MARY HOLM’S TIPS HEY, PAY ME MORE! GET RICHER Frances Cook explains Martin Hawes: It's all How to get the best how to get a pay rise about risk and reward out of term deposits
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What We Like A showcase of the hottest products and places that are the talk of the town. Fable tells a beautiful story What’s not to like about golf, skiing, breathtaking scenery and great food and wine? There is somewhere where you can get it all, at a luxury resort in Canterbury. The iconic Fable Terrace Downs Resort has just started a new chapter with a new owner after becoming part of the Fable brand in March. Just an hour’s drive from Christchurch and nestled in the shadow of Mount Hutt and the Southern Alps, the luxury resort has become a destination in its own right. It features a prestigious 18-hole golf course, a clubhouse, restaurant, conference, event facilities and 25 luxury villas. CPG Group Operations Manager, Ronnie Ronalde, says the opening of this, Fable’s third property in the South Island, signals a new chapter for the resort. “It has a rich legacy in this area and we’re looking forward to elevating Fable Terrace Downs Resort even further to become the premier luxury resort in the Canterbury region.” Golf draws many to the resort. Views over the Southern Alps and the Rakaia Gorge make it a truly unique scenic alpine course. The par-72 Fable Terrace Downs Resort golf course was designed by Sid Puddicombe and has been ranked by New Zealand Golf magazine in the country’s top five courses. If you want more than golf, there’s also horse riding, archery and clay bird shooting available. After a day skiing or playing golf, enjoy the best of local produce at The Clubhouse Restaurant, which has a menu focused on local inspiration, whole foods and sustainable produce. WI NTE R 2 0 2 2 | I N F O R M E D I NVESTO R 1 2
W H AT W E L I K E
Softy, Softly Cashmere has long been referred to as ‘soft gold’, says the Kiwi founder of Modern Love Cashmere, Jo Lloyd. “It’s the standout choice for warmth and versatility, while the composition of the fibres allows for a higher level of design,” she says. “Also, if like me you can’t wear wool next to your skin, cashmere is a dream.” Lloyd has designed a collection of cashmere winter classics designed and made using 100 per cent pure cashmere, meaning it has not been mixed with other yarns. She believes consumers today are demanding more sustainable choices, so she supports a move to slow fashion – to pieces that are not trend-driven, but wearable season after season. She also traces each garment to the fair-trade Mongolian farm the yarn was sourced from. Lloyd launched her brand in 2020, after a long love affair with cashmere. “I can still remember buying my first piece, aged 23, at a vintage cashmere store in New York,” she recalls. “It made me feel like one of the models you saw stalking around Soho! It was a beautiful shade of pink, so soft, and when I pulled it on with my black jeans and high suede boots, I was enthralled.” Lloyd says she’s part of a huge trend globally. “The market for luxury goods has taken a notable step away from short-lived trends. “Modern Love Cashmere is part of that movement – a boutique retailer with sustainability at the core of the brand, starting at the very beginning of the supply chain. “Each batch of yarn can be traced right back to the goat, and farm it comes from. “To know that the animals, farmers and grasslands are being looked after and protected is incredibly important to me, and to our customers.” www.modernlovecashmere.co.nz
Think pink Yes, it’s a beer, and yes, it’s pink! Garage Project and Resene have joined forces for a colourful craft beer they’ve called Scrumptious. The beer’s soft kettle sour base has been saturated with purple pitaya (dragonfruit) and pineapple. It pulls off a convincing taste sensation matching the fuchsia of Resene’s Scrumptious paint colour. The collaboration was born because both businesses started in Wellington garages. Resene’s first ColorShop is just metres away from Garage Project’s Wild Workshop, so it made sense they should join forces. Buy it at www.garageproject.co.nz WI NTE R 2 0 2 2 | I N F O R M E D I NVESTO R 1 3
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PERSONAL FINANCE
The Overwhelm Effect Worrying about money can put us at risk of ‘overwhelm’, says Lynda Moore. Here’s how to deal with financial anxiety.
Does the idea of checking your bank balance leave you in a cold sweat or with a feeling of dread? If it does, you could be suffering from ‘overwhelm’. The technical term for overwhelm is financial anxiety. First, you need to understand that anxiety is a normal emotion.
that financial anxiety was ranked number two in terms of what is stressing Americans out. I think it would be the same here in New Zealand. Before I go any further, let me just bust a myth. Financial anxiety doesn’t just happen to people who are struggling financially. It can hit you regardless of your net worth, income, or financial stability.
It’s a healthy, temporary response to stress, and it shows up in the way we think, feel, and behave.
Know the signs How can you tell when overwhelm is affecting your life?
It’s anxiety that gives you the sweaty palms, dry mouth and dread feeling in your tummy you get before you make a speech or do something outside your comfort zone.
