use to exchange for any commodity we desire. Each of us has a different relationship with money, the ways we describe money are incredibly varied. We say “money talks,” but it is the way we talk about money which is most revealing.

When we talk about money we usually refer to it as dirty stuff, the root of all evil. Women don’t discuss money; cash is hard, women are soft. Women can be appalled when they have to ask for money, that’s the sort of thing prostitutes do – exchange money up front for a service to be rendered in the future. But money does count and is important to us.

Money is the stuff of life. It is the measure of all the services you enjoy. It is money that changes hands in nearly all transactions, the end result of the selling or value process. Money is your friend. It signals the worth of your abilities; money is power, marking you as a person of substance. Make peace with money by changing the language in your head.

More about this in Girls Just Want to Have Fund$ and more about our irrationality in Money, Money, Money Ain’t it Funny.

Who's Counting

2009-02-23T12:22:00.001+13:00

1 mother + 2 kids + 0 husband = Family.
In the US in 1960, unmarried mothers accounted for about 5 percent of births, now they are almost 40%; about half are women on their own, the rest with partners. More and more women are choosing to bring up their families along or to have a child without a partner. Single parent families now make up about 40% of households. This makes the emphasis society places on the traditional nuclear family.

1 mother + 2 kids + 1 husband is an equation that could become more rarefied in the decades to come. Will the children of single parent families themselves become single parents or will they try to create the “traditional” nest they themselves didn’t have?

One good thing about statisticians they will always continue to count so the identification of trends will continue to intrigue those of us who enjoy counting – but not necessarily accounting.

Everyday Money

2009-02-23T12:19:00.002+13:00

Many people are feeling intense anxiety over jobs and money during this period of uncertainty. If you are one of these and are struggling to cope here are some ideas to help your state of mind:

• Firstly establish what money is: it is simply a medium of exchange, it does not reflect self worth. If you cannot live in the way you have in the past, or have to downsize, it does not measure your value as a person.
• Money does not define success. If you think it does examine the messages you have received about money such as those you assimilated as a child, and reflect on your peer’s attitude to money.
• Visualise and verbalise your worst case scenario, this will reduce the fear factor – reflect on the saying “there is nothing to fear but fear itself.”
• If you need to take action write a timeline and stick to it, don’t let events overtake you. (Much more on this in Money, Money, Money Ain’t it Funny).

And a final thought; the present does not reflect the future. Markets will go up again, banks will stabilise and unemployment will reduce.

Musings and Amusings

2009-02-23T12:11:00.004+13:00

In my last Womenomics blog I wrote about women in Zimbabwe protesting. As a cosseted woman in the Western world I can only watch the women who take action against seemingly insurmountable odds with admiration and amazement. A documentary called ‘Pray the Devil Back to Hell’ recounts the story of a woman in Liberia who was inspired to organise the women of her church to pray for peace during the regime of Charles Taylor; the rebels opposing him created a country where violence, death, and rape were the norm.

Leymah Gbowee’s passion for peace through faith and prayer spread to other Christian churches and then to Muslim woman. Like the women of Zimbabwe and their improbable protest the Liberians organised a demonstration for peace at the open air fish market in the capital Monrovia. These women had no resources but sang, danced, prayed and agitated for peace.

After Taylor’s exile and peace negotiation which nearly broke down the world witnessed their thrilling triumph. Ellen Johnson Sirleaf was sworn in as the president of Liberia on January the 16th 2006 – the first woman ever elected president of an African country.

Faith may not have moved mountains but what an amazing achievement for women in a country where violence is endemic.

Womenomics

2009-02-23T11:59:00.003+13:00

The Davos Forum (see Finance and Investments) had 81 business leaders attending; of the 81 four were women. This disparity is not new in fact women created their own forum, Women’s Forum for the Economy and Society held in France each year. Seperate but equal, I don’t think so!

“The big theme at this year’s World Economic Forum was Shaping the Post-Crisis World,” wrote Ruth Sunderland in Britain’s The Observer. “The idea that that can be achieved while excluding half the population is breathtaking in its arrogance and shows that the male Davos elite remains mired in its own preening self-regard and complacency. They have wrecked the world economy, but seem oblivious to the idea they may not be the best people to rebuild it.”

Surely now we should recognise that it is essential that women are included in the economic decision making. It is simply foolish to ignore half of the world’s population particularly those who do not embrace the macho capitalism which has caused the problems we are facing in the first place.

