Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 291

Cuffelinks Newsletter Edition 291

  •   1 February 2019
  •      
  •   
At the start of every year, investors are inundated with forecasts and projections on all manner of financial metrics. Company profits, economic growth, currencies ... on it goes. In theory, they act as inputs to asset allocations as portfolios are rebalanced.

Yet some of the world's most successful investors eschew these guesses about the future. Warren Buffett told the 2003 Berkshire Hathaway Annual Meeting:

"We don’t give a hoot about anybody’s projections. We don’t even want to hear about them, in terms of what they’re going to do in the future. We’ve never found any value in anything like that."

Another of our favourites, Oaktree's Howard Marks, has been writing letters to his clients for decades. In 1993, he wrote:

"Groucho Marx said "I wouldn't join any club that would have me as a member." Another formulation may be "I would never act on any forecast that someone would share with me." I'm not saying that no one has above-average forecasting ability. Rather, as one University of Chicago professor wrote in a paper years ago, such forecasters are more likely to be sunning themselves in Saint Tropez than going around entreating people to borrow their forecasts."

(The new client memo from Marks includes the famous 'beer' explanation of the tax system). 

What does our annual look at the Morningstar Gameboard tell us? It's all over the place and history is no guide. The best asset class in 2016 was Small Caps, and it was the best again in 2017 then the worst in 2018. Australian fixed interest was near the bottom in 2016 and 2017 and top in 2018.  

 

Nobody predicted Australian government bonds would win in 2018, when interest rates were supposed to be rising with the Fed tightening, the threat of inflation and massive bond issuance. But as the chart below shows, there was a big fall in Australian bond rates and forecasts were wrong.
 

It's time for a government bond face-off 

Dear reader, don't switch off because we're on to fixed interest ... it's important. In one corner, Paul Chinsays diversified portfolios should always hold some government bonds, while Jonathan Rochford says now is not the time. You're welcome to take sides in the comments.

Last week's articles on Labor franking changing behaviour and new superannuation policies drew plenty of comments, and Shadow Treasurer Chris Bowen laid down the gauntlet on ABC Radio on Tuesday:

"I say to your listeners, if they feel very strongly about this, if they feel that this is something which should impact on their vote, they are of course perfectly entitled to vote against us." 

Also this week, Gemma Dale reports on the ASX and foreign bourse trading patterns of nabtrade clientsNicholas Paul believes the QE flood of liquidity lifted all boats on a rising tide, but now it's time to know what you own as you navigate tougher markets. Similarly, Miles Staude cautions investors who say they need 10% returns but without taking capital risk.

Did you realise the reduction in the income threshold for the extra 15% tax on super contributions has led to thousands of taxpayers receiving a new tax bill? Julie Steed explains how this has crept up on many.

Notwithstanding our comments on the perils of forecasting, this week's White Paper from AMP Capital's Shane Oliver lists his macro factors affecting investments in 2019.

Graham Hand, Managing Editor

 

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

 
  •   1 February 2019
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

How cutting the CGT discount could help rebalance housing market

A more rational taxation system that supports home ownership but discourages asset speculation could provide greater financial support to first home buyers.

Want your loved ones to inherit your super? You can’t afford to skip this one step

One in five Australians die before retirement and most have not set up their super properly so their loved ones can benefit from all their hard work and savings. 

Super is catching up, but ageing is a triple-threat

An ageing Australia is shifting the superannuation system’s focus from accumulation to the lifecycle of retirement. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change.

Has Australia wasted the last 30 years?

The 20 years after Peter Costello left Treasury have been deemed wasted...by Peter Costello. The missed opportunities for Australia began long before.  

Meg on SMSFs: Last word on Div 296 for a while

The best way to deal with the incoming Division 296 tax on superannuation is likely doing nothing. Earnings will be taxed regardless of where the money sits, so here are some important considerations.

The 5% deposit scheme is bad for homeowners and Australia

An ‘affordability’ scheme making the county more vulnerable to economic shocks and contributing to the deteriorating financial situation of everyday Australians.

Latest Updates

Investment strategies

The thin line between investing and gambling

Prediction markets are blurring the line between investing and speculation and savvy investors can profit from this trend by heeding the advice of famed investor, Benjamin Graham.

Strategy

The refinery problem: A different kind of energy crisis in 2026

The Strait of Hormuz closure due to US-Iran conflict severely disrupted global energy supply chains. While various emergency measures mitigated the crude impact, the refined product market faces unprecedented stress.

Gold

Are we running out of gold?

Geopolitical instability and challenges with new gold discoveries mean we may be approaching a structural shortage of mineable gold, but what does this mean for gold's overall long-term availability?

Investment strategies

ETF investors adding to portfolios during recent volatility

In the face of recent market volatility investors continue to add to their ETF portfolios with these ETFs getting notable inflows, indicating that long-term fundamentals remain solid.

Strategy

Policy setting in democracies

Democracies aren’t a given, and policymakers need to be mindful not to alienate communities and instead be more aligned with mainstream ideas and attitudes. 

Investment strategies

Take my money and lie to me… again

As private funds increasingly show signs of cracking and buckling under a complete lack of liquidity, the salespeople do their best to keep the cash pouring in from new investors. 

Economy

Australia was once a world leader in innovation, now the system is ‘broken’

Ambitious Australia joins a long line of reports examining research and development, finding Australia has fallen behind its peers on many fronts. It urges bold reform to address declining productivity and research spending.

Sponsors

Alliances

© 2026 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.