The Weekend Edition includes a market update plus Morningstar adds links to two additional articles.
Lately, I’ve been reading a book by Robert Fulghum called, All I really need to know I learned in kindergarten. The book became a bestseller in the 1980s for its quirky short stories on the meaning of life.
In one story that became a cult hit, Fulghum realises that he already knows what’s necessary to live a meaningful life – and he’s known for long time. He learned it in kindergarten.
These are the things he learned:
Share everything.
Play fair.
Don’t hit people.
Put things back where you found them.
Clean up your own mess.
Don’t take things that aren’t yours.
Say you’re sorry when you hurt somebody.
Wash your hands before you eat.
Flush.
Live a balanced life – learn some and think some and draw and paint and sing and dance and play and work every day some.
Take a nap every afternoon.
When you go out into the world, watch out for traffic, hold hands, and stick together.
Be aware of wonder. Remember the little seed in the Styrofoam cup: the roots go down and the plant goes up and nobody really knows how or why, but we are all like that.
Goldfish and hamsters and white mice and even the little seed in the Styrofoam cup – they all die. So do we.
And then remember the Dick-and-Jane books and the first word you learned – the biggest word of all – LOOK.
Yes, the lessons are corny. Yet they include essentials like the Golden Rule, love, politics, the environment, and basic sanitation. As Fulghum notes:
“Take any one of those items and extrapolate it into sophisticated adult terms and apply it to your family life or your work or your government or your world and it holds true and clear and firm. Think what a better world it would be if we all – the whole world – had cookies and milk about three o’clock every afternoon and then lay down with a our blankies for a nap. Or if all the governments had as a basic policy to always put things back where they found them and to clean up their own mess.
And it is still true, no matter how old you are – when you go out into the world, it is best to hold hands and stick together.”
The purpose of schools
Fulghum’s stories got me thinking about what our kindergartens and schools teach and don’t teach. Teaching values is central to what they do. As is teaching reading, writing, and understanding numbers. These skills provide the building blocks for understanding the world, and eventually helping kids find work that provides an income for them.
Practical skills aren’t on school curriculums as much nowadays. I’m thinking of cooking, cleaning, maintenance (of gardens, for instance), making and fixing things, as well as money and investing. All these skills are essential for kids as they turn into teenagers and then young adults. The question is: why aren’t these skills taught in schools?
I have friends and family who are teachers, and I can already see them metaphorically grabbing hold of me and giving me an earful. They would probably say a few things (a few too many, perhaps):
- They can’t teach everything.
- They already have enough on their plate.
- Some practical subjects are taught in schools, such as technology, economics, and science.
- It’s the parents’ job to teach practical skills to their children.
The last point is important. Parents have a big say on their child’s development. On their values, and their education. Scientific studies suggest that children with parents who are more involved in their education get better results and better jobs. And parents can teach practical skills to their children too.
But what if parents aren’t equipped to teach their kids about money and investing, for instance? What happens then?
In my case, I learned maths and accounting at school. The latter acquainted me with the language of business and investing but didn’t provide me with tools to use in the real world.
My guess is that most kids are like me when they leave high school - they don’t know enough about the basics of money and investing.
Changing the status quo
Obviously, changing school curriculums to include things like investing is a huge ask. Any effort would need significant funding and commitment. It would also need the support of governments, schools, and businesses.
What can be done?
In the case of money and investing, here is what I would love to be made compulsory in all schools across Australia:
- In year one, there’s a program to learn about the basics of money and saving. CBA ran the Dollarmites program in schools for 90 years until 2022, when it was closed after complaints that it was using the program to promote the bank rather than for financial literacy. Why can’t governments demand that all the major banks sponsor and co-run a similar program? Perhaps making it part of the obligations of their banking licenses?
- In year five, a similar program reiterating earlier lessons and updating them for ‘tweens’ who are developing their own spending and savings goals.
- In year seven, get experts in passive exchange traded funds and listed investment companies to talk about the basics of investing and investing in the whole stock market. And practical tools to implement this ie. getting parents to sign children up as minors on share trading accounts.
