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.

 

  •   30 January 2020
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

Why have Australian living standards 'fallen' and how do we fix it?

For the last few years there has been much talk of a 'cost-of-living' crisis in Australia and of 'falling living standards'. Lately this has flared up again with the pickup in inflation resulting in a renewed fall in real wages.

Will you run out of money in retirement?

Fear of running out has become a defining retirement anxiety. Why do some retirees die with substantial wealth while others deplete their nest egg? Evidence suggests the answer is more complicated than we think. 

Four options for an income investor’s next dollar

What if Australia’s golden age of dividends is ending? Rather than overhaul your portfolio, it may be worth considering where new capital can work harder. I discuss four income strategies and the trade-offs behind each.

Why spending more in early retirement can improve lifetime income

Conventional wisdom encourages retirees to preserve superannuation. But if those likely to qualify for the Age Pension later in life spend a little more today, it may deliver higher lifetime income and a more stable retirement.

The investment that sidesteps the new tax traps

Tax rules have changed, but many investors are still using yesterday’s strategies. Insurance bonds may offer advantages for those seeking greater control, tax efficiency and certainty about their wealth.

Testamentary trusts have secured the CGT exemption

Treasury’s latest CGT reform draft delivers a win for testamentary trusts and deceased estates, exempting estate-derived gains from the 30% floor. However, questions on death and divorce rollovers remain unresolved.

Latest Updates

Shares

Is it time to bail on Australian stocks?

For generations, Australian investors have backed banks, miners and dividends. But has that loyalty come at a cost? A look at the numbers raises an uncomfortable question about where future returns will come from.

Investment strategies

Making a case for the 40 year mortgage

The housing debate tends to focus on prices, interest rates and deposits. Yet an overlooked feature of the mortgage itself could help buyers enter the market sooner without abandoning prudent lending standards.

SMSF strategies

Red flags to watch out for when considering an SMSF

Thinking about an SMSF? Before you sign anything, learn how to spot the difference between genuine advice and a sales pitch, understand the real costs, and avoid the compliance mistakes that attract ATO attention.

Investment strategies

Not all income is created equal

Market conditions are shifting as familiar yield sources quietly lose momentum. Australian public credit may be the most compelling source of income in today's market but many investors haven't noticed the shift. 

Investment strategies

The market paid for change, not comfort

Reporting season has delivered a clear message: the market is no longer paying simply for quality, resilience or an earnings beat. It is paying for change in earnings expectations and the outlook ahead. 

Investment strategies

Will AI destroy investor capital?

Some of history's most important innovations changed the world while leaving investors much poorer. As trillions pour into AI, a familiar pattern may be emerging, one that rewards society far more generously than capital.

ASX reporting season: Signals, surprises, stock stories

August reporting season delivered strong earnings and bigger-than-expected dividends, but beneath this, a more nuanced story emerged. First Sentier Investors’ David Wilson and Christian Guerra unpack the key trends.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 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.