I don’t believe in eschewing capitalism, but the current style certainly needs revisiting.

Finance and Investments

2009-02-23T11:34:00.003+13:00

Gender balance requirements and usefulness are frequently seen as part of the bra burning feminist culture and treated with disdain. Nicholas D Kristoff writes in an Op-Ed piece for the New York Times that banks around the world ‘desperately want bailouts of billions of dollars, but they also have another need they’re unaware of; women, women and women.”

This comment follows on from discussions which took place at the recent World Economic Forum in Davos, Switzerland (For the uninitiated this is a bunch of old white men who meet to talk about the world economy. Unfortunately no solutions to the dire situation have been proposed).

The consensus was that banks need women to improve the quality of decision making – it is pretty clear that the quality of decision making to date has been shoddy to say the least. An article in the Journal of Economic Theory supports this after an analysis of research in the field of problem solving; diverse groups perform better. It won’t surprise you to know that I subscribe to this view. Women don’t subscribe to peer pressure, have a greater concern for the common good and among other things don’t suffer from over confidence (but more on this in Girls Just Want to Have Fund$). This makes for considered and sensible decision making, obviously sorely needed in the giddy realms of financial institutions. In fact as Kristoff reports the Davos discussions concluded that if Lehman Brothers (a large US bank which is being bailed out) had been Lehman Brothers and Sisters they may not be in the same mess today. There is a whole range of research compiled by researchers such as McKinsey, Goldman Sacs and Catalyst which show women are a huge missed economic opportunity.

Why?

2009-02-23T11:06:00.003+13:00

Why in 2008 are women still underrepresented in politics? In the USA the land of equality and opportunity we have seen the inauguration of Obama after an incredibly gender focused campaign. Obama’s cabinet does not reflect his rhetoric; less than 25%of his cabinet are women. No doubt the naysayers will claim that there are not enough women with the appropriate skills to take their place alongside the male cabinet members.

But, consider this – the top ten companies in the Fortune 100 have close to 40% women in senior positions – these companies are performance driven in a way that governments are not.

Consider also the gender balance of the cabinets appointed by France, Spain and Sweden – all three presidents have accurately reflected their populations with close to a 50/50 split. Gender balance is a key priority of their governments such as those in the Philippines, Finland, Germany, India, Ireland, Liberia, Argentina (and until recently New Zealand) are led by women.

For more on gender balance read blogs Finance and Investments and Womenomics.

Musings and Amusings

2009-01-06T14:50:00.002+13:00

Neuroscience, still a relatively new science is examining “the benefits of enhancement” through drugs.

They theorise that cognitive enhancement is already practised by most of us. We drink coffee, eat nutritious foods, train our brains and get a good night’s sleep.

Taking drugs they say is simply a little further on in the continuum. Wouldn’t you want the surgeon whose mind is extra sharp, a pilot who’s extra alert or the medical researcher whose memory is finely tuned to make extraordinary connections?

Or on a personal level you could make plans for socialising, pay the bills and consolidate your credit card debt, do your job without forgetting your dental appointments or neglecting to pick the kids up from school? Sounds good to me! Coming to a pharmacy near you soon!

Everyday Money

2009-01-06T14:45:00.004+13:00

If you are struggling with finances, particularly paying your mortgage, here are some ideas to help ease the burden.

• Sell luxury items or household goods that you don’t need, if you are a two car household reduce to one. Any money you save or make should go to reduce your mortgage.
• Look at ways to reduce your outgoings - is there anything in your budget you can do without.
• Look at how you might increase your income – part time work, take in a boarder, can you set up a small business from home.
• Most lenders will offer you a 90 day repayment holiday if you need one.
• Convert to an interest only mortgage until your situation improves. This will reduce your repayments.
• Extend the term of your mortgage.

Bear in mind the last three suggestions will increase your interest bill and are short term solutions only.

Who’s counting

2009-01-06T14:40:00.003+13:00

A conversation overheard in a bar;

Gentleman 1: “I believe in what you are saying 110%. Howard.”
Gentleman 2: “Ugh.”
Gentleman 1: “What?”
Gentleman 2: “Why not 120%, or 130%, or more?”
Gentleman 1: “Okay, I believe in you 140%.”
Gentleman 2: “Anything beyond 100% is meaningless.”
Gentleman 1: “Okay, now I’m down to 90%.”
Gentleman 2:”That’s better.”

