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Thursday, 13 May 2021
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All new apartment buildings have defects, and inexperienced owners assume someone else will fix them. But developers and builders will not volunteer to spend time and money unless someone fights them. Part 1
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Josh Frydenberg's third budget contained changes to superannuation and other rules but their effective date is expected to be 1 July 2022. Take care not to confuse them with changes due on 1 July 2021.
Why are prices rising but not the CPI? When we measure inflation, we aren’t measuring raw price changes, we’re measuring the pleasure-adjusted or utility-adjusted price changes, and we use it incorrectly.
The global recession came quickly and deeply but it has given way to a strong rebound. What are the lessons for investors, how should a portfolio change and what role will inflation play?
We are publishing this anonymously knowing it comes from an impeccable source. Bernie Madoff’s fund was almost distributed to retail Australian investors a year before the largest-ever hedge fund fraud was exposed.
Some LICs have recently paid out more in dividends than their net profit as they have the ability to tap their retained profits and reserves. Others reduced dividends to ease the burden on cashflow and balance sheets.
With the increase in the concessional cap to $27,500 on 1 July 2021, a contribution reserving strategy could allow a member to make and claim deductions for personal contributions of up to $52,500 this year.
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Welcome to Firstlinks Edition 406 with weekend updates
This time last year, we were debating the shape of the recovery in alphabetic terms. Choices were the L, where the economy fell and stayed down for a long while, and the U, where the fall was followed by a period on the floor before a rise. Some offered the W, a series of rises and falls as pandemic waves took over, and the K, a widespread drop followed by strong rises and falls across sectors and economies. Are a tick or a swoosh better analogies?Read More.
Warren Buffett explained why he believes most investors should not pick stocks but simply own an S&P 500 index fund. "There's a lot more to picking stocks than figuring out what’s going to be a wonderful industry."
Renewable energy is evolving rapidly, and incumbent and non-renewable sources of energy generation have been priced out of the market. But there are many challenges when investing in such a changing paradigm.
There are many reasons why 2021 has the potential to be a great year for equities. What are the themes and opportunities most likely to deliver, and how much is inflation a threat?
Even the best long-term performing fund managers have shorter-term periods of underperformance. It’s not a failure, it’s a feature of the industry. Investors need patience when backing a good track record.
The proposed European Super League received enormous media coverage, while the A-League sits in the margins. The most successful club, Sydney FC, has played wonderful football for years, but struggles for fans.
Peter Thornhill shows how his personal portfolio has thrived under an 'all-in equities' strategy, but Warren Buffett's favourite valuation indicator says stock markets are priced at their most extreme ever.
Consensus growth forecasts are far too conservative, and the Coalition’s political challenges and the Budget’s economic windfalls will likely spark additional fiscal spending later in 2021, giving further boosts.
The refusal of both sides of politics not only to adopt ‘microeconomic reform’ but in some cases reverse reforms, looms as a bigger driver of unemployment than any failure to fine-tune macro or monetary policy.
US growth forecasts for 2021 are as high as 8%, so is the massive stimulus a superfluous ‘sugar hit’ amid shrinking spare capacity? High government debt points to taxes and reduced benefits, with inflation risks.
While western policymakers aim to sustain economic recovery, Chinese post-pandemic policy normalisation is a headwind with slower credit growth, less government bond issuance and a reduction in the fiscal deficit.
With bond rates and Reserve Bank actions driving equity markets and inflationary expectations, it pays to understand what is really happening in both central bank and commercial bank balance sheets.
Bull markets tend to follow their own momentum until they hit a clear opposing force. The economy is like a spring about to be uncoiled with the most obvious restraint on the horizon is the return of inflation.
Rather than marking the end of a bull run for technology, the recent sell-off is just a healthy correction and offers a great buying opportunity into technology leaders that have strong long-term earnings growth.
The Australian stock market is skewed towards mining and financial services which account for a whopping 55% of market capitalisation. In the US, these two account for only 17%. But there's more to our underperformance.
We can profit from trends that have the potential to change the world, and it's also possible to make a positive impact with thematic investing in the catastrophe and opportunity of climate change.
We are undergoing a multi-year transition where high near-term economic growth drives rising real rates and higher but stable inflation. It bodes well for risky assets but with volatility and changing correlations.
40 years of investing is distilled into five crucial lessons. An overall theme is to embrace uncertainty to make an impact on how much you earn, how much you spend, how much you save and how much risk you take.
The gap between property yields and bond yields is known as the ‘risk premium’, the excess yield from investment in commercial property. The high yield spread signals limited downside to commercial property values.
Seeking financial advice can be a daunting task and over 80% of Australians do not have a financial adviser. Here are the steps involved in understanding the advice process to encourage more people to jump in.
The widespread use of 'millionaire' must stop. Inflation means that the basket of goods and services that cost $1 million in 1960 now requires $15 million. Today, millionaires are not wealthy.
