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Economy

How I'm playing the return of inflation
Nader Naeimi, Head of Dynamic Markets, believes inflation is coming back in a meaningful way and is preparing for its return by investing in a fairly obscure fixed income ETF.
How stimulatory will US tax reform be for share markets?
“We think this [market expectation] is quite low… We still think tax reform will get through and all the signs point to this occurring,” Mousina says.
Are bank deposits and gold safe havens?
The gold price shot up to US$1,900 per ounce at the height of the US downgrade crisis in late 2011. The usual shrill ‘end of the world’ panic merchants were excited about buying gold as it was going to go up to US$3000 or even higher.
How share market investors can play QT
“Going forward key beneficiaries of this change will be financials like global banks, more industrial and cyclical parts of the share market.”
Fear of missing out trumping fear of loss
In the early 20th century, Argentina was one of the world’s wealthiest nations, thanks to an educated workforce and agriculture. But after a litany of economic and financial crises, Latin America’s third largest country is not high on the list of places to invest for Australian investors.
Why we’re still waiting on a correction
A look at the earnings per share growth on a rolling year-on-year basis shows this measure is at strong levels perhaps indicating fear around an overvalued market might be a little over blown, at least in the short term.
Census 2016: The opportunities investors need to know
Here, we take a look at how the 2016 Census results could impact investment returns down the track.
US will fall more than Australia in next bust
The US is leading the current boom and US shares are more over-priced than Australian shares, so US shares will have further to fall in the next bust.
2017 reporting season wrap up: a look at banks, resource businesses, and retailers
After two years of declining profits, shareholders and self-managed super fund (SMSF) investors have won this year as profits and dividends are up across the board.
Central banks head to Quantitative Tightening: how to protect your assets
While there might be a difference in the amount of capital deployed by professional versus SMSF investors, the way risk is approached can be surprisingly similar.
How to protect your fund from a share market correction
It’s likely members of the smaller fund will need to use the underlying capital, and some exposure to growth assets may be required to ensure the fund can meet members’ income needs in retirement.
Markets may head for a correction
Global equity markets could head south in coming months if the US Federal Reserve moves aggressively on rates, AMP Capital Head of Dynamic Markets, Nader Naeimi predicts.
Bubbles mean trouble
The first sign of a bubble is that share prices have risen dramatically relative to earnings and dividends, or property prices have risen dramatically compared to people’s incomes and rents.
Super changes: How you altered your investments
When superannuation rules change, it’s difficult to know how investors will react, as everyone’s personal circumstances are different. While some see the changes as a call to action, others throw their hands up in frustration.
Three global investment themes to watch
Prospects for economic growth appear to be higher in global markets than Australia. For instance, domestic GDP is forecast to be just 0.8% by 2020, whereas this figure is predicted to be 2.0% for the US in the same year.
If you had a million dollars to invest, where would you invest and why?
SMSF Community member @JessicaWingreen recently asked Dr Shane Oliver, AMP Capital’s Chief Economist and Head of Investment Strategy, a question on the community, which we ask Shane to answer in the below short video.
Three asset classes and the ‘Trump trade’: Part 2
Donald Trump was elected six months ago and has been US President for four. Share markets around the world have generally performed well and global growth has been solid since he was elected.
Three asset classes and the ‘Trump trade’: Part 1
It’s now six months since Donald Trump was elected US President and four months since he was inaugurated.
What are central banks doing about interest rates?
The Reserve Bank of Australia (RBA) has implemented an accommodative monetary policy for some time, having left the cash rate unchanged at 1.5% since September 2016.
How e-commerce is driving demand for industrial real estate
In 2016, Walmart became a top 10 tenant of industrial real estate investment trust (REIT) Prologis for the first time, largely as a result of its online sales platform.
Why inflation matters for SMSF portfolios
The Reserve Bank of Australia (RBA) has a mandate to keep inflation within a 2% to 3% target band over the course of time.
What will the budget hold for SMSFs?
With so many changes to the superannuation system announced at the 2016 Federal Budget, there’s an expectation that few further amendments to the system will be made this year.
Are we headed for more normal economic conditions? Part 2
There are signs global growth numbers continue to rise from a low base, especially in light of improving economic conditions in China.
Super reform myths – part 2
As we draw inexorably closer to 1 July, d-day for a raft of super reforms, several myths have taken grip.
Are we headed for more normal economic conditions? Part 1
Despite near-term risks, AMP Capital continues to expect 2017 to be a year of “reflation contagion”. This is good news for investors.
How to assess IPO opportunities
When share markets are on an upward trajectory companies that require capital to grow often consider it a good time to ‘go public’ or list on a stock market such as the Australian Securities Exchange (ASX).
3 disruptive technologies to watch in 2017
Disruption was one of the buzz words in 2016 but the discussion largely focused on the potential of technology to disrupt established business models. In 2017, we expect technologies to deliver the first waves of impact. A few industries in particular will see technology change the way they do business, namely manufacturing, finance and retail.
Where are we in the global investment cycle?
