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Wednesday, 12 August 2020
Recently trending After 30 years of investing, I prefer to skip this partyAustralian house prices: Part 2, the bigger picture How to handle the riskiest company results in historyAustralian house prices: Part 1, how worried should we be?Welcome to Firstlinks Edition 367
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Most Australians are comfortable in retirement provided they own their homes. We’re failing retirees who rent but we also need to include more of the family home in the pension assets test.
With more people living longer, retirement expectations are being reshaped and redefined. Now is the time to consider the financial and cultural solutions for making the most out of the gift of a longer life.
In the final Leaders' Debate, the Prime Minister asked why Labor wishes to deny a tax deduction for additional personal concessional contributions, reinstating the old 10% rule. What's the logic of this complex rule?
The main focus in retirement planning should be on the entire return from a portfolio, not just the income generated, and this might help some people in managing changes due to Labor's franking credit proposal.
With almost one thousand people entering retirement in Australia every day, they face different challenges to managing an investment portfolio in the accumulation stage.
The current system is complex and inequitable, and those most affected by aged care anomalies are often least able to understand the consequences.
Retirement is not a steady state of more time for holidays and family. Planning must allow for the onset of part-disability and disability, and costs can rise significantly in the final 'frailty' years.
The financial concerns of those in or close to retirement are focussed on health and housing. Lower interest rates, rising healthcare costs and lifespan uncertainty legitimately compound those concerns.
Australian retirees' access to dividend imputation refunds justifies a bias towards Australian equities in retirement, and the loss of refunds will have significant portfolio and income implications.
The National Seniors Australia (NSA) survey reveals that retirees want access to regular and stable income, even at the expense of lower returns. The need to preserve capital reduces tolerance of losses.
Preferences revealed by actual investing behaviour are often different to preferences stated in surveys. Financial planners and super funds should use newer analyses that helps understand the discrepancies.
Life expectancies have increased dramatically since the nineties, but the uncertainty is forcing retirees to live too frugally. The super industry is switching its attention to the drawdown phase to find better solutions.
Eventually, prices become so extreme they bear no relationship to reality, and a bubble forms. I believe we are there today, not for all stocks but for many in the technology space.
There is good reason to believe the negatives will continue to outweigh the positives over the next 12 to 18 months. There is more concern about house prices than the short-term indicators suggest.
It is better to miss a results bounce and buy after the company has delivered than it is to step on a landmine. With such uncertainty, avoid FOMO by following these result season investing tips.
Three key indicators are useful for predicting the short-term outlook for house prices, although tighter lockdowns make the outlook gloomier. There is enough doubt to create cause for concern.
There is a similarity between the current health crisis and economic crises of the past. For COVID-19, record amounts of biotech funding from government agencies and private companies are looking for a vaccine. Likewise, central banks once struggled treating recessions but the 'vaccine' now is record amounts of financial stimulus to ensure liquidity. While the world awaits a COVID treatment, markets are purring along, at least until side effects hit.
Imagine you had perfect foresight about COVID-19 at the start of the year. You correctly foresaw that the global pandemic would kill over 700,000 among 20 million infections by August. In Australia, borders would close, cities would be locked down, most mortgagors would be on income support and companies would be allowed to trade while insolvent. You then had to guess how much the stock market would fall. Would you say about 10%?