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Latest Insights
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- Macro & Markets
Fantastic Beta and Where to Find Them
30 Mar 2021 |
By Jesse Imer
READ TIME 4 mins
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Diversification is an investment process that seeks to lower portfolio risk in order to achieve a lower variability in returns. The importance of diversification only started to be a mainstream economics concept in the 1950s, when Harry Markowitz wrote his...
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- Wholesale Investments
Weekend Reading | “Running of the Bulls”
26 Mar 2021 |
By Max Pacella
READ TIME 6 mins
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- Macro & Markets
“Mayday, Mayday, Mayday. This is the Ever Given”
26 Mar 2021 |
By Darren Letts
READ TIME 4 mins
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Petroleum is the most versatile fuel source ever discovered, it’s the lifeblood of the modern global economy. We use petroleum products to travel in vehicles, heat buildings and produce electricity in the industrial sector. The petrochemical industry uses petroleum as...
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Australian investors are all-too-familiar with property; owning anything from a piece of land to a newsagency is part of the great Australian dream. But when it comes to performance over the last year, and what economic sentiment you are expressing...
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One of the tell-tale signs of the US housing bubble and the subsequent subprime mortgage crisis and credit crisis – later labelled the Global Financial Crisis or Great Recession – was a surge in house prices that peaked in 2006,...
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Infrastructure as an asset class seems to offer one solution to the ‘inflation hedge’ many investors are seeking in this current environment. Despite this, many investors have little to no allocation in the sector due to lumping it in with...
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The world is now into month four of COVID-19 vaccinations, and we’re one month since starting the inoculation process in Australia. It’s also been one month since our last update. On 22-Feb: there was 186mln doses administered worldwide across 82...
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- Wholesale Investments
Weekend Reading | “Schoolyard Antics”
19 Mar 2021 |
By Max Pacella
READ TIME 6 mins
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Welcome back to our weekend reading, This week saw world-moving economic announcements and global dissonance around vaccines, which were treated in equal weighting by the news cycle to two world leaders slinging playground insults and Elon Musk delivering the best...
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For the last month financial market commentary, when not discussing the merits of Bitcoin, has been focused on how the tech sector which has lost its performance lead and the rotation from Growth to Value has accelerated, triggered by rising...
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- Macro & Markets
Exploring Current Market Psychology
18 Mar 2021 |
By Max Pacella
READ TIME 6 mins
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Like a high school essay, let’s outline a thesis statement at the very beginning of this note: Anybody with the conviction, the capital and the aptitude should be able to access and participate in financial markets. Furthermore, investors should always...
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- Macro & Markets
The USA’s New Plans for Asia Pacific
17 Mar 2021 |
By Jesse Imer
READ TIME 4 mins
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Title: The USA’s New Plans for Asia Pacific While financial markets have been focusing on; bond markets sell offs,equity market earnings season,COVID-19 vaccine rollouts,cryptocurrency developments, the United States has been rolling out a comprehensive strategy against China and has been...
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Space, the final frontier. Although I am more of a Star Trek -Next Generation man, the words of Captain James T. Kirk have captivated human imagination since the 1960s, as an increasingly technological world looked to the stars for new...
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In July this year, the Communist Party of China (CCP) will commemorate its 100th anniversary – and considering the global superpower is poised as one of world’s most robust economies after the pandemic, we can expect to see a party...
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- Wholesale Investments
Weekend Reading | “What Goes Up”
12 Mar 2021 |
By Max Pacella
READ TIME 6 mins
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Welcome back to our weekend reading.There are no middling stories anymore – either everything is going up, or else everything must come down. This week was a litany of rallies, collapses, new records and slumping potential. Like a frustrated parent...
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For any multi-asset portfolio, the first steps for most investors will be their asset allocation decisions.What are my inflation expectations? How long is my investment objective? How much capital will be exposed to equities? What room does that leave for...
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- Macro & Markets
The Building Blocks of our Future: Investing in Cryptocurrencies (Part 3)
11 Mar 2021 |
By Mike Young
READ TIME 6 mins
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By now, we are all used to hearing the same old stories – growing COVID-19 infections, the U.S. government’s newest stimulus bill, and the price of Bitcoin going up. Whilst cryptocurrencies have been around for 10 years, several structural tailwinds...
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- Macro & Markets
International Women’s Day & Economic Reform
10 Mar 2021 |
By Jesse Imer
READ TIME 6 mins
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International Women’s Day (IWD) is not new. Its origin dates back to February 28th 1909, thanks to the Socialist Party of America in New York City. Attendees cited the need for a reoccurring and more formalised event with credit to...
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There has been a lot of hype over the last few weeks regarding the sell-off in sovereign bond yields, most of it fixated on longer-duration government issued fixed-rate bonds of maturities 7+ years from now (2028 or later). Due to...
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- Wholesale Investments
Weekend Reading | “A Series of Blow-Ups”
05 Mar 2021 |
By Max Pacella
READ TIME 5 mins
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Welcome back to our weekend reading.A quieter week this week, littered with a lot of interesting stories that unfortunately mean we’ll need to harp on about Elon Musk and crypto again – don’t worry, I promise to make enough snarky...