In this video, Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital asserts that where we are in the global investment cycle is critically important.
Latest trade figures: SMSF update
It can be difficult for SMSF investors to gauge economic conditions when there’s disparity in the fundamentals. Here, we look behind the numbers and what they mean for investors.
Outlook for the ASX in 2017
What is likely to drive the market for 2017?
The SMSF sector by the numbers
The best available data on the SMSF sector as a whole comes from the latest ATO statistics. The report released in December 2016 is based on 2014/15 SMSF tax returns, with the time lag due to the tax return process.
The resilient Australian dollar – how long will it last?
The Australian dollar showed resilience during the second half of 2016 due to a number of variables. Commodity prices rallied, the US Federal Reserve pushed back interest rate hikes, the market started pricing out interest rate cuts from the Reserve Bank of Australia (RBA) and Australian and global economic data was generally positive.
February 2017 results season: Profit improvement expected
The February results season will signal a return to profit growth in aggregate by Australian companies.
Second-level thinking on Australian banks
Understanding the difference between first- and second-level thinking can make for more informed investment decisions, finding things others miss or bringing insights others don’t possess.
Expect the unexpected: Preparing for uncertainty in global markets
Whilst there is uncertainty amongst investors at the outlook for global markets 2017, if 2016 taught us anything it’s to expect the unexpected.
The resilient Australian dollar- how long will it last?
The Australian dollar has been surprisingly resilient over the past few months, despite the softening in domestic data and rising US dollar.
Shane Oliver economic update with ASX
This week Shane Oliver joined the ASX for a webinar to share his views on recent economic developments and his future outlook for the coming months.
No escaping constrained return potential
Investment returns are expected to be subdued for some time, and it’s important for investors be realistic about what will drive the performance of self-managed super funds in the future.
Market serves up some savage volatility
We are seeing rapid one-day movements in some large stocks of 10% to 20%, especially those that were ‘priced for perfection’. What is causing this, and does it present a threat or an opportunity in a portfolio?
Value versus growth investments: state of the market
A fundamental decision many SMSF investors need to make is finding the right balance between growth and value assets in their portfolio.
Reserve Bank on hold, relatively relaxed about the housing market
With the RBA having just cut rates again last month, the economy running reasonably and no new inflation figures being released in the last month, it was no surprise to see the RBA leave rates on hold at 1.5%, at its September meeting.
Sharemarkets rally despite Brexit jitters
In this video, Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital provides an outlook for global markets over the next 6-12 months.
Impact of US rate rise on SMSFs
Markets are divided as to whether the US Federal Reserve will lift official interest rates in the US this year. Any future rate rise, this year or next, will have a significant impact on global financial markets.
How is the Australian economy tracking?
Overall the Australian economy is performing reasonably well, having seen growth of around 3% over the last year, ahead of most other developed economies.
EOFY review: how have markets performed?
Cash rates and bond yields globally are low and are likely to remain lower for longer, while equity market returns over the 2016 fiscal year have been generally poor. In this article we look at what’s been driving weaker returns and consider the outlook for returns over the medium term.
Don’t let Brexit rush you to the exit
The media screams the scary headlines at times likes Brexit as the share market reacts to the uncertainty. Investors need to ignore the shouting and accept with equanimity that this is the cost of participation.
Banking juggernaut stalling: questions remain on dividends and asset quality
Some of the factors that are likely to impact bank stock valuations in the near term.
Unpacking the Chinese tech boom
The growth of its technology sector has been a big part of China’s industrialisation.
What’s driving the Chinese economy?
How can China's opportunities and risks be explored within a goals-based investment framework.
What’s in store for the ASX?
What is likely to drive the market for the rest of 2016?
Trends in global markets
AMP Capital has developed a unique view of the global economy. We believe geography is less relevant in an increasingly globalised world, where share market indices are dominated by multinationals operating internationally.
What’s the outlook for Aussie equities?
The Australian share market has experienced a period of significant volatility recently.
3 things to remember about market volatility
After a period of relative calm over 2012-2014 share market volatility has spiked over the last year as various worries about the global growth outlook intensified.
Linking investment returns to market returns
Understanding how market movements can impact investment returns is a key strategy for achieving long-term goals.
Federal Budget: 3 things for SMSF investors to consider
Low interest rates and superannuation reform will affect SMSF trustees
3 things to know about investment cycles
To make the most of market opportunities, investors should stick to a long-term strategy while adjusting medium-term allocations.
Landmines in the Field of Dreams
It matters little if you are invested in property, shares or bonds, we have moved into a lower return environment. It’s a time for caution in a world where debt and defaults are rising.
How will the Aussie dollar perform in the near-term?
We see the Australian dollar trending downwards over the next 12-months.
The value opportunity in Australian equity
Investment styles are rewarded by the market in different circumstances and times, and ‘value’ has had a difficult run lately. When will it have its day in the sun at the expense of ‘growth’?
Will climate change risk impact your share portfolio?
SMSF investors need to query whether the stocks they are holding have greenhouse gas emissions, and to what level.