You can’t give more than 100% in anything!

Finance and Investments

2009-01-06T14:32:00.002+13:00

You have survived 2008 and are feeling shell shocked. Here are some tips to help you through 2009 and beyond – you should of course have a financial plan.

Tip 1 - The share market is still cyclical
It is not different this time, all asset classes have cycles. You just forget about it after five years of positive growth with few corrections.

Tip 2 - Volatility will continue
You cannot call the highs and the lows. Dollar cost average, that is buy every month, set up a regular savings plan.

Tip 3 - Prepare for Downturns
Work out how much risk you can stand and structure an exit strategy into your investing life. The hardest thing for you to beat is not the market but your mindset (for more on this read Money, Money, Money Ain’t it Funny).

Tip 4 - Getting it right is not easy
Even the best get their picks wrong. If you or your advisor is right almost 80% of the time – remember it’s your losers you sell, not the winners! (For more on this read Money, Money, Money Ain’t it Funny).

Womenomics

2009-01-06T14:27:00.002+13:00

I have been wondering who or what will bring Mugabe down. An article towards the end of last year made me wonder if it would be women.

The rare demonstration of resistance was fuelled by some 200 women hoisting placards and demanding an end to the cholera epidemic. The women only marched a couple of hundred yards before dispersing, foiling the security services who only found flyers blowing along the Harare footpath.

The contrast between the concerns of the Zimbabwean women and in the Western world is phenomenal. In Australia, concern is growing at the systemic problems which inhibit the appointment of women to senior management roles despite women graduating in greater numbers. The lack of promotion is tied to the time women take out of the workforce colliding with the lack of flexibility demonstrated by businesses. Here in New Zealand the Human Rights Commission says that the evidence of gender equality is now indisputable (for more on both of these issues read Girls Just Want to Have Fund$).

If women continue to defy Mugabe, will they take power, economic power, in a way that we have not been able to?

Why?

2009-01-06T14:13:00.002+13:00

Why do we always feel so guilty when we eat fat? Fat is one of the most joyous things to eat; think butter on Vogel’s (how could you eat popcorn without butter?), crunchy crackling on pork, bacon (said to be the one food which tempts vegetarians).

Then there are butter based sauces, think French beurre blanc on a whole sole. If you are still with me I can recommend Jennifer McLagan’s cookbook entitled “Fat.” The book is split into four sections: butter, lard or pork fat, poultry fat (mmm...crispy skinned duck and chicken) and beef and lamb fat. And yes – she does complement her fat dishes with herbs, sage is her favourite. She also uses bay leaves, parsley and there are recipes with spinach, pumpkin, rice and fish.

Indulge yourself with her slow roasted pork belly and kale – just don’t discuss this with your personal trainer or nutritionist! McLagan makes a case for fat – she says that as it is so satisfying you eat less of it.

Finance and Investments

2008-11-27T16:36:00.005+13:00

Are you a DIY investor? If so how are you feeling now? Pretty stressed I imagine and your emotions will swing between denial, fear and blame which is probably resulting in portfolio paralysis. This response is not rational, this is the time to do something and that thing would be to seek advice. If you think you don't need an advisor ask yourself the following questions;

1. What return do I expect over the next 12 months?
2. What was my return for the last 12 months?
3. Do I get independent advice, if so who from?
4. Do I get research or investment suggestions from non-mainstream media?
5. Do I have a structured investment strategy?
6. Do I have a structured exit plan?

If you can't answer yes to all these questions, hie thee not to a nunnery (or a monastery), head in the sand is not an elegant or useful stance; get yourself to a financial planner.

Womenomics

2008-11-27T16:19:00.003+13:00

The world of womenomics can be quite confusing. Two reports one from the UK and one from the USA caught my eye.

In Britain it appears that the average earnings of black women are now 6% higher than that of their white counterparts. This is a reversal of last years figures when white women earned more than 7% more. The Equality and Human Rights Commission said that one explanation for these results was that 50% of black women live in central London where the average pay is higher and many black women work in health and social services where pay has been rising.