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Momentum is important, it makes movement easier. For the Australian equity market, the momentum was driven by the earnings recovery that a successful vaccine rollout would create post lockdowns globally coupled with the valuation expansion falling interest rates allowed. These...
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- Macro & Markets
- Uncategorized
Investing in Emerging Markets
04 Mar 2021 |
By Max Pacella
READ TIME 5 mins
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Emerging Markets (EM) have been a compelling investment case for the last few decades. This has been for a number of reasons; Modern portfolio theorists like EM because it represents a risk diversification tool, both geographic and sector, across equities...
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Bond markets are not meant to be interesting. Bond markets are where governments and corporates can raise money via borrowing, to finance their operations, projects and objectives. Bond markets are meant to be orderly and stable, a place of mathematics...
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- Macro & Markets
The Building Blocks of our Future: Cryptocurrencies (Part Two)
02 Mar 2021 |
By Mike Young
READ TIME 6 mins
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Investor interest in cryptocurrencies, both from institutions and investors, has exploded over the past six months. Although cryptocurrency has been an existing asset class for over a decade, its renewed public profile makes it important for investors to gain a...
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The human brain is a funny thing. There is a psychological phenomenon called the mere-exposure effect, a type of familiarity bias, where people tend to develop a preference for things merely because they are familiar to them. In investing, this...
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- Wholesale Investments
Weekend Reading | “The Roaring Tens”
26 Feb 2021 |
By Max Pacella
READ TIME 7 mins
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Welcome back to the Weekend Reading It’s been a turbulent week, as I write this our market is redder than an English backpacker after a day in the sun and news of rising 10Y bond yields have created some particularly...
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- Macro & Markets
Banks and the Search for Yield
26 Feb 2021 |
By Max Pacella
READ TIME 6 mins
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Now that the major bank results are sitting comfortably in our hindsight, and following on from our banks outlook earlier this month, today we’ll consider some further views from the street on bank stocks; both as a rotational play and...
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- Macro & Markets
The Building Blocks of our Future: Blockchain (Part One)
25 Feb 2021 |
By Mike Young
READ TIME 7 mins
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Cryptocurrencies are the talk of the town, with their total market capitalisation increasing from $344 billion USD on the first day of October 2020, to $1.46 trillion USD as of the 24 February 2021, representing a 324% increase over just...
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- Macro & Markets
Central Bank Policy and Geopolitical Stress
24 Feb 2021 |
By Jesse Imer
READ TIME 6 mins
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Yesterday I had the opportunity to speak at the Institute of Managed Accounts Professionals (IMAP) conference, held in Sydney. First and foremost, I would like to thank IMAP for the opportunity to attend and speak to the large cohort of...
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- Macro & Markets
A Guide to Performance Metrics
23 Feb 2021 |
By Max Pacella
READ TIME 5 mins
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When reviewing a portfolio or managed product, advisers and investors are inundated with a variety of performance metrics, some of which may be outside their field of expertise and therefore are ignored in favor of the historical performance. This is...
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The world is now into month three of COVID-19 vaccinations, with over 186 million doses administered worldwide, across 82 different countries, at a rate of 6.34 million doses per day at the current run-rate. Unfortunately for Australians, we are not...
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- Wholesale Investments
Weekend Reading | “The Comeback”
19 Feb 2021 |
By Max Pacella
READ TIME 9 mins
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Welcome back to our weekend reading. This week has been a story of ‘coming back’, for better or for worse. As LL Cool J said in 1990, “don’t call it a comeback, I been here for years, rocking my peers...
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- Currency & Cash
The Rise (and Fall?) of the USD
19 Feb 2021 |
By Mike Young
READ TIME 7 mins
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Over time, there are three things which have held true – death, taxes and a change in the global reserve currency. By nature, all predecessors to the USD’s rule as the global reserve currency have fallen – brought down by...
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The equity market is the subject of a lot of polarization at the moment. In the minds of many vocal commentators, everything is either the next “big bull run”, or another sign of a bubble. Valuations are either stretched beyond...
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There was once a period of time where government bonds provided the desired income that investors required to meet their objectives. I’m talking about when “govies” used to yield 4% p.a. or higher, basically any time before the last 10...
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By the time you read this, the Hong Kong stock exchange will have re-opened after Lunar New Year, with Shanghai bourse remaining closed until 17 February. Global stock markets are subject to seasonal influences throughout the year, as the usual...
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It has become an ever-increasing topic of discussion in how to avoid potential market drawdowns this year or next, yet still be invested. In fact, for many balanced and growth mandates, they are required to maintain allocations to equities in...
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- Wholesale Investments
Weekend Reading | “Here We Go Again”
12 Feb 2021 |
By Max Pacella
READ TIME 6 mins
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Welcome back to our weekend reading.Happy Lunar New Year to you all, may the Year of the Ox bring fortune, health and a continuing bull market if you’re long equities (an ox is a bit like a bull, right?)We first...
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- Equities
Implications of a rising AUD on ASX shares
12 Feb 2021 |
By Mike Young
READ TIME 4 mins
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The AUD/USD has appreciated by 33% since March 2020 and has brought foreign exchange (FX) risk into the forefront of the minds of investors looking at US equity and fixed income markets. We have discussed the factors which have driven,...