Adjusting to a low-yield world: don’t expect double-digit growth
The combination of low inflation, low starting point yields and constrained global growth means investors will need to adjust to single digit annual returns over a medium-term horizon.
Take the good times with the ‘Bard’
In times of financial turmoil, returning to the classics can remind investors to take a long-term perspective and seek opportunities to focus on their financial goals.
The future of stock prices: is the worst behind us?
We debunk fluctuating investor sentiment.
Turbulent times: drivers, opportunities and outlook
We are seeing attractive opportunities emerge amidst market volatility.
The ‘January effect’ in stock markets – Part 1
For many decades, stock market performance in January consistently outperformed other months of the year, but before you start planning an arbitrage strategy, that horse has bolted.
Oil price fall will lubricate economic growth
There’s been much media attention on the negative aspects of oil price falls, but some of the benefits are doing more for the economy than the government stimulus package during the GFC.
Poor start to 2016 is not a bad omen for Australian shares
The 2016 calendar year started with seven down days in a row for the Australian stock market index. What lessons can history provide investors about how to react?
Global turmoil likely to make Fed patient
Now that the question of when the US Fed will increase interest rates is answered, the next big question for global markets is how far will they increase rates?
Bad month for SMSFs: some key things to remember
Amid reports about SMSFs being the ‘hardest hit’ by the recent brunt of share market volatility, we provide insights on the global economic and investment outlook
Chasing markets in a zero-sum game
Investors who have the courage to be a contrarian will earn a handsome ‘fear’ premium for taking the other side of the industry’s trades
Market falls: Sort the signal from the noise
Shares invariably go through volatile patches
Putting new year market falls in perspective: 4 things to consider
Shares have gotten off to a very bad start for the year.
Outlook for the New Year
Expect volatility to remain high into the New Year
Have markets been good this year?
This past year has been somewhat constrained for investors.
Australian surplus will be delayed: economic update for SMSFs
As the economy continues to rebalance in the wake of the mining downturn, The Reserve Bank of Australia’s (RBA) decision to hold interest rates this month has not come as a surprise. For 2016, the risks on rates are all skewed to the downside – it will be very hard to see the RBA raising rates
Top macroeconomic concerns for SMSFs in 2016
Switzer Expert Paul Rickard and AMP Capital's Chief Economist Shane Oliver discuss the key macroeconomic themes for 2016
Commodities prices and the Australian stock market
It’s not low or high commodities prices, or even rising or falling prices, that matter for the share market. A pattern relating to changes in the rate of change can be observed as far back as the 1950s as a useful forecasting tool.
Australian dollar follows commodity prices
Australia’s reliance on raw material exports combined with imports of manufactured goods is ensuring that the Australian dollar remains closely pegged to commodities prices.
Tips to manage equity risk
As 2015 draws to a close, we explore some key investment fundamentals that can serve investors well in this challenging environment: equity risk premium and the power of diversification.
3 reasons why poor market performance is a blessing in disguise
This article highlights why poor market performance can be a blessing in disguise for contrarian investors.
World economy will be ‘slower for longer’
This period of ultra low interest rates and government-stimulated economies has created an overly optimistic view of world economic growth, which will have implications for future retirement savings returns.
High-frequency trading: are you in the dark?
Australia has fewer opportunities for electronic front-running.
Can you afford to live longer?
Increasing longevity is good news, but it poses difficulties as society and our retirement system adjust, particularly for those who outlive their money and have to rely on the uncertain future of the age pension.
Defaulting into a world without growth
Global debt levels have increased significantly over the last decade, but not to fund new businesses or productive assets. When debt funds growth and growth fuels debt, can we continue to push the problem into the future?
What to do with resource stocks
After the large falls in the prices of most resource stocks over the last year, investors might be wondering what to do. Here are a few factors to consider relating to resources at this time of great uncertainty.
3 things concerning the globe’s top financial minds
The key areas of discussion at the most recent International Monetary Fund-World Bank Meetings.
How to adapt to buying shares when markets fall
When stockmarkets fall, investors have the opportunity to ‘grab a bargain’, but the panic and negative media coverage that often accompanies a downturn makes it difficult to go against the crowd.
Chinese shares and currency red herrings
Despite the recent falls, the performance of Chinese shares over the last 12-months is still above Japan, Europe, the US and Australia. But the Chinese market is volatile, and currency movements are important.
FactCheck: Is 50% of all income tax paid by 10% of the working population?
In defending how superannuation concessions might favour the wealthy, Treasurer Joe Hockey claimed 50% of all income tax is paid by 10% of the working population. Is that statement supported by the data?
Reporting season – what investors need to know
Profits for Australian companies have likely dropped overall by about 1% however, dividend payments continue to rise.
Further corrections possible for Chinese shares
Another fall in the Chinese share market may be unsettling but the overall economic impact is likely to be limited.
How well capitalised are Australian banks?
The implications for hybrids, bank margins and bank fees from the increase in the risk-weighting of residential mortgages. Our banks are not top quartile among the capital levels of global banks.
