My day job is a mix of quantitative and fundamental investment analysis. What that essentially means is that I spend my time looking for situations where the numbers don’t match the narrative – and I can’t help but notice that in the Australian Federal election result the narrative and the numbers are miles apart. Scott
Final look at election odds before the election: There have been some improvements for the Coalition overall. But not enough – if every single one of the 16 “Maybe” and “Toss-up” seat falls to the Coalition, they will only have 72 seats, with Labor on 75. The Coalition then would also need to convert at
Quick update to election odds from earlier this week after the final leadership debate: Both major parties improved odds in seats they were already favoured to win, but there was little major movement elsewhere. Things still look grim for the Coalition: If every single one of the 21 “Maybe” and “Toss-up” seat falls to the
I have a working theory that overall betting odds on elections are affected by what people wish would happen as much as what people think will happen. However, my theory is individual seat odds are less likely to be affected by the casual gambler and the betting odds are likely to be dominated by either
Global equities finished the month with the best quarterly performance since 3Q 2010. Of more interest to our investors though: we have had a change of heart and made some significant portfolio changes. Our assessment is that “we are not in Kansas anymore” and, while we will return to the real world before the end
There have been a number of commentators who have made the point that we have inflation in things we need (housing, utilities, fruit&veg, hospital services) and disinflation in things that we want (ice cream, TVs, cars, washing machines etc): But this isn’t the full story. Of the eleven main categories that the Australian Bureau of
From SuperRatings last week Lonsec has sustainable (AKA ethical or ESG) super funds charging high fees and underperforming: the median performance of ‘sustainable’ investment funds is lower than the median performance of the SuperRatings SR50 Balanced (60-76) Index, comprised of traditional balanced super funds. Furthermore, the ‘sustainable’ funds have higher median fees. The combination of the
We have long been of the view that the Reserve Bank is misdiagnosing the economic environment and interest rates are not going up any time soon. Over the past few months, interest rate markets have joined our pessimism and bond yields have fallen – netting a tidy profit on longer-dated bond holdings. After today’s RBA
Chant West has the latest performance stats: Super funds have kept up their strong start to 2019, with the median growth fund (61 to 80% in growth assets) gaining 2.7% in February on the back of the ongoing rally in share markets. “World share markets have traded in a V-shaped pattern over the past few
From Bloomberg: Australia’s best-performing superannuation fund is going against the grain by avoiding cash and bonds, betting the 30-year investment horizon of its youthful members means it can ride out looming economic shocks. Hostplus, which represents swathes of the country’s baristas and restaurant waiters, had about 53 per cent of its $40 billion invested in
Stock markets continued to rally in February to recover most of the losses from late 2018, at the same time Australian government bonds have continued to price a slowing Australian economy which led to a strong performance from all of our portfolios. International +5.3%, Tactical Growth +3.4% and Tactical Foundation +2.0% were the best performers. We
The RBA was out last night discussing climate change and posted the following chart of energy costs which confirms our view that it is game over for coal: These numbers are largely in line with our numbers on electricity costs from various sources and since it has been over a year since I last
The Wall Street Journal was out yesterday with a comment expressing optimism on 2020 earnings forecasts that is wrong: While analysts have been downgrading their forecasts for this year’s revenues and earnings growth, projections for 2020 look more encouraging. The real way these things work is that analysts have forecasts, say for 10% growth for
Modern Monetary Theory or MMT seems to be being discussed everywhere lately, and a number of high profile debates between the economic establishment such as Paul Krugman, Ken Rogoff, Jerome Powell and Larry Summers on one side and MMT advocates (most of which are not economic luminaries) have broken out. The key difference in the
Quick shout out to AQR (a large US quantitative manager) who have a post out fighting the good fight against some of the big issues with funds with high levels of unlisted assets – this includes many of the large industry super funds in Australia. Three of the key issues they raise: 1. Reporting quirks
