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Merry Christmas from McCarthy Group If your kids have a photo with Santa this Christmas, he might look much older than he did a year ago, given the tough times that he, like all of us, has had to travel through. ‘Ho! Ho! Ho!’ last year would have sounded more like ‘No! No! No!’ as at that time the world economy had already gone pear-shaped, and we were all wondering what the new year would hold. For many Australians, the new year didn’t hold much at all. There were fewer orders, fewer working hours, fewer jobs, less pay and more leave, whether requested or not. Employers had their hands full finding ways to stay afloat, while for much of January and February, Australia was, well, on leave! Fast forward to the approaching year-end, and we are recharged with new confidence (both consumers and businesses), our credit cards have fresh capacity and we are looking forward to the much-loved Christmas season. Australians are getting ready to celebrate our good fortune to be in such a great country, even though the hot weather means we will need to lay down extra supplies of beer and champers on ice! If this sounds like you, then “Good on ya” we say, because we have all experienced a tough year, and it is hard to resist celebrating our triumph over adversity, and revelling in the brighter prospects that lie ahead. That’s how we feel at McCarthy Group anyway, and so we say to all of our loyal customers and friends: We have all come through a tough year. Some of you have been fortunate enough to have grown, and even flourished, in these times. This is the way it’s meant to be. We live in the Lucky Country. Let’s appreciate that for all that it means, and let’s celebrate our good fortune. Let’s enjoy the Christmas break ahead and return renewed and refreshed in 2010, ready to pick up where we left off, and then go forward with confidence into the endless opportunities that are out there for us all. Thank you for your support through challenging times. We value your partnership with us and we look forward to working with you in 2010 to help build your family assets and prosperity in the country where everything is possible, in the land of the fair go. Merry Christmas and a Happy New Year. Stephen McCarthy CEO McCarthy Group



What happens if I lose my job? This is a very real worry for first-time investors. As a valued client, you would probably have had similar thoughts, and if we had a dollar for every time this question had come up in an investor presentation, we could have bought a nice block of land thank you very much! Underlying the question is a very rational fear.

“Things aren’t easy at the moment and I am doing all I can to meet our monthly expenses which seem to grow all the time. A new mortgage is a major ongoing commitment. So what happens if I lose my job?” We have all been through this thought process, and as investors you will have come up with the answers needed to quieten the inner voice. But what about the voices that rise up again as you consider your next investment property? Does the same chorus chime in with the same song? If so, here are some tips about how you might approach this subject, to give yourself the confidence needed to continue on your investment journey. 1. Be positive, and project enthusiasm If you retain a positive outlook, and show that you are fully on board and ready to take action to help your company and colleagues get through tough times, it will lift the spirits of everyone around you. Position yourself as a positive contributor and a valuable person for the future. 2. Understand the overall position You need to be sympathetic to the circumstances of your company. It’s not the time to ask your boss for a pay rise, or for a nice long holiday. You need to show that you appreciate the financial situation of the company, and that you are there for more than short term gain. In other words, you are committed for the long haul. 3. Put yourself out there - in a good way Avoid being the guy who comes into the office and gasbags by the water cooler. Be a motivated, hard working employee who sets an example for your colleagues. This kind of employee is an asset to any company. Work is

serious. Be serious when it counts, but equally be there when the time comes to kick back and have a bit of fun. 4. Act like every day is your first When you first started your job you would have been enthusiastic and on your best behaviour. All fired up. Recall how you thought and felt, and then act like you are still new to your job, determined to do well, and show it. 5. Don’t be too modest If you deserve the credit for something, make sure you get it, that you accept it, and that people recognise that you worked hard and achieved a great result. Similarly, give credit where credit is due. Be generous to your colleagues and your boss. 6. Work hard This might seem like Captain Obvious slapping you in the face, but it’s true. Get the job done, even if you need to put in a little extra effort. When you are prepared to put in the hard graft and keep pulling hard when others call it a day, it gets noticed and remembered. 7. Be flexible It’s better to cut down your working hours than to be out of a job so be realistic. Be flexible. And look for ways that you can contribute that might be out of your immediate job description, but that would be of great value overall. Everyone needs to pitch in and do their share, even if it doesn’t seem ideal at the time. 8. Take control If someone leaves the company, there needs to be someone to pick up the slack. If you know the ropes, use your initiative to help all round, and show the way. Helping out with this can make you indispensable, and you are seen as a real team player.