Study the pension reforms with great care
Under the current pension reforms, changes to the asset test taper, which are designed to reduce the entitlement of part-pensioners, will also hit ‘downsizers’ and people moving into aged care hard.
Hockey on super at Tax Reform Summit
Joe Hockey made strong statements on super reform this week: “Superannuation policy is incredibly complex … So adding to the complexity by laying on new additional changes is daft.”
Recent labour market stability keeps interest rates on hold
Australia’s labour market recorded a mild growth in jobs in June, prompting the Reserve Bank of Australia to keep the interest rate at 2% at its meeting this week.
Estimating a share’s intrinsic value 101
The basic formula for estimating the intrinsic value of shares.
Sequencing risk: is it an unnecessary anxiety for SMSF investors?
The fear of sequence risk drives investors to take equity and risky asset exposures out of their retirement portfolios.
Slowing productivity and its impact on investors
Investors need to be aware of what’s happening to productivity and how this will affect future returns and the affordability of tax-payer funded pensions, especially if company profits fall.
Is this the end of record profits for ‘big 4’ banks?
Australian banks may have seen the end of record profits and dividends as the world recovers and Australian growth moderates.
A Swiss makeover for Australian super
Switzerland is renowned not only for high-end spas and wellness clinics, but good retirement policy.
Adapting to new pension asset testing
The government announced a change in attitude to wealthy pensioners.
Australia’s modest growth sees cash rate remain steady
Australia’s low cash rate is likely to remain steady over the coming months
Fed tightening: 3 things for SMSF investors to remember
The Fed will raise interest rates later this year
Continual but uneven growth for global shares
Expect more volatility this year.
3 things for SMSF investors to consider: investment cycles
In this article, we explore where we are in the investment cycle.
Don’t miss out on the Chinese bull market
The latest ATO figures reveal that global shares represent less than 2% of SMSF equity assets
Don’t miss out on the Chinese bull market
The latest ATO figures reveal that global shares represent less than 2% of SMSF equity assets
Repair or despair: What does the budget mean for SMSF investors?
View the latest commentary on the 2015-16 Federal Budget from AMP Capital’s Head of Investment Strategy and Chief Economist, Shane Oliver.
Retirees should prepare to support themselves
Challenges facing policy makers are around reducing the deficit.
3 things to watch: Federal Budget 2015-16
In this video, AMP Capital's Head of Investment Strategy and Chief Economist, Shane Oliver explores the key things to watch in the upcoming Budget.
RBA cuts rate to 2.0 %
The Reserve Bank of Australia (RBA) lowered the official cash interest rate by 0.25% to 2.0% at May’s meeting.
May Budget an opportunity to properly sell Intergenerational Report challenges
AMP Capital’s Head of Investment Strategy and Chief Economist Shane Oliver, suggests that the May Federal Budget is an opportunity for the government to properly sell the challenges outlined in the Intergenerational Report.
Federal budget: time for a steady but firm hand
Australian key commodity export prices have fallen towards 2009 lows in the past few months, the Australian dollar has eased, economic growth has softened and the shutdown phase in mining has arrived.
Shorting and pair trading using Exchange Traded Products
Imagine you have found a stock you think is likely to rise relative to the overall market, possibly because it is either technically oversold or fundamentally cheap...
China sets 7% growth target: Implications for Australia and commodities
China has set its growth target at around 7% for 2015. The target is lower than the 7.5% pace set last year, which was narrowly missed.
Can high yields support equity returns?
Over the past seven decades in Australia the level of 'real' dividend yields across the market has provided a pointer to broad stock market rallies ahead.
5 reasons why China’s worries are not as bad as they look
Realising last decades’ 10% plus growth was not sustainable, the Chinese leadership has been engineering a downshifting in growth to a sustainable pace.
SMSF weekly market update
A bit of profit taking in shares, don't worry about Yemen and RBA property concerns unlikely to prevent another rate cut
Bull, Bear or Goat?
Asia’s reputation as a high growth region came under pressure over the last few years, as the growth premium narrowed.
What can investors expect from QE in Europe?
The European Central Bank was reluctant to embrace a QE strategy following the GFC. But in late 2014 it was introduced to fight deflationary forces and boost growth in the euro-zone. The question is: will it work?
Soft labour market’s impact on retirement outcomes
The ‘economics of retirement outcomes’ is a concept that explores how economic developments can affect retirement outcomes. The current soft labour market is one of those developments.
Market volatility presents ongoing opportunities
Volatility and widespread dispersion in asset class returns is creating opportunities for active managers.
The world by 2050
We don’t know what the world will look like in 2050, but that doesn’t mean we shouldn’t think about it and plan for different scenarios. Demographic change and growth in emerging markets are major themes.
A super consensus needed before the demographic tsunami
It’s no surprise that the Intergenerational Report predicts an increase in the number of people retiring over the next decade as well as years spent in retirement. It’s a challenge for any government now and to come
Ten great quotes from Buffett’s latest letter
Warren Buffett’s eagerly awaited annual letter to Berkshire Hathaway shareholders came out this week. It marks 50 years since he and Charlie Munger took charge, and each has summarised expectations for the next 50
Rates go sub-zero, markets go red-hot
As interest rates drop to below zero in some nations, we explore why it’s important to keep a grounded demeanour when it comes to Australian equities.
