Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 340

Welcome to Firstlinks Edition 340

  •   15 January 2020
  • 1
  •      
  •   

Companies hit by technology disruptions from competitors often face tough decisions hanging on to customers. It's why investment analysts look for strong 'economic moats' in the best companies. For example, Morningstar's definition is:

"An economic moat is a structural feature that allows a firm to sustain excess profits over a long period of time. Without a moat, profits are more susceptible to competition."

Technology can destroy moats, and it's happening to Foxtel. Two years ago, I was paying Telstra $238 a month in a bundle for high-speed broadband and Foxtel. Realising we did not watch many channels, we separated Foxtel and reduced the channels, paying $113 to Foxtel alone. With the growth of streaming services such as Stan and Netflix costing $10 to $14 a month, and sport on Kayo for $25, our Foxtel cost was too high. Worse, Foxtel was offering new subscribers the service we wanted for $58 a month.

In calls to Foxtel asking for the $58 rate, we were reminded we had been "loyal for 19 years" but we were told the $58 rate was only for new customers. How do we become a new customer? By returning all the Foxtel equipment at their cost, waiting 30 days, then they would post the equipment back to us and we could go on the $58 rate. So that's one strategy to retain customers.

Foxtel's 'churn' rose to 14.4% in 2019 versus 12.9% the previous year, and parent News Corp has lent it $700 million as the losses build. We have realised the streaming services and free channels on chromecast meet our needs.

Foxtel's business decision is the same reason banks offer worse home loan and deposit rates to existing customers, and inertia pays off for a while. However, it's possible that the new flexibility of Open Banking will do to the incumbent banks what streaming has done to Foxtel. A moat is a moat until it leaks.

There are few greater changes in our lives than the smartphone, and on the just-passed anniversary of Steve Jobs launching the first iphone on 9 January 2007, it's fascinating to see how far we have come in only a dozen years. Said Jobs at the launch:

"Every once in a while, a revolutionary product comes along that changes everything ... today, we’re introducing three revolutionary products of this class ... an iPod, a phone, and an internet communicator. Are you getting it? These are not three separate devices, this is one device, and we are calling it iPhone."

These early Apple launches were like religious events, and they destroyed competitors. No doubt Nokia once had a moat. As the following chart from Statista on smartphone shipments shows, Apple's ongoing success comes not from dominating sales, but its remarkable ecosystem and quality that commands a price premium.

In this week's edition ...

In a year when many funds delivered stellar results, geared funds are near the top of 2019 league tables. We explain how this was achieved, but warn about the asymmetry of results. For those tempted to borrow to invest in shares, Roger Montgomery describes his optimistic assessment of the market.

Given the confidence sweeping global equity markets, many at all-time highs, it's surprising to read Louise Watson's report on new research into attitudes of large investors. Their pessimism includes a majority expecting GFC-like conditions within a few years.

Over many years, state and national governments have introduced a wide range of benefits for retirees, but as Brendan Ryan says, not many people tap into them fully. See his enticing list of 20 opportunities.

Bank hybrids are a highly-popular alternative to term deposits despite the added risk, and Norman Derham provides a simple way to measure the yield pick up and whether the risk is worth it.

Rob Garnsworthy was a senior wealth executive at the top of the industry, but now long-retired, he admits he has turned from poacher to gamekeeper in his attitude to investing.

If you want to give to bushfire victims but are wondering if the money will be used properly, philanthropy expert Antonia Ruffell provides a list of charities and activities with strong bona fides.

This week's White Paper from BetaShares is the 2019 review of the Australian Exchange Traded Fund (ETF) market, reaching a remarkable $62 billion with 52% growth in only one year.

 

Graham Hand, Managing Editor

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

 

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Latest Updates

Planning

Will young Australians be better off than their parents?

For much of Australia’s history, each new generation has been better off than the last: better jobs and incomes as well as improved living standards. A new report assesses whether this time may be different.

Superannuation

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

Investment strategies

A steady road to getting rich

The latest lists of Australia’s wealthiest individuals show that while overall wealth has continued to rise, gains by individuals haven't been uniform. Many might have been better off adopting a simpler investment strategy.

Economy

Would a corporate tax cut boost productivity in Australia?

As inflation eases, the Albanese government is switching its focus to lifting Australia’s sluggish productivity. Can corporate tax cuts reboot growth - or are we chasing a theory that doesn’t quite work here?

Are V-shaped market recoveries becoming more frequent?

April’s sharp rebound may feel familiar, but are V-shaped recoveries really more common in the post-COVID world? A look at market history suggests otherwise and hints that a common bias might be skewing perceptions.

Investment strategies

Asset allocation in a world of riskier developed markets

Old distinctions between developed and emerging market bonds no longer hold true. At a time where true diversification matters more than ever, this has big ramifications for the way that portfolios should be constructed.

Investment strategies

Top 5 investment reads

As the July school holiday break nears, here are some investment classics to put onto your reading list. The books offer lessons in investment strategy, financial disasters, and mergers and acquisitions.

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.