When we are feeling anxious, we go into Fight, Flight, or Freeze mode.
We’ve all felt like this and it’s fine. In small doses anxiety can be beneficial. With financial anxiety you feel the same – on edge, nervous and worried about money – and the feeling isn’t going away. We’re seeing more overwhelm It’s not too surprising that after two years of living in a pandemic, financial therapists like me are seeing more cases of financial anxiety. In April 2020, not that far into the pandemic, the Financial Therapy Association noted
We do things to make the anxiety go away. We make unwise choices: like sitting on the couch watching Netflix with a bag of potato chips instead of heading out for a walk and getting some fresh air and exercise. From a financial perspective, this can lead us to make irrational decisions, like buying a brand-new big-screen TV when we’re facing job uncertainty and we’re worried about paying our rent. We don’t think through our decisions, or we’re paralysed and avoid making any decisions at all. These symptoms can all have a long-term impact on our future financial security.
Distorted thoughts We get caught up in the Thought – Feeling – Behaviour cycle. Our thoughts become distorted, or just not true – but we think they’re true. We tell ourselves: “I’ll never get my spending under control. I’m doomed, I’ll never have enough money for retirement. I’ll never be able to buy a house. I’m such an idiot.” Then the anxious feelings kick in. We worry, we feel on edge and nervous. This can also show up physically with a tightness in the chest or throat, stomach aches, tension, or headaches. You may notice these feelings more when it’s time to pay the bills, log into your bank account, or when you need to have a conversation about money with your partner, or boss. If you’re waking up in the night with your stomach churning because you’re worrying about money, that’s a pretty good indicator that you have some level of financial anxiety going on in your life. Two sides of the story The two ends of the behaviour’s spectrum are ‘perfectionism’ or ‘procrastination’.
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PERSONAL FINANCE
Is it the Right Time to Quit? Across the globe, workers are quitting their jobs. And this means there has never been a better opportunity to earn more money, says Amy Hamilton Chadwick.
Since 2021, we’ve been hearing about the Great Resignation: employees quitting their jobs in huge numbers. In the US, 4.4 million people quit their jobs in February this year, driven by factors like low wages, job dissatisfaction, and people’s changing priorities, thanks to the pandemic. Lockdowns made people reassess their lives, and some realised they didn’t like their jobs, or couldn’t face returning to the office after working from home. Online movements like r/antiwork on Reddit fuelled the fire, championing those who demanded better conditions or quit. Most workers moved on to higherpaying jobs, but some left the workforce altogether, leading to labour shortages that have been exacerbated by widespread Omicron infections. Employers beg for staff Have we had our own version of a Great Resignation here in New Zealand? Yes and no, says economist Finn Robinson of ANZ. Our labour laws and healthcare make New Zealand a better place to be an employee than the US, he says. But New Zealand is definitely part of the global trend that’s seen the balance of power shift from businesses to employees. Where employers once called the shots, they’re now having to bend over backwards to keep their staff.
“A worker generates income for an employer,” Robinson explains, “and what share of that income the worker receives depends on how tight the labour market is. “Here we’re seeing quite a different dynamic to the post-global financial crisis period where employers could dictate terms. “Now we have close to record job vacancies, and employees can more easily get other job offers, so the employer has to pay up. “That fundamental shift from the previous labour market is one reason why inflation is expected to be so persistent over 2022.” Perfect time to hunt for a job With our borders closed for so long, our worker shortage has worsened, with businesses competing for the same pool of local talent. Employers have had to get creative to make themselves attractive, primarily with higher pay, but also with work-from-home options, greater flexibility, and more emphasis on treating employees well. All these factors are encouraging Kiwis to quit jobs they’re not happy with and make the switch into a new higher paying role or jump into an industry they’re more passionate about. It’s even attracting people to stay in the workforce longer or return from retirement, particularly in the face of rising household costs.
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PERSONAL FINANCE
The Secret of Laddering How can you get the best returns at the bank? Mary Holm says laddering term deposits should give you a better return in the long run.
Many New Zealanders have money in the bank in term deposits. A term deposit is where you lock your money away with a bank for a set time and get a fixed interest rate. You can’t get your money out until the end of the term, but you can be certain just how much interest you’ll be paid every year, and for how long. Even if interest rates drop, you’ll still get the same amount. Who uses term deposits? Some people have just a few hundred dollars in term deposits – for emergencies or when the credit card bill is higher than usual. Others have hundreds of thousands of dollars sitting in term deposits, perhaps the proceeds from a house sale waiting to be reinvested in a new property. But for many, it’s a safe place to leave their retirement savings – either before or during retirement. These people have probably heard the message that they should take a bit more risk with at least some of that money, because higher risk brings higher returns on average. But they like the security of holding their money in the bank. Or they might, indeed, have their longerterm money in riskier investments, but wisely keep their short-term spending money in term deposits. “Interest rates are too low!” A common complaint in seminars I run is that term deposit interest rates are too low.