Big four bosses bank a hefty bonus The executives of the big four banks have sailed through the financial crisis and their annual reports on the year just passed show they have managed to trouser a combined annual pay packet of $35 million! Through the GFC!


The highest earner was Mike Smith, CEO of ANZ bank, who took home $10.9 million while Westpac’s Gail Kelly - Australia’s highest-paid female CEO - was paid $10.6 million. CEO of Commonwealth Bank, Ralph Norris, earned $9.21 million and bringing up the rear was the CEO of NAB, who (only) managed $5.2 million. In a year when banks were struggling with bad debts and failed companies, where senior executives were terminated or resigned and the economy was suffering, the big bosses of the big banks were raking in more money than they did before the collapse of Lehman Brothers in 2008.


If reward is based on risk, then their haul should have been far lower, as the Federal Government provided guarantees to the banks that not only removed most of the risk, but also dealt them a massive competitive advantage against smaller lenders. The big four banks have proved almost untouchable as a result, and have increased their market share to the point where they could even keep some of the RBA’s interest rate reductions for themselves, saying that their ‘funding costs’ had increased. And then they each report $3 or $4 billion profit, or more.


I think that the banks should have been far more cautious about the lavish pay that they have given their CEOs, given the really tough situations faced by many of their customers. Some people have lost their businesses, their homes, their jobs, their investments. In other words, maybe for only one payday, the top bankers should have been sensitive enough to say ‘No’ to their annual pay bonanza, out of respect for those who have suffered through this crisis, all of whom would have had links in some way to these same four banks and their bankers. The fact that none of them were prepared to do so speaks volumes about their priorities, and makes a mockery of their ‘customer centric’ strategies in the market.




Harry Triguboff - 3,500 investment properties, and counting... Billionaire Harry Triguboff has investing down pat, and we could all learn something from his amazing success. Harry Triguboff is the Chairman and Managing Director of Meriton Apartments, a company that has built almost 50,000 residential dwellings, mainly townhouses and apartments, since its creation in 1963. He personally owns 3,500 of these apartments. Triguboff invests in property because “We never have enough. We have never had enough since I started developing 45 years ago.” He doesn’t actively trade in the stockmarket - although he does own a small portfolio - nor does he invest in racehorses. He believes that people should own something steady, something that is trustworthy and that will provide great long-term returns. Investment property certainly fits that description. Due to his immense contribution to the Australian property market and his superb investment strategy, Triguboff has been named Property Person of the Year of 2009. We can all learn something from Triguboff’s investor mindset. We recommend that our clients target three

or four investment properties to fund their retirement. However, Triguboff’s success story shows that once you have made a start in investment property, you can keep going, and keep growing your portfolio. For many people, investment property ends up being far more than a financial strategy; it can become a rewarding full time career. The toughest part is when you make the decision to buy your first investment property. People are understandably fearful of the unknown and are worried about making a big mistake involving a lot of money. After the first one it becomes a lot easier, and numbers 2, 3, and 4 become easier and easier each time. I wonder how it might feel to be making the 3,501st such decision! What an incredible story, and what an inspiration to those of us who are involved in a small way, with only a few properties, but whose goal it is to do more. Congratulations on your achievements, Harry Triguboff, and thank you for confirming the investment property route as the way to go.



Great news for property investors is that rents continue to rise. In the last year, rents on houses nationally increased 3.4 per cent in the 12 months to October, while they lifted 4.1 per cent on apartments.* How many investors in shares, MSI schemes or superannuation funds would have loved to have such positive returns, as opposed to the losses and even wipe-outs in other asset classes? The reason for the ongoing growth in rents, come what may, is the simple fact that there are not enough houses or units in Australia relative to the number of people needing accommodation. It’s the story of supply and demand taught in Economics 101, which has led to ongoing positive returns for property investors.

