Over the past few months the global economy has seen the emergence of “green shoots”. As implied, there are indications that the global economy may be turning a corner. Like turning around a super tanker, turning around the global economy will take a long time and these signs aren’t so much an improvement but indicate …
Category Archive: Uncategorized
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Jun 13
Misquoted in the Financial Review
I’m typically a little nervous about interviews with journalists because you never know how they may use your comments and its not always 100% clear as to specifically what they’re writing about. Lucky me had my photo and was quoted in today’s Financial Review article on inflation linked bonds written by Brendon Lau (page 42 …
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Jun 12
Australia’s Steep Yield Curve
An incredible steepening of the yield curve has occurred throughout 2009. As can be seen the latest 10 year bond yield isn’t too far from where it was in the middle of 2008. This yield curve tells us several things about the state of current markets and economy… the market is starting to think that …
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Jun 12
The safest investment strategy
I have just read an article by Zvi Bodie, who has authroed a few university investment texts, and he reminds us of a simple but unfortunately forgotten or ignored concept… “Matching is the safest investment strategy for achieving a specific goal. To eliminate the risk of falling short of an investment goal at a specific …
Jun 11
Style Biased Index Funds – the Future of Managed Funds
Index funds were born out of modern portfolio theory which suggested that the highest risk-adjusted return should come from purchasing the market portfolio. As it is impossible to purchase market as a whole, the index fund effectively replicates the market by purchasing a large proportion of the market with each stock’s weighting proportional to its …
May 23
Another financial product rant
As I sit down to write another article, Great Southern has just collapsed and I have been asked to speak to some Financial Planners about structured products. If the Global Financial Crisis has taught us anything or confirmed what we already know, it’s that we must avoid investing in anything we don’t understand and avoid …
May 16
Default Super Funds
There’s been a little bit of publicity lately about the makeup of default super funds. I don’t have any statistics but my understanding is that most default super funds are the balanced fund which, strangely, is 70% invested in growth assets like shares and property. Given the overall lack of understanding of investment risk in …
May 15
Thought of the Day
If the risks of investing in the sharemarket are supposed to be lower the longer you invest, then why does it cost more to insure the same sharemarket portfolio (using put options) the longer your timeframe? Answer…because the first part of the statement is false and sharemarket risk does not decline over time Send …
May 06
Market Valuation Update
Source: RBA The rise in global sharemarkets in the last 2 months has seen the PE Ratio increase from its bottom at around 10 to around 12 to 13. As the above chart shows this ratio valuation level is not too different to the average PE Ratio in the 1970s and for Australia, the 1970s …
May 05
Today’s RBA Rate Prediction
The current September 2009 government bond is yielding 2.77% indicating the market is expecting (most likely) only one more 25bps rate reduction over the next few months. Most economists expect the RBA to stay steady today and given the RBA reduced rates last month by 25bps I also expect it to stay steady as they …