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4 December 2023

Two proven ways to make big money in markets

Many ASX success stories – like JB Hi-Fi, Lovisa, and AUB – have followed one of two strategies: rolling out single store formats nationwide or consolidating fragmented industries. Here are the secrets behind these business models.

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The bank is still a terrible place to put your money

With the RBA having lifted interest rates by 4.25% over 18 months, many investors now see cash as an attractive investment option. That ignores the silent tax of inflation, which makes other assets better investment alternatives.

Little to fear from APRA's hybrids review

APRA's objections to hybrids are misplaced. If the regulator wants more safety in our banking system, it will come at the expense of effectiveness, and that's why wholesale changes to the hybrid market are unlikely.

Rates higher = shares lower… is it that simple?

Typically, higher interest rates are associated with lower share market valuations, but not always and the relationship hasn’t been that strong over the long term. Company fundamentals will matter more over the next few years.

Diversification is not a free lunch

Harry Markowitz said that “diversification is the only free lunch in investing” as holding a broader range of assets can result in better returns without assuming more risk. This has become accepted wisdom - but it isn't true.

Why Asia remains one of the world's best growth stories

China’s economic slowdown and the resilience of the US dollar have dimmed the lustre of many Asian economies’ strong growth momentum in the past year. But heading into 2024, Asia's growth story should reignite.

Podcast: Property picks, PE update, and Warnes on Michelle Bullock

Charter Hall's Steven Bennett talks through commercial property's challenges and opportunities, Schroders' Rainer Ender on private equity's bright spots, and Peter Warnes on how RBA hawkishness will impact rates and the economy.

Subject Articles: Select the latest articles from each of the following sections

The best income-generating assets for your portfolio

Is it worth venturing beyond cash and term deposits for steady income? This looks at the pros and cons of assets - including stocks, bonds, and hybrids - in providing yield and how they stack up against cash.

The ASX's 16-year drought: a rebuttal

The ASX All Ordinaries index is around the same price that it was in 2007, so is it time to give up on the local share market and look elsewhere? Here's why you shouldn't listen to the pessimists and stay invested.

Navigating downsizing

You may have spent years, and a significant amount of money, making your current home your 'forever home' so thinking about downsizing can be hard. This is a guide to help you make an informed downsizing decision.

From our 2018 interview with Sir Michael Hintze, what's happened since?

We interviewed Sir Michael Hintze while his credit-focused hedge fund CQS was at the height of its powers. Since then, he's changed the firm's investment strategy and found a buyer in Canadian giant, Manulife.

Charlie Munger on Buffett, gambling, Apple, and China

Munger is best known as Warren Buffett’s sidekick though he’s a formidable investor in his own right. Here he addresses what makes Buffett great, Costco's retailing genius and Berkshire's investments in Apple, Japan, and China.

Does Barrenjoey hold the key to Magellan's fortunes?

Magellan Financial Group has had a tough time of it, with its faltering funds management business getting all the attention. Less mentioned is the significant value in the company's other assets, such as Barrenjoey.

Former RBA Governor on why interest rates won't come down soon

Former RBA Governor Ian Macfarlane says our economy has held up well given the sharp spike in interest rates. He thinks that economic strength plus high inflation mean rates are more likely to go higher than lower in 2024.

The RBA’s QE losses

Accounting losses from a pandemic inspired bond buying spree have wiped out the RBA's equity and more, pushing its balance sheet into negative equity territory. How did it happen and what lessons can be learned?

ASX tool for interest rates bets needs an overhaul

News outlets and RBA watchers use a handy tool from the ASX to gauge market predictions for the RBA cash rate. Yet the tool has an obvious flaw that needs to be fixed to better reflect current monetary policy.

Rising rates are transferring wealth to older people

Young people hold the majority of home loans while older people have the vast majority of deposits. It's not hard to see why rising interest rates are hurting the young and resulting in increased intergenerational tension.

It’s dismal: good news is bad news … and vice versa

Almost every economic data point or announcement can be interpreted as good news or bad news, which is confusing for investors looking for guidance. 'On the other hand' is a catchphrase of the dismal science.

China in advanced stage of demographic collapse

New data shows China's demographic issues are much worse than most realise. This is going to be the final decade that China can exist as a modern nation-state because it simply isn't going to have the people to even try.

Bank reporting season: which ones get the gold stars?

The banks have reported results and it's a mixed picture of reduced margins from increased deposit competition, yet low bad debts and healthy capital positions. Here's a look at which banks stood out and which ones didn't.

The time for bonds has come

Bonds have had a miserable time of it for the past three years. Yet with central banks almost done with interest rate hikes and inflation set to fall towards central bank targets, bonds look primed for a bounce back.

Australia’s housing battle: Interest rates versus supply and demand

Everyone seems to have an opinion on house prices and not all of it is based on fact. Here is an analysis of the current supply and demand factors influencing residential property and the stocks poised to outperform.

Best investments to own during a recession

It's impossible to predict when the next recession will happen. That said, looking at which types of investments have historically fared best during economic downturns can help you limit some of the damage.

Three ASX small caps set to shine in 2024

A turnaround in the fortunes of ASX small caps is overdue after a disappointing 2023. It's important to pick your spots though, and miners and building materials companies look the standouts heading into next year.

