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Wednesday, 12 August 2020
Recently trending After 30 years of investing, I prefer to skip this partyAustralian house prices: Part 2, the bigger picture How to handle the riskiest company results in historyAustralian house prices: Part 1, how worried should we be?Welcome to Firstlinks Edition 367
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It is better to miss a results bounce and buy after the company has delivered than it is to step on a landmine. With such uncertainty, avoid FOMO by following these result season investing tips.
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Sometimes the simplest ideas are the best. The founders of Afterpay stumbled on the attraction for consumers of paying by instalments, and now retailers must offer the facility or lose business.
Although most office workers are currently WFH, an energy and a buzz comes from working in the same physical space. Other benefits include team building, relationships, talent mentoring and creative collaboration.
Going back to June 2019, investors would have questioned the logic of diversifying away from outperforming growth assets. But when markets feel at their best, it is paramount to keep a perspective on long-term goals.
While its impact will take time to unfold, 5G will meaningfully change the world. Once adoption takes hold, there is huge potential for its application across a wide range of industries.
Three key indicators are useful for predicting the short-term outlook for house prices, although tighter lockdowns make the outlook gloomier. There is enough doubt to create cause for concern.
There is good reason to believe the negatives will continue to outweigh the positives over the next 12 to 18 months. There is more concern about house prices than the short-term indicators suggest.
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Welcome to Firstlinks Edition 369
Imagine you had perfect foresight about COVID-19 at the start of the year. You correctly foresaw that the global pandemic would kill over 700,000 among 20 million infections by August. In Australia, borders would close, cities would be locked down, most mortgagors would be on income support and companies would be allowed to trade while insolvent. You then had to guess how much the stock market would fall. Would you say about 10%?Read More.
Eventually, prices become so extreme they bear no relationship to reality, and a bubble forms. I believe we are there today, not for all stocks but for many in the technology space.
Citi's clients tap into their own views to find investments that suit their portfolios, often working across global boundaries. It's a search for solutions in a world with no risk-free returns.
There's a popular view that generations are 'at war', but is it really the case that generations are more divided than ever before? If so, what's causing it? Why now? And how can we move forward?
With the Retirement Income Review now in Treasury's hands, will the 'fact base' establish whether large super funds do better than the share index? The public evidence is not impressive.
With 160 programmes underway and billions of dollars spent on COVID-19 vaccines, investors are drawn to optimistic news. However, the company that has developed most new vaccines has a sober view.
It’s not only products and business models that create wealth. Management teams make decisions on how to deploy capital and such actions drive vastly different outcomes over time.
With historic falls in greenhouse gas emissions during the COVID-19 pandemic, we have a unique opportunity to construct a recovery that ensures a stronger economy while minimising carbon emissions.
With signs that the economic recession will not be as deep as first feared, many companies will emerge strongly with robust business models. Here are the sectors with the best opportunities.
The growth in wealth and aspirations of middle-class Chinese may become a 'consumer of last resort' for the world economy, but to earn that status, China must avoid a ‘trap’ among other challenges.
Even when the virus is finally contained, the business landscape will look very different. A critical issue is the ability of consumers to find product substitutes. Many people like what they find.
Population decline is a new, yet largely ignored, trend with underrated economic and social costs. Much of the growth that drives economies, especially in Australia, comes from population increases.
It seems counterintuitive, but share prices rose during 17 (85%) of the 20 economic recessions in Australia in the past 150 years as markets tend to anticipate the bad times and recover early.
COVID-19 is delivering winners and losers, and buying a well-positioned company while shorting one with worse prospects can provide returns while managing the downside of an overall market correction.
As uncertainty intensifies around geopolitics and markets, gold has rallied strongly in 2020. While most investors think of gold for price growth, does it deliver defensive features to a diversified portfolio?
There are plenty of reasons for pessimism as the market has recovered too strongly, but quality stocks with good earnings growth and strong cash generation and balance sheets are still available.
Complex products beyond the purview of ASIC are being offered to retail investors based on tax and return advantages beyond the ability of investors to assess, making them manifestly unsuitable.
A new sponsor, Chi-X, shows how it follows long-term trends reinforced by COVID-19 to select US-listed companies accessible on local exchanges, often in sectors not served by Australian companies.
Falling dividends and the uncertain outlook deliver challenges for income generation, but a dual approach of short-term income and long-term sustainability should ensure a portfolio continues to perform.
Reductions in loan repayments, either deferrals or failing to opt out of lower payments, seem like a good idea. But they are expensive and should only be adopted if the borrower needs the money.
Aged care should not be narrowly defined, as opportunities include home care, granny flats, retirement villages, land lease communities and residential aged care. Take advice and don't rush it.
Simpler tax arrangements for investments are a key benefit of separately managed accounts, where after-tax outcomes vary from other vehicles such as managed funds and direct equities.
The use of discounted pricing by insurers to attract new business is unsustainable and leaves existing policyholders on higher premiums for what is essentially the same product.
The best way to preserve your SMSF’s favoured status is to make sure the fund’s annual return reaches the ATO on time. There are new rules this year that every SMSF trustee should know.
