Damien Klassen

1

Asset allocation vs stock selection in portfolio returns

There was another entry into the academic statistical war that makes up the debate between whether asset allocation or stock selection is more important from ReSolve Asset Management recently. The full paper is technical, full of principle component analysis and the discussion of the appropriate correlations to use between markets (if that sort of thing appeals

12

Coal still doomed

The new look US Department of Energy released a big report last week on the power industry. As a reminder this is the report commissioned by the new Secretary of Energy, Rick Perry, who seemed as if he had already written the conclusion that “coal was king” and was just looking for someone to come

2

International shares are less volatile than Australian

Investing can be a volatile ride, the last few days have reminded us. The last few days have also reminded us why holding international equities is often beneficial for Australian investors – the Australian dollar acts as a shock absorber on returns when volatility hits, which is exactly the opposite effect that international investors get investing

25

Money Laundering for Dummies

The bit I don’t get with the whole CBA money laundering through ATMs is why? The fees are so small. If you are going to launder money you need to: (1) take a hefty fee (10-15% should be an absolute minimum); and (2) obtain leverage over the criminal for future use. Macrobusiness has numerous times

19

Where to invest internationally

Given: (1) a spike in the AUD to 80c vs the USD (2) an increase in the interest in our international fund and (3) that our tactical asset allocation portfolios remain heavily overweight international, I thought it worth expanding on our international equities portfolio and its exposures. It’s a tough time to be making investment

49

Are electric vehicles cost-competitive?

The biggest risk to the thoughts I have presented on energy costs are the assumptions about the cost of batteries. Battery costs have been shrinking at 20% per annum for the last few years. If that cost improvement continues for the next 5-10 years then disruption for the energy sector will have arrived. If it

20

Energy/Battery price update

Last week we got an update from the US EIA on the growing differential between electricity prices throughout the day – the spread is now out to $45/mWh between prices at 1pm and prices at 8pm: Source: EIA Given this, it is worth a quick update of where prices stand in our journey to energy

7

Are oil stocks cheap?

Quick chart from the Wall Street Journal / BMI overnight asking the question: Are energy stocks undervalued?   The answer is no. No, they aren’t. And even if oil stocks were undervalued this is precisely the wrong valuation chart to look at. I’m not saying the Price to Book ratio shown above won’t rise –

3

Robo-advice conflicts

Bloomberg ran a story this week about conflicts of interest in the robo-advice world with a few choice digs: Some of the big banks’ new algorithmic programs may favor funds from companies that pay the banks millions of dollars for access to their wealthy clients. … There’s a risk that the banks’ robo programs could

14

How do the rich get richer quicker?

There are a few studies that show that the richer you are the better your investment returns – Thomas Piketty the French economist is probably the most well-known author in this space. A recent Vox article digs into these returns using detailed Swedish data and essentially finds the same thing. The top 5-10% of households

49

Death to the Death Tax!

The front page of the Australian is highlighting that the Labor party is starting to make inequality an issue for the next election, and Leith ran a post yesterday about the Labor party and a possible inheritance tax for next year. I find the whole inheritance tax debate fascinating. In my experience Australian’s have 3

43

Why property is such a compelling investment in an SMSF

There is sometimes confusion about the returns available on property in a self-managed super fund (SMSF) – especially as the mathematics starts to get confusing with relative rates of return, real vs nominal and opportunity cost vs risk, before tax and after tax returns. But I have a much easier way to explain why it

26

Why does the MB Fund own some banks and miners?

I’ve had a number of discussions with investors over the last few weeks about investing in the Macrobusiness fund versus “do it yourself” investing and thought it worth aggregating the discussions into a post. Part of what I want to do with the MacroBusiness fund is to de-mystify portfolio investing. Many parts of investing are

53

Buy or sell the Syrian missile strikes?

The US missile strikes in Syria today create a considerable investment issue. On the bullish side, US intervention in Syria to help stop the descent into a failed state could stem the flow of refugee from Syria and potentially save hundreds of thousands of lives. Stemming the flow of refugees (the UN estimates there are

8

Are machines taking over the stock market?

There have been a bunch of articles out in the last week about the rise of the machines driving fund managers out of business. The headline is way more exciting that the details though. The detail is that computers are making fund managers more efficient. From the NYT Score one for the machines. The largest

7

Buy or sell the US dip?

No market goes up in a straight line, and so the US stock market was due a pull back at some stage. The question that you have to ask at this point is whether this is a typical market retreat following a 4 month almost straight line rise or is it something more sinister? The

16

When will electric cars disrupt oil?

Yesterday we had a long look at solar and battery power and how they affect the electricity sector. Today we extend the battery analysis to the oil sector and look at electric cars. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Mark

35

Special report: Where to invest to win the energy race

Fossil fuels have a limited time as viable sources of energy. And I’m not talking about saving the planet or carbon taxes, simply economics. Coal, gas, oil, all have economics based on a “scarcity curve” – the more we use them, the deeper we need to dig to find more and more expensive they become

37

Want to buy the bigotry ETF?

A new ETF from Inspire in the US is trying to show that bigotry knows no bounds (hat tip to the FT): The methodology removes from the investment universe the securities of any company that has any degree of participation in activities that do not align with biblical values, which are: abortion; gambling; alcohol; pornography;

21

Are central banks really independent?

After yesterday’s suggestion that a brick would do as good a job as Phil Lowe at the RBA owing political sensitivities, Goldman Sachs offers this chart on central bank independence: The Goldman piece was about highlighting how the US Fed doesn’t actually have that many legal protections if Trump decides to test his powers. I

22

Fundies have a shocker

Fund results out today from S&P are not good for active fund managers: The majority of Australian actively managed funds in all categories (equity and bonds) underperformed their respective benchmarks. This is the first time this has occurred across all categories in a calendar year since the first SPIVA Australia report was published in 2009.

6

Will the Snapchat unicorn bring you riches?

Snapchat is listing shortly, probably early March. It’s a unicorn, a start-up with a valuation over $1b. It’s going to be valued at lots (USD25b?), and it loses money, which makes it hard to value. In the end, it’s a lottery ticket. Late last year there was a research paper out suggesting that the investment

28

Chanticleer channels the MB fund

Shout out to Chanticleer this morning in the AFR (channeling the reasoning behind the MB fund) and talking about the problems with financial advice: … it provided a stark reminder of why the integrated advice model of the major banks cannot survive. Argo and WAM Leaders stand for the sorts of things banks struggle to