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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.
When we look back five years from now, which companies will we regret not having bought at today’s prices? The next opportunities come from focusing on the long term, not the next few months.
The ability of countries to support their economies today turns on fiscal practices set well before this crisis. Increasing levels of debt escalate overall risk, and tie our hands in the future.
It might be a 'black swan' event, but the market is down only 15% since its peak. Looking back at an article written in 2008 reveals the uncertainty at the time was similar to the unknowns now.
There have been 11 occasions in the 148 years between 1871 and 2019 when US stocks destroyed at least 25% of value for investors. What has been the best strategy to recover the losses?
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.
The tax cost of a ‘portfolio makeover’ from moving equities to a more efficient structure may now be minor compared with the benefits. The market fall is not just an opportunity to find bargains.
Are analysts who repeatedly issue warnings that do not come true crying wolf about an imaginary risk of inflation? The problem is governments may become addicted to imprudent deficit spending.
Rather than tying spending only to the income generated by a portfolio, a total-return approach encourages the use of capital returns when necessary to meet defined goals.
With about $350 billion of new government spending announced to combat COVID-19, the obvious question is whether Australia can afford it, especially when national income will fall rapidly.
The previous austerity of the Coalition Government has been tossed aside to deal with COVID-19, but at some point, debt will be repaid. Are policies once considered off-the-table now a target?
Australia is in a relatively good position to borrow $200 billion, with the RBA using printed money to buy bonds in the market. The long-term consequences are better than the alternative.
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.