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Yesterday, Commonwealth Bank (CBA:ASX) was the first of our major banks to report 1H21 results, firing the starting gun on what will be several weeks of news coming out of the largest ASX sector. In light of this we thought...
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Prelude In order to provide you daily content in our morning notes, we are usually organised ~2 weeks in advance with lists of topics and thematics that we hope will resonate with you. Originally, I had planned to write this...
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Investors do not always need to be economists. In fact, one of my favourite investors – Peter Lynch of Fidelity – is fond of saying, “If you spend 13 minutes on economics a year, you’ve wasted 10 minutes”. But despite...
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We tend to overconsume things that have no monetary cost. In economics, we call this the “free rider problem” where consumers do not value the inherent costs and benefits of things that are free. Think about it yourself, what is...
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- Wholesale Investments
Weekend Reading | “The Big Squeeze”
05 Feb 2021 |
By Max Pacella
READ TIME 7 mins
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Swipe, swipe, partner for life…? Dating apps have revolutionised the dating industry, with the advent of Tinder in 2013 flipping the script on existing matchmaking services by placing the onus on users to pick and choose from singles in their...
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- Equities
Healthcare Sector Overview and Outlook
04 Feb 2021 |
By Max Pacella
READ TIME 5 mins
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It is undeniable that COVID-19’s impact upon our society and economy will be felt for decades to come. We are living amongst at an inflexion point in history, in which certain priorities have been brought into focus as the pandemic...
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- Equities
Exposure to Cryptocurrency Through Stocks
03 Feb 2021 |
By Max Pacella
READ TIME 4 mins
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Much like any other designated ‘financial services guy’ in a circle of friends, if I had a dollar for every time I have been asked about buying “cryptos”, I could probably afford one whole Bitcoin. Cryptocurrency has become the investors’...
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- Macro & Markets
Current State of the Australian Economy
02 Feb 2021 |
By Jesse Imer
READ TIME 7 mins
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Australia’s economy has fared relatively better than most other Western economies throughout the ongoing COVID-19 pandemic. This is due to many factors: our isolation being an island nation that is far from many other global trading hubs; fiscal and monetary...
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Happy New Year and welcome to our first daily morning note of calendar year 2021! We hope that you all had a lovely holiday period and are rejuvenated for the year ahead. Our last morning note was published on 18...
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Today is the last note of the year.We’ll return to publishing our daily content on 1 February 2021. First and foremost, thank you for your support this year – reading our publications, utilising our platform and investment service, participating in...
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Today’s daily missive marks our second last publication for the year and the last of our 2021 outlooks, finishing with our multi-asset view. While it’s useful to derive and forecast performance objectives for specific asset classes, it’s increasingly important to...
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- Equities
International Equity Market 2021 Outlook
16 Dec 2020 |
By Rod Skellet
READ TIME 5 mins
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Next year’s global equity performance may well be shaped on what happens in the next 2 months.
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As we all unwind after this tumultuous year, many of us will turn to music to relax and celebrate. But do we ever stop and consider the growth and change in how we consume that media? Or even, how can...
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As primarily a fixed income investor, I spend an inordinate amount of time managing foreign currency fluctuations, as currency exchange rates tend to gyrate more than the underlying bond prices. As an example, it doesn’t make sense to buy a...
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“Be a symbol of perfection,Be an object, be a cultTake their praise, take the collectionAs the multitudes exalt"Elton John, “It’s Tough To Be A God” Despite what we may read in the news of late, the world has become a...
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- Macro & Markets
Central Bank Policy Fuelling Property Markets
10 Dec 2020 |
By Jesse Imer
READ TIME 5 mins
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The imposition of COVID-19 on societies across the globe may have lead investors to doubt the future prospects of commercial property, while the opposite has occurred in many nation’s residential property markets, as the rise of working-from-home arrangements has re-emphasised...
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- Equities
Australian Equity Market Outlook 2021 (Part 3)
09 Dec 2020 |
By Rod Skellet
READ TIME 7 mins
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In this final part of our Australian equity outlook notes, we look at the industrials, healthcare and communications services sectors. All three sectors were hit hard in 2020 and have yet to recover to their pre-COVID highs, something that analysts...
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- Equities
Australian Equity Market 2021 Outlook | Part 2
08 Dec 2020 |
By Rod Skellet
READ TIME 6 mins
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In the second part of our domestic outlook series, we run the ruler over: MaterialsConsumer staplesInformation technologyReal estate All four sectors have drawn attention in the past 12 months – generally for good reason – with the exception of the...
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- Equities
Australian Equity Market 2021 Outlook | Part 1
07 Dec 2020 |
By Rod Skellet
READ TIME 5 mins
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With Christmas rapidly approaching, investors and listed companies alike are probably looking forward to some quiet time over the summer break. With borders reopening in all states in Australia (thank you WA for joining the fray) many of us can...
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“Could we have kippers for breakfast,Mummy dear, mummy dear,They got to have ‘em in Texas,‘Cause everyone’s a millionaire”Supertramp, “Breakfast in America” Not chasing hot picks and waiting to ‘buy the dip’ is generally the sage advice that an experienced stock-picker...
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In a previous note published on 22 October 2020, we looked into the driving forces behind Australia’s weather, and how the respective dominance of El Nino and or La Nina impacted not only our weather, but also impacted the outlook...
