Even if the field is not put in production for a while, or produces only 10 per cent of the whole oilfield, it will help hold down the price of oil.
That's excellent because lower energy costs are just what the world economy needs as it recovers from the crisis
The NZ dollar - the RBNZ is losing
As the world still groans under the effects of the global finance crisis, most countries want to grow their exports. One way is to keep their currencies as low as possible.
Lowering interest rates to "repel" inward money is a growing trend around the world. But our Reserve Bank is so slow to lower our interest rates.
A high NZ$, especially against our biggest trading partner, Australia, will have a negative impact on the New Zealand economy. Stubbornness on the part of the Reserve Bank can only hurt New Zealand. However, the moment the bank hinted it might lower rates the NZ dollar eased - at last.
NZ Super fund loses $200 million
The super fund just lost $200 million by investing in a Portuguese bank, a classic junk bond. Junk bonds and some syndicated properties may pay a higher yield but the risk is higher too.
Higher yield means higher risk - no free ride in this game. Search for quality and, if you have to, accept a lower yield too. Then if things get tough, you won't sweat much. In the long run, no one ever regretted buying quality.
What can we expect?
In any six- to seven-year period there are usually two good years, three to four average years and 18 bad months.
I would expect this trend to continue. But this is not an exact science so expect the time intervals it to vary quite a bit.
High markets: what action to take
Buy only quality bonds. Buy only quality share funds too; for example, the DFA funds that we like filter out a lot of shares for lots of good reasons, and do the same with their property funds.
Diversification
Diversification is key - the portfolios we build hold more than 500 bonds, 250 property companies and 5000 shares.
Tighten up on rebalancing
Let's assume a balanced portfolio is 50 per cent bonds and 50 per cent shares.
The share market rises and soon it is 45 per cent bonds and 55 per cent shares. It is common to let it run to a tolerance of 5 per cent over the desired percentage.
But now that markets are high it would be wise to tighten up and go only to a 2.5 per cent tolerance before switching the profit to bonds, or to cash if you need income.
If markets fall you should do the opposite, in effect buying more shares more cheaply on market weakness.
Don't try to forecast
In 2013 bonds averaged 1 per cent, New Zealand shares 15 per cent, global shares 30 per cent and global property 0 per cent.
In 2014 bonds averaged 8 per cent, New Zealand shares 16 per cent, global shares 9.5 per cent and global property 28 per cent. I doubt anyone could have predicted these returns, but diversifying across them all has worked well.
Change down
If you are really nervous you can take your risk profile down one step. For example, if you are balanced, you could choose to go down to conservative (reduce shares).
If in doubt, do half - apply this rule to all transactions
This is one of the best rules I know. You can apply it to investing, buying or selling just about anything: bonds, multiple rental properties, and shares.
