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Cuffelinks Newsletter Edition 274

  •   5 October 2018

In every state and most major cities in Australia, there are massive infrastructure projects underway. The 2018 Federal Budget had an entire section devoted to them, including an amazing list of bridges, highways, rail lines and ports. The transport chart below is a beauty, produced by Macromonitor. It's an unbelievable change from $6 billion in 2016 to $22 billion in 2022 and should underpin economic growth for years.

Royal Commission fallout continues

A consequence of the Royal Commission is a profusion of litigation. On 27 September, law firm Slater and Gordon (S&G) announced that it had filed class action proceedings in the Federal Court against NAB and MLC on behalf of customers sold worthless credit card insurance. S&G is also running a class action against AMP, and investigating whether “CommInsure used obsolete medical definitions and even pressured doctors to change their opinions when assessing claims.” 

The second volume of the Commission's Interim Report on detailed case studies is even bigger than the main volume's 115,000 words. Rich pickings for the No-Win No-Fee class action lawsuits, making it a great time to be a lawyer.

Meanwhile, ASIC told Kenneth Hayne that there is a high likelihood of both criminal and civil proceedings commencing soon against the banks over the No-Service Yes-Fees issue.

Two articles published last weekend examine the bank culture and incentives issues in the Interim Report. 

Labor's imputation policy continues to grab the headlines

Labor’s proposed franking credits policy is dissected by Don Hamson and he rings the warning bells on the impact for many members with institutional super, not just SMSFs. This is an important clarification of the policy impact.

Small caps companies can be a diversifier for portfolios, but are more susceptible to a moat contraction. Richard Ivers looks at how to analyse a small cap’s moat

Graeme Forster argues that current high prices makes bonds vulnerable, with a higher correlation with equities, while Jim Masturzo and Jonathan Treussard make a persuasive case for diversification to overcome the well-known home bias to extend portfolios globally.

Justin Arzadon outlines the role of both active and passive ETFs in a portfolio, and Aleksey Mironenko looks specifically at the tech-enabled sector in Asia.

Adam Shultz demonstrates a key flaw in the argument to raise the pension age. On retirement strategy, Kaye Fallick asks whether parents with adult live-in children are better off formalising contributions.

This week’s White Paper is on 'Ethical Considerations in the Technology Sector' by MFS Investment Management. While technology has undoubtedly contributed to prosperity, social impacts include a heightened ability to invade privacy, and affect consumer choice, mental health, and unlawful discrimination. Investors should be prepared to engage with tech companies on these issues.

Graham Hand, Managing Editor


For a PDF version of this week’s newsletter articles, click here.




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