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- Macro & Markets
The COVID-19 vaccine distribution dilemma
02 Dec 2020 |
By Jesse Imer
READ TIME 5 mins
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The American pharmaceutical firm Pfizer, in collaboration with German firm BioNTech, surprised the world when it announced their coronavirus vaccine showed 90% efficacy in preventing COVID-19. Days later, another American firm, Moderna, announced their vaccine has nearly 95% efficacy. Shortly...
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Economic Outlook for 2021 and US/China relations under President Elect Biden. With 2020 almost over, I have been researching what 2021 could hold, especially for Australia’s largest trading partner, China. Given that the global pandemic may have started in the...
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- Multi-Asset
Re-thinking Portfolio Composition (Part 2)
30 Nov 2020 |
By Jesse Imer
READ TIME 4 mins
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If you missed last week’s missive, I’d encourage you to take a look, as today I continue from where we left off last week. The original topic was to deconstruct modern portfolio theory, in order to build portfolios that meet...
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“I’m gonna keep on the runI’m gonna have me some funIf it costs me my very last dimeIf I wind up broke, oh wellI’ll always remember that I had a swingin’ time”Elvis Presley, “Viva Las Vegas” Now more than ever,...
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Yesterday, I had the opportunity to speak on a panel discussion hosted by the Institute of Managed Account Professionals (IMAP) regarding what zero% interest rates mean for managed account investing, and how we should invest in defensive and income bearing...
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- Macro & Markets
Regional Comprehensive Economic Partnership (RCEP)
25 Nov 2020 |
By Rod Skellet
READ TIME 4 mins
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The largest Free Trade Agreement in the world On 15th November, Australia signed its commitment to a free trade deal almost a decade in the making: The Regional Comprehensive Economic Partnership (RCEP). 15 nations in total signed the RCEP, which...
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- Equities
Telstra: Investor day well received by the market
24 Nov 2020 |
By Rod Skellet
READ TIME 3 mins
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The last few weeks have probably been the best weeks in CEO Andy Penn’s time at Telstra, with the market warmly accepting his strategic plan for the next three years. Since succeeding David Thodey on the 1st of May 2015,...
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- Multi-Asset
Re-thinking Portfolio Composition (Part 1)
23 Nov 2020 |
By Jesse Imer
READ TIME 5 mins
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Mark Twain once observed: “History does not repeat, but it rhymes.” We are seeing parallels between current markets and 1999, the start of a ten-year period where US equities indices returned negatively. There have been 6 different “Lost Decade” periods...
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After falling victim to COVID-19 in Q2, spending on online advertising has posted a strong recovery moving towards 2021. Today we follow this recovery and consider if we can use where this advertising spending is going, between regions and sectors,...
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- Macro & Markets
Environment Social Governance: Part 2
19 Nov 2020 |
By Rod Skellet
READ TIME 5 mins
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Delving into the world of ESG is an eye-opening investigation, as the wealth of data and content that is now being assessed and incorporated into modern portfolio investment practises is enormous.
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- Macro & Markets
COVID, our economy and monetary policy
18 Nov 2020 |
By Jesse Imer
READ TIME 6 mins
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RBA Governor Philip Lowe attended the Committee for Economic Development of Australia (CEDA)’s annual dinner on Tuesday evening. The topics he spoke about are not only important to us for their investment implications, but also to understand what policies one...
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- Multi-Asset
Gold, Real Interest Rates and the USD
17 Nov 2020 |
By Jesse Imer
READ TIME 4 mins
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The world changed last week, and not just because of the US election. Pfizer announced a COVID-19 vaccine that is looking to be over 90% effective in stage 3 clinical trials. The market also knows that many other COVID-19 vaccines...
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- Equities
A good result after a turbulent week
16 Nov 2020 |
By Rod Skellet
READ TIME 4 mins
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Tencent has delivered a very robust 3rd quarter report last week, with revenue up 29% year on year (YoY), to RMB125.4bln while its adjusted net profit rose 32% YoY to RMB32.3bln.
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“Oh Superman where are you now? When everything's gone wrong somehow, The men of steel, the men of power Are losing control by the hour.” Genesis, “Land of Confusion” “So, what happens to Company X if China and the U.S....
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- Equities
On the importance of Governance (Part 1)
12 Nov 2020 |
By Rod Skellet
READ TIME 4 mins
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Investors globally have increasingly been looking at ESG criteria as a screen for investment opportunities. This is the first note of a 2-part series that looks at Governance and its lack of application in the past and why in future,...
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Equity markets and society at large welcomed the news of positive COVID-19 vaccine results from Pfizer and their partnership with BioNTech, with successful results published from their phase 3 trials of vaccine candidate BNT162b2. Understanding the process to develop a...
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It is well known that certain companies, such as the mega-tech FAANG stocks, are trading at valuations that are high relative to historical averages. If you’re wondering why – there are two main answers. Investors and traders believe the valuation...
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For investors, risk and return go hand in hand where for a potentially higher return on capital, there is a corresponding increase in risk. This is known as the risk-return trade-off. It is important to be aware that investing is...
