Hi Ben, when the ‘nominal' value of the nominal rate is so low, there’s not much of a real rate to talk about either.
Thanks Chris. I have seen first-hand the impact of climate change on the revenues of farms in Warren and around Dubbo NSW. But thanks to ultra-low interest rates, property prices haven’t changed. If anything, they remain at record levels. It seems there are factors today that are impacting asset values in a way that wasn’t anticipated if one only looked at climate. Ultimately of course you are right.
Thanks Sean, it's a fair assumption but many currencies are weak against the USD so if the products they are buying aren’t priced in USD...
Hi Dan, having just spent the weekend with AMG in New Zealand, I am confident there will be a few cars on the road with carburettors, air filters and spark plugs for a while yet. Investors tend to overestimate the disruption in the short term and underestimate it in the long term.
Hi David, It is of course very disappointing to see the change in outlook, due to a number of factors, for Challenger over the last year. For the longer term, we still believe that Challenger will benefit from demographic and legislative drivers as it is in the governments clear interest to make sure that more and more retirees invest at least part of their superannuation in products that provides a secure cashflow for however long they live and Challenger is in the prime position to benefit from this. It is therefore a question of how long it will take for these positive forces to overtake the negative shorter term drivers.
Thanks James, the combined valuation of the two listings for Uber and Lyft at IPO was >US$100bn (Uber $82bn, Lyft $24bn), a higher valuation than every company on the ASX aside from the mighty BHP.
Thanks Claire, appreciate the support.
The new information/evidence indeed is the massive lift in Auction clearance rates experienced in Sydney and Melbourne last weekend. It's now quite possible that a combination of rate cuts and loosening of APRA restrictions on credit availability could mitigate any downturn. The low for property may have been seen. Only a wave of forced sellers - if the RBA/APRA response isn’t effective at reversing the construction slowdown - would keep pressure on prices.
Hi James, thanks for your comment. Yes, I think you are missing something. I assert it because Uber have the most to lose from switching. They already generate billions of revenue in rides with drivers who would strike and protest at any sign of change that disenfranchises them. They would lose billions of revenue as drivers switch en-masse to rivals and the fleet of robots taxis would be very small. Uber would be decimated. Note the recent driver strikes in LA. Moreover, fully autonomous vehicles in scale is a future whose horizon has just shifted a lot further down the road. Keep in mind autonomous vehicles were originally pitched to governments on safety grounds. But now, 80% of the lifesaving benefits of autonomous technology are available in driver assistance systems such as autonomous braking, lane holding and distant polio systems. That means it’s no longer a safety issue that the government needs to consider but a massive cost issue only.
Hi John, Amazon wasn't making any profit when it listed. It was loss-making at the time.
Thanks for the support Rodney.
Dan, electric vehicles "everywhere"? Often our dreams of an electric future fail to recognise the reality of billions of combustion engine cars still on the road for many decades. Think through each case for a car purchase; from farmers to those who can only afford a cheaper second hand car there will be many that will own combustion engine vehicles for a long long time. Unless government compels people to own electric, the cheaper second-hand values of conventional vehicles will also delay the transition to a fully electric national fleet of cars. It will be decades and decades before all cars on the road are electric.
Carlos, we have done so elsewhere on our blog at: https://rogermontgomery.com
Hi Albert, amid a belt tightening version of Deleveraging (which I believe I am first to call for Australia) people also delay/defer/discount repairs unless they are compulsory.
Thanks for sharing. I am not sure I agree with the conclusion of what the impacts will be on the market make-up from the proposed NG changes by Labor. Given NG will still be available to property investors in new or off-the-plan purchases, there are other dynamics at play.
Thanks for your comment Shaishav. The peak in interest only was June quarter 2015. APRA’s changes followed David Murray’s financial system inquiry in 2014. The changes shown in the table are between 2017 and 2018.
Hi all, appreciate you taking the time to share your thoughts and comments. Thanks.
Hi Paul, my apologies for the delayed response. ARQ, since 2014 have invested a lot more than they have generated with a consequent increase in debt and equity raising. ROE is not impressive however the price has pulled back towards something closer to ‘value’.
Yes Carlos we do have an Active ETF. My paper was not about active ETF strategies, it was as Chris tried to point out about passive market cap index investing.
Hi Carlos, I was referring to the concern for property investors who will come off 5-year interest-only (IO) loans, and couldn't refinance again on IO, would potentially be forced on to unaffordable Principal & Interest loan terms in 2019 and 2020, this might cause them to sell the investment property. Hope that clears that up. All the best
Hi Parth, I think you will find many of the fintechs will fizzle. Something or one thing will eventually break through to disrupt the majors but most will fizzle out and picking the winner and when is almost impossible.
Thanks Ed, appreciate the comment and thanks for sharing.
Yes great point Sathyan
Hi Patrick, its an estimate supplied by UBS.
It is true that the best businesses are those that have a competitive advantage and the most valuable competitive advantage is the ability to charge a higher price and cause people to still cross the road to buy that product. Consumer brands are often used as examples of this and A2 milk has achieved the ability selling what is basically milk. The question has always been about the price of the stock and the barriers to entry. If you believe that the company can continue to grow in the future, as fast as it has in the past, then the price might in fact be cheap. If however you believe that normal market and competitive forces will produce more modest earnings growth than the price is implying, the stock is expensive. By definition (we don’t own the stock), we believe the latter.
Thank you for sharing your view. Different views are precisely what makes a market, and indeed, we could be wrong. You are quite right when you point out that if your scenario transpires, the P/E would not be 40 times. Thank you again for providing the counter view.
Hi Rick $100 invested in the bond divided by 2.4 = 42
Thanks for listening K A.
Hi Carlo, you make a very good point. I too have been seeing flyers most weeks at a lower price. Price wars aren't great either (for the customer yes!)
Hi Glenn, we wrote our thoughts on our site about VTG. Even though the weighting of VTG in our funds was relatively minor, we are nevertheless enormously disappointed.