Welcome to the Money Maven's Financial Blog

Money Maven Blog by Sheryl Sutherland, Authorised Financial Adviser and Director of The Financial Strategies Group

Recommended Reading

Recommended Reading by Sheryl Sutherland: Girls Just Want to Have Fund$ - Every Women’s Guide to Financial Independence, Money, Money, Money Ain't it Funny - How to Wire your Brain for Wealth, and Smart Money - How to structure your New Zealand business or investments and pay less tax.

The Financial Strategies Group

We think for ourselves and make unique recommendations. We only recommend investments and insurances that are in the best interest of our clients.

The Financial Strategies Group

Most of us spend 40 years working to secure our financial future; the most important investment you can make is to purchase appropriate financial planning advice.

Contact us for a review of your investments and insurances.

Begin to experience the serenity that accompanies financial responsibility and integrity: email sheryl@strategies.co.nz, call 0800 64MONEY or visit our website http://www.strategies.co.nz

Monday, 3 December 2007

These Markets Aren't Emerging, They're Exploding

Look, it's not that "emerging markets" is a loaded term. In fact, it's a pretty exciting one. You're talking about countries that are transforming themselves in a few short years from being highly dependent on their ability to sell raw materials to the West into dynamic, information-driven economies with burgeoning middle classes and plenty of domestic consumption.

Yes, they're emerging. But that sounds a bit like a butterfly emerging from a chrysalis. This is different. These countries are blowing up.

If you look at the performance of indexes tracking some of the biggest emerging markets, you'll see shapes ranging from mountain-climbing to parabolas to moon launches. China, Brazil, India, Argentina, Vietnam, and Mexico have all seen their stocks markets double, triple, or more in the past three years.

America’s economy is too developed for the kind of explosive growth taking place in much of the developing world.

China, for example is on the move. Not in the way you think, with its ever-expanding external influence. No, China has 200 million people living comfortably and another 1.1 billion who aren't but would like to be. The result is the greatest migration in the history of humankind. Each month, the major Chinese cities receive enough new inhabitants that they need to build the equivalent of Houston - infrastructure and all - to handle them.

India's economy has heated up to the point where the government is trying to build stronger restrictions against foreign money pouring in to invest in the country. Yes, on a per-capita basis, India is poor. But by the same measure, they're turning money away at the borders. Even countries you don't think of immediately, like Vietnam, Argentina, and Malaysia, are enjoying staggering growth rates.

Obviously, you'd like to get involved with markets like these before they take off, so unless you've invested in them already, you've missed some enormous gains. But let me make three points: one historical, one prospective, and one differential.

Point 1
The historical one is this:

In hindsight, was 1987 a bad time to invest? Heck, no, for the very reason that the American economy was still at the beginning of a great transformation. The big fortunes were still ahead. Sell in 1987, and you're kicking yourself for the next 20 years ... and counting.

Point 2
By this same measure, the transformation ongoing in emerging markets worldwide is still in its infancy. It's going to continue -- in fits and spurts -- for decades. The growth prospects in China are still virtually limitless.

Point 3
And finally, the differentiation. While China and India have enjoyed salubrious rises in their share prices, they started at an extremely low base. Many people shun emerging-market investing because of the risks, the lower level of regulation, or the lack of protection. And they're right to be concerned. But things are improving in every country that has companies coveting Western capital, with the possible exception of Russia.

In fact, what I do every day is advise clients on these issues.

Why can we make disastrous decisions in love?

This is your brain on love - more neuroscience!

Her front brain is telling her he's trouble. Look at the facts, it says. He's never made a commitment, he drinks too much, he can't hold down a job.

But her middle brain won't listen. Man, it swoons, he looks great in those jeans, his black hair curls onto his forehead so adorably, and when he drags on a cigarette, he's so bad he's good.

His front brain is lecturing, too: She's flirting with every guy in the place, and she can drink even you under the table, it says. His mid-brain is unresponsive, distracted by her legs, her blouse and her come-hither stare.

Alas, when it comes to choosing mates, smart neurons can make dumb choices. Sure, if the brain's owner is in her 40s and has been around the block a few times, she might grab her bag and scram. If the guy has reached seasoned middle age, he might think twice about that cleavage-baring temptress. Wisdom - at least a little - does come with experience.

But if the objects of desire are in their 20s, all bets are off.

