Stanford Brown Recognised As One Of Australia’s Top Money Managers!
We are delighted to announce that Stanford Brown has again been nominated as one of Australia’s top money managers! We are the only firm to be nominated for the IMAP Multi Asset Class award two years in a row, and we hope to go back-to-back as Australia’s premier Managed Account offering!
This is another ringing endorsement of the quality and rigour of our Investment Philosophy and our Managed Accounts from the leading independent industry association. The winners will be announced on the 25th of June, wish us luck!
Global markets rallied this week, as the prospect of rate cuts from the Federal Reserve and progress in US-Mexico trade negotiations overshadowed regulatory concerns for the major US tech companies. Markets were soft to start the week, as the US tech goliaths Apple, Alphabet (Google), Amazon and Facebook all had regulatory probes opened to investigate their practices.
US stocks then had their second best day of the year after US Federal Reserve Chief Jay Powell remarked in a speech that the Fed would “act as appropriate to sustain the expansion”, leading investors to believe that any deleterious effects of Trump’s trade war will be offset by accommodative monetary policy. In March virtually nobody was expecting a Fed rate cut by July, now the market is pricing a 55% probability of a July cut!
In local news, RBA governor Phillip Lowe announced the end of the RBA’s 3 year streak of inaction, lowering the cash rate from 1.50% to 1.25%. This coincided with reports that the Australian economy was growing at its slowest pace since the GFC. The local sharemarket responded to this gloomy economic news by rising 1.2% for the week!
Finance 101 – Survivorship Bias
If you had invested $1000 in Amazon when it listed on the NASDAQ in 1997, you’d be sitting on just under $900,00! Imagine if you had the foresight to know the potential of the internet back in 1997 and had invested in Amazon!
When daydreaming about missed investment opportunities like Amazon, it is important to keep survivorship bias in mind. Survivorship bias occurs when we only consider success stories and forget about the companies that failed. As it turns out, lots of people thought that the internet was going to be a big thing in the late 90’s and early 2000’s, creating one of the largest speculative bubbles in history. For every Google and Amazon, there were dozens of companies like Webvan, Pets.com, and eToys.com which went into bankruptcy once the speculative party was over. Who’s to say that if you had your time again you would’ve chosen Amazon over one of these lemons?
One of the many lessons from the dot-com bubble is that it is not always a good idea to invest in a company just because it is in a booming industry. We often have clients ask whether they should invest in solar since it’s “the next big thing”. Even if that’s true, you need to make sure you’re investing in the next Amazon rather than the next Webvan!
Get the full scoop on Australian bond yields, plus a plethora of other enthralling articles, in this month’s Monthly Top 5!
This week’s RBA’s rate cut reminded us of a quote often misattributed to Einstein “The definition of insanity is doing the same thing over and over again and expecting different results”. The RBA has a mandate to keep inflation between 2% p.a. – 3% p.a. As far as the RBA is concerned, if prices in the broader Australian economy are not rising more than 2% p.a. they need to stimulate more spending by making debt cheaper (i.e. lowering interest rates). For the last 5 years they have kept interest rates at (up until this week) historic lows, and much to their bewilderment inflation has been non-existent.
There are a multitude of reasons why prices aren’t rising in Australia:
Increased globalisation has resulted in many Australian business having to keep prices low to remain competitive. This is particularly true for retailers, who are struggling to remain competitive with Amazon (this is known as the Amazon Effect)
Price wars between Coles, Woolworths and Aldi have kept grocery prices low
Wage growth remains stagnant, with underemployment (i.e. people with a job who want to work more hours) at historical highs
The Australian economy remains undynamic, desperately needing reforms to the business environment and education system to reduce our reliance on the mining and property sectors. This is reflected in Australia’s woeful productivity growth figures
Do you think any of these structural issues will be addressed by making debt 0.25% cheaper? We certainly don’t!
Wondering what effect ScoMo and the RBA’s rate cuts will have on property? Tune in to this month’s edition of the Stanford Brown Market Insight Podcast, where we are joined by renowned buyer’s agent Patrick Bright and the incomparable mortgage broker John Ruddick!
This month we cover:
Whether the property downturn is over
What to look for in an investment property
How to negotiate a lower rate on your mortgage
What value a buyer’s agent can provide
Sydney Slump Slowing
The property downturn has continued to lose pace in the major capital cities, with Sydney only falling 0.5% in May. This is in contrast to the end of last year, where we saw declines of 1.4%, 1.8% and 1.3% in November, December and January respectively.
But the question remains – will the Bank of Mum and Dad pass on the RBA’s rate cuts to their children?
Triumph of the Dad Bod!
Take a guess which man below is the boxing heavyweight champion of the world?
Andy Ruiz, the well fed man on the right, pulled off one of the greatest upsets in boxing history last weekend. The bookies had Ruiz as a +1,100 underdog, whilst the heavily favoured incumbent champion Anthony Joshua was paying -2,500. For those not familiar with America’s obscure gambling methodology, a $100 dollar bet on Ruiz would have earned you $1,100 (an 11-1 underdog), whilst it would take a $2,500 bet on Joshua to earn $100.
Believe it or not, most pundits attributed Ruiz’s superior conditioning to his TKO victory!