This report I juxtaposed with an article in the New York Times under the banner "What has Driven Women Out of Computer Science?" It seems that less than 10% of the recent computer science graduates are women compared with the mid 1980's when women made up 40% of the students who majored in computer systems. One professor of mathematics and computer science at the University of Wisconsin theorised that it has been the rise in the subculture of action gaming which is the cause. There was the sense that computers were "boys" toys and that true girls didn't play with computers. There is also of course the pejorative term of "nerd" or "geek."

I was recently taken to task for talking about the "ghettoisation" of some occupations; these two reports reminded me of that. Health and social services are "womanly" occupations and computer science is not.

Musings and Amusings

2008-11-27T16:01:00.003+13:00

In some books and websites of late there has been a common theme of anger - anger displayed by single young males (SYM's). They are angry at women who they say turn marriage into a raw deal for men. Apparently women see men as a conduit to money as well as being dishonest, self centred, slutty, manipulative, shallow and controlling. The men who complain seem to think this view of women is a new phenomenon. I can only say they must be poorly educated or don't read.

Women have been depicted in this fashion in plays, novels and in the laws which have been enacted in many cultures for centuries,

I suggest the SYM's who complain, most likely seek out women who fit their assessment of our fair sex and who reflect their own characteristics of shallowness, self absorption etc. To these men I say get a life - it is probably time for you to step up to the plate and seek a new equality by taking on the sorts of work that married women enjoy - the cooking, cleaning, ironing, changing nappies etc. After all it is not fair that we monopolise these tasks.

Who's Counting?

2008-11-27T15:50:00.005+13:00

Niall Ferguson is in his recent book entitled "Survival of the Fittest" subtitled "The Ascent of Money: A Financial History of the World."

The financial world is all about counting - counting the risk, counting the money, counting the debits and credits.

Without mathematics there wouldn't be a financial world and we would not enjoy the sophisticated advanced economics of the 21st century.

In his book Ferguson discusses the evolution of "money" and what accounted as valuable in the financial history of the world ranging from large stones, shells to the coinage used almost universally today.

He concludes by saying finance is the mirror of mankind and as such can hardly be blamed if it reflects our blemishes just as much as our beauty.

Why?

2008-11-27T15:36:00.003+13:00

Well actually I would say why not? Why not invest in equities? Yes, in hindsight the best place you could have kept your money over the last year is in the bank, and the volatility of the markets combined with the media reports of the worst financial crisis ever make you feel intimidated, fearful. You want to wait until "everything is stabilised." That is sheer foolishness. There is one certainty that has stood the test of time. By leaving all your money in cash assets you will never reach your financial goals.

One simple way to get started without causing too much angst is to buy into unit trusts on a monthly basis. If you use a good wrap account you can even split your monthly investments. I recommend Europe, Asia and Emerging Markets.

I suggest you take a deep breath and jump in, contact an advisor.

Everyday Money

2008-11-27T15:27:00.005+13:00

10 Places to Find Money
1. Stop spending coins. Collect them. Only pay with notes.
2. Supermarket coupons (don’t spend the $1 that you have just saved!)
3. Cancel SKY TV.
4. Take lunch to work.
5. Limit magazine subscriptions.
6. Increase your insurance deductibles.
7. Lower your thermostat.
8. Set up automatic bill paying (saves money on stamps) and timely payment can give you discounts.
9. Reduce or eliminate ATM and fee-charging credit cards.
10. Buy less coffee (Latte, Cappuccino).

The Latte Effect
Gina, who is 29, came to see me some months ago, she earned a salary of $53,000, and had paid off half of her mortgage, but claimed that she couldn’t save money. She said she hated budgeting although she wanted to save for her retirement. She “wanted to start enjoying life now”. After some discussion we decided that rather than doing a budget we would do an “analysis of her current spending patterns”; if we found areas we could comfortably prune she would focus on those and save the excess. This was our list of expenses we could attack and the monthly savings we could make:

Savings Per Month
Lattes (reduce by 50%) $75.00
Dining out (reduce by 50%) $100.00
Alcohol (reduce by 50%) $57.00
Cigarettes (stop smoking) $170.00
Total: $402.00
This adds up to $4,824 per annum.
Gina became quite excited by this, she had been wanting to quit smoking anyway and this analysis gave her an added incentive. She has stuck to her plan for seven months now, “Saving”, she said “is quite addictive, I have found that I am becoming much more aware of spending in other areas and I’m really enjoying looking for bargains. It’s quite funny – I used to think budgeting was repressive.”

