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Thursday, 23 September 2021
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Is it more difficult to find stocks to short in a rising market? What impact has central bank dominance had over stock selection? How do you combine income and growth in a portfolio? Where are the opportunities?
The pandemic has shown that the emerging market complex is more mature, with central bank discipline, strong demand for commodities and a positive outlook for currencies. Diversification into EM is worth a look.
Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.
Long duration assets such as government bonds and property have benefitted from falling interest rates, but a turn is coming. It's time to find assets that may benefit from rising rates, such as private debt.
Renewable energy is evolving rapidly, and incumbent and non-renewable sources of energy generation have been priced out of the market. But there are many challenges when investing in such a changing paradigm.
In investing, income and capital gains are akin to scoring goals, but successful teams must also stop the other side from scoring. Most portfolios need a manager preserving capital and reducing drawdowns.
This increased focus on affordable housing is welcome but the challenge is that investors typically require ‘market’ rate financial returns. By definition, social housing tenants cannot pay market rent.
Emerging market equities performed strongly up to the GFC but have gone sideways since. In this cyclical sector, there's an opportunity to catch up boosted by strong inflows, a lower US dollar and tech adoption.
Global equity markets have experienced huge volatility during 2020. Investors are now looking at stretched large cap valuations but there are good opportunities in less well-known, smaller companies.
COVID-19 is delivering winners and losers, and buying a well-positioned company while shorting one with worse prospects can provide returns while managing the downside of an overall market correction.
With central banks injecting as much liquidity as the market needs, the fundamental price signal has been lost. But the evidence is this does not help sustainable and long-term economic growth.
There are heavy clouds on the horizon in the near and medium term, yet risk markets have separated themselves from the economics. Liquidity will not solve the problems of bankrupt companies.
As hopes of a V-shaped recovery diminish, so will the revenues of many highly-geared companies. Client redemptions and downgrades will force selling at distressed prices beyond the Fed's capacity.
Market uncertainty, low interest rates and the threat from COVID-19 to global economies have boosted the performance of high quality fixed income assets. Lesser corporates face another story.
Australian investors have a domestic bias, but around the world, a swag of small to medium cap companies offer better value than the mega-cap names that have driven markets in recent years.
With the power of 5G technology, the IoT phenomenon will grow exponentially, especially from apps, platforms and services. Much of the opportunity in emerging markets is underappreciated.
Bonds markets have continued to defy the notion that low yields imply low returns, and most investors need the solid foundation that bonds give to a portfolio.
Higher volatility, higher funding costs, US rate rises with AUD interest rates decoupling, Quantitative Tightening, maturing bond reinvestment flows all point to a difficult 2018.
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.
Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.
Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.
Critics of franking credits are missing the main point. The taxable income of shareholders/taxpayers must also include the company tax previously paid to the ATO before the dividend was distributed. It is fair.
Wet streets cause rain. The Gell-Mann Amnesia Effect is a name created by writer Michael Crichton after he realised that everything he read or heard in the media was wrong when he had direct personal knowledge or expertise on the subject. He surmised that everything else is probably wrong as well, and financial markets are no exception.