Let compounding do its work. It starts slowly. This is why many of those who start an investment programme (or fitness programme, dietary change, sport, or business) give up in the early stages.
Don't make life difficult for the person trusted to manage your estate. Find the time to arrange your documents, contacts, online accounts and files in a convenient place, including giving them some cash.
Most people pay cursory attention to estate planning, limited to a will and maybe a chat with the children. Those who want to make their intentions clearer and easier for others should check these quick tips.
Financial advice has moved well beyond simply recommending investments, with five major components to quality advice. Helping clients avoid potentially disastrous mistakes is often underestimated.
Active managers need to know what factors are distorting asset prices. This interview with Ted Maloney, CIO of MFS, explores how much of 10 years of growth has been pulled forward and the impact of Reddit users.
The Interview Series has proved highly popular with our readers. This year’s collection of 20 interviews for 2020 covers most asset types and is a window into how diversification helps to manage risk.
ETFs have gone from bit player to major force in Australian investing in the space of a few years, and will top $100 billion soon. One of the major providers explains how they bring products to the market.
As people stayed home during the pandemic, a bearish view swept over most property sectors, but many have thrived and prices have recovered rapidly. The best opportunities are in long leases with quality tenants.
Paul Keating is the champion of compulsory superannuation as the central means of funding retirement. In the wake of the Retirement Income Review, he is at his passionate best defending the system, with Leigh Sales.
This time last year, we were debating the shape of the recovery in alphabetic terms. Choices were the L, where the economy fell and stayed down for a long while, and the U, where the fall was followed by a period on the floor before a rise. Some offered the W, a series of rises and falls as pandemic waves took over, and the K, a widespread drop followed by strong rises and falls across sectors and economies. Are a tick or a swoosh better analogies?
Includes weekend market update and Morningstar highlights. According to music scholars, Beethoven became more original and brilliant as his hearing deteriorated late in his life. He could not hear the music of either himself or others, and so became less influenced by the external 'noise'. The clarity and creativity of his music formed inside his head. Good investing is similar.
In a market where the valuation superlatives and 'meme investing' gains become more ridiculous by the day - a joke cryptocurrency called Dogecoin is now valued higher than Ford or Wesfarmers - it's welcome when a chart is the surprise of the week. While we have written before about the rapid increase in new participants who consider the stock exchange like a video game, inflows into global stock funds in the five months since November 2020 were greater than the previous 12 years.
Most Australians hold their superannuation in a balanced fund, often 60% growth/40% defensive or 70%/30%. Lifecycle funds are also popular, where the amount in defensive assets increases with age. Employees who are not engaged with their super (and that's most people when they start full-time work) simply tick a box for the default fund selected on their behalf by their employer. Are these funds still appropriate?
There was an important moment in an interview with Paul Keating last week when asked about the origins and purpose of super. He said he thinks about retirement in 'family terms', and it is appropriate to pass super money to the next generation ... assuming you have not spent it through living so long.
It's doubtful we will see short-term rates above 5% for at least a generation, maybe a lifetime. It's a weird thing to say for someone who spent his first decade in money markets with double-digit rates and a bank bill rate of 17.5% in 1990. Plus Deborah Ralston on retirement income, and why picking fund managers is like selecting hot cross buns.
To mark Firstlinks' 400th edition, we're offering almost 50% off a Morningstar Premium subscription, now with Sharesight. Ditch that old portfolio spreadsheet and manage your investments more efficiently.
Warren Buffett's annual letter has a simple focus on long-term investing: "All that’s required is the passage of time, an inner calm, ample diversification and a minimisation of transactions and fees."
It is often said that female investors are more risk-averse than males, but a closer look at the data suggest that income - rather than gender alone - may be the real determinant of women's investing choices.
Immersed in the business and finance worlds at an early age, Hetty Green became one of the most successful investors of all time. Her story shows that the best advice is often timeless.
Retirees or those close to retirement are courting risk by standing pat with too-aggressive portfolios. In a volatile market, tune out the pundits and take a look in the mirror. Are you happy with your exposure?
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.
webinar: Will inflation spoil the equity party?, 13 May 2021.
announces expansion into New Zealand.
wholesale industrial fund CPIF acquires a $269M industrial portfolio leased to PFD Food Services.
It looks like a magic money tree, where the central bank simply deposits money in the government's bank account. We asked one of the world's leading authorities on monetarism for an explanation.
Favourite quotations from famous people on markets, investing, processes, noise, pessimism, self perception and life balance. These lessons carry across investment cycles and lifetimes.
It's often said that 'A man is not a financial plan'. A Practice Director in a successful business shares some of her life tips on financial independence for women aiming to self-fund their retirement.
Markets have recovered in the last six months but most investors remain nervous about the economic outlook. Morningstar analysts provide four quick tips on how to navigate this uncertainty.
The story of Mr Market originated with Ben Graham and was further popularised by Warren Buffett, but does it still hold true? Based on experience, the two-investor scheme looks hopelessly oversimplified.
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.