Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 291

Cuffelinks Newsletter Edition 291

  •   1 February 2019
  •      
  •   
At the start of every year, investors are inundated with forecasts and projections on all manner of financial metrics. Company profits, economic growth, currencies ... on it goes. In theory, they act as inputs to asset allocations as portfolios are rebalanced.

Yet some of the world's most successful investors eschew these guesses about the future. Warren Buffett told the 2003 Berkshire Hathaway Annual Meeting:

"We don’t give a hoot about anybody’s projections. We don’t even want to hear about them, in terms of what they’re going to do in the future. We’ve never found any value in anything like that."

Another of our favourites, Oaktree's Howard Marks, has been writing letters to his clients for decades. In 1993, he wrote:

"Groucho Marx said "I wouldn't join any club that would have me as a member." Another formulation may be "I would never act on any forecast that someone would share with me." I'm not saying that no one has above-average forecasting ability. Rather, as one University of Chicago professor wrote in a paper years ago, such forecasters are more likely to be sunning themselves in Saint Tropez than going around entreating people to borrow their forecasts."

(The new client memo from Marks includes the famous 'beer' explanation of the tax system). 

What does our annual look at the Morningstar Gameboard tell us? It's all over the place and history is no guide. The best asset class in 2016 was Small Caps, and it was the best again in 2017 then the worst in 2018. Australian fixed interest was near the bottom in 2016 and 2017 and top in 2018.  

 

Nobody predicted Australian government bonds would win in 2018, when interest rates were supposed to be rising with the Fed tightening, the threat of inflation and massive bond issuance. But as the chart below shows, there was a big fall in Australian bond rates and forecasts were wrong.
 

It's time for a government bond face-off 

Dear reader, don't switch off because we're on to fixed interest ... it's important. In one corner, Paul Chinsays diversified portfolios should always hold some government bonds, while Jonathan Rochford says now is not the time. You're welcome to take sides in the comments.

Last week's articles on Labor franking changing behaviour and new superannuation policies drew plenty of comments, and Shadow Treasurer Chris Bowen laid down the gauntlet on ABC Radio on Tuesday:

"I say to your listeners, if they feel very strongly about this, if they feel that this is something which should impact on their vote, they are of course perfectly entitled to vote against us." 

Also this week, Gemma Dale reports on the ASX and foreign bourse trading patterns of nabtrade clientsNicholas Paul believes the QE flood of liquidity lifted all boats on a rising tide, but now it's time to know what you own as you navigate tougher markets. Similarly, Miles Staude cautions investors who say they need 10% returns but without taking capital risk.

Did you realise the reduction in the income threshold for the extra 15% tax on super contributions has led to thousands of taxpayers receiving a new tax bill? Julie Steed explains how this has crept up on many.

Notwithstanding our comments on the perils of forecasting, this week's White Paper from AMP Capital's Shane Oliver lists his macro factors affecting investments in 2019.

Graham Hand, Managing Editor

 

For a PDF version of this week’s newsletter articles, click here.

 

 

Leave a Comment:

banner

Most viewed in recent weeks

16 ASX stocks to buy and hold forever, updated

This time last year, I highlighted 16 ASX stocks that investors could own indefinitely. One year on, I look at whether there should be any changes to the list of stocks as well as which companies are worth buying now. 

2025-26 super thresholds – key changes and implications

The ABS recently released figures which are used to determine key superannuation rates and thresholds that will apply from 1 July 2025. This outlines the rates and thresholds that are changing and those that aren’t.  

Is Gen X ready for retirement?

With the arrival of the new year, the first members of ‘Generation X’ turned 60, marking the start of the MTV generation’s collective journey towards retirement. Are Gen Xers and our retirement system ready for the transition?

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

What Warren Buffett isn’t saying speaks volumes

Warren Buffett's annual shareholder letter has been fixture for avid investors for decades. In his latest letter, Buffett is reticent on many key topics, but his actions rather than words are sending clear signals to investors.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Latest Updates

World's largest asset manager wants to revolutionise your portfolio

Larry Fink is one of the smartest people in the finance industry. In his latest shareholder letter, the Blackrock CEO outlines his quest to become the biggest player in private assets and upend investor portfolios.

Economy

Australia's economic report card heading into the polls

Our economy grew by a nominal rate of 7% per annum from 2017 to 2024, but it benefited from the largesse of fiscal and monetary policies, both of which are now fading. We need a new, credible economic growth agenda.

Preference votes matter

If the recent polls are anything to go by, we are headed for a hung parliament at the upcoming federal election. So more than ever, Australians need to give serious consideration to their preference votes.

SMSF strategies

Meg on SMSFs: Tips for the last member standing

It’s common for people as they age to seek more help in running their SMSF if their capacity declines. An alternate director may be a great solution for someone just planning for short-term help in the meantime.

Wilson Asset Management on markets and its new income fund

In this interview, Matthew Haupt from Wilson Asset Management discusses his outloook for the ASX, sectors such as REITs that he likes, and his firm's launch of a new income-oriented listed investment company.  

Planning

‘Life expectancy’ – and why I don’t like the expression

Life expectancy isn't just a number - it's a concept that changes with survival rates over time. This article breaks down how age, survival, and societal factors shape our understanding of life expectancy, especially post-Covid. 

The shine is back on gold, and gold miners

Gold mining stocks outperformed in 2024 and are expected to do well in 2025. At this point in the rally, it's worth considering what has driven gold prices higher and why miners could still have some catching up to do.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.