Robinhood, Retail Revolution, US Stimulus, and our new SB Portal
There have been few years we collectively waved goodbye to quite as enthusiastically as 2020.
The year started with the ongoing devastation of the bushfires, only for this heartbreak to quickly be surpassed by the global pandemic, and the many unanticipated challenges it threw our way.
As we enter 2021, the pandemic still casts a long shadow over our lives, however we move forward with optimism and plan for a year where businesses can rebuild, and families reunite.
On that note we excitedly introduce our first Stanford Brown in person event in 12 months.
Market optimism has been fuelled by prediction of an end to inflation and a ‘New Normal’ for interest rates. Can we really assume a zero-interest rate outlook? Can the debt-fuelled asset-price bubble last forever? Where do we find income? How do we protect against risks?
On the 25th of February we cut through the noise to focus on the questions that matter for client portfolios in 2021 and beyond!
Introducing the SB Portal
We are very excited to launch our tailored Stanford Brown Personal Wealth App.
The portal allows you to link up your finances from bank accounts and property to superannuation and more. It will keep you up to date with live data and help you manage, track, and store your entire financial world.
It also has a built-in digital signing tool for fast and easy sign offs, allowing you to use the time you would have spent printing and signing off a form to sit back and feel good that you’re taking small steps to help limit unnecessary paper waste.
We will be rolling the portal out to clients in stages over the coming months. Should you want to understand more please speak with your adviser today.
GameStop the Game Changer?
In what seems destined to end up as the backdrop to a Martin Scorsese masterpiece, the world has watched with fascination at the Gamestop share price explosion.
As our C.I.O. Ashley Owen wrote in our recent quarterly outlook, this was a very public round one in a war between millennials and boomers. On one side were thousands of cashed-up, locked down millennials using a chatroom called Wall-Street-Bets on the social media site Reddit, trading on commission-free broker Robinhood. On the other side were baby boomer billionaire hedge fund managers. Each side accused the other of using the stock market as a casino to line their pockets, without regard for the actual companies involved. Round one went to the Reddit betting ring, with the hedge funds suffering losses estimated at US$70b.
Usually, it is the hedge funds doing the shorting that make a killing, but the recent episode was the first time the boot was on the other foot. It showed how the power of thousands of tiny bets by a coordinated army of small traders, can cause multi-billion-dollar losses in big hedge funds run by seasoned ‘professionals’.
This is unlikely to be the last battle in the war, and it has Wall Street and regulators scrambling to keep up.
January was another eventful month in US Politics, with the Storming of the Capitol on January 6th to the Presidential inauguration on January 20th. Perhaps most significant was the result of the US Senate runoff election in Georgia.
The result determined which party would control the US Senate, in which Republicans have had a majority since 2014. With a 50-48 advantage, the Republicans were on the verge of maintaining control after the November elections and needed just one additional seat for a majority. Democrats needed to win both Georgia seats to tie the chamber; in a 50-50 Senate, and they did. The Vice President, Kamala Harris, will provide the tie-breaking vote, thus giving Democrats the majority.
Senate control will be key in shaping the Biden administration’s trajectory for at least the first two years of his term and Democrats are wasting no time in taking steps to push through the President’s $1.9 trillion economic rescue plan.
Mr. Biden and Treasury Secretary Janet Yellen met virtually with Senate Democrats this week and spoke about the need for Congress to respond boldly and quickly. Strong emphasis was made on the need for a substantial package, reportedly advising Republicans that the $600 billion that they proposed was “way too small”.
The scale of the proposed stimulus has raised questions from various quarters regarding the medium-term inflationary implications, however, for now the markets continue to cheer every announcement.
Quarterly Review of Investment Markets
For investment markets, much has changed since our October quarterly review. The US elections, development of virus vaccines, and improvements in economic activity and outlooks in Australia and around the world, all contributed to a strong December quarter for the major asset classes, continuing their steady recovery from the February-March 2020 virus scare sell-off.
In our latest Quarterly report, you will find:
-What happened in the investment world over the past quarter, and why?
-How our portfolios are positioned for the coming quarter.
-What are the major risks to investment markets and how they are changing?
Life After Google?
Australians may face the loss of Google Search and news in Facebook feeds if proposed legislation forcing the companies to negotiate payments to news media companies goes ahead.
The move would mean the 19m Australians who use Google every month would no longer be able to use Google Search, and 17m Australians who log into Facebook every month would not be able to see or post any news articles on the social media site.
The two companies are fighting against legislation currently before the parliament that would force the digital platforms to negotiate with news media companies regarding payment for content. In the event these negotiations reached an impasse, an arbitrator would have the final say on the appropriate amount.
Last week, Google delivered an ultimatum to the government, saying it would not be viable to continue offering search in Australia if the code goes ahead.
The company’s Australian managing director, Mel Silva, told a Senate committee the proposed news code was untenable and would set a “dangerous precedent” for paying for links.
You may think Australia is a relatively insignificant market in terms of population and revenue when considering Google’s global footprint, and to a degree this is true. The reason the stakes are so high is because this would set a very significant precedent and could establish a model for other countries to replicate. Something the technology behemoths are desperate to avoid.
You can expect this battle to intensify in the weeks ahead. As a backup plan you may wish to check out your other search options.
The Retail Revolution
For years industry analysts have foreshadowed the demise of traditional brick-and-mortar retail stores, anticipating that online retailing was an unstoppable force. For some the pace of this transition has been slower than expected but the pandemic has played a significant role in accelerating the trend.
This week the Big-Daddy of on-line retailing Amazon delivered its largest quarter by revenue of all time, generating US$125.56 billion in sales. Let us pause for a second to appreciate the sum involved.
Amazon also announced Tuesday that Amazon Web Services CEO Andy Jassy will replace Jeff Bezos as CEO of Amazon later this year, with Bezos assuming the role of Executive Chairman. Given he has lived and breathed Amazon for over 20 years it is hard to imagine Bezos’s hand will be far from the tiller.
As one star continues its unassailable rise correspondingly the revolution claims another victim. This week UK online retailer ASOS purchased several prominent labels from their parent group HIIT brands. This included UK high street icons such as Topshop, Topman & Miss Selfridge’s. Most notably the acquisition included the brands but not one of their retail stores. We can expect to see this trend intensify in the years ahead.