Until the last year or so, I’ve responded by showing a graph of deposit rates and inflation. “The interest you get might seem low, but at least it’s considerably higher than the Consumer Price Index,” I would say. “Look at what happened back in the 1970s and early 80s. Interest rates were in the teens. Wow! But inflation was even higher. “You put $100 in the bank in January and withdrew $116 the following December. But that $116 would buy you less for Christmas than your $100 bought at the start of the year! “At least now your term deposit money buys more when you withdraw it. Stop moaning!”
How laddering works If you don’t want to move your money into other investments, I’d recommend laddering – setting up your deposits so they mature at different times. Here’s how it works, step by step: Let’s say you have $200,000 of retirement savings. Step One: Divide the money into, say, four lots of $50,000. Step Two: Invest $50,000 in a 1-year deposit, another $50,000 in a 2-year deposit, another $50,000 in a 3-year deposit, and the last $50,000 in a 4-year deposit. Step Three: In a year’s time, when the first $50,000 matures, reinvest it for four years. When the others mature, reinvest each lot for four years.
But I can’t say that any more. While term deposit interest rates are rising, inflation has zoomed up and, at least for a while, is higher than interest. If you have money in term deposits, the value of your money – expressed as how much you can buy with it – is falling. That’s not good!
Or you might want to ladder over the shorter term. You could put, say, a third of your money in a 3-month deposit, a third in a 6-month deposit and a third in a 9-month deposit. When the first one matures, reinvest it for nine months, and keep reinvesting the others for nine months.
Laddering $200,000 of Term Deposits X is the year the deposit matures. You then reinvest it for four years.
2022 $50,000 $50,000 $50,000 $50,000
2023
2024
2025
2026
x
2027
2028
2029
2030
x x
x x
x x
x
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MARKET INSIGHTS
Bitcoin Scales Up Jenny Rudd went to the Bitcoin 22 conference and discovered that changes are revolutionising the crypto ecosystem. She says the future of crytocurrencies is exciting.
Miami is positioning itself as the bitcoin capital of the world. The mayor, Francis Suarez, takes his paycheck in bitcoin. And about 25,000 people flocked to Bitcoin 22 at the Miami Beach Convention Centre in April. Suarez opened the event by unveiling a crypto bull with glowing blue eyes, saying: “The future of finance is here, in Miami.” And there were some big themes. Like Senator Cynthia Lummis from Wyoming, who said that regulation and legislation were on their way - a good thing. Capital will pour in from institutions when the legislation arrives, she says. If all fund managers put one per cent of their portfolio into bitcoin, the market would grow enormously. Early adopters are already doing something similar, like wealth management firm NZ Funds who own crypto assets in their growth-orientated mandates. The options and derivatives markets are just two per cent of the bitcoin spot market at the moment, as compared to being eight times the size of the entire gold market. Pat Baker, chief executive of Centaur Markets, says banks are ‘salivating’ and just waiting to jump in and create new derivative financial instruments around the currency. The mortgage market has also woken up, with some experienced players taking part. WI NTE R 2 0 2 2 | I N F O R M E D I NVESTO R 1 1 1
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MARKET INSIGHTS
How Will Ukraine Hit the Markets? The war in Ukraine will affect equity, bond, currency and commodity markets. But how bad will it be? Andrew Kenningham from Capital Economics suggests some outcomes. We’ve already seen the war in Ukraine have an immediate impact on global equity markets. Let’s look at what might be to come. Share markets have fallen in the first few months of this year, partly because of the war in Ukraine. That said, the falls have not been huge. European equity markets fell by around 10 per cent after it became clear that Russia was going to launch a full-scale invasion and these falls have since been partly reversed. The one exception, unsurprisingly, is that Russian markets have fallen much further. Russia’s equity market is down by more than 50 per cent since the invasion, and bonds have collapsed in value, too, as the central bank has doubled interest rates. There are plenty of historical examples of wars which have affected financial markets, but it’s not easy to draw any simple lessons, because experiences have varied so much. Extreme crashes At the most extreme end of the spectrum – such as following the Russian Revolution and the Chinese civil war – equity and bond investors were completely wiped out. Investors also generally lost a lot of their wealth during World War 1. However, in World War 2 they did much better, at least in the countries which were on the winning side. More recent conflicts probably offer more useful clues about how the war in Ukraine will affect the markets – but these also suggest that the impact of conflicts varies. WI NTE R 2 0 2 2 | I N F O R M E D I NVESTO R 1 1 9