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Wednesday, 15 July 2020
Recently trending 11 lessons from my lousy $50K profit on AfterpayWhich companies will do well in the turmoil of 2020?Why are we convinced 'this time it's different'?Howard Marks' anatomy of an unexpected rallyWelcome to Firstlinks Edition 363
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Afterpay listed at $1 in 2016 and traded recently at $70. How should an investor treat a small holding in a 70-bagger when each new level defies the experts? Should true believers let the profits run?
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Compared with most years in the last decade, FY20 performed poorly due to the virus, and now dividends are falling. There are three things to watch this year as support policies are wound back.
While the shutting of Australia’s borders to international travellers and quarantine measures is damaging to certain sectors of the economy, it is not uniformly negative for all companies.
Data science is increasingly embedded into the research process of investment teams with the resources to exploit new technologies. The way the data is integrated and interpreted is crucial.
As the world gradually emerges from the aftermath of COVID-19, many are questioning if now is value’s time to shine? How can value stocks deliver outperformance in today’s environment?
Do you think investors can only lose heavily on bonds if the credit defaults? When bondholders accept 0.88% for 100 years, there is great potential for serious pain somewhere along the journey.
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.
The strictness of screening processes can vary between ethical ETFs, and many rely on indices without additional oversight. This can result in stock inclusions that may not pass the ethical ‘smell test’.
There are valid concerns about the coming pain among smaller companies but attractive risk-adjusted lending opportunities exist provided the right checks and precautions are taken.
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Welcome to Firstlinks Edition 365
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 1o% 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?Read More.
APRA's heatmap has profound implications as it shows which super funds are underperforming in a period. But when good markets are compared with poor markets, one in five of funds changes its assessment.
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.
The latest SMSF data shows retirees favour listed shares and cash to maintain liquidity. SMSFs continue to grow, and the new super rules led to changes in contributions, payments and lump sums.
A new survey of over 1,000 people near or in retirement found three in four are not confident how long their money will last. Only 18% felt their money was safe during a strong economic downturn.
Awareness of common misunderstandings in relation to the payment of death benefit pensions can assist in estate planning matters. Given the large amounts involved, seeking professional advice helps.
Taking a realistic view of the median ‘operating expense’ of an SMSF shows they cost less to run than previously claimed. Look at this granular breakdown and see how the costs of running your SMSF compare.
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.
Despite signs of optimism, market valuations are stretched and recovery is fuelled by government support. Some companies are doing well but stimulus cannot continue to prop up consumers for too long.
It is always easier to see the challenges and risks while underestimating ingenuity and positive possibilities. It's likely to be the case this time, too, as long as we move quickly to open economies.
We cannot throw our hands up in the air and say 'this time around, it's simply too hard'. Having no macro view is unhelpful, but many of the baseline scenarios are overly optimistic, says the former CEO of Westpac and now Chairman of Chi-X Australia.
The ability of countries to support their economies today turns on fiscal practices set well before this crisis. Increasing levels of debt escalate overall risk, and tie our hands in the future.
Stocks have rallied hard creating a virus bubble, but will this run for years or collapse in a matter of months? The market is giving a second chance to leave so head for the exit before there's a rush.
The ability to buy and sell cheaply and quickly in small parcels is both the biggest drawback and benefit of shares. But it encourages people who should not go near the market to use it as a casino.
Running a fund should not become a gravy train for boards and investment managers. It is time to address the persistent discounts to NTA on LICs, and there is one especially exciting new structure.
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.
A pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: speculation is most dangerous when it looks easiest.
Anyone with capital gains from property or shares should take this EOFY opportunity to find offsetting capital losses. There are many benefits from cleaning out the portfolio stuff-ups.
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.
1997 Nobel Laureate Robert Merton wants greater focus on the income that will sustain a retirement, and even Jane Austen understood this. And he has a surprising proposal to help with longevity risk.
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 biggest policy issue facing the Government over the next few months is how to phase out JobKeeper and reduce JobSeeker. While stock markets continue to ride a mood of optimism, a September withdrawal of support would create a rapid rise in unemployment with consequences for business loans, mortgages and home prices. At the same time, payment deferrals will expire, and let's hope deferrals do not become impairments.
Legendary US fund manager Peter Lynch was an early adopter of what we might now call 'high frequency indicators'. Perhaps 'early warning signs' is better. He sat in shopping malls watching which stores people went into and what they bought. Many traditional economic indicators are out-of-date when they are released, so the market has developed early warnings which have become far more sophisticated than sitting around malls.
Drought, bushfires and coronavirus ... the Treasurer has admitted Australia is in a recession after the fall in the March quarter GDP, but the stock market has rallied strongly driven by the optimism of the stimulus packages. The withdrawal of up to $20,000 from superannuation is understandable for anyone struggling financially during the epidemic, but some young people have more money during this crisis than ever before in their lives.
We recently sold the family home we have lived in since 1989 for a high multiple of the original purchase price. Does that make us good investors? No. Did we pick a particularly fine house? No. The prices say more about our age than our skill. It simply means we live in Sydney and we allowed the investment to grow over a long time without selling any part of it. There's a powerful equity investing lesson here.
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.
Australian bank share prices are down about 40% since February 2020, with many of the risks factored in. It's hard to estimate short-term loan losses and asset growth, but the longer term is more positive.
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.
Zenith upgrades the Legg Mason Martin Currie Equity Income Fund rating to ‘Highly Recommended’.
divests Mercer parent company, Marsh & McLennan.
Spike in day trading drives significant demand for Chi-X Warrants.
Investing in unit trusts just before a distribution is paid may see a portion of your capital returned to you in the form of taxable income, which will be a poor outcome for your returns.
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.
Increasing longevity is good news, but it poses difficulties as society and our retirement system adjust, particularly for those who outlive their money and have to rely on the uncertain future of the age pension.
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.
When Barack Obama puts out a reading list with 19 of his favourites from 2019, it makes us realise we should spend more time reading books. Plus Morningstar's experts recall 2019 and preview 2020.
State Street Global Advisors is a pioneer in the Australian ETF market, but aggressive pricing from new rivals has eroded its competitive edge.
We should be grateful for our mandatory and 'auto enrolment' super system as the most powerful tool for increasing savings. Without one, the US has a severe retirement crisis approaching.