In February global concerns dominated markets around the world. China moved to tighten its credit to help slow down the speculative bubble in property. The finances of Greece and other countries (notably Portugal, Ireland and Spain) raised concerns about possible defaults. Whilst the risk of default is low these countries as well as many others like the USA need to rein in spending in order to repay the massive debts incurred during the GFC stimulus...

...At home in Prime Minister Kevin Rudd diverted attention from his failed insulation and school building programs by announcing that the Commonwealth would take over the majority of health care funding from the states. Whilst I am not a fan of big government it is clear that something has to be done but the key question remains: who will pay for this health care reform? Ultimately it will be the taxpayer through an increase in income taxes, the Medicare Levy or increases in the GST. The Henry Review of taxation and the May 2010 Budget may give us some indication of where things are headed. But don’t count on it as this is an election year and any unpopular measures are likely to be put off until after that election.

It looks like we will continue to live in interesting times. Personally I continue to invest regularly into shares directly and via managed funds as an alternative to earning interest income that does not create any real return after tax and inflation - what I term “going broke safely”.  

This is an excerpt of Michael Lannon's monthly commentary. Read the full commentary here.


Michael Lannon
Managing Director