Investor Newsletter #4 - December 2013

Welcome to our December 2013 General Finance quarterly newsletter. We appreciate your support. The purpose of this newsletter is to keep you informed about the company and various financial matters that may interest you.

2013 in Review

For us, this year has been a slightly better year than last year. More people are continuing to invest with us, on the deposit side of the business. This is positive. Demand for loans was good until a few months ago, when the Reserve Bank brought in their loan to value restrictions.  This has slowed down the housing market and there are fewer transactions around. The question is, will this slow down house prices in the Auckland market?  Our view is that it will not. It has merely restricted the number of first home buyers entering the market. This, we believe, is not a particularly good policy.

Crystal Ball for 2014

It is hard to predict the future, but looking at the financial markets every day does assist you in picking up certain economic trends. The difference between 2014 and this year, is that 2014 is an election year. The current Government will be trying to avoid any contentious issues, so on the political front, it will be pretty much steady as she goes, without any major policy announcements.  Many commentators are predicting interest rates will rise as early as the first quarter of 2014.  We believe this is premature, as any increase in interest rates will raise our already high exchange rates. Unemployment needs to decrease from the current 6.3% to closer to 5.5%, before interest rates should rise. It should be noted that New Zealand has one of the highest interest rates within the OECD. On the positive side, the economy will grow reasonably well, largely on the back of the high demand for our soft commodities.  Inflation will continue to be relatively benign, hovering in the 1-2% range. The exchange rate may well decline a little due to the better economic prospects of some of our trading partners - particularly the USA and UK.  In summary, we are predicting that 2014 will be a better year than 2013, economically speaking.

Next Year for Us

Next year for us will be largely unchanged from this year. We plan to carefully grow our business. We will continue to lend only on residential real estate and lifestyle type properties.  Lending in the residential space is not without its pitfalls, and conservative criteria are called for. Over the past seven years we have noticed that, in some parts of the country, properties have actually gone down in value. These properties tend to be in smaller provincial towns, in both islands, that were dominated by older style declining industries.  We are aware of these locations and we either do not lend in them or lend on much lower loan to value ratios.  Our preference is to lend in growing areas such as the Auckland, Tauranga, New Plymouth and Christchurch regions.

Next Interest Payment

Our next quarterly interest payment will be made on the evening of Monday 30 December 2013. Direct credits will be processed that evening, with cheques (if applicable) and paperwork being forwarded during the week.

As this is our last newsletter for the 2013, we wish everyone a Merry Christmas and a happy New Year. We appreciated your support this year and look forward to your continued support in 2014.

If you have any questions about your investment please do not hesitate to contact James Lockie on 09 526 7800 or by email to jlockie@general.co.nz.  Our website is www.general.co.nz.     

If you want to invest more funds, you can obtain an investment statement and application form from Computershare Investor Services, our securities registrar.  Their freephone number is 0800 500 602.

In accordance with the Financial Advisers Act 2008 (“the Act”) this Newsletter is “Class Advice” and any advice or recommendations contained in it or on the General Finance website is not “Personalised Advice” as defined by the Act. This means the Newsletter does not take into account an investor’s particular financial position, financial needs, financial goals, risk profile or asset allocation. Investor’s who require “Personalised Advice” should contact an Authorised Financial Adviser (AFA).