I wanted to talk about the Australian budget. I’m not seeing what the admirers are seeing. At first, I was worried that I’d missed something. But yesterday’s dovish speech by Governor Lowe suggests the Reserve Bank are seeing exactly the same thing I am. Four months ago, I wrote what good government stimulus would look like. This budget
Markets move in cycles. The last 40 years have seen interest rates down from 20% to less than 1%, quietly fuelling a rise in bond returns over the same time. This has driven the return of the benchmark 60/40 portfolio (60% stocks and 40% government bonds). Over the 40 years, the benefit of the 60/40
Nobel prize winner Harry Markowitz gets the credit for coining the phrase that “diversification is the only free lunch in finance”. Add the insight that stock markets are at least semi-efficient, and a multi-trillion dollar exchange-traded fund (ETF) industry was born. And indeed, many exchange-traded funds are worthwhile investments, providing low-cost diversification. But some take
Before COVID-19 hit, Nucleus Wealth launched an Australian property calculator. The idea I wanted to illustrate is that house prices are very sensitive to interest rates. So, with interest rates so low, property was going to be stuck in purgatory: if the economy improved and interest rates increased then higher interest rates would cap property
August saw the market continue the recovery as investors cheered positive news of a potential COVID-19 treatment and welcomed a month-long succession of upbeat economic data. The month’s recovery was underpinned by a series of better than expected economic reports, including an increase in manufacturing activity, better-than-anticipated factory orders, and a lessening of new jobless
The digital games and interactive media sector is probably much larger than you think and still growing. To put it into perspective, one of the highest rating movies ever, Avengers: Endgame, grossed US$858m during its opening weekend. Grand Theft Auto V’s release, earned US$1b in just over three days. Originally just a PC/console experience, ubiquitous
Markets took a tumble last week, is this the start of the end? It could well be. Markets certainly looked like they were in the final stages of a blow-off top over the last week or two with fewer and fewer stocks driving the gains and technical issues in options markets driving stocks higher. Maybe
Australian energy policy is a mess. Investors should ignore the arguments. The antagonists are stuck in a perpetual time shift, prosecuting cases from 5-10 years ago, ignorant of the incoming change in solar economics. 5 years ago coal and gas were the cheapest sources of energy in a majority of countries. Now wind and solar
Investment markets are in the eye of the storm. The initial storm danger came as COVID-19 hit, decimating jobs and smashing demand. Governments and central banks ably stepped up to stem the damage, and investment markets calmed. But insolvencies and bankruptcies have only been delayed, not avoided and the employment recovery is unlikely to be
Many of you will have seen Trump’s announcement essentially trying to prevent pension funds from considering ethical issues for investing. To quote The Australian: After a remarkable run of success in the investment sector, ethical investing has received an unwelcome jolt from the US government with a Trump administration proposal to remove so-called Environmental, Social and
We are in a strange political environment. Globally there have been trillions of dollars of government stimulus announced, deficit hawks have turned chicken, and formerly staunch opponents of government intervention have been leading the charge. How should investors assess each government stimulus announcement? One day the Australian government told us they had the right level
Diversity issues have exploded into the global zeitgeist over the past few months as Black Lives Matter protests have rocked cities around the world. From an investment perspective, diversity is an interesting concept. There have been a lot of studies into the diversity of gender and race on company performance with, well, diverse results. The
An ounce of prevention is worth a pound of cure. Coronavirus has shown this to be accurate, both in managing the virus and in managing investment portfolios over the year to 30 June. At the end of January, we inoculated our portfolios against coronavirus. Our best performing fund in an absolute sense was our international
May saw share markets extend their bounce in the face of worsening economic conditions. In particular the last week of May and the first week of June we would characterise as a blow-off top. Value and cyclical stocks rallied hard, completely at odds with earnings and economic outcomes. Our portfolios continue to be positioned for
See our Coronavirus data Dashboard for individual country data. COVID-19 statistics and cases around the World We think there is some effect from seasons, but poor or delayed responses swamp any benefit. In wealthier southern hemisphere countries, like Australia and New Zealand, the cold weather does not appear to have had an impact on
There is a decent argument that stock markets have condensed an entire three-year cycle into three months. While there are other factors at play, robotic trading is accelerating both the speed and magnitude of stock market movements. I’m not expecting robots to go away, and how investors look at the market will need to adapt.
