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Thursday, 6 August 2020
Recently trending A hard dose reality check on vaccinesAfter 30 years of investing, I prefer to skip this partyHow we have invested during COVID-19Welcome to Firstlinks Edition 367Is the '4% rule' for retirement broken?
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Value investing is a long-cycle play, but a decade (and counting) of waiting for mean reversion has tested the faith of even long-horizon investors. Some basic principles are worth assessing.
Millions of inexperienced traders have entered global equity markets since the end of March, fuelled by hype in a rapidly-rising market. What is happening and how are they having an impact?
Markets always come back to fundamentals, valuations and liquidity, even when faced with a global pandemic. The key question is whether liquidity can hold up the market as the economic storm hits.
Amid the coronavirus-induced turmoil, many quality names are trading at a discount to fair value, according to Morningstar analysts. A smaller list of companies also screen for earnings certainty.
The Total Return Investing approach is elegant, it makes intuitive sense and like many investment strategies, it backtests well. But low rates suggest the theory will not hold in future.
Investing in equities for their dividends and income is not as easy as it sounds. High dividend stocks are more volatile and the dividend is not a sign of quality or value. Take care chasing yield.
Many ‘baby boomer’ retirees contemplating decades of retirement prefer a sustainable lifestyle based on a steady income that keeps up with inflation. New perceptions of risk are required to meet such income demands.
Dividend streams tend to be stable and determined by fundamental factors. Unlike capital valuations, which are affected by estimates of prospective returns which are, in turn, strongly affected by market sentiment.
Everyone’s calling for the end of the long bull-run in equities. But we don’t know if the end is a few months or a few years away, and technological change is so vast that historical lessons need to be tempered.
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.
Global stock markets could face the most volatile period since 2008-09. The danger is that US fiscal stimulus could fan inflation and lead to higher-than-expected interest rates. Risks are asymmetric to the downside.
The collapse of the Exchange Traded Note (ETN) linked to the value of the VIX was a warning to traders not to be complacent about volatility, and the entire market felt the impact.
With 160 programmes underway and billions of dollars spent on COVID-19 vaccines, investors are drawn to optimistic news. However, the company that has developed most new vaccines has a sober view.
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.
With signs that the economic recession will not be as deep as first feared, many companies will emerge strongly with robust business models. Here are the sectors with the best opportunities.
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.
The traditional 4% rule was designed to ensure retirees do not run out of money, but low interest rates and expensive equity markets question the sustainability of the level. What are the alternatives?
It’s not only products and business models that create wealth. Management teams make decisions on how to deploy capital and such actions drive vastly different outcomes over time.