30 Nov 2023
Berkshire Hathaway: Talent
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Berkshire Hathaway Inc. (Berkshire) is a publicly listed American multinational conglomerate headquartered in Omaha, Nebraska which was run by Warren Buffett and Charlie Munger.
Charlie Munger has passed away age 99.
Berkshire is effectively a LIC (Listed Investment Company) or more simply a professionally managed fund. Its business is the business of investing in other businesses.
Now with Charlie Munger gone, will Warren Buffett retire?
Unlikely but Buffett and Berkshire have lost an incredible talent.
Talent, specifically having the right Portfolio Manager working for you is the key to achieving above index performance.
Vale Charles Munger (1924 – 2023).
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
23 Nov 2023
Market Metrics: Profitable vs Unprofitable
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Benjamin Graham is just such a talent, even in death he is always right.
Graham laid the foundations for value investing principles which detail how to value an asset.
Many ‘things’ can be called an asset but Graham narrows down the investable universe of ‘things’ using key criteria, the most important of which is that the ‘thing’ you buy must produce a profit.
It is incredibly easy to get attracted to shiny and exciting ‘things’ on the promise that they will make a profit but time and time again it proves to be a financial disaster.
To give you an example of Graham’s thinking we have attached charts that track profitable and unprofitable ‘things’ and unsurprisingly, decade after decade the investors chasing the unprofitable shiny and exciting ‘things’ suffer financially.
Click for chart.
Newealth is built on Graham’s principles, boring yes but beautiful in how they just work.
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
14 Nov 2023
US Recession???
- Posted by Dejan Pekic BCom DipFP CFP GAICD
We have been asking why the United States has still not gone into a recession given that the Effective Federal Funds Rate has increased from 0.08% in December 2021 to the current 5.33% that was reached in September 2023.
The answer is the US consumer.
Inflation has fallen while wages have risen and there is much more excess savings (US$816 billion remaining) than what was previously estimated.
Click for chart.
This implies that GDP (Gross Domestic Product) in the United States will continue to be positive for the next 12 months.
We will wait and then react because when recessions do occur, they always present investors with an opportunity to buy more quality assets at a discounted price.
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
8 Nov 2023
Recession Probability Indicator
- Posted by Dejan Pekic BCom DipFP CFP GAICD
The RBA (Reserve Bank of Australia) increased interest rates yesterday by 0.25% to bring the official Cash Rate up to 4.35% in order to reduce inflation.
The interest rate chart above points to a peaking in central bank interest rates except for Australia which is expected to go higher again in 2024.
Will this new interest rate increase tip us into a recession?
The answer is that we cannot be certain.
The attached chart is the latest Worldwide Recession Probability indicator and it puts Australia right on the fence at 50% likely.
Click for chart.
The key to remember is that even when Australia’s does go into the next recession, it will present investors with an opportunity to buy more quality asset at a discounted price.
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
31 Oct 2023
The Wisdom of Great Investors: What you need to know
- Posted by Dejan Pekic BCom DipFP CFP GAICD
The insight from these Great Investors is remarkable yet deceptively simple.
What you need to know to invest-
- Avoid self destructive behavior– Benjamin Graham
- Don’t attempt to time the market– Peter Lynch
- Be patient– Jesse Livermore
- Don’t let emotions guide your investment decisions– Warren Buffett
- Recognise that short-term underperformance is inevitable– John Maynard Keynes
- Disregard short-term forecasts and predictions– John Kenneth Galbraith
Click to read.
The underlying message is that investing is boring.
It is about compounding over time and not about sexy.
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
9 Oct 2023
Market Metrics: Bond Yields
- Posted by Dejan Pekic BCom DipFP CFP GAICD
The US 10 year bond yield has jumped higher over the past few months to reach a new high of 4.81% as at 3rd October 2023.
Rising bond yields are almost always bad news for growth assets prices (property and shares) and also bad news for defensive assets prices (bonds).
This is the key reason for the Dow Jones Industrial Index falling 7% to 8% since the end of July 2023 (see above chart).
Click for multi-decade chart.
The only positive outcome from rising bond yields is for interest earned on cash deposits.
When asked if bond yields will go higher, it is difficult to see because the elephant in the room remains global debt which currently stands at over US$300 trillion and will act as a break on rising bond yields.
However, if what currently tracking as an economic slowdown changes into a recession with mass unemployment then fear and panic will take hold and as Benjamin Graham taught, that is the best time to buy more quality assets.
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
25 Sep 2023
Market Metrics: EPS
- Posted by Dejan Pekic BCom DipFP CFP GAICD
The numbers keep supporting a slow down for the Australian economy.
The chart above tracks the weekly cost of filling up a vehicle which is at record levels which negatively impacts on surplus disposable income for other spending.
For business it is all about EPS (earnings per share) growth which is a measure of a company’s profitability and calculated by dividing a company’s net income by its number of shares outstanding.
We want EPS to grow.
However with consumers spending less widely, EPS growth is forecast to slow into 2024.
Click for chart.
As Benjamin Graham taught, there is nothing that we can do about economic cycles which is why remaining invested according to your appetite for volatility is key and when panic takes hold, react by buying more quality assets at discounted prices.
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
22 Sep 2023
Friday Tidbit
- Posted by Dejan Pekic BCom DipFP CFP GAICD
If you are still unconvinced that immigration is not the immediate pain point for the lack of affordable residential property in Australia then let us take a look at millionaire migration.
The High Net Worth (HNW) are defined as individuals having wealth over US$1,000,000 which is AU$1,560,000.
According to Henley & Partners the number one destination for HNW is Australia with 5,200 migrating this year followed by United Arab Emirates who are attracting 4,500 and Singapore bringing in 3,200.
These HNW are leaving China, India, Russia and United Kingdom which is no surprise apart from India who’s economy is very good, growing at 7.8% in the April to June 2023 quarter.
If the Federal Government wants to stop steep rises in residential property prices and steep rises in rents then it needs to either cut immigration immediately or streamline the building of more residential property.
Building more residential property is preferable because it brings economic benefits but it takes years to deliver on the supply of residential property which is needed today.
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
21 Sep 2023
Australian Residential Property: Surging population
- Posted by Dejan Pekic BCom DipFP CFP GAICD
Immigration without doubt is the immediate pain point for the lack of affordable residential property.
We simply do not build enough residential property for the additional people that come to work and live in Australia.
Our population rose by 563,000 for the 12 months to 31 March 2023 with 454,000 being new migrants moving to Australia.
That is a lot of people/families needing shelter to live.
Click for charts.
Immigration will continues to fuel steep rises in residential property prices and steep rises in rents which is not sustainable.
The answer is to either cut immigration which can be done immediately or build more residential property.
The challenge with building more residential property is that it takes years to complete.
If you have family, friends or colleagues that want financial advice please ask them to contact us and we will work out how best to help.
14 Sep 2023
Megatrends
- Posted by Dejan Pekic BCom DipFP CFP GAICD
All the numbers keep pointing to a recession in the United States in 2024 which on the basis of probability is more likely than not to occur.
However this is still not going to stop ‘software consuming the World’ over the next few decades or population growth or energy transition.
For outline of these three megatrends.
Click for charts.
Yes population collapse is still expected but only after population peak.
If you have family, friends or colleagues that want to take advantage of megatrends such as this, please ask them to contact us and we will work out how best to help.
