Personal investing: The extra return to hybrid notes

Avoiding complex investments is a good guiding principal for investors.  Bank hybrid notes are an exception to that rule.  Yes, they are complex relative to plain vanilla shares and bonds.  But their reward-to-risk ratio, and their defensive qualities, are so attractive that investors should consider bank hybrids despite their complexity.

Personal investing: Buckets for money

About  450,000 affluent Australian families hold their investments in some combination of superannuation, family trusts and direct ownership of negatively geared property.  But over the last year, changes in tax rules and changes in property market conditions have shifted the relative benefits of these arrangements.  Family trusts have been made comparatively more attractive. Investors should […]

Global economy: Janet and Mario go too early

Inflation bulls are currently in the ascendency.  The US Fed raised its overnight rate again in June and is discussing the unwinding of quantitatvie easing (QE).  The European Central Bank Governor Mario Draghi now says that the \”deflationary forces have been replaced by reflationary forces\”.   It is good to talk up inflation, but let\’s not […]

Show us the money

During the commodity price boom from 2004-2011 BHP Billiton\’s board raised the firm\’s  dividends to unsustainable levels and now in the commodity bust it has been forced to cut dividends by 75%.  Well, so what?  A firm that experienced an unanticipated surge in cash flows paid out a large part of that cash to shareholders […]

A convergence trade: Qantas and Virgin

There is something odd about Australia\’s airline duopoly at the moment.  Over the last two years Qantas shares have risen in price by 225%, but Virgin Australia\’s shares are up a mere 25%.  It is not so unusual for two firms in the same industry to have highly divergent fortunes, but it is unusual in […]

Going defensive: Option strategies

A combination of bank shares plus put options to protect against a fall in the value of those shares looks attractive at the moment.  Grossed-up dividend yields are very high and the price of options on banks shares are relatively low.  That is a happy combination, especially for SMSF investors.

Robo-advice

Robo-financial advice is an idea that is as old as the web itself.  Vanguard had plans for a robo-advice product in 1999. Now there is a new surge of energy in this space with a large group of fintech startups going after the opportunity. Imagine that you were building a robo-advice product, then what would your […]

Inflation is the only way out: Part I

Many economists believe that an extended period of inflation is ultimately the only way out of the low growth aftermath of the GFC. Moreover, the measures needed to stimulate inflation, such as: quantitative easing, negative interest rates, higher inflation targets and commitments to \’do whatever it takes\’, are blunt instruments. Therefore, a degree of overshooting […]

Digital disruption: Peer-to-peer

Platforms that connect household borrowers to household lenders will soon push banks aside.  The only reason capital still flows through banks from savers to lenders in 2015 is because the banks have a historic monopoly.  As soon as new platforms can be created to directly connect households to households, then borrowers will pay lower interest […]

Irrational exuberance

Now is a good time to remember the lessons of history about growth shares versus value shares.