The three biggest drains on our money are paying for housing, food and transport. And there’s no getting away from the fact that it is unlikely we can live without any of the “big three”. Here we look at some ways of how to save on these items...
Australian House Price Crash?
A common narrative on the Australian housing market is that it’s in a giant speculative bubble propelled by tax breaks, low interest rates and “liar loans” that have led to massive mortgage stress and that it’s all about to go bust, bringing down the banks and the economy with it. Recent signs of price falls – notably in Sydney – have added interest to such a view...
Interest rates: US Fed begins to tighten
The US Federal Reserve provided few surprises following its September meeting. While it left interest rates on hold, it confirmed that it will begin what it calls “balance sheet normalisation” next month and continued to signal its expectation that it will raise interest rates again in December and in the years ahead...
Income & Dividends: The search for yield
MORE GREAT INVESTMENT CHARTS
As Warren Buffett once said: “There seems to be a perverse human characteristic that makes easy things difficult.” This has particularly been the case with investing where complexity has multiplied with new products, new ways to access various investments, tax changes and new regulations, all with social media adding to the noise. But it’s really quite simple and this can be demonstrated in charts...
Financial Planning: BELIEFS, ATTITUDES & REGRETS
In taking the nation's collective pulse on financial related behaviours and beliefs, the FPA Live the Dream report has uncovered some fascinating insights into how Aussies are living out their dreams and what it takes to succeed. Four personality profiles have emerged from the research: Go-Getters (33%), Cruisers (19%), Daydreamers (32%), and Builders (16%). Which personality do you mostly identify with?
THE GFC TEN YEARS ON
QUARTERLY HOUSING REPORT
The $A: THIS IS NOT 2007!
Contrary to our expectations, the Australian dollar has recently broken out of the $US0.72 to $US0.78 range of the last 15 months or so on the upside and spiked above $US0.80, its highest in over two years.
So what gives? Why has the $A broken higher? Is it an Australian dollar or US dollar story? What will be the impact on the economy? Is it on its way to parity again or will the downtrend resume? Read more here.
5 GREAT INVESTMENT CHARTS
Investing is often seen as complicated. And this has been made worse over the years by the increasing complexity in terms of investment products and choices, regulations and rules around investing, the role of the information revolution and social media in amplifying the noise around investment markets and the expanding ways available to access various investments.
But at its core, the basic principles of successful investing are simple. And one way to demonstrate that is in charts or pictures – after all, a picture tells a thousand words.
This note looks at five charts I find useful in understanding investing. Check back soon as another 5 charts are coming your way.
2016/17 Review
The past financial year turned out far better for investors than had been feared a year ago. This was despite a lengthy list of things to worry about: starting with the Brexit vote and a messy election outcome in Australia both just before the financial year started; concerns about global growth, profits and deflation a year ago; Donald Trump being elected President in the US with some predicting a debilitating global trade war as a result; various elections across Europe feared to see populists gain power; the US Federal Reserve resuming interest rate hikes; North Korea stepping up its missile tests; China moving to put the brakes on its economy amidst ever present concern about its debt levels; and messy growth in Australia along with perennial fears of a property crash and banking crisis.
Predictions of some sort of global financial crisis in 2016 were all the rage. But the last financial year provided a classic reminder to investors to turn down the noise on all the events swirling around investment markets and associated predictions of disaster, and how, when the crowd is negative, things can surprise for the better. But will returns remain reasonable? After reviewing the returns of the last financial year, this note looks at the investment outlook for the 2017-18 financial year.
Market Volatility
Three reasons not to be fussed...
For much of this year, there has been a surprising divergence between share and bond markets with shares up in response to improving growth and bond yields down in response to weak inflation.
Some feared that either bonds or equities had it wrong, but in a way it seemed like Goldilocks all over again – not too hot (ie benign inflation) but not too cold (ie good growth). However, the past week or so has seen a sharp back up in bond yields – mainly in response to several central banks warning of an eventual tightening in monetary policy.
Over the last week or so, 10 year bond yields rose 0.2-0.3% in the US, UK, Germany and Australia. This may not seem a lot but when bond yields are this low it actually is – German bond yields nearly doubled. This caused a bit of a wobble in share markets.
