WeWork – Sex, Tequila & Tigers!
Just six weeks ago, coworking giant WeWork (think Regus and Servcorp) was valued at a stratospheric $47 billion, bestowing upon it the honour of ‘most valuable tech startup’ in the US. Then it filed its IPO registration disclosing a smorgasbord of conflicts of interest, mismanagement and dodgy accounting. Cofounder and CEO Adam Neumann has since been fired, the IPO has been cancelled and there is even talk of bankruptcy. Yes, bankruptcy. From $47bn to zero in six weeks? This is an incredible story and for those hunger for more information, we recommend this excellent story in Business Insider here. For those curious to read about sex, tequila and tigers, read this story. Enjoy!
The RBA cut rates for the third time in quick succession by 25bp to a paltry 0.75%. The RBA Statement can be found here. In a nutshell, they say that inflation has completely disappeared and that economic activity is declining. Our Big Banks failed to pass on the cut (they will pass on less and less as they face intense margin pressure) and politicians screamed blue murder. Everyone in Sydney and Melbourne went house-hunting at the weekend (see graph below) and discovered there are no decent houses to buy (although there are plenty of poorly constructed off-the-plan apartments to choose from). Expect mortgage rates to drop below 3% very soon. Global equity markets wobbled this week and are some 2-3% lower on fears the economic slowdown and trade wars are spreading to Europe and the US. The price of oil continued to plummet and is now lower than the 15% one-day price surge on Sep 14th that followed the attack on Saudi Arabian facilities. Oil prices are now down over 25% this year (though you wouldn’t know it when filling up your car).
The Retirement Income Review – Much Ado About Nothing?
Last week the government announced the first Retirement Income Review since the 1993 Fitzgerald inquiry into national savings, which followed Paul Keating’s introduction of compulsory super. The Government’s Terms of Reference include: “The Review will look at the three pillars of the existing retirement income system, being the age pension, compulsory superannuation and voluntary savings. (It) will cover the current state of the system and how it will perform in the future as Australians live longer and the population ages.” It is interesting (and disappointing) to note that the Government has already ruled out including the family home in the age pension assets test. Graham Hand, writing in Firstlinks, warns not to expect too much from this Review.
Stanford Brown Monthly Top 5
Is out and can be read here. This month we reflect on nine months of stellar portfolio returns (see story below), Ashley commemorates the 70th anniversary of the Chinese Communist Party by giving us a history lesson of China since the Roman times, and we ask the question “Recession? Sure. Why do you ask or care?”. Happy long weekend reading!
Let The Good Times Roll!
Calendar 2019 has been an exceptional year for investment markets and for the portfolios of SB clients. For example, those of you lucky enough to be invested in our Dynamic Index High Growth Managed Account are enjoying an eye-popping 19.3% return for the nine months to Sep 30th! Even our Moderate Managed Account is up over 12%. Markets have been supported by the sugar hit of interest rate cuts, the prospect of more QE (Quantitative Easing), ever more government spending and tax cuts. Of course, this is unsustainable. But like all good parties, it’s important to leave before it turns ugly.