Our November meeting covered a variety of investment issues and some topics needed some analysis that I promised to do. A main topic for follow-up was “fixed interest returns” and with an official cash rate of 0.1% and Term Deposits yielding little more the question was “where can we go for better returns?”. The opportunity mentioned was Bond ETFs and my research showed the following. The ASX has 17 Australian listed fixed interest ETFs ( there are also 8 global ETFs on the ASX) The largest is The Vanguard Fixed Interest Index ETF.$1.32 billion funds under mgmt. ASX:VAX Second is iShares Core Composite Bond ETF (ASX:IAF) with $1.11billion FUM. Third is Betashares Australian Bank Senior Floating Rate Bond ETF (ASX:QPON) with FUM $0.78 billion. Fees for VAF & IAF are 0.2% and QPON 0.22%. Running yields VAF 3.27%, IAF 3.28% and QPON 1.87% 12 month returns - VAF 7.07%, IAF 7.09%, QPON 3.48%. These high returns reflect the capital gain from interest rate drops. VAF is a Vanguard Fund, large US company with many products in the [...]
It’s that time of year when those of us with a professional interest in grabbing headlines stare into our crystal balls and make bold predictions about what lies ahead in 2020. The trick for those of us seeking both fame and longevity is to keep things a bit vague. So, in that vein, here is my one big prediction for the economy in 2020: there is a higher than usual chance things are about to get very weird. Like, deeply weird. If the economic concepts that arise this year don’t make much sense to you, congratulations: you’re within a hair's breadth of grasping the gravity of the situation. But to give you a fighting chance at keeping up, I’ve once again assembled my top 10 list of economic jargon words or phrases you’ll need to avoid looking silly at dinner parties this year. You’re quite welcome. Advertisement Unconventional measures: First, a quick update. Australia’s official cash rate is 0.75 per cent and economists are tipping it to fall again to 0.5 per cent when the Reserve Bank [...]
Opportunities in sight from the top of the LIC cycle
Woolworths and Wesfarmers’ liabilities will double, and Myer’s liabilities will treble in 2019 – not because of a major acquisition but because of new accounting rules (AASB 16 Leases). Putting this in very simplistic terms – companies that rent space to sell their goods, record that rental expense in their profit and loss account with other expenses such as wages, electricity etc. However, they would very likely have entered into a lease agreement for a 5 or 6 or even 10-year lease, and it is this commitment that up to now has not been reflected in the accounts of the operator. Companies are now being forced to bring operating leases onto their balance sheets for the first time, from January 2019. Whilst the new accounting standard will improve transparency it will also have a major impact on key financial metrics such as gearing ratios and return on invested capital, as the present value of leases will be represented on the balance sheet as an asset and liability. It becomes a bit more complex as companies have [...]
The Reserve Bank has raised the spectre of widespread mortgage stress against a backdrop of high household debt, rising home loan rates, declining home prices and years of irresponsible lending by banks. The RBA, which revealed that the official cash rate would remain on hold at 1.5 per cent on Tuesday, flagged a potential rise in mortgage arrears.“Banks’ large exposure to a potential deterioration in housing loan performance is expected to remain a key issue.