It's a dance that holds many mysteries, to psychologists as well as to the willing participants. Science is just beginning to parse the inner workings of the brain in love, examining the blissful or ruinous fall from a medley of perspectives: neural systems, chemical messengers and the biology of reward.

It was only in 2000 that two London scientists selected 70 people, all in the early sizzle of love, and rolled them into the giant cylinder of a functional magnetic resonance imaging scanner, or FMRI. The images they got are thought to be science's first pictures of the brain in love.

The pictures were a revelation, and others have followed, showing that romantic love is a lot like addiction to alcohol or drugs. The brain is playing a trick, necessary for evolution, by associating something that just happened with pleasure and attributing the feeling to that magnificent specimen right before your eyes.

Somehow, it all comes together, for better or for worse, the sum total of what's found in the mating dance of the ancient reptilian brain, the passion of the limbic brain and the logic of the neocortex; and, if you want to know how this translates into your money behaviour read 'Money, Money, Money Ain't it Funny.'


A recent McKinsey survey asked men and women executives to define the event that has had the most significant impact on their careers. Both men & women report that work factors have more influence than those from home. Women were more likely to say they had role models and mentors.

The top three career changing moments were:

  • Realisation you were not leading the life you wanted.
  • Difficulties balancing work and private life.
  • Change in marital status.
  • Women ranked the first in two more highly than change in marital status which rather surprised me.

Another notable difference was that 27% of the women surveyed but just 7% of men say they have experienced discrimination and are also somewhat more likely than men to say they have difficulty balancing work and private life.

Overall, when both sexes were asked who, inside or outside the workplace provided substantial help they offer very similar answers.

The top three were; spouse, friends then colleagues or friends at work.

It’s good to see similarities between the male and female experiences in the workplace – with, of course, the exception of discrimination!

Who's counting?

The UN estimates that the cost to end world hunger completely along with diseases related to hunger and poverty is about $195 billion a year.

Twenty two countries have joined together to raise this money by each contributing 0.7% (less than 1% of national income).

Now let’s think about US foreign policy dominated by its military budget. The US will spend about $800 billion on security compared with less than $20 billion for economic development.

Take Pakistan as a case in point, it faces huge problems of poverty, population, and environment but 75% of the $10 billion in aid has gone to the Pakistan military. Another 16% went straight to the Pakistani government, no questions asked. That left less than 10% for development and humanitarian assistance. Annual US aid for education in Pakistan has amounted to just $64 million, or $US1.16 per school aged child.

None of this spending helps address the underlying problems of poverty, child mortality, water scarcity in places like Pakistan, Sudan’s Darfur or Somalia.

Everyday Money

Everyday we pay tax – in fact work for months to fill the government’s coffers before we get our share of our earnings. Most of us understand that we have to fund the services we enjoy, but the surplus the government has now is something else entirely – and the speciousness of those in charge in regards to this is incredible. Finance Minister Michael Cullen told a select committee last year that anyone advocating large tax cuts because large surpluses “should be taken out and quietly drowned.” Prime Minister Helen Clark has said “Tax cuts are a path to inequality…the promises of visionless and intellectually bankrupt people.”

You will be interested to know that in fact Treasury told Cullen in 2003 that “This healthy fiscal portion presents the government with scope to cut taxes, increase expenditure, and build up financial assets.”

Now with National snapping at their heels Labour have done an about face. Quite possibly too little too late methinks. I would like to see a one off tax refund to each taxpayer (it is our money after all) and a reversion to flat tax rates with possibly a moratorium for very low earners but I doubt we will see anything of the sort. And….while I am on the job no GST on fruit, vegetables, fish, meat, milk and bread!

I have decided to apply for the position of All Blacks coach

I have decided to apply for the position of All Blacks coach. I feel I have superb qualifications;

Teamwork; - I never have an issue with teamwork as long as everyone does what I say.

Fieldwork; - I have a lovely garden so don’t see how I can fail to be creative in a field.

Rotations; I have rotated a few men in my time and it has not been wildly successful. Based on those experiences I firmly believe that no rotation would benefit the AB’s.

Uniform Colour; - as every fashionista knows black is the new…..black so no pansy pink shirts for the boys.

Footnote: Great Minds think alike. I see Beck Eleven (a Christchurch Press reporter) has done the same and has not even been shortlisted!