Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 447

Welcome to Firstlinks Edition 447 with weekend update

  •   24 February 2022
  • 15

The Weekend Edition includes a market update plus Morningstar adds links to two recent stock pick highlights from the week.

Weekend market update

Most western diplomats and political commentators did not expect Putin to order an invasion of Ukraine, but this extract from his 7,500-word speech to his nation highlights his conviction about Russia's destiny. 

“It is an inalienable part of our own history, culture and spiritual space. These are our comrades, those dearest to us - not only colleagues, friends and people who once served together, but also relatives, people bound by blood, by family ties. For a long time, the inhabitants of the historical lands of the south-west of ancient Russia called themselves Russians and Orthodox. This was the case until the 17th century, when part of these territories were reunified with the Russian state, and after ... Ukrainians squandered not only everything we gave them during the USSR, but even everything they inherited from the Russian empire. Even the work created by Catherine the Great.”

Where will he stop? According to GlobalFirepower, "For 2022, Russia is ranked 2 of 140 out of the countries considered for their annual review." For a nation of only 140 million people, their military resources are frightening, with 850,000 active personnel and more land forces than the United States.

Russian Airpower and Land Forces, 2022


From AAP Netdesk: The Australian sharemarket ended marginally higher on Friday after the rout in the previous day, as investors remained on edge over the impact of Russia's invasion of Ukraine. The benchmark S&P/ASX200 index closed just 0.1% higher at 6998 points after rising as much as 0.8% in early trade. The index was down 3.1% for the week after sliding 3% on Thursday.

Western nations unveiled fresh sanctions to limit Russia's ability to do business by freezing bank assets and cutting off state-owned enterprises. But they stopped short of disconnecting Russia from the SWIFT international banking system or targeting its oil and gas exports.

Technology shares rallied, led by a 32% surge in payments giant Block. Its stock, which replaced Afterpay on the ASX in January after taking over the buy now pay later pioneer, closed at $153.75. Appen shares jumped nearly 9% while Wisetech Global rose 5% and Xero climbed 3%. Utilities and consumer discretionary stocks also saw gains.

But the heavyweight mining sector was weaker, mainly on account of a decline in bullion prices. Newcrest, Evolution and Northern Star Resources all dropped between 3 and 5%. Iron ore majors BHP and Rio Tinto also ended lower. Energy stocks were mixed even as oil prices rose. Each of the Big Four banks closed heavily in negative territory, while Magellan Financial dropped another 10% to $17.78 after the troubled investment firm disclosed further fund outflows in the past few weeks.

From Shane Oliver, AMP Capital: While US shares fell below their January low into mid-week, a relief rally from oversold conditions helped by expectations that a further worsening of the energy crisis could be averted pushed them higher later in the week such that through the week as a whole they actually rose 0.8%. Despite rallies on Friday, Eurozone shares fell 2.6% through the week, Japanese shares fell 2.4% and Chinese shares fell 1.7%. 

The market volatility in reaction to the Ukraine conflict reflects a fear of the unknown about how far the conflict will go. The key risk is that Russia (which accounts for around 30% of European gas imports) cuts off its supply of gas to Europe when prices are already very high, with a potential flow on to oil demand at a time when conflict may threaten oil supply. In short, investors are worried about a stagflationary shock to Europe and, to a lesser degree, the global economy generally.

If the conflict is limited to Ukraine with Russian gas still flowing to Europe and NATO not getting involved, then the economic fallout will be limited. Russia has no interest in war with NATO and President Biden has continued to stress that the US will not engage in military conflict with Russia just as it managed to avoid it right through the Cold War and ever since. The presence of nuclear weapons on both sides remains a huge deterrent here.

European exports to Russia are just 0.7% of its GDP and US exports to Russia and Ukraine are less than 0.2% of its GDP so the direct impact on them from say a collapse in the Russian economy would be small.


Last year, two of my close friends died, both in their late 60s. One was undergoing cancer treatment, so it was not a major surprise although he had been improving. The other suffered a heart attack while he slept at night, and his death was a massive shock. Putting aside the personal tragedy, in both cases, their estates were left to their wives who had not been heavily involved in managing their investments. Both are strong women capable of handling the stress but not everyone has their fortitude. One wife turned to the financial adviser her husband had worked with, but the other was forced to quickly pull together the financial pieces.

There are additional complexities with SMSFs. Most are managed by a dominant trustee, usually the husband, yet women have longer life expectancies. It's possible the surviving spouse will not want to continue to manage the investments, there are tax and estate implications and some assets may be illiquid.