We often focus on the implications for financial security of being unable to save enough for a comfortable retirement, but mental wellbeing is as important. Financial advice can help.
Rob Arnott is a leading researcher, fund manager and academic often quoted in US media. We chatted at a moment in time when President Trump must make some critical calls on coronavirus.
While coronavirus has brought into sharp focus the risks in bond portfolios, markets are always changing. Relative value and risks must be constantly watched as opportunities are presented.
The Morningstar CEO on democratising investing, why saving in your youth is crucial, and why most investors care more about paying off their debts than comparing their results against benchmarks.
An active manager of cash and fixed interest funds can achieve higher returns than the cash rate through a selection of other securities while managing both liquidity and income for clients.
A global portfolio of infrastructure assets allows trends in one part of the world to be recognised early in another, while companies with pricing power and high barriers to entry enjoy extra resilience.
Differences of opinion create a market. Technology stock buyers have been the big winners but there are plenty of sellers as it's not difficult to make a compelling argument for and against the sector. The doubters say money flowing into tech has pushed values well beyond fundamentals, while supporters say the virus has compressed years of digital progress into months. We check both sides.
There is a similarity between the current health crisis and economic crises of the past. For COVID-19, record amounts of biotech funding from government agencies and private companies are looking for a vaccine. Likewise, central banks once struggled treating recessions but the 'vaccine' now is record amounts of financial stimulus to ensure liquidity. While the world awaits a COVID treatment, markets are purring along, at least until side effects hit.
The ways we think about investing are guided by several foundational texts published decades ago. One classic still read by students of markets is 'Security Analysis', continuously published for almost 90 years with the latest edition carrying a foreword by Warren Buffett. Although written by Graham and Dodd in 1934, much of it rings true now as markets remain subject to human behaviours that change little over time.
The stock market and its many participants deserve admiration for hanging on to recent gains in the face of complete uncertainty. The S&P/ASX200 is only about 10% below its level at the start of 2020, and economic conditions and the outlook are clearly far worse. Plus Afterpay, vulnerable industries, FY20 and where to next?
Australian shares had their biggest annual loss for eight years in FY20 while Wall Street just had its best quarter since 1987. Whatever happens from here, we will look back in a couple of years and say the outcome was obvious. We will either say, "Of course markets rose as governments injected unlimited liquidity, medical science found treatments and the economy rebounded" or "Of course markets fell as businesses collapsed, millions of jobs were lost forever, the virus was resilient and consumers changed forever."
The stock market continues to defy most equity pundits and push through fears of ongoing recession, job losses, business closures and a second virus wave. But if there's one factor in Australia specifically that is seriously underestimated, it is the loss of stimulus from population growth and immigration.
The traditional 4% rule was designed to ensure retirees do not run out of money, but low interest rates and expensive equity markets question the sustainability of the level. What are the alternatives?
Many people were financially unprepared for a pandemic, but it is women who are suffering most because they earn less, have interrupted careers and have less risk-taking capacity.
Investors who stick with the same asset allocations as in the past will likely fall short of their goals. The 'right' allocation is personal and holding more equities depends on risk capacity.
How does an analyst value a stock which has traded between $8 and $50 in two months? Regardless, Afterpay has delivered Australia's youngest billionaire, and thousands have enjoyed the wild ride.
Amid the coronavirus-induced turmoil, many quality names are trading at a discount to fair value, according to Morningstar analysts. A smaller list of companies also screen for earnings certainty.
Warren Buffett's annual meeting of Berkshire Hathaway showed he has not been 'investing while others are fearful' during the crisis. lt's a reminder to take caution and preserve cash.
Chris has many years of experience in building successful wealth management practices.
Noel Whittaker is one of the world's foremost authorities on personal finance.
Phil Ruthven is the founder and director of IBISWorld, Australia's best-known business information, forecasting and strategic services corporation
Paul John Keating is a former Australian politician who served as the 24th Prime Minister of Australia, in office from 1991 to 1996 as leader of the Labor Party.
PMGOLD holdings increase by more than 60% in 2020, with the current market value of AUD 597.6 million.
webinar: Protecting your investment portfolio during a pandemic, 13 Aug.
affiliate, Martin Currie achieves highest PRI score for all three categories of ESG Strategy & Governance, Incorporation and Active Ownership.
No amount of experience as an adviser specialising in aged care prepared Alex for the actual events her father faced inside an aged care facility. It might be about care, but it's a profit-making business.
Your SMSF story reflects your life's journey, and real people telling real stories encourage the popularity of this structure. Retail and industry funds struggle with this.
The costs of owning an apartment for short term rental consume most of the income, leaving uninformed investors blind to actual returns until the statements roll in. The practice of marketing gross yields is misleading.
Make sure you're not focussing on minor investment problems while giving short shrift to the game-changers. This pyramid describes the important decisions and it might surprise what comes last.
State Street Global Advisors is a pioneer in the Australian ETF market, but aggressive pricing from new rivals has eroded its competitive edge.
The quality of the content and editorial attracted us to Cuffelinks and now Firstlinks. Personally, I am an avid reader of the weekly newsletter, as an industry professional and as an investor.