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- Macro & Markets
Generational Wealth Transfer
06 Nov 2020 |
By Max Pacella
READ TIME 5 mins
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“And as he hung up the phone it occurred to me He’d grown up just like me, My boy was just like me” Harry Chapin, “Cat’s in the Cradle” One of the largest transferrals of wealth in history will occur...
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- Equities
Aussie Banks: an update post-results
05 Nov 2020 |
By Rod Skellet
READ TIME 4 mins
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Over the past two weeks we have seen three of the four major banks – NAB, ANZ and Westpac – report their second half results for 2020. The environment in which these results have been released has been unusual, as...
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The Reserve Bank (RBA) met yesterday and while the market predicted most of the resulting change in monetary policy setting, the Bank did provide some unexpected surprises. The point of policy In our missive on 26 October, we sought to...
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In this COVID-19 world, there has been many behavioural norms that society and individuals have been forced to accept. This manifests in an inability to catch up with friends at a restaurant, heading out to watch your favourite sport or...
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In advance, thank you to Brent Donnelly at HSBC for the two charts and providing the link to the BBC news article. "Past performance does not indicate future performance." You may have seen this statement or a similar one on...
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“Don’t care if my liver is hanging by a thread, Don’t care if my doctor says I ought to be dead, When my ugly big car won’t climb this hill I’ll write a suicide note on a hundred-dollar bill.” Dire...
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- Equities
Ant Group – The Biggest IPO in History
29 Oct 2020 |
By Max Pacella
READ TIME 7 mins
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“Today’s financial system is the legacy of the Industrial Age – We must set up a new one for the next generation and young people. We must reform the current system.” Jack Ma, Co-Founder of Alibaba on Ant Group In...
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Governments’ budget proposals are just that – proposals – meaning they are subject to amendments. In implementation, they can differ greatly from their original plan. They are based upon assumptions such as tax rates, unemployment figures, government revenue (tax receipts),...
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The conundrum continues The two schools of thought and the disparity of the relative performance of both investment styles continues to be a point of discussion amongst investors. As equity markets continue to rally in all major regions, are we...
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- Macro & Markets
Why Cut Interest Rates When They’re Near 0%?
26 Oct 2020 |
By Jesse Imer
READ TIME 5 mins
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Monetary policy has become less clear, despite central banks stated desire to promote stability and transparency. It used to be that looking at the RBA’s cash rate target and charting the yields of ASX-listed bank bill futures would provide a...
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“I’m on my way, I’m making it I’ve got to make it show, So much larger than life, I’m going to watch it growing” - Peter Gabriel, ‘Big Time’ To quote All the President’s Men (1976), “follow the money." Investors,...
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Over the last decade, our Australian dollar (AUD) exchange rate has been closely correlated to the relative change in iron ore prices. As iron ore was more highly demanded and bought, our AUD would rally against foreign currencies – all...
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Following on from our morning note on water rights, we take a look at the driving forces behind the weather in Australia and have a look at how weather can impact certain stocks and sectors. The agriculture sector is directly...
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“Well he cast his eyes upon her And the trouble soon began And Leroy Brown learned a lesson 'Bout messin' with the wife of a jealous man.” - Jim Croce, “Bad, Bad, Leroy Brown” We live in the age of...
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- Macro & Markets
When Does Government Spending Become Socialism?
19 Oct 2020 |
By Jesse Imer
READ TIME 5 mins
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I’ve used a provocative title today, but the question has been asked of me more and more in recent weeks - where government expenditure as a ratio of our overall national output (spending/GDP) is growing to higher and higher levels....
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“Money, so they say, Is the root of all evil today But if you ask for a raise it’s no surprise that they’re Giving none away.” Pink Floyd, “Money” The world is steadily gaining more wealth - with more money...
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The price of goods, services and financial assets determine our ability to consume or invest in them. If prices increase and our income does not, then we need to reduce our ability to consume or invest. In terms of goods...
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- Equities
Running the ruler over Aussie Oil stocks
14 Oct 2020 |
By Rod Skellet
READ TIME 5 mins
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In yesterday’s note we highlighted the difficulties faced by the global oil sector over the past eight months. In today’s note we are going to take a closer look at the large cap portion of the Australian oil and gas...
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If there was one industry sector that epitomises the negative impacts of the coronavirus, it’s energy, with oil being the hardest hit within the sector. The macroeconomic impact of COVID-19 has been a “once in a century” event according to...
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“Get on a TWA to the promised land. Every woman, child and man Gets a Cadillac and a great big diamond ring. Don't you know you're riding with the king?” Eric Clapton, B.B. King (2000) The adage that ‘cash is...
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There's a lady who's sure All that glitters is gold And she's buying a stairway to Heaven Led Zeppelin (1970) Yesterday’s announcement on the proposed merger of Northern Star Resources Ltd (NST.ASX) and Saracen Minerals Holdings Ltd (SAR.ASX) has focused...
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On Tuesday evening, Commonwealth government Treasurer Josh Frydenberg delivered the 2020-2021 budget (delayed since May) which was brimming with a mix of measures designed to boost near-term demand as well as lift longer-term growth and economic output. The latter, the...
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- Macro & Markets
Water Entitlements: An Alternative and Unique Asset Class in Australia
06 Oct 2020 |
By Rod Skellet
READ TIME 6 mins
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Considering the huge variance in weather over the past 12 months in Australia, where extreme drought, horrendous bushfires and now flooding rains have all impacted not only rural communities but also those in the “big smoke”, the above words of...