The big question is: are we seeing a resumption of the rising trend in bond yields that got underway last year and what does this mean for yield sensitive investments and shares? Since central banks are critical in all of this we’ll start there.... Read on
HEADLINE BLUES
It’s a tough gig being a nancial media pundit whose job requires making eye-grabbing calls on the outcomes of major world events. But at least the pundits rarely have to deal with the consequences of their bad predictions. Read more
GLOBAL POLITICAL RISKS
It's now 12 months since the British voted to leave the European Union, an event that some saw as setting off a domino effect of other European countries looking to do the same. This was also followed by a messy election result in Australia, Donald Trump's surprise victory in the US presidential election, increasing concern around North Korea and a steady flow of terrorist attacks.
The combination of which seemed to highlight that geopolitics is now more important, and perhaps more threatening, for investors than had previously been the case. But while political developments have figured highly over the last year, the impact on markets has been benign. Since the Brexit vote, global shares are up 22% and Australian shares are up 13%.
So what gives? This note looks at the main issues. Read more here
The perils of forecasting...
I am regularly called on to provide forecasts for economic and investment variables like growth, interest rates, currencies and the share market. These usually come in the form of point forecasts as to where the variable that is being forecast will be in, say, a year’s time or its rate of return. Such point forecasts are part and parcel of the investment industry. In fact, forecasts about all sort of things – from the environment to economics to politics to sport – have become part of everyday life.... Read more here
Trump Trade or Trump Bump?
Around May each year I normally get a bit wary about the risks of a pullback in shares. It seems the old saying “sell in May and go away...” is permanently stuck in my mind. And of course shares have had a great run since their global growth scare “bear market” lows in February last year to their recent highs with global shares up 31% and Australian shares up 25%, and both saw good gains year to date to their recent highs of 7% and 5% respectively. Meanwhile, although there have been several calls this year that the so-called “Trump trade” – anticipation of his pro-business policies that supposedly drove the surge in shares since the US election – is over, the risks have intensified lately given the issues around Trump, the FBI and Russia with some fearing the Trump trade is now set to reverse. This note looks at the main issues. Read more
The Perfect Storm
When tropical cyclone 'Debbie' ravaged the Australian state of Queensland in March 2017, the price paid for steelmaking coal surged 15% as the storm disrupted exports from the region. It was an illustration about how quickly prices can change. Read more
Federal Budget 2017: Snapshot
On Tuesday 9 May, the Federal Government handed down its Budget for the 2017–18 financial year.
According to Federal Treasurer Scott Morrison, this year’s Budget is founded on the principles of fairness, security and opportunity. Mr Morrison claims that the government’s proposed measures will raise almost $21 billion in revenue over the next four years, returning Australia’s budget to surplus by 2021.
Here are some of the key Budget announcements. Note that each of these proposals will only become law if it is passed by Parliament...
Read Budget Summary Here (Colonial First State)
ASX 200 to hit 10,000...
Australia's sharemarket could jump as much as two thirds over the next decade, underpinned by a booming superannuation sector and the nation's status as a 'growth haven', according to a new report by Macquarie Research.
The report released today, says the ASX 200 could climb from its current level at just below 6,000 points to 10,000 points over the next 10 years, and to 20,000 by 2040.
Jason Todd, head of Australian macro-economic research at Macquarie, said Australia's super pool, which is expected to rise from $2.3 trillion to around $8.8 trillion over the next 25 years, would provide a "backstop" to equity markets and demand for new listings.
He argues that while many view the Australian market as expensive, it is currently trading at 16 times earnings versus a long-run average of 19 times. The US sharemarket is trading at 29 times.
James McIntyre, head of economic research for Australia at Macquarie, described Australia as a "growth haven", pointing out that economic growth has outstripped other advanced economies by 0.7 per cent over the past 25 years.
...While recent changes to Australia's immigration policies showed it would not be untouched by this shift, which Macquarie sees as structural rather than cyclical, Mr McIntyre said support for immigration was still relatively high compared to other nations. He estimates this support gives the Australian economy a 1 percentage point boost compared to other advanced economies.
The Macquarie report suggests four sectors that should do well over the next few decades: education, tourism, services and agribusiness.
RATES ON HOLD
The RBA has opted to leave the official cash rate on hold at 1.5%.
As lenders continue with their out of cycle rate increases, at its board meeting today the Reserve Bank of Australia decided to leave the official cash rate unchanged.
This follows new data released yesterday that indicates the strong Sydney and Melbourne property markets may be close to peaking following APRA's intervention into the levels of interest only and investment lending the banks are funding.
It also appears the Reserve Bank is waiting to gauge the impact of next Tuesday's federal budget on overall economic sentiment.