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Welcome to Firstlinks Edition 335

  •   4 December 2019

I doubt the Reserve Bank Governor, Philip Lowe, is looking for a new home at the moment. If he were, he would know first-hand that Sydney residential is red hot, and it might make him think again about cutting rates. For the first time in 30 years, I am looking for a new home, and it's clear that FOMO has replaced the FONGO (Fear of Not Getting Out) in the space of a few months. It's a market where selling before you buy can quickly become expensive.

Everyone has real estate anecdotes, but here's a broad sample. In early November, a local real estate agent listed 32 properties for potential sale in its auction rooms on 28 November. Only seven made it to the auction as all the other sellers accepted early bids, and six sold on the night. Quality apartment developments are again selling out in hours. For many Boomers, 'downsizing' means a prestige apartment rather than a house, but it doesn't mean downsizing in property value. And they can take advantage of the downsizer policy which allows a couple to put another $600,000 into super from the 'proceeds of selling your home', even if they already have more than $3.2 million in super.

Corelogic's latest data shows capital cities prices were 4.6% higher (Melbourne 6.4%, Sydney 6.2%) over the three months to 30 November 2019, and cashed up Boomers are sending the upper quartile even higher.

Source: CoreLogic, as at 30 November 2019

Higher prices will push out the timing on the following chart even further for many. The chart comes from last week's article on housing and ageing, and shows the deferred entry median age for many life events. Buying a first home has gone out from 27 to 33 years-of-age and paying off the mortgage from 52 to 62. The good news is that living longer means the benefits of home ownership can still accrue over time.

Source: CEPAR analysis based on ABS Census, customised ABS data, ABS SIH, and customised AIHW data.

In this week's new articles ...

Investors desperate for income but scared of equity risk are flocking to new fixed income Listed Investment Trusts (LITs). However, those who equate 'bonds' or 'loans' with traditional defensive characteristics need to understand the risks they are accepting. These funds are not a place to store genuine 'cash'. In a week when bank shares fell heavily, investors need to understand the risks of capital erosion as they search for income.

It's always a fun article when Shane Oliver takes us through some of his favourite quotations on investing and life lessons, with a collection of gems and timeless wisdom from global leaders in their fields.

Many fund managers who built their reputations on analysis of company valuations have faced up to the challenges of highly-priced market darlings. Warryn Robertson argues the market cannot have it both ways: it cannot value companies based on low interest rates while building in strong economic growth. The maths doesn't work.

Two articles in one on a new survey on financial advice and attitudes to retirement. Matthew Harrison and Emma Rapaport show the Retirement Income Review faces major challenges to improving the life of retirees.

Managing an SMSF involves understanding the rules and opportunities. Lawyers William Moore and Sam Baring say SMSFs are becoming a battleground for family disputes, while Julie Steed warns of the little-known consequences of bankruptcy.

The chair of APRA, Wayne Byers, has strongly defended the regulator's plan to become more involved in executive pay, but Will Baylis believes there are more dangers than benefits in APRA's move. We also attach a survey on salaries in financial services to give some context for what APRA is addressing.

The Education Centre features the usual ETF and LIC updates, and the Sponsor Noticeboard includes a summary of the BetaShares/Investment Trends ETF Report for 2019 showing continuing strong growth.

This week's White Paper from Neuberger Berman describes 10 themes they expect in markets in 2020.


Graham Hand, Managing Editor

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



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Welcome to Firstlinks Edition 362

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.

  • 18 June 2020

New ways for listed funds to fix their price discounts

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.

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Markets can swing quickly from optimism to pessimism, and while there are more positives now than in the bleak early days in March, the market is ignoring many negatives. Risk is not rewarded at these levels.  

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Common confusions with death benefit pensions

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.



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