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- Multi-Asset
US election implications for financial markets
05 Oct 2020 |
By Jesse Imer
READ TIME 8 mins
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I’ve wrote the majority of this note on 2-October and since original time of writing, it has been reported that US President Trump and his wife have tested positive for COVID-19 and have begun their 14-day quarantine period. It would...
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Over the course of 2020, coal is certainly one of the most unloved sectors on the ASX, with a raft of headwinds impacting the sector including: COVID-19 and the direct impact on global GDP and fall in energy usage Softer...
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“But I'm all right Standing out here In the hot sun When I see the light I feel like More than just a number” Neil Young, Computer Age (1982) Apple can see your search history, Europe is protecting you, and...
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In Monday’s missive regarding the RBA’s (potential) impending rate cut and alteration of current monetary policy settings, the key sentence for me and a lot of other market participants was “Given the outlook for inflation and employment is not consistent...
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- Macro & Markets
Another RBA Rate Cut Priced In
28 Sep 2020 |
By Jesse Imer
READ TIME 6 mins
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The market is now pricing in a cut to the Overnight Cash Rate (OCR) from 0.25% for the RBA’s October 6th meeting, with potential to change other policy measures as well. Let’s take a look why. The Australian Economy and...
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“A noble craft, but somehow a most melancholy! All noble things are touched with that.” ― Herman Melville, Moby-Dick Hunting for whales I’ve been asked before to keep an eye on video game companies, often an overlooked part of the market,...
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As a daily commuter, I have noticed how social distancing has changed the overall travel experience. The commuting public that shares the same routes as I have, prioritised health through face mask wearing, and there’s less music, tablet watching and...
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That’s where I first saw Mary, On that roadside picking blackberries, That summer I turned a corner in my soul, Down that red dirt road Brooks and Dunn (2003) Some days my song references and links to my...
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The candy store paupers lie to the shareholders They're crossing their fingers they pay the truth makers The balance sheet is breaking up the sky Midnight Oil (1990) Despite the negative rhetoric behind this classic hit from Peter Garrett and...
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Ngilondoloze (Guard me) Uhambe nami (walk with me) Jersulame ikhaya lami (Jerusalem is my home) Master KG [2020] Today marks the vernal equinox so a happy first day of spring for all of us reading in the southern hemisphere....
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When the lights go down in the California town People are in for the evening I jump into my car and I throw in my guitar My heartbeat in time with my breathing Driving over Kanan, singing to my soul...
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Automobile in America, Chromium steel in America, Wire-spoke wheel in America, Very big deal in America! Westside Story The continued slide of the VIX index in recent days has given US equity markets confidence in recent days after six days...
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And it pains me so much to tell you, That you don’t know me that well… Nelly Furtado (2000) [Today is part 1 in a two-part series regarding bank funding and capital – today’s topic being about funding and...
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Cause the players tried to take the field The marching band refused to yield Do you recall what was revealed The day the music died? Don McLean (1989) November 3rd will be an important date for most Australians. First and...
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There’s a lady who’s sure, All that glitters is gold And she’s buying a stairway to Heaven Led Zepplin (1971) Last Wednesday, I wrote this note about how central banks are providing so much liquidity in an attempt to...
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A great partnership Following on from yesterday's piece on Green Steel, and the use of hydrogen manufactured from renewable sources of electricity, comes an announcement from General Motors that they are taking a 11% stake in Nikola Corporation, an electric...
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HYBRIT: Hydrogen Breakthrough Ironmaking Technology In this new world of COVID-induced change, the rapid change in focus by society and mainstream media away from environmental reform and greenhouse gas emissions to health care and job security has been remarkable. It...
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“People say I got a drinkin’ problem But I got no problem drinkin’ at all They keep on talkin’ Drawing conclusions They call it a problem, I call it a solution” Midland (2017) My song and band reference...
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It is very important to emphasise that options trading is for sophisticated and experienced investors and this report is not a recommendation to use options. This note is to explain what could be happening in derivative markets and the impact...
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Today, I want to talk about the Autumn of ’68 in the USA. While not as catchy as Bryan Adam’s “Summer of '69”, the US Autumn of 1968 was quite a notable period, but for all the wrong reasons. Calendar...
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Come senators, congressmen Please heed the call Don't stand in the doorway Don't block up the hall For he that gets hurt Will be he who has stalled The battle outside ragin' Will soon shake your windows And rattle your...
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Times are rough, but we can make it, We can work it out How can we be lovers if we can’t be friends? How can we start over if the fighting never ends? Michael Bolton (1989) This week...
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You changed it all And stopped all my pain I guess what I'm saying You're a game changer Johnny Grill (2014) The emergency authorisation granted to Abbott Labs' 15-minute coronavirus test may be the game changer we've been waiting for....
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While the iron ore price continues to hold over US$100 per tonne, the Australian miners of the red metal continue to outperform. Last week the iron ore price surged above US$125 a tonne for the first time since February 2014....
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Each year there is a large gathering of economists, financial market participants, academics, US government officials in Jackson Hole, Wyoming (USA), to discuss long-term economic policy issues of mutual concern. All the papers are available online. This year’s meetings occurred...