Regardless of personal circumstances - health or financial - we should all take the time to ensure spouses or partners know in advance what steps to take if someone dies or becomes otherwise incapacitated. Making major decisions at a time of grieving is unwise. In any case, it is a legal requirement for SMSF trustees to have a documented investment strategy and to review it regularly. All 'non-dominant' trustees should know a trusted financial adviser they can turn to.

Some people will think it is too early in their lives to worry about such a morbid subject, but do they understand what life expectancy really means? Former leading asset consultant, Don Ezra, explained in a recent newsletter that while most people probably know the average age at death is in the early 80s, few people know the age distribution of deaths. He wrote:

"If we don’t have a rough, intuitive idea of how large the uncertainty is, we will make decisions that are totally inappropriate ... the distribution is extremely wide. That suggests that longevity is a big risk, and we need to consider it seriously, particularly those of us who are risk averse."

Ezra asked five of his friends to guess what one standard deviation of the longevity data might be. (Stay with me here. Simply put, standard deviation is a measure of variance around a mean, and one SD is about 68% of samples - in this case, ages at death - and two SDs is about 95% of samples). Ezra reports:

"One colleague, an actuary, clearly had the right mind-set. He said: ‘A few will live to 100. Let’s say that’s a two standard deviation event. If the average age at death is 81, then 19 more years will be roughly two standard deviations. So, in round numbers, I’d say 10 years is the standard deviation'."

Which is about right. Most of Ezra's friends guessed too low. The point is, while life expectancy is a useful measure of how long you might live, there will be outliers like my friends who will live a lot less. We usually worry about outliving our savings but consider also if you drop off the twig earlier than expected.

To top it off, The Economist reported last week that life expectancy in many countries is falling:

"To assess just how much damage the virus has done according to this (life expectancy) measure, a team of researchers based across Britain, Denmark and Germany compared life expectancy in 28 countries and Northern Ireland before and after the start of the pandemic."

The chart below shows a fall in life expectancy in nearly all countries surveyed. This must be the first time in history. For years, we have talked about living longer, and that might not be right in future.

It has been surprising to read this week how dependent much of Europe is on Russia for its energy needs. Germany relies on Russia for 50% of its gas and Austria is 100% dependent. At US$90 a barrel, Russia earns US$1 billion a day in hydrocarbon revenues and that buys a lot of military hardware. In contrast, the US now produces enough petroleum for its own needs. It means the rise in the oil price and supply dependencies impose different economic and geopolitical implications on the US and other countries. Where the US does import oil, half comes from Canada.

In this week's edition, a welcome return to Peter Thornhill who updates his 'mothership' chart to prove again the benefits of holding dividend-producing shares instead of other assets, especially cash. Peter has no time for diversified investing, but it takes a strong risk tolerance over a long time horizon to be a true disciple.

How many people know Stephen Jones, the 'shadow' Labor minister in Jane Hume's portfolio of financial services and superannuation (although Hume has a broader remit)? Given Labor has a decent chance at the May election (current Betfair odds, Coalition $3.15, Labor $1.46), it's worth knowing what he thinks about super, advice and other parts of the portfolio.

There are fascinating changes underway in media which perhaps older generations of investors are not aware of. Video games are bigger than the movie industry. Jody Johnsson and Martin Romo explain how traditional media is being disrupted, including some of the market's favourite companies.

While there is an obvious focus on the implications of inflation and a potential war, Shane Woldendorp says many companies were already falling and vulnerable due to their expensive valuations. They are no place to hide.

The new Design and Distribution Obligations (DDO) may sound arcane to most investors, and indeed, many issuers simply bury the regulations in the paperwork. But not so with bank hybrids. Norman Derham explains how access to this mainstay of many retiree portfolios is changing, as seen already in a new ANZ Bank issue.

Despite the best intentions of a well-considered asset allocation, all portfolios change as asset prices rise and fall. Inna Zorina suggests investors undertake a portfolio rebalance, especially in the context of taking a 'total return' approach during low interest rates.

Michael Batnick is a US financial adviser and author who issues a regular newsletter, and last week, he featured a most-intriguing note from one of his readers. After a lifetime of investing, the reader has come to the conclusion that it's a 'colossal waste of time' listening to all the market pundits. There's at least one good reason, however, why it's worthwhile.

Two bonus articles from Morningstar for the weekend as selected by Editorial Manager Emma Rapaport

Lewis Jackson explores seven undervalued mining companies amid the copper boom. And Adrian Atkins believes AGL was right to knock back Mike Cannon-Brooke's $5 billion bid saying it would lock shareholders out of any share price revival.