Rents are rising. Property values too

Rentals aside, property values will grow for the same reason: there is a limited amount of housing stock and land ready for development. The availability falls short of the numbers wanting to buy, as we saw when the government introduced the First Home Owner Scheme. While it is surprising that more Australians don’t see the obvious investment opportunity caused by ever-increasing demand and slow supply, savvy investors have worked it out, and are benefiting from the 3 to 4 per cent annual rental increases, and the 7 to 8 per cent increase in capital values. * Data courtesy of

Getting a ‘W’ When Tiger Woods won the Australian Masters golf tournament, he told the press that he had achieved a ‘W’. When I read about this, I sat for a moment and then caught on to what he meant. Woods had had a Win, as he usually does. Tiger says that he is addicted to golf. It consumes him and he has a passion for it that nothing can quash. “I get to play golf for a living. What more can you ask for - getting paid for doing what you love.” Not all of us are as lucky as Tiger. Many people don’t get to make a living by following their dreams and passions. Those who are able to do what they love for their entire life are the lucky ones. However, we can all do what we can to bring what we love into our work, and to love what we do. We can all learn from Tiger. He has to face hurdles and controversy every day. It was amazing to think that he arrived in Australia the day after victory in Beijing. He started practice day on a tough and unfamiliar course, met new people, had tens of thousands of people photographing his every move (including helicopters overhead), he went straight to work and went on to...Win! It’s no wonder that grown men go weak in his presence and say how much they admire him. Tiger’s willpower, ability and positivism are what make him great. He lives his dream. So, perhaps it is time to ask yourself, are you living yours? Are you playing for a ‘W’ in your life, and if the answer is ‘No’, what do you need to change in 2010?



It all began many years ago, When investments seemed but a dream. Meeting month-end payments was hard enough With income that was simply too lean. Our wages did work okay for us, But there never seemed to be enough

The Man in McCarthy Blue

And living it up for a week or two Always placed us back in the rough. We never discussed retirement, you know, Thinking instead, ‘She’ll be right mate’. We never even gave a thought To what we’d find at the retirement gate.

Ostriches we were, with our heads in the sand. If we couldn’t make good, someone would lend a hand. And then we met the man from McCarthy Group, A strong voice that had come from nowhere. With a message that was full of conviction And that he simply wanted to share. We worked steadily through the workbook For many hours on end. “Where did the years and your money go?” Is the message it seemed to send. “How on earth will you ever have more, If the current trends hold true?” Oh yes, we still recall our meeting With the man in McCarthy Blue. Since then so much has changed for us, For better, and not for worse. We were challenged to face our deepest fears Without feeling the need for remorse. We now own several properties That we lease to people unknown. And with careful planning and good management, Just look how our money has grown. So to the man in blue, from McCarthy Group, You have turned our lives around. To the man in blue from McCarthy Group Thank you for the wealth that abounds. For us and for our children This is a life to which we never aspired. We now face our future in confidence With the independence we’ve acquired.



What a difference a year makes As a nation we should feel blessed to have come through these past 12 months relatively unscathed. Our economy has proved to be a world-beater, largely because of the following: 1) We went into the crisis with established budget surpluses 2) Our banks are very strong 3) The demand for our minerals - especially from China remained strong 4) The government moved aggressively to stimulate the economy

“There’s never been a better time to invest. Property prices and rentals are increasing, and there are plenty of opportunities out there. Interest rates remain low in historical terms, and credit is freeing up. It’s the perfect time to get into the market.”

At this time last year, many Australians were fearing the worst, and the outlook for businesses and individuals seemed pretty grim.

“What happens if we invest in property and can’t find a tenant?”

3. On finding a tenant

Or; It is therefore with a great sense of relief, and some pride, that we face the prospects of a much stronger start to 2010 than was the case for this year. Yes, what a difference a year makes. And thank goodness that it’s a change for the good. It’s too late now to look back and see what opportunities we might have taken on the way through. But we can look forward and review how we’re thinking about things, to see if we are prepared for the opportunities that undoubtedly lie ahead. Here’s a sample list for you to check your mindset as we close out the tough year that was 2009, and enter the opportunity of a new decade. On the 3 topics below, how would you be thinking? 1. On the current state of the economy “I’m not convinced we’re out of this yet. Let’s sit and watch for a while.” Or; “I never thought we’d come through so well. We didn’t even have a recession. Compared to where we might have been, we’re far ahead. Let’s use that to our advantage, and make our next move.”

“With population growth approaching half a million a year, and with accommodation not keeping pace, we should always find plenty of tenants, particularly if we invest in affordable property in high growth areas.” These are three examples of how people may take a positive or a negative view when faced with certain scenarios. It is widely known that an ‘Investor Mindset’ is one that enables decisions and action at times when others might be pulling back and retreating. For example, when the stock market hit the bottom in March 2009, there were savvy investors buying the same shares that others were selling. Right as the market was bottoming out. How did they know that it was bottoming? They didn’t. They simply sensed the bottom was near, and took the risk so that they could gain maximum returns. The buyers of these shares have since seen a 50 per cent gain or more as a result. This is also known as being ‘Contrarian’, in other words, doing the opposite of what everyone else is doing at the time. Some of these smart investors would now be selling their shares and taking the profits, while those buying them are late into the market, and finding little growth, and even face the chance of a pullback, thereby losing money!