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Better than feared with High PE stocks driving the market. In this note, we take a helicopter view of the first 3 weeks of the reporting season here in Australia. Of the 174 ASX 200 stocks due to report, 110...
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I never made promises lightly and there have been some that I've broken But I swear in the days still left we'll walk in fields of gold Sting (2017) In this note, we have taken a look at the gold...
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Worried Australians have stockpiled fresh Australian banknotes during the current pandemic, with Note Printing Australia issuing over $10billion worth of new notes year to date, increasing the total supply of bank notes 13% from 84 to 95bln AUD. This is...
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- Equities
Equities v Bonds: What is the bond market telling us about the near term equities
25 Aug 2020 |
By Rod Skellet
READ TIME 5 mins
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A recent report from Citi, delved into this critical topic from a very macro perspective. Now, while equities are a smaller asset class than bonds, it does get a disproportionate amount of research and media comment, which highlights the importance...
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An August summer night, Soldiers passing by Listening to the wind of change Scorpions (1990) With the publication of ANZ’s Q3 results last week, we closed the reporting season for our Big Four Major banks – ANZ, Westpac,...
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Blown (blown blown blown) 'Round by the wind Thrown (thrown thrown thrown) Down in a spin Jigsaw (1975) ASX reporting season update In this note, we take a step back and look at how the Australian reporting season is panning...
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"Every gambler knows That the secret to survivin' Is knowin' what to throw away And knowin' what to keep." Kenny Rogers (1978) Following on with our dive into sectors that are technology-related, be it music, with Spotify and Apple music,...
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- Macro & Markets
Basis Risk and the Three Body Problem
19 Aug 2020 |
By Jesse Imer
READ TIME 4 mins
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Understanding the difference between risk and uncertainty is crucial in every aspect of investing. A decision involving risk lends itself to statistical analysis and econometrics, particularly if the opportunity or idea is common, and the event re-occurring. On the other...
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I saw her today, I saw her face, it was a face I loved, and I knew I had to run away. The Searchers (1977) In our note titled Doctor, Doctor, Give Me The News, we looked at the process...
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“Just a small-town girl, Livin’ in a lonely world, She took the midnight train goin’ anywhere” Journey (1981) A question we increasingly receive at Mason Stevens is if bonds are still a benefit to portfolios. The latest academic research...
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Bob the Builder Can we fix it? Bob the Builder Yes, we can! During the lockdown periods of the pandemic, one sector that showed resilience and in fact growth following the March sell-down was the DIY home improvement space. The...
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"I been laid off from work. My rent is due. My kids all need Brand new shoes." Simply Red (1985) The importance of yesterday’s CBA earnings result cannot be overstated. CBA currently holds a number of titles which highlight its...
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On 1 July 2020, Indonesia’s central bank closed an agreement with the government to fund $40bln USD at zero% interest rate, to fight the coronavirus pandemic. This is the largest debt monetisation program among emerging market nations so far. While...
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In this Covid world, Australians have had to become a bit more personal in their search for social interaction, recreation and entertainment. Depending on the level of social restrictions in place, most forms of entertainment have experienced some form of...
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Just to see you smile, I’d do anything, that you wanted me to, And all is said and done, I’d never count the cost It’s worth all that’s lost Tim McGraw (1997) Today’s note is several weeks in...
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“I’ll tell you once more before I get off the floor.” Electric Light Orchestra [1979] Last week we posted a broad-ranging discussion with many useful and interesting anecdotes relating to various market sectors. One of the charts that caught my...
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Australian Reporting Season gets going The ASX 300 stocks start reporting earnings in earnest next week, with 30 companies reporting. This season will be more poignant than most, with the market expecting management teams to give some hard perspective on...
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“Who’s to blame for the lives that tragedies claim, No matter what you say, It don’t take away the pain” P.O.D. [2001] In Australia, we’ve been relatively lucky that our Commonwealth government has given Australians clarity of government...
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“So shiny, my polyester girl” Regurgitator [1997] Real yields on 10-year US Treasuries hit -1% on Friday – a first for American history – indicating that an investor lending money to the US government (buying their bonds) would...
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After market on Thursday US time, Amazon, Facebook, Apple and Google released their results. All four stocks beat market expectation and were up in excess of 5% in the aftermarket. In these COVID times as we all adapt to various...
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- Equities
CSL: A dead leg or a shot in the arm?
31 Jul 2020 |
By Rod Skellet
READ TIME 4 mins
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One of the best performing stocks on the ASX in the last 10 years has been CSL, who only three short years ago was trading at $100 per share. Its solid and consistent rise to being, at one point, the...
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“Want to hear you say come on over, ‘cause when you tell me to come on over, I like the sound of that” Rascal Flatts (2014) It’s become increasingly evident that economic data series are struggling to convey...
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- Equities
Aussie Reporting Season: It starts with Rio Tinto
29 Jul 2020 |
By Rod Skellet
READ TIME 4 mins
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Reporting season is almost upon us and for equities it will prove to be a very interesting one for many reasons. This season will show us just how bad the impact of COVID-19 has been for the majority of companies...
