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Monday, 25 May 2020
Recently trending Buffett's meeting takeaway: extreme cautionWelcome to Firstlinks Edition 356The vibe of future returns: tell ‘em they’re dreamin’Baseline outlook for economic recovery is too optimistic Retiree spending patterns differ from most expectations
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We cannot throw our hands up in the air and say 'this time around, it's simply too hard'. Having no macro view is unhelpful, but many of the baseline scenarios are overly optimistic, says the former CEO of Westpac and now Chairman of Chi-X Australia.
Free spending by governments risks unsustainably higher debt levels, as deficits matter and must be paid for. Here are four steps investors should consider as previous techniques may not work.
Central bank independence was an appropriate solution when inflation was a threat. In today’s low-inflation, low-growth and high-debt world, even central banks doubt their level of influence.
The fundamentals point toward bankruptcies of major sovereigns like the US and Japan in the next decade. The after effects could be catastrophic on all major asset classes. It’s time to discuss the makeup and costs of insurance.
Central banks have created surplus capital looking for a home, and Tesla is a classic example of an unprofitable tech company that has benefited. It survives on a dream rather than the ability to make cars.
Aggressive and sustained policy actions by central banks in the wake of the GFC are threatening the stability of global economies and pushing investors towards higher-risk investment options.
In previous cycles, bond yields provided a strong indication of the general health of the economy, but huge coordinated actions by central banks are changing that paradigm. Watch how you read the signals.
The European Central Bank was reluctant to embrace a QE strategy following the GFC. But in late 2014 it was introduced to fight deflationary forces and boost growth in the euro-zone. The question is: will it work?
Despite the Federal Reserve's tapering of its QE policy, liquidity in developed economies will remain abundant with the major central banks adding another USD1 trillion in 2014. But watch for global inflation.
A presentation or panel discussion is time well-spent if you can extract one new idea, and in Boston, a few were surprisingly original, including that it is better to think of the economy as a biological organism.
Warren Buffett's annual meeting of Berkshire Hathaway showed he has not been 'investing while others are fearful' during the crisis. lt's a reminder to take caution and preserve cash.
Few investors are as influential as Warren Buffett, although for the moment, the market is ignoring his caution. The annual meeting of Berkshire Hathaway revealed Buffett did not use the heavy market falls in February to buy shares. Rather than 'buy when others are fearful', he was a net seller of US$6 billion for the quarter, disposing of all airline shares. Berkshire is sitting on US$137 billion in cash, suggesting he expects better buying opportunities to come.
It's the vibe, but not much else. Super balance calculations default to earnings rates of 7.5%, but that's in the past. Global experts suggest financial plans are now dreaming at this level.
A study of actual spending habits shows retirees have a faster-than-expected drop-off in spending in later years, casting doubts on financial plans that assume increasing expenditure over time.
There is a remarkable concentration similarity between the Australian and US stock markets that has delivered poor results for Australians and great results for Americans (and global investors). As the share prices of five Australian banks have tanked, the prices of five US technology companies have surged. Each group now represents 20% of their respective indexes, but the journey has been a disaster for many Australians.