This weekend's White Paper from Martin Currie looks at the political and ideological risks of investing in Russia and its place in an emerging markets portfolio (written shortly before the invasion). 

There was a super-lively debate on my article about LIC discounts but I need to make two things clear after readers made incorrect comments. First was the claim that ETFs don't pay franking credits, which is wrong, and the second is that NTAs don't matter for ETF prices. Not so ... ETFs are priced off NTA. However, the Comment of the Week goes to John on the article about short-let apartments. John confirmed how some of these properties are a disaster yet many people think they are safe investments:

"Excellent article; spot on with all the details. As a public accountant I have seen first hand and in great detail examples of such 'investments' owned by clients! The latest example showed a 32% loss (contract selling price compared to contract purchase price) over a 12 year holding period."


Graham Hand, Managing Editor


Latest updates

PDF version of Firstlinks Newsletter

ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade

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

LIC Monthly Report from Morningstar

Plus updates and announcements on the Sponsor Noticeboard on our website


February 25, 2022

I have always been an organised and meticulous planner. Everything is on spreadsheets, but I'm the only one in the family who understands and updates them. I estimate I have about 27.5 years to go, allowing for standard deviations, but would prefer to know my exact date of death to organise distributions, account changes, farewells and donations. Voluntary euthanasia and choosing our own exit dates would make spreadsheets and financial planning so much easier and solve the problem of longetivity risk. 

February 25, 2022

Logan's Run...

(Ed: Logan's Run depicts a dystopic ageist future society in which both population and the consumption of resources are maintained in equilibrium by requiring the death of everyone reaching the age of 21).

February 27, 2022

Great movie, but the age they got 'renewed' was 30- or become runners.

February 24, 2022

"Tim Driscoll, of the Sydney School of Public Health at the University of Sydney, said the findings of the study were interesting, given COVID-19's devastating impact on Australian society. "I think all of us would have thought that because of the health problems that have come from COVID-19, with a lot of people dying as a result of that, and a lot of ill health arising with people having COVID-19, it's surprising that life expectancy was found to have improved more than would have been expected or more than it had been in recent years," Professor Driscoll said." [ that is : " expectancy was found to have improved ......." !!! ] It seems as though , fortunately for us , AUSTRALIA is the "exception that proves the rule " Graham !

February 24, 2022

Thank you for the article Graham, and very valid comments. My husband thinks "he'll go first".....because he's male and men die first....yet both his parents lived into their 90's. Whereas, my father passed away in his early 60's and my mother in her 90's.....we go when we go. However, as I manage our SMSF, Trust and personal investments, much as I involve him consistently, his brain is not wired for the minutae (and paperwork) involved. Luckily we know a trusted and reputable advisor who will look after him, as will our long term accountant. Be as prepared as you can, but still enjoy life.

Gen X Planner
February 27, 2022

Hi June, How old is the long term Acct & trusted adviser? They might "drop off the twig" before you do, or at the very least retire.

March 01, 2022

My thoughts exactly.

Much like having a GP who is about 20 years younger than you are in a relative sense.

February 24, 2022

This article did not answer the question it purported to raise ?? That is, as per where it said "ensure spouses or partners know in advance what steps to take if someone dies or becomes otherwise incapacitated. One wife turned to the financial adviser her husband had worked with, but the other was forced to quickly pull together the financial pieces. We all need to be prepared."

Graham Hand
February 24, 2022

Hi John, I did not raise a question that was supposed to be answered. I'm simply telling our readers that life may be shorter than they expect and don't leave a surviving dependant exposed.

February 24, 2022

Thanks Graham. Point taken. Is there a way to expand on the issue you raised however ??

February 24, 2022

Loved your article today. I'm not expecting to "drop off the twig" quite yet, but my wife and I have definitely planned things. She thinks I'll croak earlier because of my drinking and smoking. I feel I'm destined to prove the actuaries wrong, and reach a miserable 100.

Tony Reardon
February 24, 2022

I am entitled to a U.K. state pension will be frozen and have zero increases once I start to receive it because I now live in Australia. I have deferred it for the moment which will result in an ever increasing amount the longer I defer it. I calculate that the optimum time to commence receiving the pension payments is nine years before I die.

I told my doctor this the other day and he recommended that I start it at once!

Knowing one's date of death would make financial planning a lot easier but how many of us really want to know? (I am an optimist and still haven't started that pension.)

