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:

     
banner

Most viewed in recent weeks

2024/25 super thresholds – key changes and implications

The ATO has released all the superannuation rates and thresholds that will apply from 1 July 2024. Here's what’s changing and what’s not, and some key considerations and opportunities in the lead up to 30 June and beyond.

The greatest investor you’ve never heard of

Jim Simons has achieved breathtaking returns of 62% p.a. over 33 years, a track record like no other, yet he remains little known to the public. Here’s how he’s done it, and the lessons that can be applied to our own investing.

Five months on from cancer diagnosis

Life has radically shifted with my brain cancer, and I don’t know if it will ever be the same again. After decades of writing and a dozen years with Firstlinks, I still want to contribute, but exactly how and when I do that is unclear.

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

Welcome to Firstlinks Edition 552 with weekend update

Being rich is having a high-paying job and accumulating fancy houses and cars, while being wealthy is owning assets that provide passive income, as well as freedom and flexibility. Knowing the difference can reframe your life.

  • 21 March 2024

Why LICs may be close to bottoming

Investor disgust, consolidation, de-listings, price discounts, activist investors entering - it’s what typically happens at business cycle troughs, and it’s happening to LICs now. That may present a potential opportunity.

Latest Updates

Shares

20 US stocks to buy and hold forever

Recently, I compiled a list of ASX stocks that you could buy and hold forever. Here’s a follow-up list of US stocks that you could own indefinitely, including well-known names like Microsoft, as well as lesser-known gems.

The public servants demanding $3m super tax exemption

The $3 million super tax will capture retired, and soon to retire, public servants and politicians who are members of defined benefit superannuation schemes. Lobbying efforts for exemptions to the tax are intensifying.

Property

Baby Boomer housing needs

Baby boomers will account for a third of population growth between 2024 and 2029, making this generation the biggest age-related growth sector over this period. They will shape the housing market with their unique preferences.

SMSF strategies

Meg on SMSFs: When the first member of a couple dies

The surviving spouse has a lot to think about when a member of an SMSF dies. While it pays to understand the options quickly, often they’re best served by moving a little more slowly before making final decisions.

Shares

Small caps are compelling but not for the reasons you might think...

Your author prematurely advocated investing in small caps almost 12 months ago. Since then, the investment landscape has changed, and there are even more reasons to believe small caps are likely to outperform going forward.

Taxation

The mixed fortunes of tax reform in Australia, part 2

Since Federation, reforms to our tax system have proven difficult. Yet they're too important to leave in the too-hard basket, and here's a look at the key ingredients that make a tax reform exercise work, or not.

Investment strategies

8 ways that AI will impact how we invest

AI is affecting ever expanding fields of human activity, and the way we invest is no exception. Here's how investors, advisors and investment managers can better prepare to manage the opportunities and risks that come with AI.

Sponsors

Alliances

© 2024 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.