Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 361

Welcome to Firstlinks Edition 361

  •   10 June 2020
  •      
  •   

Weekend market update: After the S&P500 in the US fell 6.5% on Thursday, and Australia was down 2.5% for the week, many investors thought a fall back in share prices had started. Perhaps the market finally realised that ignoring economic reality was foolish. Then on Friday, the S&P500 rose 1.3% in a show of resilience, although it was down 4.8% for the week. It's being depicted as a battle between bearish professionals and optimistic retail. 

***

Legendary US fund manager Peter Lynch was an early adopter of what we now call 'high frequency indicators'. He would sit in shopping malls watching which stores people went into and what they bought. He would give his children money and see how they spent it. He was looking for frequent and early signs before they were recognised by the market. Lynch's Fidelity Magellan Fund averaged 29% per annum from 1977 to 1990, more than twice the S&P500. He was considered the best money manager of the 1980s.

Many traditional economic indicators are out-of-date when they are released, such as the recent GDP update for the March quarter. Treasurer Josh Frydenberg received more questions about the June quarter and he responded based on early feedback from the Reserve Bank. The market has developed many high frequency indicators which have become far more sophisticated than Lynch's sitting around malls (although with little evidence they are any better).

Some daily examples include travel numbers from the US Transportation Security Administration, bookings of movie tickets from Box Office Mojo and OpenTable's reporting on restaurant bookings (including for Australia). Apple is releasing mobility data for many countries and cities based on requests for directions on Apple Maps. Australia is shown below, indicating how quickly driving is recovering but not public transport.

  

Another example from HotelNewsNow is hotel bookings, with the data below for the US showing the usual seasonal trends, the fall off a cliff in March and the start of a recovery.

By watching these early signs, investors try to stay ahead of the pack. It's a game anyone can play: how busy is the car park at your local shopping centre? What does your favourite coffee shop say about business? Are your friends buying as much stuff as normal or saving more? (Some examples above come from Bill McBride of Calculated Risk).

In this weekend's edition ...

How would you like a portfolio of quality shares especially selected by a famous, highly-experienced fund manager at a 20% discount to their market value. Well you can, every day of every week. What's the catch?

The stock market is booming in the middle of a recession, and while this one is unlike anything we have seen before, Ashley Owen shows a rally is what usually happens. It's not so weird.

Yes, it's that time of year with a few weeks left to tidy up financial accounts, with some special features in super funds including SMSFs. Liam Shorte identifies 20 tips for FY2020

Many investors fear they have missed the bargains but Katie Hudson explains what her team looks for in a stock market rebound like this one. 

There's little doubt the majority of professional investors have been shocked by the market's recovery. Sean Fenton says the usual price signals a market needs have been lost in a sea of central bank liquidity, and Moray Vincent argues the extent of the rises simply cannot be justified. We are returing to pre-COVID levels as if no long-term damage has been done to the economy.

The market (and Donald Trump) was excited by the US jobs gain last week but it's good to put it in perspective. Do you consider one of these diagrams on the same data highly misleading?

Source: Bureau of Labor Statistics by Ella Koeze via NY Times

Many retirees will know the difficulties juggling around assets, eligibility for the age pension and the vagaries of the taper test, as explained by Andrew Boal. 

Finally, we reprise an article where Chris Cuffe warns about investing in unit trusts during June. Watch you do not convert your capital into taxable income.

This week's White Paper from UBS gives the view of Nobel Laureate Sir Christopher Pissarides, a labour market economist, on the epidemic and the way markets are responding.

Graham Hand, Managing Editor

 

Latest updates

PDF version of Firstlinks Newsletter

Australian ETF Review for May 2020 from BetaShares

ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade

Indicative Listed Investment Company (LIC) NTA Report from Bell Potter

Monthly Investment Products update from ASX

Plus updates and announcements on the Sponsor Noticeboard on our website

 

banner

Most viewed in recent weeks

Easy money: download Robinhood, buy stonks, bro down

Millions of inexperienced traders have entered global equity markets since the end of March, fuelled by hype in a rapidly-rising market. What is happening and how are they having an impact?

Warren Buffett's letter about new investors and speculation

A pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: speculation is most dangerous when it looks easiest.

10 reasons to sell your dud stocks for EOFY

Anyone with capital gains from property or shares should take this EOFY opportunity to find offsetting capital losses. There are many benefits from cleaning out the portfolio stuff-ups.

How much bigger can the virus bubble get?

Stocks have rallied hard creating a virus bubble, but will this run for years or collapse in a matter of months? The market is giving a second chance to leave so head for the exit before there's a rush.

The populations of key countries are shrinking

Population decline is a new, yet largely ignored, trend with underrated economic and social costs. Much of the growth that drives economies, especially in Australia, comes from population increases.

Share trading is the new addiction

The ability to buy and sell cheaply and quickly in small parcels is both the biggest drawback and benefit of shares. But it encourages people who should not go near the market to use it as a casino.

Latest Updates

Howard Marks' anatomy of an unexpected rally

Markets can swing quickly from optimism to pessimism, and while there are more positives now than in the bleak early days in March, the market is ignoring many negatives. Risk is not rewarded at these levels.  

Why are we convinced 'this time it's different'?

Investors tend to overstate the impact on investments when something significant happens and they assume the future will be different. COVID-19 has been dramatic, but is it really that unusual?   

Superannuation

Super fund performance and rank depends on risk

APRA's heatmap has profound implications as it shows which super funds are underperforming in a period. But when good markets are compared with poor markets, one in five of funds changes its assessment.    

Investment strategies

Why women are most hurt by financial pandemic

Many people were financially unprepared for a pandemic, but it is women who are suffering most because they earn less, have interrupted careers and have less risk-taking capacity.

Superannuation

What is happening with SMSFs? Part 2

The latest SMSF data shows retirees favour listed shares and cash to maintain liquidity. SMSFs continue to grow, and the new super rules led to changes in contributions, payments and lump sums.

Retirement

Retirement dreams face virus setback

A new survey of over 1,000 people near or in retirement found three in four are not confident how long their money will last. Only 18% felt their money was safe during a strong economic downturn.

Superannuation

Common confusions with death benefit pensions

Awareness of common misunderstandings in relation to the payment of death benefit pensions can assist in estate planning matters. Given the large amounts involved, seeking professional advice helps.

Sponsors

Alliances

© 2020 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.
Any general advice or class service prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, has been prepared by without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information. 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.