Understanding Volatility

Courtesy of: Visual Capitalist

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Courtesy of: Visual Capitalist
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You are missing out if you only invest in Australian equities

The overwhelming bia and perhaps “comfort” which Australian investors exhibit and seek by either solely or heavily investing in their domestic equity market has proved to be a substandard strategy over the past 20 years.

Larger, developed markets have outperformed the ASX 200 over this greater period of time.

My anecdotal experience whilst being an Australian domiciled stockbroker who focused and specialised in “overseas” equities, from investors who shunned international securities included them telling me that “at last they can drive by and ‘touch’ the company” which they are invested in, or some may have justified their strategy by convincing themselves they could conduct their research more easily by knowing the Australian company better.

I find these type of justifications quite weak and poorly founded.

It’s highly unlikely that an investor in BHP has researched or visited all or most of their sites, offices and operations located in Australia and the same would be the case if one analysed a power, supermarket or healthcare business.

Interestingly, Australians probably use more products and services from overseas corporations than they care to admit.

Whether its Google, Ford, Facebook, Dropbox, Sony, Bayer, Siemens, Netflix etcetera, etcetera……

I fear, that the government “sponsored” or “promoted” programs of negative gearing, franking dividend credits and perpetual money flow into superannuation will continue to allow “local” only biased Australian investors to continue doing themselves an investing disservice for decades to come.

 

It’s time to look at emerging markets again

I think the developed equity world is not cheap, while emerging markets are. For those hunting GDP growth, take a look at this infographic from http://www.visualcapitalist.com

It leads me to ask, how will you position your portfolio for the next 10-15 years?

 

Chart: The World's Largest 10 Economies in 2030

Not owning Aussie banks has saved you money

For 5 years I have advised clients to steer clear of owning shares in Australian banks.

Telling people when to sell, avoid or hide, not only saves & protects their capital but isn’t displayed in their annual summary of portfolio returns.

Such analysis and advice is unquantifiable yet it has proven to be invaluable.

It remains a difficult concept to explain to prospective clients.

Here are the 5 year price charts of CBA & NAB.

 

Don’t own a home, own businesses

This chart sourced from visualcapitalist.com shows the percentage of assets that people of differing “wealth brackets” tend to favour.

It may prove the theory that wealthier people allocate their money to assets and businesses whilst others tend to spend their money on “stuff”.

Also interesting is the significant weighting of money that the primary residence and vehicles categories account for amongst the first couple “wealth” bands.

This could prove why conversations around motor vehicle (sales, servicing, repairs, parts, insurance) and real estate (buying, selling, renting, furnishing, maintaining) are so prominent in our daily lives.

These two assets (or liabilities) are also enormous revenue raisers for governments. Just think of the registration fees, stamp duties, fuel excises, luxury car tax to mention a few.

I’d like to think that this data could provide the basis for our cultural and government propaganda surrounding the great dream of buying a house. For, if we believe in the “dream”, we’ll take out a notable mortgage to acquire a home and this will require us to stay in the workforce in order to service our debt, all in while, we are paying taxes and providing the labour force for the businesses which the wealthier bands of citizens own.

Maybe my conspiracy theory for the month.

Either way, I think the chart below is quite interesting.

 

Lithium stocks to release some steam

Lithium darling, Pilbara Minerals (PLS:ASX) looks like heading down to the 80 cents level

My view on the AUD

17 January, 2018
by Rob Zdravevski

The AUD is trading at 0.7980 and I feel that the current short term uptrend in the AUD is stretched.
Albeit it is a strong trend and still intact, the AUD/USD cross is overbought on many technical indicators. I expect a regression to its short term daily mean, which is approx. 0.7750;
before it resumes its rising trend.
Should the AUD close this week above 80 cents, then the chance of a pullback to 0.7750 weakens and I’ll look for it to test 0.8260, 0.8350 and then 0.8550.
Whereas a break below 0.7530 would signal the end of the uptrend and thus I’d call it a trend reversal.
The correlation of CRB (Commodities) Index to AUD is also high. Currently the CRB and the Canadian Dollar (CAD) are both exhibiting the similar trends, moving average and other technical traits as the AUD/USD cross.
Interestingly, I wrote the following to a client who asked for my view about the Aussie on Dec 15, 2017.
 
“It’s starting to form a new uptrend, albeit its yet to be confirmed as a strong trend yet.
With its current price of 0.7670, its initial target is 0.7770 and it breaks that then I expect it to test 0.7900
 
A weekly close below 0.7610 would nullify this view as it would resume a test of the 0.7500 level”
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