Musings and Amusings

2008-10-30T09:38:00.004+13:00

A famous 19th Century German doctor put it this way “Women is a pair of ovaries with a human being attached, whereas man is a human being furnished with a pair of testes”.

Homer Simpson, that well known philosopher, told Bart that women are like beer, and he’s mighty fond of both!

Somewhere between these two statements lies the reality. Something both sexes are constantly trying to evaluate, perhaps we should concentrate on our strengths rather than our perceived weaknesses.

The only irrefutable fact is that men and women are entirely different – as the French say “Vive le difference”.

Everyday Money

2008-10-30T09:35:00.003+13:00

Given the daily media barrage of disaster and crisis in the financial world what can you do to ensure your everyday money is structured to build a secure financial future?

Follow in the footsteps of those who have comprehensive financial plans. A recent study by the US Financial Planning Association reported that nearly half of those surveyed felt extremely confident in their financial future, with 30% fairly confident.

Interestingly, in these troubled times more and more investors are looking to financial planners to help them manage their finances. Only around 30% of Kiwis have a financial plan, so if you are one of the 70% who don’t, get thee to a financial planner

Who's Counting?

2008-10-30T09:33:00.003+13:00

I love the irony of this – it appears that math wasn’t Einstein’s strong point. A recent book entitled “Einstein’s Mistakes: The Human Failings of Genius” states that Einstein’s doctoral dissertation was “a comedy of errors” based on “zany” physical assumptions. And he continued to commit more math errors in 1905, the year dubbed his miracle year.

What a relief! It is comforting to think that a genius of his ability and stature struggled with math just like us mere mortals.

Finance and Investment

2008-10-30T09:31:00.003+13:00

Buffet says ‘Buy.’

Warren Buffett, the world's greatest investor, has a message for people who have become fearful of today's stock market: Buy stocks now!
In an editorial in last week's New York Times, Buffett says, "...fears regarding the long-term prosperity of the nation's many sound companies makes no sense."
The Oracle of Omaha, as he is known, cautions that he is not calling the bottom for stocks. "I haven't the faintest idea whether stocks will be higher or lower a month - or a year - from now."
But he clearly feels the environment of fear has created great opportunities. "A simple rule dictates my buying: Be fearful when people are greedy and be greedy when people are fearful."
History would certainly say Mr Buffett is right. Through two world wars, several recessions, the great depression, and countless other scares in the market, the market has always recovered. Yes, these times we now live in are different, but so are the global economies and the global opportunities.
We likely have not hit the bottom, but for anyone willing to invest for the mid to long term, history would also say that you won't see a better sale for a long time than that the market is offering right now.

Why?

2008-10-30T09:20:00.005+13:00

Why in 2008 are we still seeing practices which restrict and marginalise women?

In Kuala Lumpur the main body of Islamic clerics has issued an edict banning tomboys, ruling that girls who act like boys violate tenets of Islam.

While in the port at Kismayo, thousands of people gathered to witness 50 Somali men stone a women to death. She was buried in the ground up to her neck and her head was battered with rocks. The local Islamist leader claimed she wanted Sharia law and the punishment to apply following her act of adultery.

Womenomics

2008-10-30T09:10:00.006+13:00

There is no doubt that the world economies look bad. Andrea Learned, a specialist in marketing to women, suggests that the only way to dig ourselves out of the crisis is to model businesses and organisations on typical feminine behaviour. “Women’s way” includes building and leveraging community, being socially responsible, and operating from an “it all matters” perspective. She says that reaching out to women is how brands should be preparing for these questionable times when redesigning organisational policies, products, processes and marketing. To quote Ralph Waldo Emerson “Women are the best index of the coming hour” and who could disagree?

FINANCE AND INVESTMENT

2008-10-09T16:03:00.001+13:00

We are at the point in time when we are faced with a particularly fragile global banking system, a weakening global economy, very depressed and nervous equity and capital markets.

As you are undoubtedly aware, not least from the pervasive and extensive media coverage of recent months, it has been a particularly harrowing time in equity and credit markets. For the quarter, the MSCI Global Equity index returned -4.8%, Irish equity index -31.2% and Merrill Lynch Global bond index 4.5% * with almost all of these losses being incurred in September.

