Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 238

Cuffelinks Newsletter Edition 238

  •   2 February 2018
  •      
  •   

Investors face a dilemma in 2018. Markets always offer uncertainty, but we have the best global economic conditions since the GFC at a time when most asset classes appear fully priced.  

It's traditional to start a new year with forecasts for the next 12 months, but let's kick off with a Warren Buffett warning:  

"It's a terrible mistake to look at what's going on in the economy today and then decide whether to buy or sell stocks based on it. You should decide whether to buy or sell stocks based on the long-term value you're getting for your money at any given time. And next week doesn't make any difference because next week is going to be a week further away. The important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a terrible market or a terrible economy is your friend. If you wait until you see the robin, spring will be over."

John Mauldin, whose newsletter goes to over one million subscribers, said recently:

"Two years ago, when I was at the same Bank of America Merrill Lynch investment conference that I attended last week in Hong Kong, the mood in the room was quite sombre, even bearish. The sentiment turned out to be wrong ... the mood of this year's conference was almost universally upbeat. There was a clear consensus among these very seasoned and powerful traders." 

Amid this confidence, The Economist leads this week with a story on 'The growing threat of great-power conflict', mentioning the US, North Korea, China, the UK and Russia. It's not a time to ignore the risk of black swan events. 

What about rising rates? Investors with little in fixed interest might wonder why they should worry. Consider an infrastructure stock like Sydney Airport. Its stable earnings mean it's often valued as a bond substitute, and its $8 billion in net debt make it exposed to rising rates. It has hedged the risk for many years but free cash flow and therefore dividends would be hit by future rising rates. 

What should an investor expect from their portfolio in 2018? For those beating themselves up for not backing the big winners last year, the Future Fund and Willis Towers Watson 2017 Asset Owner Study of large asset managers suggested achieving CPI plus 4% will be a stretch over the next five years.

 


We start our articles with the latest thoughts from Howard Marks and his cautious optimism, while Miles Staude gives an upbeat assessment on Australia's wealth and prosperity. Gopi Karunakaran is more circumspect, and warns about the assumption that government bonds are defensive and diversifying. Still on managing risk in 2018, Andy Sowerby offers strategies for the inevitable return of higher volatility.

Last year, both Listed Investment Companies (LICs) and Exchange Traded Funds (ETFs) attracted record inflows as more investors embraced them. Ilan Israelstamsummarises 2017 and makes some 2018 predictions for ETFs, while Nathan Umapathy looks at what caused the strong year for LICs.

It's tempting to ignore the Bitcoin babble (sic) but judging by the Christmas party discussions, it's almost mainstream now. Carlos Gil reminds us that price and value are not the same thing, regardless of the future potential of cryptocurrencies.

This week's Sponsor White paper from AMP Capital's Shane Oliver is a thought-proving set of lists on what to look for in 2018.

Best wishes to all our readers for a successful 2018. It should be quite a ride. 

Graham Hand, Managing Editor

 

Edition 238 | 2 Feb 2018 | Editorial | Newsletter

 


 

Leave a Comment:

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

100 Aussies: seven charts on who earns, pays, and owns

The Labor government is talking up tax reform to lift Australia’s ailing economic growth. Before any changes are made, it’s important to know who pays tax, who owns assets, and how much people have in their super for retirement.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Chinese steel - building a Sydney Harbour Bridge every 10 minutes

China's steel production, equivalent to building one Sydney Harbour Bridge every 10 minutes, has driven Australia's economic growth. With China's slowdown, what does this mean for Australia's economy and investments?

9 winning investment strategies

There are many ways to invest in stocks, but some strategies are more effective than others. Here are nine tried and tested investment approaches - choosing one of these can improve your chances of reaching your financial goals.

Latest Updates

Retirement

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

Shares

Boom, bubble or alarm?

After a stellar 2025 to date for equities, warning signs - from speculative froth to stretched valuations - suggest the market’s calm may be masking deeper fragilities. Strategic rebalancing feels increasingly timely.

Property

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Economy

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Shares

Is the iPhone nearing its Blackberry moment?

Blackberry clung on to the superiority of keyboards at the beginning of the touchscreen era and paid the ultimate price. Could the rise of agentic AI and a new generation of hardware do something similar to Apple?

Fixed interest

Things may finally be turning for the bond market

The bond market is quietly regaining strength. As rate cuts loom and economic growth moderates, high-quality credit and global fixed income present renewed opportunities for investors seeking income and stability. 

Shares

The wisdom of buying absurdly expensive stocks (or not!)

Companies trading at over 10x revenue now account for over 20% of the MSCI World index, levels not seen since the dotcom bubble. Can these shares create lasting value, or are they destined to unravel?

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.