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With equity markets and analysts focused on the earnings season in the US and bespoke company research being the main product of note, Citi produced a more macro piece on Friday that pointed out how these unprecedented times have stressed...
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Want to hear a bond market joke? Q: What do you call Canada after having its credit rating cut from AAA to AA? A: Canad Thank you, I’ll be here all week. On to the note – last week Tuesday...
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- Equities
Is Cadia the best gold mine in the world?
24 Jul 2020 |
By Rod Skellet
READ TIME 3 mins
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A question like that is completely subjective with no right answer but gee, Newcrest’s strong result yesterday morning owes plenty to their NSW mine located south of Orange. Newcrest’s MD Sandeep Biswas and their operational team have delivered a result...
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- Equities
Brexit Issues. Remember that old chestnut?
23 Jul 2020 |
By Rod Skellet
READ TIME 4 mins
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With so much going on in global markets it is pretty easy to forget some of the major issues facing financial markets pre the COVID-19 pandemic. One of those issues was the Brexit issue, and how the UK was going...
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- Macro & Markets
Creative Destruction and the Fed Put
22 Jul 2020 |
By Jesse Imer
READ TIME 6 mins
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I don’t have a song for you today – nothing really fits the brief. I want to use today’s missive to talk about the economic term “creative destruction” and the inference that the US Federal Reserve has investors backs and...
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The political contest between Australia and China is still a regular news story, squeezed in amongst COVID-19 stories, with our economy on tender hooks awaiting the negative impacts of the lockdown in Victoria. Add to this the fear of what...
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“And we’re falling all over again, Like a flashback to way back when, Back when we were us.” Luke Combs (2019) It is becoming a consensus view that an Australian economic recovery, as well as a global recovery, hinges upon...
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The level of optimism in equity markets and society in general, regarding the progress being made on developing a vaccine for COVID-19, has certainly been increasing. The world is desperate for news of a potential vaccine and is very much...
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“And if you said this life ain’t good enough, I would give, my world, to lift you up I would change my life, to better suit your mood” Santana ft. Rob Thomas – Smooth (1999) 32.9 million Americans received some...
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“Don’t call it a comeback, I’ve been here for years” LL Cool J (1990) I set aside time each week in my “reading time” to peruse theories that I disagree with. I believe this is key in mitigating confirmation bias...
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“I’m an easy read but I ain't no open book, Got a knack for making things harder than they look” Luke Combs (2019) Something the RBA is particularly good at is making their balance sheet transparent so that market watchers...
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“Funny the things you thought you’d never miss, in a world gone crazy as this” Tim McGraw & Faith Hill (2014) This may be new news – but financial markets around the world are in varying stages of transitionary periods...
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Much has been made during the discussion on the US/China trade war, of the importance of Soybeans from both a political perspective as we get closer to the US election, and how this commodity has become a powerful weapon for...
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“Come on, come on, listen to the moneytalk” ACDC (1990) It has been a point of interest that Australian bond markets stick out in attractiveness compared to global peers, starting with our AAA-rated sovereign issued bonds, yielding higher than comparable...
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The number of research pieces, investment articles or conference calls with global strategists, that I have either read or listened to over the past 2 weeks, all say pretty much the same thing but in different ways - that equity...
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“Hey now, hey now, don’t dream it’s over” Crowded House, 1986 Last week the ABS released Q1 2020’s GDP figure, telling us what we already knew, that economic output declined in Q1 this year. Australia has gone 114 quarters without...
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It’s been widely publicised that this crisis is different from the GFC, as its origin is medical in nature as opposed to financial. This has prompted us to assess financial markets differently, as the government and institutional responses have been...
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Understanding inflation is crucial to investing because inflation can reduce the value of investment returns. Inflation impacts all aspects of the economy – be it household spending, business spending, employment rates or interest rates. Inflation is a sustained rise in...
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On Thursday evening, the heads of the Reserve Bank, APRA and ASIC gathered together to host a webinar regarding the Australian financial services sector. The most interesting topic is APRA chairperson Wayne Byres noting it would not be a concern...
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Over the weekend I found myself reading an excerpt from Thomas Macaulay, a British historian in the early 1800's. In 1830, T.B. Macaulay wrote in reply to the pessimists of his day: “We cannot absolutely prove that those are in...
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The most extraordinary episode in the history of traded petroleum products, occurred Monday in the US. The price of West Texas Intermediate crude oil futures, expiring on April 21st (the May contract) plunged 321% to -$40.32 a barrel, the lowest...
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Today I would like to take the opportunity to talk about Modern Monetary Theory (MMT), which is a recent socio-economic view stemming from the 1990s. It may be surprising to know that MMT as a standalone concept was developed originally...
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The phrase “throwing everything but the kitchen sink” gained popularity during World War II when it was delivered to describe using every possible weapon or methodology against the enemy in order to beat them. We use this phrase liberally in...
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The Australian reporting season is in full swing with circa 59 companies making up the ASX 200 having reported (of the 170 companies due to report) and 37 of the ASX 100 index. Using market cap as the basis, 51%...
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The announcement this week of Facebook’s full-on venture into the world of Cryptocurrency and Banking, via Libra, the cryptocurrency, and Calibra, the blockchain payments platform supporting the back-office processing function, may well be described as the “Rock Musical Hair” sang...
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