Managed Funds Navra Brisbane update

I went to the Navra Financial Services/NavraInvest presentation last week in Brisbane. Apart from thanking his clients for their support for the year and doing some "pre-marketing" for two new funds that NI is launching early next year, Steve had some interesting observations on how the share market will perform over the next few years.

I took 9 pages of notes and given what Steve was saying I'm surprised that nobody else seemed to be frantically jotting things down...perhaps it's all covered in the podcasts Sim has posted over on Steve's forum.
I won't try to cover everything that was discussed.

In a nutshell Steve pointed to his track record of picking the top and bottom of the market and advising his clients what to do and said he had his most emphatic advice yet. In fact he would be writing to his clients saying "you must do this...".

He said there will be an inevitable future financial crisis driven by the unwinding of the US$ carry trade. The time frame for that could be 5-7 years (or sooner if unpredictable events like say various broke countries like Greece & Italy etc defaulting on obligations or a nuclear or biological based terrorist attack in the US were to occur). What will be leading indicators of the next meltdown will be stabilising of the US housing market, increasing US employment and inflation as the US consumer spends up again. The Fed will increase interest rates to curb inflation and the US $ will appreciate again against other currencies. This will create the problem for those who've borrowed USD at very low rates to invest in markets providing higher returns. When the USD reaches 75% of its previous high he will recommend clients exit the market. I'm not quite sure how you'd do that if you're locked into a 10 year product but perhaps the capital protection would let you ride it out...not sure.

As a result he is recommending clients "migrate to safety" via the 2 new funds. One is a structured property fund (which has property and cash as well as shares thus not being totally exposed to shares and having a lower correlation to the market), the other fund is an Asia Pacific large cap fund with up to 200% capital protection and up to 100% (limited recourse) gearing available.

My dislike for structured products, their high fees and the inflexibility they impose is well known I think. However, these products in particular the growth fund do look interesting and cheap finance (at best 8% fixed for 10 years at 100% gearing provided you can prepay interest each year and a 2% structuring/arranging fee in year 1) is appealing. PDSs are not yet available though.

Of course form your own views, on advice, after reading the PDS's for these products when available. My purpose here is not to spruik them, but to mention what Steve suggests is the solution to take advantage of the bull run until the next crash without exposing yourself to unecessary risk. Inflation is the friend of those holding assets he says, but makes the poor poorer.

Disclosure: I'm a shareholder so I hope the products are wildly successful, but make your own decisions in due course.

Other advice included a recommendation to fix your interest rates. He suggested interest rates will go up in Feb and continue to rise for the next 18 months.

Whether or not you agree with what he has to say, it was certainly a thought provoking and entertaining presentation. Anyone else from the Brisbane or other presentations have any other comments?

 

Nigel thanks for the update, I too like taking lots of notes when something interests me.

I try not to listen to predictors and sales people these days, as it gets in the way of getting out there throwing my fishing line in the water and trying to catch my own fish. If someone is mentioning their great track record then just ask to see it please To be useful for me and my money grinding out a return in the reality of the markets then a prediction needs these three things.

1) Entry
2) Exit
3) Risk

Without them it's all just noise.

With regard to 'risk free' structured packaged products, I trust them not. You expose yourself to risk to gain risk premium, that's just how markets work and I believe they are pretty efficient mechanisms generally. Genuine risk free or lower risk opportunities might exist but I don't think they are being packaged up and lumped with nice juicy fees and then sold to retail investors, cynic that I am.

 

Nigel it is interesting getting your feedback. I too was at the presentation.

What I would like to say first of all is review your strategy. If you are happy with your return over the past few years and you have a buffer in place to ensure no loss in a time of market upheaval then why change? What is the cost, not only monetary, but time out of the market, of changing products. Your strategy is essentially the same. Selling down your existing portfolio and property is a cost and buying into the new investments is a cost. Will your return be sufficient to recoup these expenses.

Steve's observations on market movements are similar to others in the industry. Chartists will tell you there is a fall in the market approximately every 6 years. If the next fall is as dramatic as Steve makes out then why lock in an investment for 10 years why not invest for 5 and opt out at the top of the market wait for the fall and buy in again when you feel it is at the bottom.

All the reading I have done emphasise a number of things:
1: We all have different risk profiles
2: Set your strategy and adhere by it
3: The strategy is a long term plan
4: Have a buffer to ensure safety in hard times
5: Diversify your portfolio to reduce volatility
6: Be disciplined

Remember they are your investments. It is your strategy and it is your future.