Question 1: Your thoughts on Pink Diamonds as a hard asset inside an SMSF?
Answer: I have no problems with “alternatives” such as pink diamonds in an SMSF, as long as you and your trustees understand what you are doing. I don’t know anything about pink diamonds (apart from the “hype” I can Google), so I would not even consider the idea.
Three things to consider:
- The old adage: “don’t invest in things you don’t understand”;
- If you plan to invest, the Trustees should formally resolve to do so and the Fund’s Investment Strategy should be updated to reflect this; and
- Likely to be a very illiquid asset – so I would caution on having more than 5% to 10% of the Fund’s exposure to these assets.
Question 2: In relation to the super limits, did the ceiling remain at $1.6 million at 30 June 2019? There was mention that it would be indexed periodically by $100,000 increments from time to time when it was introduced. Secondly, are funds held in the accumulation stage still not counted when calculating whether the $1.6 million ceiling is being breached? And, has there been any change in the $100,000 p.a. non-concessional limit?
Answer: In order: 1. Yes, no change to the Transfer Balance Cap (the amount you can transfer into pension phase). 2. Yes, amounts held in accumulation do not count against the Transfer Balance Cap of $1.6 million. However, they do count when measuring your overall super balance. 3. In regard to your non-concessional cap, there has been no change to this (i.e. it is still $100,000). If your total super balance exceeds $1.6 million, then you aren’t allowed to access this (i.e. you can’t make any further after tax contributions).
Question 3: Could you give me some information on jumbo Interactive (JIN)? I hold it. Is it time to sell?
Answer: Congratulations on holding Jumbo Interactive – a super performer this year, up from $7.20 at the start to $20.65. The owner of Ozlotteries, it has recently entered the Lottery SaaS market with the signing of its first customer to use its “Powered by Jumbo” lottery software.
I went to an industry insider who said:
- Tabcorp (TAH) owns 12.5% following its purchase of Tatts – at some stage, they could be a strategic buyer;
- Very strong CEO; and
- There has been a bit of a “purple patch” recently with high jackpots – this drives business and partly explains its growth in 2020.
Only two of the major stockbroking firms cover it – Morgan Stanley with a target of $20 and an ‘overweight’ call; Morgans with an “add” and a $19.18 target.
I guess I wouldn’t be a buyer at these levels. If I was a holder, I would probably put faith in the adage “let your profits run”. Maybe sell a portion to put something in the bank, and let the rest run.
Question 4: Wow. Whenever I read one of Charlie’s articles, I feel inspired. He is a great writer when it comes to finance. In a recent article, he posited the view that we may be seeing a structural decline in interest rates i.e. they could be low for ages, if not forever. In other words he is saying “this time it is different”. And you know when financial commentators say this, it is usually a sign we have reached the top of the market. What do you think? Do you think this time it is different?
Answer: I am not sure about whether “this time it’s different”, but I do agree with the central idea that if interest rates are lower for longer, return expectations for other asset classes will reduce. So whereas the “risk premium” for investing in shares might have been 6%, if bond rates stay low, this rate will reduce to (say) 5%. Consequently, market PE multiples will rise over the medium term and shares will get more expensive (which is what we have been seeing).
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