Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 361

Welcome to Firstlinks Edition 361

  •   10 June 2020

Weekend market update: After the S&P500 in the US fell 6.5% on Thursday, and Australia was down 2.5% for the week, many investors thought a fall back in share prices had started. Perhaps the market finally realised that ignoring economic reality was foolish. Then on Friday, the S&P500 rose 1.3% in a show of resilience, although it was down 4.8% for the week. It's being depicted as a battle between bearish professionals and optimistic retail. 


Legendary US fund manager Peter Lynch was an early adopter of what we now call 'high frequency indicators'. He would sit in shopping malls watching which stores people went into and what they bought. He would give his children money and see how they spent it. He was looking for frequent and early signs before they were recognised by the market. Lynch's Fidelity Magellan Fund averaged 29% per annum from 1977 to 1990, more than twice the S&P500. He was considered the best money manager of the 1980s.

Many traditional economic indicators are out-of-date when they are released, such as the recent GDP update for the March quarter. Treasurer Josh Frydenberg received more questions about the June quarter and he responded based on early feedback from the Reserve Bank. The market has developed many high frequency indicators which have become far more sophisticated than Lynch's sitting around malls (although with little evidence they are any better).

Some daily examples include travel numbers from the US Transportation Security Administration, bookings of movie tickets from Box Office Mojo and OpenTable's reporting on restaurant bookings (including for Australia). Apple is releasing mobility data for many countries and cities based on requests for directions on Apple Maps. Australia is shown below, indicating how quickly driving is recovering but not public transport.


Another example from HotelNewsNow is hotel bookings, with the data below for the US showing the usual seasonal trends, the fall off a cliff in March and the start of a recovery.

By watching these early signs, investors try to stay ahead of the pack. It's a game anyone can play: how busy is the car park at your local shopping centre? What does your favourite coffee shop say about business? Are your friends buying as much stuff as normal or saving more? (Some examples above come from Bill McBride of Calculated Risk).

In this weekend's edition ...

How would you like a portfolio of quality shares especially selected by a famous, highly-experienced fund manager at a 20% discount to their market value. Well you can, every day of every week. What's the catch?

The stock market is booming in the middle of a recession, and while this one is unlike anything we have seen before, Ashley Owen shows a rally is what usually happens. It's not so weird.

Yes, it's that time of year with a few weeks left to tidy up financial accounts, with some special features in super funds including SMSFs. Liam Shorte identifies 20 tips for FY2020

Many investors fear they have missed the bargains but Katie Hudson explains what her team looks for in a stock market rebound like this one. 

There's little doubt the majority of professional investors have been shocked by the market's recovery. Sean Fenton says the usual price signals a market needs have been lost in a sea of central bank liquidity, and Moray Vincent argues the extent of the rises simply cannot be justified. We are returing to pre-COVID levels as if no long-term damage has been done to the economy.

The market (and Donald Trump) was excited by the US jobs gain last week but it's good to put it in perspective. Do you consider one of these diagrams on the same data highly misleading?

Source: Bureau of Labor Statistics by Ella Koeze via NY Times

Many retirees will know the difficulties juggling around assets, eligibility for the age pension and the vagaries of the taper test, as explained by Andrew Boal. 

Finally, we reprise an article where Chris Cuffe warns about investing in unit trusts during June. Watch you do not convert your capital into taxable income.

This week's White Paper from UBS gives the view of Nobel Laureate Sir Christopher Pissarides, a labour market economist, on the epidemic and the way markets are responding.

Graham Hand, Managing Editor


Latest updates

PDF version of Firstlinks Newsletter

Australian ETF Review for May 2020 from BetaShares

ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade

Indicative Listed Investment Company (LIC) NTA Report from Bell Potter

Monthly Investment Products update from ASX

Plus updates and announcements on the Sponsor Noticeboard on our website



Leave a Comment:


Most viewed in recent weeks

How to enjoy your retirement

Amid thousands of comments, tips include developing interests to keep occupied, planning in advance to have enough money, staying connected with friends and communities ... should you defer retirement or just do it?

Results from our retirement experiences survey

Retirement is a good experience if you plan for it and manage your time, but freedom from money worries is key. Many retirees enjoy managing their money but SMSFs are not for everyone. Each retirement is different.

A tonic for turbulent times: my nine tips for investing

Investing is often portrayed as unapproachably complex. Can it be distilled into nine tips? An economist with 35 years of experience through numerous market cycles and events has given it a shot.

Rival standard for savings and incomes in retirement

A new standard argues the majority of Australians will never achieve the ASFA 'comfortable' level of retirement savings and it amounts to 'fearmongering' by vested interests. If comfortable is aspirational, so be it.

Dalio v Marks is common sense v uncommon sense

Billionaire fund manager standoff: Ray Dalio thinks investing is common sense and markets are simple, while Howard Marks says complex and convoluted 'second-level' thinking is needed for superior returns.

Fear is good if you are not part of the herd

If you feel fear when the market loses its head, you become part of the herd. Develop habits to embrace the fear. Identify the cause, decide if you need to take action and own the result without looking back. 

Latest Updates


The paradox of investment cycles

Now we're captivated by inflation and higher rates but only a year ago, investors were certain of the supremacy of US companies, the benign nature of inflation and the remoteness of tighter monetary policy.


Reporting Season will show cost control and pricing power

Companies have been slow to update guidance and we have yet to see the impact of inflation expectations in earnings and outlooks. Companies need to insulate costs from inflation while enjoying an uptick in revenue.


The early signals for August company earnings

Weaker share prices may have already discounted some bad news, but cost inflation is creating wide divergences inside and across sectors. Early results show some companies are strong enough to resist sector falls.


The compelling 20-year flight of SYD into private hands

In 2002, the share price of the company that became Sydney Airport (SYD) hit 80 cents from the $2 IPO price. After 20 years of astute investment driving revenue increases, it sold to private hands for $8.75 in 2022.

Investment strategies

Ethical investing responding to some short-term challenges

There are significant differences in the sector weightings of an ethical fund versus an index, and while this has caused some short-term headwinds recently, the tailwinds are expected to blow over the long term.

Investment strategies

If you are new to investing, avoid these 10 common mistakes

Many new investors make common mistakes while learning about markets. Losses are inevitable. Newbies should read more and develop a long-term focus while avoiding big mistakes and not aiming to be brilliant.

Investment strategies

RMBS today: rising rate-linked income with capital preservation

Lenders use Residential Mortgage-Backed Securities to finance mortgages and RMBS are available to retail investors through fund structures. They come with many layers of protection beyond movements in house prices. 



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.