Bubbles and the corruption of risk
With cash investments providing such poor returns, the search for yield has driven up share and property prices, some to unrealistic levels. It has also corrupted our sense of risk which is a dangerous combination.
Treasury says don’t use the $32 billion number
The $32 billion ‘cost of superannuation’ number has become the most dangerous weapon used by critics of super tax concessions. Treasury says it’s not the amount that would be saved.
21 quotes for SMSF investors
Investing can be profitable as well as fun, but it can also be unnerving and unprofitable if you don’t understand markets and don’t have the right mindset. The basics of successful investing are timeless and some experts have a knack of encapsulating these. Here are 21 investment quotes that SMSF investors may find insightful.
What will super look like in 40 years?
David Murray and Don Russell spoke at a leadership forum as part of the SMSF Association’s 2015 Conference on the future of Australia’s retirement income system. They included many valuable insights.
Will ETF liquidity be there when I need it?
One benefit of ETFs for investors is their tradability – being able to buy or sell at any time through the ASX just like an ordinary share. But this leads many investors to mistakenly evaluate their liquidity in the same way.
Economic Outlook: February
Shane Oliver takes a look at the economic outlook for February.
Falling oil prices: what it means for SMSF investors?
There’s been a lot of commentary around the recent drop in oil prices, and what it might take for them to recover. Integral to this discussion is the Organisation of Petroleum Exporting Countries (OPEC) and Saudi Arabia, which produce about 33% and 9% of the world’s oil respectively. In this article, we examine the factors that have led to the drop in prices and what this all means for SMSF investors.
Australian bond yields and inflation
Current bond yields and prices haven’t been seen in Australia since the 1890s and 1930s depressions. The market is being supported by foreign buyers and central bank liquidity.
RBA cuts official cash rate
The Reserve Bank of Australia (RBA) cut the official cash interest rate by 0.25% to 2.25 % at February’s meeting. This decision was largely priced in by interest rate markets. In this article, we look at the key implications for SMSF investors.
3 themes investors should watch in Europe
There has been a lot of commentary surrounding Europe in recent weeks. In this article, we explore the main issues that require consideration.
The potential of smart beta
Capital-weighted index funds have been providing investors with low cost exposure to equity markets for 40 years. Now we have the potential of smart beta to consider as an alternative to active and index funds.
Who’ll win in our National Broadband Network future?
Telstra’s competitive advantage in regional areas may be under threat after the National Broadband Network is rolled out because wholesale costs are expected to equalise for smaller retail service providers.
The future of Australian Aviation
As legacy airlines around the globe respond to the competitive market dynamics created by low cost carriers, there is a distinct cycle of adaptation for the industry. This happens to recapture lost market share and reposition carriers for financial performance.
AMP Capital's outlook for real assets in 2015
AMP Capital, a long-term investor in real assets, expects further demand for prime real estate and infrastructure assets in 2015 as institutional investors such as global pension funds, insurers and sovereign wealth funds continue to search for more consistent income and capital preservation.
The risk of being overweight in all the wrong areas: a review of the food and beverage sector
Driven by population and economic growth in Asia, there are opportunities to capitalise on the rising demand for food and changing consumer trends. However, with the increasing problem of obesity, the food and beverage sector is exposed to a number of other sustainability issues. Food for thought for investors...
2015 outlook: 2 things you need to know
The economic backdrop for the year ahead is likely to be fairly similar to what we saw in 2014; expect continued economic expansion but at a relatively modest and uneven pace globally.
Economic Outlook: December
The AMP Capital investment strategy and economics team takes a look at the economic outlook for 2015.
2015 – a list of lists regarding the macro investment outlook
2014 saw good returns for diversified investors as the global economy continued to grow and monetary conditions remained easy, but a combination of uneven global growth, worries about deflation, plunging commodity prices, soft growth in Australia and geopolitical concerns meant returns were uneven across asset classes.
The plunging oil price – why and what it means
The past year has seen the world oil price fall by more than 50%. Late last year as the fall accelerated this started to act as a drag on share markets and this has resumed at the start of this year as the oil price has continued to slide. But what’s driving the oil price plunge and isn’t a fall in oil prices meant to be good news?
How much can SMSF trustees really afford in retirement?
The ASFA ‘comfortable retirement standard’ for a couple is only $58,128 per annum, below the average full-time wage. SMSF trustees should check these numbers as an estimate of how much and at what age before they retire.
Some challenges ahead for 2015
Every investor has questions they are pondering at any point in time. In 2015, finding value in the market, explaining how to think about risk and the design of solutions for the post-retirement phase are three major issues
A Christmas fireside chat
As we wrap up 2014 and position ourselves on the blocks of 2015, it is worth considering how investors and consumers might behave. The big uncertainties centre around economic growth, inflation and the value of stocks.
