The first budget of the minority Labor government was a relatively benign event with very few measures impacting financial services. The government was mindful of the fact that with a minority, the options for serious reform are limited. There were minimal announcements that will affect our clients’ financial plans. For the details of the budget announcements please go to this month’s education section of this newsletter.

Governments around the world have been printing money to stimulate their economies and bail out economies like those of Portugal, Ireland and Greece that overspent during the good times. The key question going forward is how and when governments can remove this stimulus without causing a recession.

The uncertain future coupled with the risk aversion caused by the GFC has resulted in many customers choosing to stay on the sidelines and increase their cash holdings. Those of you who are regular readers will be familiar with my example that earning interest is really “going broke safely”. That is to say that after taxes and inflation most cash returns are negative in real terms.  Personally I have been increasing the diversification of my portfolio by investing in alternative assets like absolute return funds. These funds are designed to be able to make money in both rising and falling markets and an allocation to this asset class can actually lower the overall risk in your portfolio. If you would like more information on absolute return funds please feel free to contact me.

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


Michael Lannon
Founder & Executive Director