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

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.

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. 

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.

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.

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.

With markets near record highs, here's what you should do with your portfolio

Markets have weathered geopolitical turmoil, hitting near record highs. Investors face tough decisions on valuations, asset concentration, and strategic portfolio rebalancing for risk control and future returns.

Latest Updates

Taxation

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.

7 key charts on the state of the Australian property market

The Australian property market stirs fierce debate - often bullish optimism versus crash predictions. But beyond the noise, seven charts reveal what's really driving prices and the outlook for residential real estate.

A simple alternative to the $3 million super tax

Division 296 aims to introduce improved fairness into the superannuation system, yet is overly complex. This scours the world for better ideas and suggests a simpler alternative which can achieve the same goals.

CBA and the index conundrum for super funds

After the hyperbolic rise in CBA shares, super funds are floating the idea of carving out the weightings of ASX bank securities and indexing them within their portfolios. This looks at why that might be a big error.

Strategy

10 policies to drive Australian productivity higher

Here's a comprehensive list of proposed reforms to fix Australia's stagnating economy, including introducing a flat income tax rate, reducing migration, and making childcare tax-deductible.

Interviews

Where to find big winners in Asia

As more money looks for a home outside the US, Asia may soon get some love. Fidelity's Anthony Srom outlines the best places in Asia to invest, including in Chinese consumer names, Indian financials, and Thailand.

Investment strategies

We have trouble understanding the time value of money

We overvalue the present and underestimate the future - it’s a cognitive glitch called hyperbolic discounting. It affects savings, spending, and loans, and it's more common - and costly - than we think. 

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.