A trifecta opens Asian export opportunities
Australia’s exports are increasingly skewed towards our three largest trading partners – China, Japan and Korea – making the Free Trade Agreements with these countries vital for further growth.
Howard Marks on the unpredictability of commodity prices
Howard Marks tells a New York conference that there’s no way to predict commodity prices, as we cannot know what will happen in the future.
‘Tis the season, and aged care may be on the wish list
The final of our series on aged care in Australia covers aged care facilities. More than a third of men and half of women who reach 65 are expected at some point to live in aged care. Understanding the recent reforms is key.
Rob Arnott seeks many happy returns
Smart beta strategies are now common but they were a quirky idea when Rob Arnott set up his first fund. This veteran of US investing talks about asset allocation, demographics and the state of the asset management industry.
Long term equity returns and mean reversion
Baron Rothschild is credited with saying that “the time to buy is when there’s blood in the streets.” Implicit in this statement is that markets are mean reverting and periods of extreme negative returns are not likely to be sustained. Put simply, when everyone is selling it often represents an opportunity to achieve superior future returns.
Who wins? Australians investing in US shares
In part 1, we compared real total returns from shares from the point of view of two different investors: an Australian investor in the broad Australian market in Australian dollars after Australian inflation, versus an American investor in the broad American market in American dollars after American inflation. The ‘return on investment’ (ROI) from both markets was around the same at 6.6% in real terms when averaged over 115 years. However, returns in the two countries did vary considerably along the way, with Australia and the US taking turns in having larger booms and bust cycles.
Reflections on markets in October 2014
October 2014 could be filed away as another month of reasonably normal returns. However if you lived through it day-to-day, there were lots of events and volatility, including somewhat of a ‘mini-panic’.
Sustainability of the super system in a time of disruption
It could be said that the super system is always facing disruption. As the system grows it will be constantly reviewed, scrutinised and changed, and industry participants should work together for the collective good.
The saga of FoFA (so far)
Following the Ripoll Inquiry in November 2009, the Labor Government formulated the Future of Financial Advice proposals. A lot has happened since, but five years of effort has not done the advice industry much good.
The great myth of the ‘1 in 100 year’ event
How many times do we hear that a ‘1 in 100 year’ event has occurred? Weather and financial market events in particular seem to have occurred far more than once in the last 100 years.
Who wins? Australia versus US in local shares
A study of Australia’s stock market returns for Australian investors versus the returns from the US stock market for US investors uncovers some interesting trends. Where do the returns come from in each country?
Impact investing – Australian market in 2014
Cuffelinks reader, Josh, asks: “Can you tell me about Impact Investment, how do I do this, and where do I go?” The market is gradually unlocking the challenges and potential of this sector.
Divesting from fossil fuels and from rational economics
John D Rockefeller turned in his grave when the news drifted in that the Rockefeller Brothers Fund was divesting from fossil fuel companies. What are the responsibilities of companies, funds, directors and trustees?
Australia’s longest bear market?
The performance of the Australian sharemarket has been surprisingly weak in recent years, not only relative to the US and other developed markets, but also relative to previous major bear markets.
Impact of QE on markets opposite of expected
October 2014 marks the end of the US Federal Reserve’s monetary policy it called ‘quantitative easing’. The Fed’s aim was to create inflation, increase bank lending and depress the US dollar to help exporters. Did it work?
I will survive! Investing amid structural change
Australia’s economy has fared better than most post-GFC, buoyed primarily by the tail end of the resource boom, solid population growth and a strong financial sector.
Bank capital in a post-FSI world
The Financial Services Inquiry (FSI), chaired by David Murray, is scheduled to release its final report in November 2014.
Retirement system begging for reform
Much attention has been drawn recently to the high cost of the Australian superannuation system compared with pension systems overseas, with retirement outcomes often overlooked. What should we be striving for?
Our industry has a problem
A study recently published by Towers Watson claims that many in the investment industry focus on looking after intermediaries at the expense of clients. And we’re obsessed by short-termism and chasing alpha.
Millions of households are missing out on good financial planning
A broader study of household financial situations reveals that quality financial advice eludes the very people who would benefit from it most. Every Australian should have equitable access to our financial system.
The most complex super system in the world
Australia has a world-class superannuation system, but it is also the most complex. From insurances to estate provisions to the many different forms of contributions and withdrawals, we should try to ‘keep it simple’.
Why LICs trade at premiums or discounts
The surge in popularity of listed investment companies has seen the erosion of the average price discount relative to net assets. Whether a LIC is likely to trade at a discount or a premium should inform your decision to invest
Currency winners and losers
The Australian dollar has finally fallen against the currencies of most trading partners, and there will be companies that benefit or struggle at the new levels. If you think it will fall further, how do you take advantage?
Changing of the guards in Asia
A look at how democracy and political stability (or lack thereof) is shaping our Asian neighbours’ economies and outlooks. Asia appears on the cusp of moving from a perpetually-emerging region to one that has emerged.