- In year eight, get leaders of large businesses to come in and talk about the nuts and bolts of how their companies make money. For instance, get the students into a local Bunnings store and get the store manager to talk through the nuts and bolts of the business. How it makes money, costs, labor issues, etc. Get the students to do assignments on the pluses and minuses of these businesses.
- In year nine, bring fund managers in to speak to their businesses and how they invest. Make it practical by perhaps visiting the sites of some of their investments and going to an investor presentation or AGM.
- In year ten, get superannuation funds experts in to go through the basics of the super system. The different funds, options, and costs. And go through practical examples on each.
Is a broad-ranging program like this unrealistic? Perhaps. It would require federal and state governments, major businesses, super funds, and investors to come together to make it work. It would need money and leaders willing to give time to the effort. It would need checks and balances to make sure that businesses don’t use it as a marketing opportunity.
But surely we can do better to help younger people navigate the world of money and finance?
James Gruber
In this week's edition...
It's great to have Peter Thornhill back. Peter is well-known to our readers as an independent author and speaker advocating a multi-decade investment strategy of holding industrial companies for income. Today, he updates us on the long-term returns from industrial shares versus the index. He also adds comparisons with listed property, resource stocks, and term deposits. Peter explains why his strategy has stood the test of time, and should continue to do well.
Consumer price index figures out this week show a welcome fall in the annual rate. Yet, does this index accurately reflect the actual cost of living? Peter Martin suggests that it clearly doesn't, and he has proof. He says the ABS publishes other estimates that provide a much clearer picture of living expenses, especially how they've risen of late.
Here's a fascinating datapoint for you: the average age of UniSuper members rolling out to an SMSF is 50, while the average age of members who roll money in from an SMSF is age 62. UniSuper's Derek Gascoigne explores this and other SMSF trends, as well as the pluses and minuses of administering your own super fund.
Are ASX small cap stocks set to play catchup and outperform their larger peers this year? Many people think so, though Katana's Romano Sala Tenna isn't sure. If it's right, he thinks there are four small caps worth considering for your portfolio.
One of the hottest plays in residential real estate investment is the land lease community. Currently, this model of ownership houses 130,000 Australians and there are many more projects in the pipeline. Cameron Murray does a deep dive into the business model and whether it works for both residents and landlords.
Thanks to the 'Magnificent Seven' tech stocks, global passive investors thrashed most active peers in 2023. But Orbis' Eric Marais says these investors shouldn't celebrate too soon because their portfolios are now concentrated in the most overvalued segment of the market, making them especially vulnerable if these stocks take a tumble. Meanwhile, Raheel Siddiqui of Neuberger Berman sees challenges ahead for the Magnificent Seven from stretched valuations, inherent cyclicality, and high correlations between the stocks.
Two extra articles from Morningstar for the weekend. Shaun Ler analyses Pinnacle's earnings and says they've proven reslient in a difficult market, while Roy van Keulen suggests Megaport's shares still have upside after its shares surged on a sales update.
In this week's whitepaper, VanEck provides its latest asset allocation outlook.
Finally, we'd like to give a shoutout to a new website on listed investment companies (LICs) created by Firstlinks' subscriber, John Fox. After retiring, John studied up on LICs, and recently open-sourced the findings. You can now find his latest research on the Firstlinks website. We've found it helpful and we hope you do too.
***
Weekend market update
On Friday in the US, a much stronger-than expected January payrolls report helped push 2- and 30-year Treasury yields higher by 16 and 12 basis points, respectively, to 4.36% and 4.22%. Stocks spiked to the tune of 1.1% on the S&P 500 and 1.7% on the Nasdaq 100, WTI crude tumbled to US$72 a barrel and gold slipped to US$2,037 per ounce. The VIX held just below 14.
From AAP Netdesk:
On Friday in Australia, the local share market rebounded from Thursday's sell-off and rocketed to a fresh all-time high after a trio of leading US tech firms soundly beat earnings expectations. The benchmark S&P/ASX200 index closed near the highs of the day Friday, up 111.2 points, or 1.47%, to 7,699.4, while the broader All Ordinaries gained 112.8 points, or 1.44%, to 7,931.6. For the week, the index climbed 1.9%, its second straight week of gains.
