As 26th President of the USA, Teddy Roosevelt said, “In any moment of decision, the best thing you can do is the right thing…the worst thing you can do is nothing.” Last month - where we set course for the rest of 2018 with our strongest views - one of... Show More
In the AFR today I reveal that Australia's budget has shocked all analysts and credit rating agencies by moving into an official surplus for the first 11 months of the 2018 financial year---some $20 billion better than Treasurer Scott Morrison forecast in 2017---on 2 of the 3 key budget measures... Show More
Chinese steel consumption is the most significant variable in determining the iron ore price. China consumes over half of the world’s iron ore each year. As such, and while supply themes play a role, cycles of Chinese credit growth and housing activity are the key factors in determining iron ore... Show More
September 27th, 1983. What comes to mind? What if I include the quote from Bob Hawke? “Any boss who sacks a worker for not turning up today is a bum”. If you are over 45, you will know straight away. It was the day the yacht Australia II won the... Show More
This will be short and likely controversial. There’s a lot of vitriol about dividend imputation these days. Much of it is misguided. However widely practised around the globe, double taxation of corporate earnings is unfair. Most countries acknowledge that fact indirectly by having low tax rates on dividends. Our dividend... Show More
While recent headlines have focused on the OECD’s passing comments on housing-debt risks in their recent 47-pager on Australia, the real meat and spuds in this great report is the analysis on, and recommendations for, Australia’s slipping productivity, innovation and inequality. We’ve pulled out some of the highlights and key... Show More
Last week marked the busiest week of the current reporting season. With most of the smaller companies reporting there was no shortage of stocks to profile. We take a look at three of these businesses, how they have fared during the reporting period and what this means for the businesses... Show More
This time last year, JCB Advisory Board Economist, Saul Eslake warned of the risks of a Yuan devaluation: “A large devaluation of the Yuan would add renewed impetus to the deflationary pressures that policymakers in advanced economies are hoping will ebb this year.” This proved prescient as markets saw a sharp... Show More
As a fan of dystopian classics such as Huxley’s ‘Brave New World’ and Orwell’s ‘1984’, Martin Conlon, Schroders’ Head of Australian equites, finds their insights into the perils of searching for a manipulated utopia alarmingly relevant to today’s financial world. As a rationalist, he suggests the benefits of manipulating asset... Show More
Recessions are capitalism’s ways of correcting the imbalances that expanding economies ferment. Australia’s 25-year expansion has allowed two debt-based distortions to fest. These debt blowouts will be paramount in deciding how Australia’s economy performs in coming years. The threat posed by these imbalances, however, is contentious. One way to express... Show More
‘Oh, Inverted World’ is the title of the 2001 album of the US indie band The Shins. It's a good description of todays’ topsy turvey world created by loose monetary policy. One big distortion in the anomaly we see in stock pricing tied to business duration. Much-used discounted-cash flow analysis... Show More
The surprise 'Brexit' vote result towards quarter end served as a stark reminder of increasingly tenuous linkage between the financial economy and the real economy. Politicians and those connected to the financial economy were almost universally in favour of remaining part of the EU. Warnings of the consequences of exiting... Show More
Bubbles, by definition, exaggerate the span of multiples paid for cashflow streams in equity markets, as in squeezing up the favoured they tend to emaciate the orphans. In early to mid-2000, Computershare was the most favoured poster child for technology stocks listed in Australia. In current terms, its share price... Show More
The Australian Economy has now delivered 99 consecutive quarters without a recession. Australia is enjoying the longest economic expansion in the developed world — 24 years and counting. However, other commodity led economies are starting to falter. The Wall Street Journal have produced a great resource that looks at the... Show More
The interaction between valuation, sentiment as calibrated through price momentum, and policy is key. Differences in the valuation of cyclical stocks relative to defensive industrial stocks has only through the past quarter moved slightly away from hitherto unseen extreme levels. Sentiment, as ever, has followed this move, as measured through... Show More
It will be a shame to lose another iconic brand but you can’t blame Pacific Brands shareholders if they accept HanesBrands takeover offer. Show More
We believe expectations of ongoing deflationary conditions (which are spurious in any case, as they depend on the particular prices on which one chooses to focus) are, like the prevailing investment methodologies, anchored in extrapolation rather than logic. Added to bond portfolios which have rarely been larger or more ludicrously... Show More
Last month I interviewed Head of Australian Equities, Martin Conlon, on the current positioning of the Schroder Australian Equity Fund and our views as we look forward. More recently we have seen a turnaround in the market leaders, with the Fund benefiting from Resources and Energy outperforming the interest rate... Show More
Australian Banks have enjoyed a generational “stronger for longer” that dwarfs anything the resources market enjoyed before the consequent fall. BHP this year will make the same ebit it made a decade ago; CBA made $5b pre tax a decade ago and will make $13b this year. The driver for... Show More
Nothing propels the highs, higher, nor the lows, lower. Consider the oil sensitives - Qantas as a winner and Origin Energy as a loser. Woodside has of course underperformed because it shares a reliance upon the oil price for its economics, but its underperformance has been half of Origin’s. Part... Show More