The ongoing bear market that commenced almost one year ago continues to have two overriding elements to it:
• The state of the global banking system?-Systemic risk
• The state of the global economy?-Cyclical risk

Whilst both of these ebb and flow in terms of headlines on a daily or weekly basis, there is absolutely no doubt but that the fear of a systemic failure of the global banking system has been THE key issue that has dominated markets thus far.

The Global Banking System:
The origins of the banking crisis over the last few months were in the collapse of the subprime market in the US, with the recent problems coming from the failure of the global financial system to adapt to the new operating environment.

Funding
Historically the basic operations of a bank involved taking in deposits and lending out these funds to trusted clients, carefully vetted by the internal credit department. The amount lent out was determined by the level of deposits taken in, with these items generally in equilibrium. In recent years, banks saw opportunities to earn additional income from interest on credit cards, brokerage commissions and asset management fees. As a result, there was less of a focus on deposit collection and a significant gap opened up between deposits and loans. European banks on average have a loan to deposit ratio of 130% which means that they need to find €1.5tr from non deposit funding sources. This funding has tended to be from the securitisation and interbank markets.

Securitisation is where banks package and sell off a portion of their loan book and earn a fee in return. Due to the collapse of the US sub-prime market, securitisation markets are closed, with no interested buyers for these securities.

The other source of funding is the interbank market, which is simply where banks lend to one another for a specified time period. The collapse of the sub-prime market in the US created a substantial level of write downs for the financial system. As well as being concerned about their own holdings in these high risk assets, banks were even more concerned that other banks to whom they lent (in the interbank market) would have a similar or even larger exposure to this toxic debt. Hence the interbank market simply dried up with banks unwilling to lend to each other due to a fear of the unknown.

As noted above, banks fund their loan book through deposits, securitisation and interbank funding. With securitisation and interbank funding both unavailable, the banks with large funding gaps were left in a perilous situation. The situation was even more perilous for banks who do not have access to any form of retail deposits. This is what created the crisis in the US investment banking sector, where the companies did not have the security of retail deposits, hence the demise of Bear Stearns and Lehman Brothers.

Capital
Capital is the other issue that needs to be discussed. The losses related to the sub-prime crisis led to a dramatic reduction in global bank capital. The losses were large and were taken as a once off hit rather than spread over a number of years. The banks were subsequently forced to raise additional capital to fill this hole and thus far over $440 billion has been raised. Regulators are likely to re-visit capital requirements following the various banking collapses and there will be further rights issues and placings ahead.

Outlook
Looking into the future, the banking model has undoubtedly changed. Banks will be forced to place an increased emphasis on gathering deposits and lending growth will be curtailed as banks attempt to reduce their reliance on interbank funding and securitisation. Deposit gathering and risk management will recapture their once dominant role in banking activity. The various announcements of public sector support for the financial system should help to restore confidence and over time inter-bank lending will likely recommence. Banks will have to increase the level of capital to support their issue equity capital when markets recover but funding is still the bigger concern at this moment in time. The deteriorating macroeconomic environment will undoubtedly lead to an increased level of bad debts and bankruptcies over the coming years. All the issues discussed above will result in a period of slower loan growth, worsening credit quality and capital raisings and we have seen valuations adjusting to reflect this changed environment.

Market Outlook
• Firstly, we are unquestionably in the midst of THE most uncertain financial environment that has faced the world in many many decades.
• Secondly, it is a time for much disciplined decision making. The volatility and rate of change of material facts is incredible. Take the Irish banking sector’s performance this week alone; despite a 46% fall on Monday, at the time of writing Anglo Irish bank’s stock is up almost 20%!! Global authorities have and are waking up quickly to the challenges currently being faced.
• Thirdly, our key challenge is weighing up the balance between the major uncertainties/risks in the global macro-economic system versus the medium term investment opportunity afforded by assets that are at multi decade lows. At present “risk assets” (equities for example) look cheap, and especially versus cash and government bonds, both of which have attracted safe haven status

Previously outlined events dominating markets:
• The state of the global banking system?-Systemic risk
• The state of the global economy?-Cyclical risk

Over coming months the focus will switch from systemic to cyclical concerns. The two are obviously linked, particularly with the dent to confidence and activity levels that the credit crunch has inflicted on the economy. We are closer and closer to solutions to the systemic banking crisis that should safeguard the system.