Stock markets have dislocated from fundamentals. The economic fundamentals are almost as bad as they have ever been. Stock market valuations are almost as expensive as they have ever been. But that hasn’t concerned markets for the past six weeks and, to be frank, it doesn’t look like concerning markets any time soon. This is
April saw a bounce back in share markets after March was one of the worst months ever. Our portfolios continue to be positioned defensively and so only took a limited part in the bounce. Over the last year, our Tactical Growth fund is beating the Chant West median superannuation fund by 10%. In our direct
What’s our medium to long-term outlook on Australian banks? We are not positive on Australian banks in the medium term. Australian banks will have a time to shine again. That time is not while staring down the barrel of the highest unemployment rate seen since the Great Depression and an extended period of close to
Chant West finally released its returns for superannuation funds for last month. Our growth fund smashed the median fund by 9.4% in March, courtesy of our aggressive move out of shares at the end of January. Our other funds also considerably outperformed their benchmarks. Unlisted Assets And those results don’t include the “massaging” of unlisted asset
One of our most frequent investor questions is around our government bond holdings and the unique risks that low-interest rates present. Government (as opposed to corporate) bonds are typically a low-risk investment. However, there plenty of doomsayers for the government bond market calling for a bond Armageddon. And the doomsayers are (technically) correct that if
A lot of people think a model and a forecast are the same thing. They aren’t. They are very different and knowing when you can forecast, and when you can only model is a critical investing skill. Coronavirus forecasting is a testament to the difference – many elements can be modelled, very few can be
Nucleus Wealth’s Head of Investments Damien Klassen was recently featured on ausbiz TV with the inside word on many Superannuation funds not writing down their significant balances of unlisted assets, and the prisoners dilemma it causes. This is an issue Damien has written about extensively as of late and sees as a major issue for
March was one of the worst months ever for stock markets. As discussed in our January and February reports, our portfolios were positioned for this outcome. Given we can only hold blue-chip liquid assets with no shorting or derivatives, our performance was as good as we could have hoped: Our tactical funds ranged from down
Most superannuation funds, and especially industry funds have significant balances in unlisted assets. Many are telling you that these assets haven’t lost money, or are only down a little despite sharemarkets being down close to 30%. This gives rise to perverse incentives for superannuants: if you leave one of these funds now, you will get
MB Fund’s Head of Investments Damien Klassen was featured in a Fund Manager Q&A today with Livewire Markets focused on Nucleus having called the possibility of Coronavirus causing widespead crashes in January when there were just 400 cases. Livewire note what’s happened since: In just 9 weeks, those 400 cases have exploded to over 400,000
I don’t think performance fees help. Actually, I suspect performance fees probably do more harm than good. Reason 1: Work smarter not harder First, it is tough to incentivise people to be smarter. Numerous studies have shown that while bonuses make people work harder at simple tasks, they don’t make people smarter. Some even argue it makes people worse at
Chant West released its returns for superannuation funds for last month and a preview of the March massacre. Our funds beat the benchmarks by up to 3.7% in February. In March returns to date our funds look to be beating benchmarks by closer to 10%. We moved decisively into international cash and bonds at the
One factor I have been watching closely is the spread of the coronavirus through summer or tropical countries. For most of February, it appeared travellers brought COVID-19 to summer or tropical countries, but the spread within those countries was limited. That looks to be changing. The raw chart comparing the two still suggests a stark
For a few weeks in late January and early February, stock markets suspended belief. Pundits on every channel emerged, suggesting a small economic dip followed by a massive stimulus package meant it was time to bid expensive stocks even higher. Meanwhile, in the real world: Earnings growth had already stalled. Valuations had reached lofty heights