Aged care and granny flats come with their own rights
A granny flat is an ideal solution for many families with ageing parents who are not ready for the nursing home, but it’s not always simple. Little is known about the ‘Granny Flat Right’ and its financial and legal implications.
Animal spirits dormant except for coffee and food
Current economic policy is failing to revive the corporate sector’s animal spirits, as spending by consumers remains weak except for a few sectors like food, cafes and restaurants.
Superannuation and our growing wealth
Average superannuation balances are increasing with each generation as more of a person’s working life is covered by compulsory saving. It won’t be long before super is the dominant source of wealth.
How megatrends are reshaping investment management
Large shifts in demographics, environment, technology and social values spell significant change for investment management. The wealth industry will need to adapt to clients’ changing behaviour and expectations
Hedge funds seizing ships – what next?
The story of a US hedge fund fighting to recoup its Argentinean bond investment has both stunned and amused all who have followed its progress over the last 12 years. Will the seizing of a naval vessel bring it to a close?
The will power of binding death nominations
Contrary to popular belief, superannuation assets do not automatically form part of a person’s estate pursuant to a will. If you want your super to be distributed as part of your estate, you’ll need a binding death nomination.
Company reporting and tired excuses
It’s all too easy for companies to point the finger at external factors to explain poor performance, but when the same excuses are repeated year after year, it’s time to look within for the real cause.
All the world’s a stage for peer-to-peer lending
Peer-to-peer lending allows borrowers and lenders to come together via online market places. Although in its infancy compared with overseas, the P2P lending model is now gaining traction in Australia
Dividends or Growth? How should Corporate Australia use your money?
During the recent August reporting period Glen Stevens, the Governor of the Reserve Bank of Australia (RBA) caused significant debate around the role of Corporate Australia in stimulating growth within the economy.
Listed versus unlisted infrastructure
When deciding between listed and unlisted infrastructure securities, the focus should be on the cashflows, the risks associated with those cashflows and the entry price to buy the assets.
Building a better retirement world
EY’s research report studies the pension and retirement systems of 18 countries to gain insights for better policy reform, decision-making and outcomes for retirees. What can we learn from the global stage?
Investor behaviour and lump sum bias
Many factors contribute to a lump sum bias among investors, and it might be one reason why they significantly overestimate how much a lump sum is worth in annual income for life.
Watch your neighbour in managed funds
The actions of other investors in a managed fund can have a material impact on individuals in the fund. How much do you know about the realised and unrealised capital gains, franking credits or distributions of your fund?
Pay attention to how growth is financed
Not all company growth is created equal. While a headline growth figure may look impressive, it’s how this growth is financed that determines whether it’s a good or bad thing for shareholders.
From building BRICs to building blocs
Has the ‘BRICs’ concept lost its relevance? An alternative of categorising emerging market economies into country blocs that perform broadly in line with each other might make more sense
Is this time different for trend-following funds?
Most trend-following funds (managed futures or CTAs) have performed poorly recently, and investors are asking if they will work again. History shows how crisis and non-crisis periods influence this investment style.
Does insurance belong in super?
There is little written about why insurance came to be included in the superannuation system. It might address the problem of under-insurance but it’s a poor fit with superannuation’s core purpose of funding retirement.
Rethinking the superannuation fund mission
Super fund mission statements typically focus on delivering strong returns and providing valuable services to members. As Australia’s super system matures, the mission should also include a goal for retirement standards
Unseen environmental costs of companies
The activities of any company have an element of environmental and social cost not quantified in the profit and loss statement. In 2010 a global corporation pioneered a new form of reporting, which is gaining support.
The great fee debate: resetting manager and investor expectations
The recent push for greater transparency on asset management fees has reignited the debate about what is fair and reasonable. Both managers and investors need to reset their expectations to find the common ground.
Look beyond market leaders to diversify
SMSFs are more heavily exposed to listed Australian equities than are default options in public funds, and particularly to the big S&P/ASX20 stocks. There are good companies in Ex20 segment which can help diversify a portfolio.
Why have small cap stocks underperformed?
Over the last two years, small caps have underperformed their large cap rivals in Australia, which goes against the global historical trend. Where has our small cap additional performance gone and will it return?
Repealing the “carbon tax” – what it means for investors
On the 17th of July 2014 Australian Prime Minister, Tony Abbott, announced the repeal of the Carbon Tax. Given the significant political posturing and media attention around this issue Livewire sought to find out what impact this development may or may not have on investor sentiment.
Should SMSFs be allowed to borrow?
There are clear signs the Murray Inquiry plans to reintroduce a prohibition on borrowing by superannuation funds including SMSFs, and there is a strong case to protect the retirement savings of the unwary.
Just when my portfolio was set for the long term …
Investment is more art than science, and even an investor who prefers a ‘buy and hold’ long term strategy will need to adjust the portfolio. When you think your portfolio is finally set, something will happen to test your resolve.
The perils of hybrids
With the current low interest rates, many investors are building exposures to hybrids unaware of the risks. Check the warnings of legendary investor, Ben Graham, and consider if hybrids can withstand a downturn.