The tech sector was the ASX's second-best performing sector on Friday, rising 3.1% as Wisetech Global added 3.5% and Altium gained 4.5%.
The interest-rate-sensitive property sector was the best performer, climbing 3.4% as Goodman Group surged 6.2% to a 16-year high of $26.98 and Westfield owner Scentre Group climbed 2.7% to $3.10.
In the energy sector, uranium developers were setting all-time highs as the after the world's biggest uranium miner, Kazakhstan's Kazatomprom, warned that limited supplies of sulphuric acid would cause it to downgrade production targets. Deep Yellow surged 12.8% to $1.68, Boss Energy rose 8% to $6.11, Paladin Energy advanced 6.6% to $1.375 and Bannerman Energy finished up 5.1% to $3.68.
In the heavyweight mining sector, goldminers were also doing well as the yellow metal traded near a two-week high. Northern Star added 4.1% and Newmont rose 2.7%.
Elsewhere in the sector, BHP added 1.1% to $47.61 and Fortescue rose 0.8% to $29.73, while Rio Tinto dipped 0.2% to $132.
All of the Big Four banks finished higher, with CBA up 1.5% to $115.81, ANZ adding 1.3% to $27.26, Westpac rising 1.2% to $24.05 and NAB climbing 1.1% to $32.25.
Gaming companies had a decent session, a day after New Zealand's SkyCity said it had agreed with the financial crimes watchdog on a penalty to settle allegations of money-laundering violations at its Adelaide casino. Skycity added 7.2% to a five-month high of $2.01, The Star rose 5.5% to a a three-month high of 57.5c and The Lottery Corp advanced 1.8% to $5.11, also a five-month high, amid excitement over the record $200 million Powerball draw.
From Shane Oliver, AMP:
- Fed not rushing to cut just yet, but still heading in that direction. Sure, Fed Chair Powell pushed back against market expectations for the start of rate cuts in March by saying it was unlikely as the Fed will want to gain further “confidence that inflation is moving sustainably towards 2%.” But that was hardly surprising as the March meeting is just six weeks away. More importantly though, the Fed dropped its reference to further tightening and is now seeing the risks as better balanced and Powell continued to flag rate cuts this year and indicated it will be data dependent. Despite a strong rise in US payrolls in January (which looks partly seasonal) we continue to see the Fed cutting rates 5 times this year starting in May, but a start in March is still possible.
- Eurozone inflation fell to 2.8% in January with core inflation falling to 3.3%yoy, with ECB officials’ comments leaning a bit more dovish. The ECB is likely to start cutting in April.
- Australian inflation is falling faster than the RBA expected. While hot spots remain (like insurance and rent) inflation fell to 4.1%yoy in the December quarter which is well below the RBA’s forecast for 4.5%, and down from 5.4% in the September quarter and a peak of 7.8% a year ago. Underlying inflation measures also fell with the trimmed mean at 4.2%yoy (below the RBA’s forecast for 4.5%) and services price inflation is now also following goods price inflation down. What’s more the proportion of items seeing greater than 3% inflation has fallen sharply to 43% which is consistent with the pre-pandemic norm and monthly CPI inflation fell to 3.4%yoy in December.
- The faster fall in inflation than the RBA was expecting along with soft data for retail sales and jobs since their last meeting along with major global central banks slowly turning more dovish is consistent with our view that the cash rate has peaked and by mid-year the RBA will be cutting rates. Of course, like other central banks the RBA is likely to remain a bit cautious initially and don’t expect rate cuts to reverse all 13 rate hikes over the last two years but by year end we expect the RBA to have cut rates three times taking the cash rate to 3.6%.
Curated by James Gruber and Leisa Bell
Latest updates
PDF version of Firstlinks Newsletter
Quarterly ETFInvestor (ETF Market Data) from Morningstar
ASX Listed Bond and Hybrid rate sheet from NAB/nabtrade
Listed Investment Company (LIC) Indicative NTA Report from Bell Potter
Plus updates and announcements on the Sponsor Noticeboard on our website