A-REITs: what the market gloom is missing

Rising interest rates have hammered ASX property REITs, many of which are now trading at large discounts to their net tangible assets. Are A-REITs a major contrarian opportunity or another market value trap?

Australians unprepared for $3.5 trillion wealth transfer

A new report suggests that Australians are ill prepared for the largest intergenerational wealth handover in history. It's estimated $3.5 trillion in assets will be transferred from Baby Boomers to their children by 2050.

The Baby Boomer bubble is over, what’s next?

In less than five years, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. What happens next, and what are the implications for the wealth management industry?

The latest costs and strategies in financial advice

There are a lot of vague statements about the costs of financial advice in Australia. This insider's knowledge shows the actual costs are skyrocketing but demand for financial advice remains strong.  

Nine rules to guide you to die with zero

Should you give your children their inheritance before you die? It's a thorny question asked more often as Baby Boomers in Australia grow older and die richer. Do they leave larger bequests or help buy the kids a home?

Planning to make your money last forever

Most people do not spend enough time thinking about achieving the best outcomes from their estate or gifts and loans before they die. Consider a trust to look after the needs of all your descendants, forever.

Watch out, it's not easy being the executor of an estate

An actuary warns of the frustrations he experienced as executor of his brother's will, a role he expected to be straightforward. He knew super does not automatically form part of an estate but there are traps for all to learn.

From our 2018 interview with Sir Michael Hintze, what's happened since?

We interviewed Sir Michael Hintze while his credit-focused hedge fund CQS was at the height of its powers. Since then, he's changed the firm's investment strategy and found a buyer in Canadian giant, Manulife.

Thornhill on shares for investment income in retirement

The dream of many investors is to be able to live off the dividend income from their shares. There is a relatively simple way to do this though it requires a mental fortitude that may not be for everyone.

A different approach to equity income investing

Traditionally, equity income funds buy high-dividend companies but earnings growth should be a key component of an investment strategy. Receiving income from selling call options compensates for the lower dividends.

Tribute to Nobel winner Markowitz: When Harry met Graham

Harry Markowitz died last week at the age of 95. He was the 1990 Nobel Laureate and the father of Modern Portfolio Theory. He explained to me the magic moment when he realised how risk-return in portfolios works. 

Why an active fund should not perform like its benchmark

Every fund is measured against a benchmark, but active managers earn their fees by taking strong views contrary to an index. It requires fortitude in the short term as interviews with Orbis and Allan Gray show.

Three companies with balance sheet strength and opportunities

Following an overseas trip to see facilities and meet management and competitors, a fund manager has strengthened her conviction on three key stocks. Some companies can prosper in an economic slowdown.

Welcome to Firstlinks Edition 536 with weekend edition

Stock markets are highly efficient in the long run yet share prices can fluctuate wildly near term. The art of investing is buying quality stocks when they’re temporarily down, and a current blue-chip may fit that profile.

Welcome to Firstlinks Edition 535 with weekend update

The tech sector in the US has had a barnstorming year and is closing in on 2021 highs. It’s in bubble territory once again, yet broader markets don't seem expensive and some other sectors seem downright cheap.

Welcome to Firstlinks Edition 534 with weekend update

Many people in the Firstlinks community have been reading my articles and editorials for 10 years or more, and worked with me for decades before that, and deserve an explanation for why I have suddenly stopped writing each week.

Welcome to Firstlinks Edition 533 with weekend update

Economic data suggests everything is fine in the US and Australia. Yet, the stock market is saying US commercial banks are again in trouble, and if right, that could soon restrict credit and impact economic growth.

Welcome to Firstlinks Edition 532 with weekend update

A couple of tiny countries down under with about 0.5% of the global population have four of the least affordable housing markets in the top 15 places in the entire world. We are so preoccupied by housing that a wide range of policy decisions must be framed with accommodation in mind.

Welcome to Firstlinks Edition 531 with weekend update

LICs will always have a place but they will never match ETF volumes again. The baggage of discounts, and even large premiums, is too heavy, with three new  announcements. And I describe the biggest loss this year in my own SMSF.

Best investments to own during a recession

It's impossible to predict when the next recession will happen. That said, looking at which types of investments have historically fared best during economic downturns can help you limit some of the damage.

Is this the start of a generational bear market in bonds?

It's carnage in bond markets now with bonds potentially heading for a third straight year of losses, something that hasn't happened over the past 100 years. Is this the beginning of a decades-long bond bear market?

Can Aussie banks rediscover their glory days?

Returns from the major banks haven't been great over the past ten years, though that could change with higher rates, less competition and cost savings opportunities. Some banks look better value than others.

ASX stocks that have stood the test of time

People love new things, and investors are no different. But there's something to be said for older businesses that have a proven formula for success, and here are nine ASX-listed stocks that fit the bill.

Admin fees on large super funds vs SMSFs

From going it alone with an SMSF to defaulting into a large super fund's balanced option, administration time and fees for super vary materially. Here's a guide to the costs involved and the potential impact on returns.

Do private investments belong in a diversified portfolio?

While private investments remain a potential source for differentiated equitylike return streams, their structure merits caution for retail investors. These investments can easily turn south without access to high quality teams.

Phil Ruthven AO

Phil Ruthven is the founder and director of IBISWorld, Australia's best-known business information, forecasting and strategic services corporation

PJ Keating

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.

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