Cyclically, the outlook is now most likely for a G7 recession though we will probably avoid a global recession. Cyclical markets and economies are normal and demand lower risk premia than the less frequent systemic crisis scenarios. Our outlook for the next 6 months in that scenario considers:

Negatives:
• The downturn has been led by the banking sector and a deflation of asset prices. Past experience shows that asset deflation cycles take much longer to recover from as deleveraging in itself has very negative dampening affects.
• We face much nastier economic numbers in all western economies. The markets are good leading indicators of what is still to come.
• We face significant earnings downgrades as companies report their earnings and analysts cut their earnings estimates much more than they have so far.
• In a cyclical sense bank funding will remain very difficult to obtain.
• Overall confidence is sapped.
• The levels of uncertainty generally, is causing investors to keep selling equities and demanding higher risk premiums.

Positives:
• Inflation which was a major concern during the early summer as commodity prices soared, is falling quickly.
• Over coming months as in any normal cycle, we expect relatively aggressive interest rate cuts from many central banks including the ECB, BOE and probably the FED.
• Valuations of equities look cheap, even allowing for the poorer earnings outlook. On measures such as dividend yield some of the European equity markets are now yielding more than their equivalent government bonds, which is very unusual and can be argued as very bullish for equities.

In the short term, I believe that the passing of the US bill, depressed levels of fear and sentiment and very oversold technical levels on markets would mean we could see a 10% or so bounce in equities. Beyond that I believe we remain in a cyclical bear market as despite the positives above, the biggest challenge to being positive on equities is to the timing of going positive. I believe we are too early in the cyclical downturn for markets to enter a new bull market as we need time to work through some of the issues outlined above.

Whilst we are not out of the woods yet that we have been through the most difficult and volatile part, and that the next cyclical phase whilst not overly positive is not as depressing as the phase we have come through

Source: KBC Asset Management.
*Source: Merrill Lynch > than 5 year global bond index

WOMENOMICS

2008-10-09T16:00:00.002+13:00

It’s pretty clear that Hollywood pays its male leads more and gives them roles for much longer than women.

This has extended to the world of comics. Five of the six upcoming Marvel movies feature male leads with women firmly relegated to the roles of girlfriends or assistants. Why not a Wonder Woman flick or any true super heroine movie? It’s not because directors and writers lack good material, there are literally hundreds of comic book super heroines, and female characters play integral roles in just about every superhero team and major comic book plots.

We recently saw women flexing their box office muscle giving Sex and the City the highest-grossing opening for an R-rated comedy in movie history; it’s not inconceivable to think that a super heroine flick could draw both the “girls night out” crowd and the already broad fan base for comic movies. That would give the studios a revenue bump of the kind provided by the Spiderman and X-MEN franchises. Don’t the movie moguls want our money? We are an economic force to be reckoned with.

WHY?

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Why does money matter? Money matters because like it or not we live in a money culture where money is the universally acceptable medium for exchange for goods and services. Money buys the things that all people want – and deserve; life, health, food, land, hope, education, sexual pleasure and some peace of mind. From Women, Money and Power. Phyllis Chesler & Emily Jane Goodman (New York: Bantam Books, 1977)

Why do we need to learn about money? Because only the powerless live in a money culture and know nothing about money. Ignorance about money and power is not an effective means of acquiring, redefining, or distributing money. A political, ‘sophisticated’, or religious horror of money dangerously avoids the fact that, in a money culture, it is only money that buys the things that all people want – and deserve; life, health, food, land, hope, education, sexual pleasure and some peace of mind.From Women, Money and Power. Phyllis Chesler & Emily Jane Goodman (New York: Bantam Books, 1977)

EVERYDAY MONEY

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What can be more everyday than marriage? Ask your favourite married couple what makes their marriage work and they are unlikely to say it’s because they found their financial soul mate.

The smartest financial decision you will ever make may be marrying someone who has the similar attitudes to money. This could in fact be your most valuable asset – or your largest liability.

Although we now marry for love, so much of what we want in life boils down to dollars and cents.

Test the following guidelines with your significant other:

• Talk and share goals, ask tough questions, share your financial health and lifestyle dreams.

• Run your home like a business, make a budget and keep track of earnings, expenses and debts.

• Be supportive of concerns, having a supportive partner helps professionally which trickles down to the bottom line.

• Enjoy – but within reason, create a cash cushion and live a lifestyle you can sustain.

• Use a mediator, an independent third party, whether a financial planner or therapist.

• Maintain some independence

• And invest in your marriage – spend time together.