MB Fund Podcast: Is Growth the new Yield? With David Lane of Pitcher Partners

After 5 years of falling RBA rates and the fact that income needs are rising against falling “safe” investment returns, what can clients do? Growth was good before March this year, but what now?

Is it a short term hit to growth or something more sustained and how can this be used to provide income when other avenues are now unsatisfactory?

In today’s investment webinar MB Fund’s Head of Investments Damien Klassen, Head of Operations Shelley George, Head of Advice Tim Fuller and David Lane of Pitcher Partners investigate ‘is Growth is the new Yield’?

View the presentation slides here

 

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Tim Fuller is Head of Advice at the MacroBusiness Fund, which is powered by Nucleus Wealth.

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Tim Fuller is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Nucleus Advice Pty Ltd – AFSL 515796.

Tim Fuller

Comments

  1. Tim FullerMEMBER

    Our viewer question of the week: Which would you prefer between income or capital gains?

    • Depends where you are in the life cycle: working or retired.

      That said, my in-laws, both in their ’70s, both with good sized equity portfolios definitely enjoy a capital again or two, along with some income.

    • Haywood JablomyMEMBER

      In theory, if you get the slowly increasing income return you need to hedge against inflation, the capital gains should follow. Unfortunately both seem to suffer considerable periodic setbacks.

  2. With derivatives it is easy to design a product where you pay the periodic growth out as a yield.

    In the end, they are two sides of the same coin (tax features apart). If I have a stock worth a dollar today and a $1.10 next dividend period – do I care if it pays a 10c dividend or not. Either I have a share worth $1.10 or a share worth $1.00 and 10c cash. If it doesn’t pay a dividend and I need some cash I can sell 10c worth of shares.

    • But you’d only have ~90% of the shares you had?
      That’s the problem with 0% interest rates – those who wanted to keep 100% of their investment have to dilute the principal ( by your ~10%) to live from.
      Eventually – it’s all gone.
      Dividend payments – or interest at above 0% – preserves capital. Failure to pay a dividend (or pay an interest return) destroys capital.

  3. From Steve Blumenthal (sign up he is free and brilliant) – https://hoisingtonmgt.com/pdf/HIM2020Q2NP.pdf

    First, with over 90% of the world’s economies contracting, the present global recession has no precedent in terms of synchronization. Therefore, no region or country is available to support or offset contracting economies, nor lead a powerful sustained expansion.

    Second, a major slump in world trade volume is taking place. This means that one of the historical contributions to advancing global economic performance will be in the highly atypical position of detracting from economic advance as continued disagreements arise over trade barriers and competitive advantages.

    Third, additional debt incurred by all countries, and many private entities, to mitigate the worst consequences of the pandemic, while humane, politically popular and in many cases essential, has moved debt-to-GDP ratios to uncharted territory. This ensures that a persistent misallocation of resources will be reinforced, constraining growth as productive resources needed for sustained growth will be unavailable.

    Fourth, 2020 global per capita GDP is in the process of registering one of the largest yearly declines in the last century and a half and the largest decline since 1945. The lasting destruction of wealth and income will take time to repair.

    On Recessions:

    The World Bank indicates that a record 92.9% of the world’s countries are in recession in 2020 (Chart 1). This level is well above the previous high recorded in the Great Depression of 83.8%.

    It also exceeds the highs registered in 1914 at 70%, 1918-1921 at 70%, and 2008-09 at 61.2%. There have been 14 global recessions from 1871 to 2020. The percentage of the world’s economies in recessions was generally not highly coordinated, with an average of 54.3%.