2. On the property market “Interest rates are rising steadily. We’ve missed the bottom of the market. Things are going to get more expensive. I’d rather wait until things move back in our favour.” Or;

In summary, we all face the same market opportunities no matter where we are in the economic cycle. What makes for winners is the perspective they take on the situation. Winners know that there is value available, somewhere, and they spend their time looking for it, and then being decisive and acting when they believe they’ve found it.



Australia’s exploding population. It’s either a blessing or a curse, but a real opportunity for property investors. Recent population forecasts project that Australia’s population is set to balloon from 22 million today, to over 35 million by 2049. That’s very much in our lifetime, and the growth is happening right now, through a new baby boom (293,600 babies were born last year), strong immigration (running at 278,000 a year), and ongoing medical advances that are serving to extend life spans. On the one hand the Prime Minister likes the idea of a “Big Australia”. So too does big business, where continuous growth in the population means continuous growth in turnover and profits. On the other hand, however, there are others who have growing concerns about what a further 13 million people over the next 40 years would do to our quality of life, and are asking whether this is the right direction of the country. Their concerns include: 1) Cities like Sydney and Melbourne are already very crowded, with infrastructure like roads and rail links inadequate even for the current population. What about drainage? Car parking? Parks? How will the ageing infrastructure cope? 2) Sustainability: Where will we get the water, which has run

dangerously low in many parts of the country, and where desalination plants are being constructed as back-ups? 3) Housing: We face an existing backlog of some 160,000 homes and the shortfall grows by 30,000 a year. Where will all the new people live? 4) Land: There is talk of the market garden farms around Sydney being ploughed up for housing development. Australia is already highly concentrated around the green fringe around our shores, with the vast hinterland hot, dry and uninhabitable for all but the toughest die-hards, farmers and Aboriginals. 5) Medical: How will we afford the costs of an increasing ageing population? This means the age pension, and the enormous cost of medical care, to name but two.



While Asian immigrants would feel that Australia is very spacious and uncluttered compared to homes they’ve left behind in Beijing, Hong Kong, Seoul or Laos, for those of us already here, why would we want to create pressured cities to accommodate ever more people, simply in the name of growth? The subject of population growth has already moved onto the political agenda, and Australians are already divided on the subject, with over 60 per cent believing that such a dramatic increase in the population is not warranted and not wanted. Treasury official Ken Henry says this increase will ‘test the limits’ in terms of economic and social sustainability. Whichever way the debate unfolds, it is certain that the population will ramp up significantly. It is also clear that the shortage of housing can only worsen, with rising property prices and increasing rentals the only response to the growing imbalance in supply versus demand. At McCarthy group we believe that the combination of factors at work leads to two inescapable conclusions: 1) We all need to plan carefully for our retirement years, as we will be living for 3 or 4 decades beyond retirement, and we don’t want to run out of money. 2) Investment property is a proven strategy, and an obvious one to meet the income goals in (1) above, given the population growth and increasing housing shortage. The worst strategy would be to ‘do nothing’. This would result in you missing out on the big growth opportunities in the investment property market, and then having insufficient income for a long life in retirement, at a time when the government will be forced to provide less and less per person overall. This is not where you want to end up, believe me! At McCarthy Group we are recommending our clients target 3 or 4 investment properties by the time they retire. The income from each one will cover the needs of a decade of retired living. If you don’t have a plan like this, you are likely to be under-provided, and we would recommend a no-cost review of your current situation to re-assess your strategy and set firm targets.

Win an Apple iPod Nano here’s how. We’d love to hear your views on the investment property market or any other subject that you feel would be of interest and relevance to The Horizon readers. Simply email your contribution to and we’ll send a colourful 8GB iPod Nano valued at $199 to the sender of the best entry. We’ll also publish the story in the next edition of The Horizon. If you have friends or relatives who you feel would benefit from an obligation-free review of their future financial circumstances, please feel free to forward them a copy of this newsletter, or email us at or call (02) 9687 3601.


The Horizon Issue 12  

The Horizon is published by McCarthy Group and is their monthly newsletter. If achieving financial independence and freedom is one of your g...