February 24, 2022

Normal life expectancy forecasts for a child born in a given year assume that the conditions at that time will be the same going forward.So,estimates made in 2020 do not take account changes since,the most significant of which was the development and widespread availability of vaccines to limit the impact of Covid infections. When life expectancy estimates are made in the future they will take that change into account so will likely show increase in life expectancy.

David Williams
February 24, 2022

Good article thanks Graham. As we have shown, Life Table averages are very commonly used for life expectancies but are not helpful for individuals. Over 200,000 people have already received a more useful estimate of their longevity – the rest of their life – using our website at My Longevity. They also get an indication of what might be personally more relevant about their health and are encouraged to discuss this with their health advisers to adapt their outlook if necessary. They can also choose to engage in proper longevity planning which covers all your article mentions and much more. The key issue is that our potential longevity will very over time – both longer and shorter. That’s why it’s good to keep track of it as we change and adapt our health, financial and estate planning accordingly. Simple longevity planning provides the framework for all other plans and decisions.
The decline in expected longevity beyond about age 85 has been going on for years in Australia and the USA. It’s interesting that the pandemic has accentuated this as the Economist suggests. One theory is that at these ages many people are kept alive with intensive (and costly) health care but are quickly overwhelmed when yet another more intractable ailment strikes. In the past, survivors to these ages tended to have more robust wellbeing – something we should all invest in to the extent possible!

February 27, 2022

The greatest reduction in life expectancy for the countries show was for the USA which has 2865 Covid deaths per million people.Denmark (760 deaths per million) and Norway (300 deaths per million) showed no change in life expectancy and Germany (1472 deaths per million)was between these and the USA .One could expect that for Australia (200 deaths per million) there will be no change.


Leave a Comment:


Most viewed in recent weeks

How to enjoy your retirement

Amid thousands of comments, tips include developing interests to keep occupied, planning in advance to have enough money, staying connected with friends and communities ... should you defer retirement or just do it?

Results from our retirement experiences survey

Retirement is a good experience if you plan for it and manage your time, but freedom from money worries is key. Many retirees enjoy managing their money but SMSFs are not for everyone. Each retirement is different.

A tonic for turbulent times: my nine tips for investing

Investing is often portrayed as unapproachably complex. Can it be distilled into nine tips? An economist with 35 years of experience through numerous market cycles and events has given it a shot.

Rival standard for savings and incomes in retirement

A new standard argues the majority of Australians will never achieve the ASFA 'comfortable' level of retirement savings and it amounts to 'fearmongering' by vested interests. If comfortable is aspirational, so be it.

Dalio v Marks is common sense v uncommon sense

Billionaire fund manager standoff: Ray Dalio thinks investing is common sense and markets are simple, while Howard Marks says complex and convoluted 'second-level' thinking is needed for superior returns.

Fear is good if you are not part of the herd

If you feel fear when the market loses its head, you become part of the herd. Develop habits to embrace the fear. Identify the cause, decide if you need to take action and own the result without looking back. 

Latest Updates


The paradox of investment cycles

Now we're captivated by inflation and higher rates but only a year ago, investors were certain of the supremacy of US companies, the benign nature of inflation and the remoteness of tighter monetary policy.


Reporting Season will show cost control and pricing power

Companies have been slow to update guidance and we have yet to see the impact of inflation expectations in earnings and outlooks. Companies need to insulate costs from inflation while enjoying an uptick in revenue.


The early signals for August company earnings

Weaker share prices may have already discounted some bad news, but cost inflation is creating wide divergences inside and across sectors. Early results show some companies are strong enough to resist sector falls.


The compelling 20-year flight of SYD into private hands

In 2002, the share price of the company that became Sydney Airport (SYD) hit 80 cents from the $2 IPO price. After 20 years of astute investment driving revenue increases, it sold to private hands for $8.75 in 2022.

Investment strategies

Ethical investing responding to some short-term challenges

There are significant differences in the sector weightings of an ethical fund versus an index, and while this has caused some short-term headwinds recently, the tailwinds are expected to blow over the long term.

Investment strategies

If you are new to investing, avoid these 10 common mistakes

Many new investors make common mistakes while learning about markets. Losses are inevitable. Newbies should read more and develop a long-term focus while avoiding big mistakes and not aiming to be brilliant.

Investment strategies

RMBS today: rising rate-linked income with capital preservation

Lenders use Residential Mortgage-Backed Securities to finance mortgages and RMBS are available to retail investors through fund structures. They come with many layers of protection beyond movements in house prices. 



© 2022 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.