Does the public hate us?
When two Nobel Laureates sit down to discuss the topic ‘Why does the public hate us?’, you know there’s a major problem. And the Murray Interim Report raises many concerns about wealth management in Australia.
Which countries should be classified as emerging markets?
Many retail investors are drawn to invest in emerging market funds, but think little about which countries they are investing in?
Australia’s default: shares versus bonds through the crisis
During the Australian government debt default, how did the performance of equities versus bonds compare? It was a time when investing in bonds was more common than equities
Dive or stay: the biases of goalkeepers and portfolio managers
Portfolio managers and goalkeepers feel the need to do something, but an awareness of this action bias may help them recognise that inaction can be an optimal strategy.
Australia’s default: the winners and losers from bonds
Even when governments default on their debts, there is money to be made by investors who resist the temptation to panic sell in a crisis.
Australia’s default: who do you rescue?
As it became obvious that Australia would need to default on its government debt in the 1930s, the question of whether to prioritise foreign or local debt was put to the people, with surprising results.
Australia’s default, part 1: A primer on government debt, default and inflation
Very few people realise that Australia once defaulted on its sovereign debt during the Great Depression. Learn how the split between local and foreign currency debt affects the policy options available to Governments.
Dealing with the demise of Defined Benefit funds
Defined benefit funds will be scarce in the future but their features shouldn’t be forgotten. Defined contribution funds should be incorporating some of these features to their members’ advantage as well their own
Ian Macfarlane on emerging markets, banks and property prices
At the recent Morningstar Investment Conference, Ian Macfarlane shared his thoughts on central bank policy, emerging markets with a focus on China, and Australia. This is Part 2 of the edited transcript
Ian Macfarlane on central bank policies, inflation and China
At the recent Morningstar Investment Conference, Ian Macfarlane shared his thoughts on central bank policy, emerging markets with a focus on China, and Australia. This is Part 1 of the edited transcript. Part 2 next week.
Australia's 2014-15 Federal Budget: Implications for SMSF investors
With the release of the Australian 2014-15 Federal Budget, AMP Capital Chief Economist Shane Oliver looks at the implications for SMSF trustees and their investments.
What is the outlook for bank hybrid yields?
Demand for bank hybrids paying margins of 3% above the Bank Bill Rate remains strong, although there is little sign that underlying interest rates will increase any time soon.
Private Ancillary Funds suffer same ‘retail’ treatment as SMSFs
One of the benefits of Private Ancillary Funds is the philanthropic family legacy they create, and Social Benefit Bonds appeal to many PAF trustees. Unfortunately, investor definitions create an unnecessary barrier to entry.
How to make choosing easier
We all want customized experiences and products -- but when faced with 700 options, consumers freeze up. With fascinating new research, Sheena Iyengar demonstrates how businesses (and others) can improve the experience of choosing.
We’ll live longer, but what will it be like?
After the age of 65, most people will spend over half of the rest of their lives with some disability or high level dependency. If ever you needed an incentive to save more and stay fit for your retirement, that has to be it.
Look at super with different eyes
Thinking differently about how to get the best out of your super means taking time to talk through the options that meet your personal needs, and making it work for you. And don’t associate ‘pension’ with ‘old age’
Longevity perceptions and post-retirement products
The super industry has struggled to develop suitable post-retirement products to cater for increases in life expectancy. How would your own investing change if you knew you would live another 30 years after retiring?
How long are you really likely to live?
Longer life expectancy means more of us will be living for several decades after we ‘retire’ or stop paid employment. Earning 3-4% in term deposits from age 60 will not be enough if you’re still alive at 90, 100, or 120!
Retirement: who's a happy little vegemite?
Retirement often receives bad press, but whether or not you enjoy this life phase usually depends on the choices created. It’s a nuanced and diverse experience and many welcome the sudden freedom.
The dynamics of the Australian superannuation system
Australian superannuation is a highly dynamic industry, as this review of 2013-2033 shows. For many retirees, institutional funds, whether industry or retail funds, have not been able to compete with the attraction of SMSFs.
We're living longer and so should our superannuation, by P J Keating
The government should be the key provider of a national annuity scheme to cater for what is now a growing gap in our retirement incomes system as a result of people living for 80 years and more.
Material shift from production to distribution
Local production in some industries has become less viable due to Asia’s lower costs, and companies need to adapt. Some of our biggest producers in the fuel and cement industries have transitioned to distribution.
Growth and the size of the financial sector
Professor Bird and Dr Gray highlight the dominance of the financial sector in Australia’s economy in their submission to the Financial System Inquiry and question whether bigger is necessarily better.
Bank hybrid market undergoing significant change
Until recently, institutional investors did not buy many bank hybrids, leaving issue size and margins subject to retail demand. But retail investors, including SMSFs, no longer have the market to themselves.
Pension indexation is a $300 billion question
With the budget in deficit, debate about the sustainability of welfare and spending gathers pace. Looking at pension indexation alone, the two methods used differ by $300 billion in revenue between now and 2050.

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