A toast(ie) to good tidings

Bruce Brammall, The Australian, 26 December, 2021

26 Dec 3

Christmas Day is fun an’ all. But how much better is Boxing Day?

Off come the pressures of presents, family and food preparation, while on goes the TV for a cricket and basketball marathon. Out come leftovers you just don’t get at other times of the year, to be inhaled during intervals for lunch, tea and time outs.

Go on, try this one at home. Toasted ham and cheese sandwiches are always awesome, but they never get any better than today.

Why? Because of what’s in your fridge and pantry right now.

Today is not a day for packaged ham, tasty cheese and boring bread. In your fridge might well be ham on the bone, gruyere, havarti or even chilli camembert, plus the beautiful bakery bread you bought yesterday, which is perfect toasted today.

Slap together in the normal fashion and toast until the cheese has a consistency somewhere between “gooey” and “molten lava”.

Be sure to let it cool a fraction, or you’ll furnace-blast the roof of your mouth and ruin all food experiences for the next week … proclaims he who hath been burnt here before.

Don’t worry about calories. They don’t count today. Even fat farmers Jenny Craig and Weight Watchers shut down at this time of year, to allow potential clients to stack on the kilos for better business in January.

The link to finances? Hmm, let’s see.

Yeah, I’ve got one. It’s fiscally responsible to use up the leftovers, especially expensive Christmas goodies.

Prepare to reminisce

Anytime my wife’s family gets together for a major occasion like Christmas, there is almost always an emotional or soul-searching question that gets asked around the dinner table.

It could be “best thing to happen to you this year” or “what you’re grateful for” or, perhaps, “favourite memory of” for milestone birthdays … or, sadly, funerals.

A long time ago, in the early days of my relationship with (the now) Mrs DebtMan, I went out of my way to try to avoid answering the questions. I’d sneak off to the toilet as it approached my turn, pretend I had an issue needing urgent attention, or offer to replenish drinks for the entire table.

I should have just seen it for what it was. Reminiscing on the good.

This time of year – from Christmas to New Year’s – is when the majority of the nation actually finds the time to ponder what’s gone on since the corks popped on 2021.

On that front, I’m here to help. And not just with the idea for the best toasted sangers you’ll have for the year.

No 2020 hindsight

This year was not 2020 revisited. Thankfully. The less of those the better. But in the parts of the country that spent much time locked up, it might still be a little hard to find too many positives to celebrate the end of the year with.

Financially, more so than ever, there were the haves and the have-nots when it came to who the winners were.

In a nutshell, if you weren’t taking a risk as an investor, you probably didn’t have too much to smile about this year.

But that’s all right, I’ll come back to you with a plan for that in the coming weeks.

Growth assets … grew

After the roller coaster ride of the 2020 Corona-crash in share and property markets, and the subsequent recovery, it was a guess as to what this year would hold.

But it panned out in a way that made sense, with hindsight. No great surprises.

Listed shares and property continued their recovery for most of the year, as the money governments had pumped into the hands of voters found its way to be spent or invested.

By August’s end, markets had been running very, very hard for 17 months. International shares had stacked on 83 per cent, Australian shares about 45 per cent and property about 73 per cent, from the March 23, 2020, bottom.

That is one of the greatest bull runs in history. Many thought the peaks were unsustainable and believed a crash was inevitable. But it hasn’t happened yet.

Shares bounced to a roll

You know when you throw a tennis ball a short distance, the bounce gets smaller and smaller until it’s rolling along the ground?

That’s what has happened to shares since Spring. Since September 1, equities, on the whole, have done nothing. Australian shares are flat, international shares are up 1.5 per cent, but the broader US market is holding everything up.

The pause is, unarguably, a good thing.

The more it rose, the more likely a major correction was likely. Shares were puffed out. They needed a breather. They’re got it. Be grateful.

Property still alive

When the Corona-crash happened in February/March 2020, listed and commercial property fell the hardest. Shares were off nearly 40 per cent, but property slumped about 48 per cent.

Australian commercial property then rose 76 per cent till the end of August and another 6.25 per cent since. International property rebounded 46 per cent and has another 3.25 per cent since then.

The massive rises still don’t put them back where they were before the crash.

You might think “who cares about listed property”? The answer is “you”. Almost certainly, some of your super is sitting there.

Homes burning bright

It’s never commercial property that gets anyone’s attention though, is it?

Homes and investment property. That’s all anyone wants to talk about around the BBQ.

Finance should probably be banned as a discussion on Christmas Day with the family. Tacky. But no doubt it came up in some households. And I’m tipping residential property prices were right up there as a discussion point this year.

And why not? Across the nation’s five largest cities, residential prices are up nearly 21 per cent on last year.

If on the menu yesterday, wannabe first home buyers will have been moaning, property investors would have been bragging and some parents will have been fretting for their kids’ future ability to purchase.

Just chill. It’s all part of a normal property cycle. Property prices went backwards between the end of 2017 and mid-2019. They rose for a bit till Corona in early 2020, fell because of the uncertainty, then the fuse was lit in late 2020. And, since then, BANG!

Like shares, residential property will eventually need to take a breather. I’m not convinced that’s just yet. Might still be a little while away. But “normal” programming will resume here soonish also.

Income assets … shrivelled

The other two main asset classes – cash and fixed interest – had a forgettable year.

Not a disaster, but their worst years in several decades.

Interest rates were placed in an induced coma in November 2020.

Fixed interest investments – loans to governments and corporates – have hit reverse thrust. Their performance is linked to interest rates. If interest rates fall, fixed interest investments generally rise. And vice versa.

Where are interest rates going? Up. Not quite yet. But definitely before 2024 when the Reserve Bank first indicated they would.

The real issue is for Australians holding too much cash. With interest rates so low, you’re not earning anything (unless it’s in an offset account). Whatever you “earn” gets taxed at your marginal rate. Then subtract inflation of 3 per cent.

It’s going backwards. Slowly. Which is potentially better than being invested when a market crash occurs. But it’s not doing anything positive for you.

Cash is something you keep as much of as you “need”. The rest … you’ve got to have a longer-term plan for it.

Belly button fluff

Taking stock is something that this time of year was meant for, while watching sport, with family, or watching the kids have a swim, while you’re washing down your ham’n’cheese toastie with a glass of bubbles or beer.

And if you’ve missed a few boats sailing this year, perhaps saving a few bucks by making an exquisite toastie with the leftovers is actually pretty sound financial advice today.

Bruce Brammall is both a financial adviser and mortgage broker and author of books including Debt Man Walking. E: bruce@brucebrammallfinancial.com.au.


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