For years, the RBA has argued that an economic recovery is “just around the corner” with wages and inflation about to increase. So far the RBA has been wrong – their preferred trimmed mean inflation has been below target for 3 years and counting. The issue is the penalty for being wrong during a housing
Via Westpac’s Bill Evans: Westpac now expects the Reserve Bank to cut the cash rate by 25bps in both August and November this year. We have revised down our GDP growth forecasts for 2019 and 2020 from 2.6% to 2.2%. With the slower growth profile we now expect to see the unemployment rate lift to
Stock markets continued to rally in January and the start of February to recover most of the losses from late 2018, at the same time Australian government bonds have begun to price a slowing Australian economy which led to a strong performance from all of our portfolios. International +4.3%, Tactical Growth +3.4% and Tactical Foundation +2.2%
Stock markets around the world bounced hard off their Christmas lows to give some respectability to what would have otherwise been another poor month for shares in December. Being overweight bonds came to the rescue in our tactical portfolios, in particular, our Income and Accumulation funds benefitted finishing up around 1% for the month. The
Elizabeth Knight has a look today at impact investing and millennials: Whether or not you subscribe to the view that today’s youth are an entitled, smashed avocado-eating, device-obsessed group, it won’t be that long before they move from being just consumers to being investors. And this they will do very differently from their parents and grandparents.
Stock markets around the world have fallen precipitously over the last 3 months, and our portfolios have not been immune to the effects. We have maintained our overweight cash and bond positions which helped to stem the losses and helped our portfolios outperform – although falling by less than competitors is rarely of much solace
With the royal commission awaiting the final report, we have been treated to a range of superannuation specific stuff-ups from major institutions. Most were through the master-trust structure that pools all the money and you end up in the situation where you as an investor find yourself paying for tickets to the tennis for HostPlus super clients,
Via UBS: …Labor’s proposed franking ‘scale-back’ also makes the near-term return of excess franking credits more attractive. Figure4 ranks the franking balances of companies relative to market capitalisation in the ASX150. Among the large caps, BHP Group and Rio Tinto have already announced off-market buybacks. Our survey of UBS analysts highlights that Woolworths and Wesfarmers
Only when the tide goes out do you discover who has been swimming naked. Warren Buffett It is a market truism that a rising stock market can hide a lot of sins, and it is only when markets fall or become volatile that you can see who has been simply taking lots of risk in a
EIA put out a timely reminder of the big picture for US oil. There has never been more proved reserves or production: A big part of this is the economics of shale oil. A typical oil well has economics that looks something like this: Source: Changing Paradigm for the Oil Industry: From Peak Oil Production
Note – Chant West asked us to clarify the fund performance data below. In our original post it was unclear as to the source of the inception data. Chant West is out with its latest super fund returns: Chant West senior investment research manager Mano Mohankumar says: “Despite a disappointing October, growth funds still have a
Global equities had the worst monthly fall since May 2012 when the euro sovereign debt crisis and Grexit loomed large. The sell-off was sparked by rising bond rates, some disappointing earnings results in the US (more on outlook than numbers) and weaker global economic data. Sentiment worsened in October due to a cocktail of worries
The Oxford Institute for Energy Studies has an in-depth piece out on the cost of LNG plants, looking in detail at the drop in LNG construction costs and how maintainable the falls are in construction costs: As you can see, the Australian plants dominate the top of the cost table, with many of the more recent plants
After a strong August performance, September saw a pull-back in most of our portfolios amid concerns surrounding trade tensions, China’s economic growth and the outlook for interest rates, as the US Federal Reserve hiked US interest rates by 25 basis points. All of those factors extended into October (and then some), with stock markets down close
Better work from Chris Joye this week on bonds as he abandons the worst of his arguments about the benefits of floating rates. However, his main purpose seems to be to distract from his prior poor arguments and so he builds an irrelevant straw man and then demolishes said straw man. In his original piece,
