Question 1: What do you think the Aussie dollar will do until the end of 2019?
Answer (by Paul Rickard): I think the Aussie is around “par value” or “fair value” at 70ish US cents. This seems to be consistent with the RBA’s long term research and middle of the trading range post de regulation – a low of about 50 US cents and a high of about $1.15.
While there is enormous support at 70 US cents (and it will take a lot of work to sustainably break below this level), my inclination is the Aussie will be weaker by year’s end – more like around 65 US cents. This assumes: Aussie interest rates stay at current levels or move down; an ALP Government in May; and a slowing global economy, which will take the shine off commodity prices, including iron ore. All these factors are “negatives” for the currency. Against this is the potential weakening of the US dollar. I think this is less likely as the US economy will still be the “powerhouse” of world (western ) economic growth.
Question 2: I have a question regarding clarification of a spouse under the superannuation act. I know that a spouse under the ATO definition is a person who you are in a relationship with, even though not legally married. We are not married but have been in a relationship for many years and wanted to confirm if we will be treated as a spouse for the purpose of being able to make use of the superannuation downsizer contribution as a result of my partner selling a property.
Answer (by Graeme Colley, Executive Manager, SMSF Technical & Private Wealth with SuperConcepts): The definition of spouse for downsizer contribution purposes includes someone who is ordinarily considered to be your spouse and another person with whom you live with on a genuine domestic basis, although you may not be legally married to them. An example would be a couple who live in a bona fide de facto relationship.
If you have been in a relationship for many years and are recognised to be in a spousal relationship, then you would most likely meet the definition of spouse for purposes of the downsizer contribution.
Here’s the definition as it applies to downsizer contributions:
“spouse” of individual includes:
(a) another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a State law or Territory law prescribed for the purposes of Section 2E of the Acts Interpretation Act 1901 as a kind of relationship prescribed for the purposes of that section; and
(b) another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple.
Question 3: I’m thinking of investing some money in shares. I currently have CSL, Nextdc (NXT), Bingo (BIN) and Webjet(WEB) in my portfolio. I’m thinking of buying Resmed (RMD). Is it a good time to buy RMD? I have a higher buying price of NXT and BIN. Do I need to buy some share and reduce the average cost?
Answer (by Paul Rickard): I like CSL and WEB. The others I would largely pass on.
Not sure that “buying to reduce the average cost” is a great strategy. Buy because they are great stocks with solid prospects. In regard to Resmed, this has been a great performer, dominating its particular niche market for sleep apnoea products. Priced on pretty heady multiples, it has come off a bit because there are some challenges in its core business and diversification into software services is unproven.
While the analysts have a target price of $15.08 on the stock (compared with a market price of $14.32), it is still trading on multiples of 28x FY19 and 26x FY20 earnings.
I would put it on the watch list. I’m not sure I’d jump in just yet. Maybe this is where an “averaging” strategy (buy a third or a half now) could be applied.
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