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Wednesday, 27 October 2021
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Bonus options issued by Listed Investment Companies (LICs) deliver many advantages but there is a potential dilutionary impact if options are exercised well below the share price. This must be factored in.
The long current positive run for the Australian stock market is unusual but not a warning of imminent demise. Previous long positive runs were not all followed by corrections but this one may end this month.
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.
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.
There are many reasons why the market places too much emphasis on the short term, but taking a long view on growth, inflation, markets and sectors will lead to better policies and investments.
In reporting season, companies must deliver their results and many issue guidance for the next year. The response often send prices up or down and the market may make swift and not well-considered decisions.
The Australian stock market is skewed towards mining and financial services which account for a whopping 55% of market capitalisation. In the US, these two account for only 17%. But there's more to our underperformance.
It has been three decades, and Japanese equities are still not back up to all-time highs reached at the end of one of the greatest bull markets in global history in 1989. Can we have lost decades in Australia too?
By now, we know 'growth' stocks have outperformed 'value' for many years and investors look to the future, but there are good reasons why the switch is on, especially as value companies emerge from the pandemic.
The Australian market overall finished flat for calendar 2020, but the pandemic delivered big wins and losses. The companies, sectors and companies you invested in delivered vastly different results.
Over the last 20 years, smaller Australian listed companies have outperformed larger companies but with greater volatility. Following a strong run in the last six months, the smaller end is looking expensive.
The global tech run paused in September but the boom is driven by rising prices rather than actual profits. It will end when global confidence in the prospect of endless monetary and fiscal stimulus runs out.
We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.
With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.
It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.
There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.