Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 342

Welcome to Firstlinks Edition 342

  •   30 January 2020

Most people satisfied with the home they own or rent care little for the parallel universe of weekend house hunters who barely have time for breakfast before they join the queues. Alerts come in for inspections on Saturday mornings and the trudging starts. With mortgage rates as low as 2.84% and risk written all over other asset classes, housing FOMO is strong in major cities, even though consumer confidence is falling in the wake of the bushfires and coronavirus.

For example, in CBA's Household Spending Intentions Series, home buying intentions in December 2019 were at record highs, as shown below. This will continue in 2020 and may signify that the residential housing construction weakness which hung over economic growth will soon end.

CBA Home Buying Spending Intentions (HSI)

It's yet another reason why interest rates will not rise for a long time. The Reserve Bank (and every other central bank) is protecting the economy and there's too much borrowing to tolerate higher rates. It also explains why many retailers are struggling and closing, as household income goes into paying off debt despite low rates. The Reserve Bank housing price data below does not yet show the kick up in the last 6-12 months, but debt is one-way traffic.

A major cash broker (who matches borrowers and lenders in institutional markets) told me this week he has never seen the small banks as active as they are now, while the majors are relatively passive. The dominance of the four big banks in housing loans has peaked.

The perverse outcome is that the lower interest rates go to hold up the economy, the higher asset prices are bid up, and Miles Staude explains why this era of artificial returns will end in pain.

Still on pain, under political and social pressure to fix conflicts in financial advice, Treasurer Josh Frydenberg has announced a quick public consultation on LIC and LIT stamping fees. Please take our survey on whether you think they should be banned, and we will pass the results to Treasury.

Warren Buffett often talks about Mr Market, who is happy to buy from you or sell to you every day. John Rekenthaler does not like the analogy that implies Mr Market is passive and stupid.

Alex Pollak has held the view that Tesla is a quality car maker, not simply a disruptor, for many years, and its market value now exceeds General Motors and Ford combined. Tesla sold only 367,000 cars last year, compared with Mercedes at 2.3 million. Alex explains why traditional businesses are not facing a simply cyclical downturn but a profound structural change.

We recently explained why geared funds had dominated league tables for 2019, and Recep Peker shows current demand for another form of leverage, margin lending.

While there are strong views on whether the super guarantee rate should increase from 9.5% to the legislated 12%, Geoff Warren goes a step further and outlines who does not benefit from the current level of compulsory saving. Little wonder his paper was unpopular with super funds.

In his popular monthly column, Jonathan Rochford trawls global sources for irreverent and controversial media stories that you probably missed. I'm always amazed by what he finds.

This week's White Paper from AMP Capital's Shane Oliver shows five charts to watch on the global economy and markets. It's a quick snapshot on what Shane considers important.


Graham Hand, Managing Editor

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



Leave a Comment:


Most viewed in recent weeks

Stop treating the family home as a retirement sacred cow

The way home ownership relates to retirement income is rated a 'D', as in Distortion, Decumulation and Denial. For many, their home is their largest asset but it's least likely to be used for retirement income.

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Welcome to Firstlinks Edition 433 with weekend update

There’s this story about a group of US Air Force generals in World War II who try to figure out ways to protect fighter bombers (and their crew) by examining the location of bullet holes on returning planes. Mapping the location of these holes, the generals quickly come to the conclusion that the areas with the most holes should be prioritised for additional armour.

  • 11 November 2021

Reducing the $5,300 upfront cost of financial advice

Many financial advisers have left the industry because it costs more to produce advice than is charged as an up-front fee. Advisers are valued by those who use them while the unadvised don’t see the need to pay.

Welcome to Firstlinks Edition 431 with weekend update

House prices have risen at the fastest pace for 33 years, but what actually happened in 1988, and why is 2021 different? Here's a clue: the stockmarket crashed 50% between September and November 1987. Looking ahead, where did house prices head in the following years, 1989 to 1991?

  • 28 October 2021

Why has Australia slipped down the global super ranks?

Australia appears to be slipping from the pantheon of global superstar pension systems, with a recent report placing us sixth. A review of an earlier report, which had Australia in bronze position, points to some reasons why, and what might need to happen to regain our former glory.

Latest Updates

Investment strategies

Are they the four most-costly words in investing?

A surprisingly high percentage of respondents believe 'This Time is Different'. They may be in for a tough time if history repeats as we have seen plenty of asset bubbles before. Do we have new rules for investing?

Investment strategies

Firstlinks survey: the first 100 tips for young investors

From the hundreds of survey responses, we have compiled a sample of 100 and will publish more next week. There are consistent themes in here from decades of mistakes and successes.


What should the next generation's Australia look like?

An unwanted fiscal drain will fall on generations of Australians who have seen their incomes and wealth stagnate, having missed the property boom and entered the workforce during a period of flatlining real wages.


Bank results scorecard: who deserves the gold stars?

The forecasts were wrong. In COVID, banks were expected to face falling house prices, high unemployment and a lending downturn. In the recovery, which banks are awarded gold stars based on the better performance?

Exchange traded products

In the beginning, there were LICs. Where are they now?

While the competing structure, ETFs, has increased in size far quicker in recent years, LICs remain an important part of the listed trust sector. There are differences between Traditional and Trading LICs.


Should you bank on the Westpac buy-back?

Westpac has sent out details of its buy-back and readers have asked for an explanation. It is not beneficial for all investors and whether this one works for some depends on where the bank sets the final price.

Investment strategies

Understanding the benefits of rebalancing

Whether they know it or not, most investors use of version of a Strategic Asset Allocation (SAA) to create an efficient portfolio mix of different asset classes, but the benefits of rebalancing are often overlooked.


Six stocks positioned well for a solid but volatile recovery

The rotation to economic recovery favouring value stocks continues but risks loom on the horizon. What lessons can be drawn from reporting season and what are the trends as inflation appears in parts of business?



© 2021 Morningstar, Inc. All rights reserved.

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. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). 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.

Website Development by Master Publisher.