August 2020 ‘Retirement income is the nastiest hardest problem in finance' - William Sharp
Sunday 1st August 2020
Daily COVID cases in Melbourne, Victoria has been rising rapidly the past week or two, from the human error Premier Dan Andrews made not using Police and/or Army for enforced hotel quarantine.
Looks like they’ll go into stage 4 lockdown, meaning enforced lock down from 8pm – 5am everyday for the next 6 weeks and only leaving the house for an hour a day for exercise and/or essential food shopping, employment, education or medical and driving no more than 5km’s from home.
This is a historic moment for Australia, Victoria especially. They along with all of Australia were three weeks into a six-week stage 3 lockdown, that’s now been upgraded to a six-week stage 4 lockdown.
Melbourne is responsible for significant portion of Australia’s economic activity. Another lockdown will devastate business and a lot of peoples lives.
Also, a mate shared this video with me. It’s worth checking out https://youtu.be/vDaQOy7ML38
Wednesday 5th August 2020
Today a decision was made to close the QLD state boarder from this coming Friday night to NSW and the ACT too. We’re going backwards again…
And with all of this the stock market keeps rising. It’s important to understand the economy is not the stock market and the stock market is not the economy. I often need reminding of this because I sometimes correlate the two. Economic data is backward looking while the stock market is forward looking. They can be many months apart as one looks at history and the other is navigating the future. For more understanding on this, Ben Felix does a fantastic job explaining in this video: https://www.youtube.com/watch?v=0ECqDaPjjV0
Friday 7th August 2020
This is the first August I’ve had in Australia since 2004. I'm usually in the USA at the KSI Coaching Camp in Park City, Utah followed by the USANA International Conference in Salt Lake City, Utah, with some recreation in Europe, Mexico, the Caribbean or somewhere in the USA tied in.
It’s not just me either; most of my close friends and family are also with me at the USANA Conference and/or in Europe themselves.
This year the conference is online, while not near as impactful at being there in person, in theory more people will be able to tune in and enjoy the online experience, announcements, releases, pay plan changes and new food plant tour video.
I’ve spent much of today writing notes of congratulations and recognition to business partners for the their great achievements this past year and over the past 16 years. We usually have a team dinner and awards night at the conference but this year, it’ll be via a FB live video with cards/gifts posted via snail mail. Missing this year’s event will just make next years even more special, if we’re allowed to travel then.
Saturday 8th August 2020
With the state of Victoria is in stage 3 and 4 lockdown and Queensland re-establishes it’s closed boarders with Victoria, NSW and the ACT, something that’s been perplexing to me is hearing about a bunch of different businesses currently flat out. I’m talking auto-electrician, car mechanic, bike shops, camping supply stores, builders, surfboard shapers and the like.
I’m guessing funds that were going towards domestic and over sea’s holiday’s are now being directed toward fixing up cars, renovating the house, taking up surfing and biking more than anytime in the past with boarders being largely closed again.
It’s fantastic this money is being circulated in the economy because without it, we’d probably being looking at 4, 5 or 6 negative quarters in a row. With what’s happening in Victoria, I’m guessing 3 negative quarters here in Australia is a given now.
Earlier this week my doctor of 40 years called me to for a chat on where to park some of his money. Safe to say this call was unexpected.
He’s been an avid investor for over 50 years owning shares in companies like CBA since they first floated, Westpac before they were Westpac, etc. He told me he knew a small group of investors who attempted acquire full ownership of Washington H Soul Patterson (WHSP) in the 1960’s when they were primarily a pharmacy chain in Sydney. With SOL’s crossing holding with Brickworks, that’ll never happen.
We discussed some of the low fee options to diversify away from Australian banks and gain more international exposure and a few other bits and pieces. Safe to say it wasn’t ‘financial advice’ and I told him not to call me if anything we discussed heads south anytime soon!
With all the talk of money printing this video does a fantastic job clearing up how it all works https://youtu.be/K3lP3BhvnSo.
‘Retirement income is the nastiest hardest problem in finance” - Nobel Laureate William Sharp
Monday 10th August 2020
Some media came out today stating about 1/3 of Australian’s are on some sort of welfare/income support. No wonder some businesses are flat out.
Tuesday 11th August 2020
Sydney Airport (SYD) is raising $2 billion in the wake of COVID. Check out these numbers. The first quarter of 2020 saw 9 million passengers pass through domestically and internationally, while the second quarter saw just 400,000 people pass through. That’s 97% drop!
There’s a 0% chance we’ll see the much-discussed ‘V’ shaped recovery in this business. I read something yesterday talking now about a ‘W’ shaped recovery. Surely a ‘U’ shaped recovery will be next, but lets all hope it’s not an ‘L’ shaped outcome...
A mate today divested a holding he’s wanted to remove from his portfolio for ages, thanks to the advancing ASX.
It’s wonderful to see Victorian Premier Daniel Andrews coming under questioning for the hotel quarantine debacle that’s lead to the current stage 3 and 4 lock down in Victoria and double digit deaths per day, in the past days. This is just insane. 17 people died in one 24-hour period in Victoria as a result of this quarantine negligence.
Late tonight I saw Auckland in New Zealand has 4 new COVID cases, it’s first in 102 days and it’s now back in lockdown.
Makes you wonder what happens long term?
Wednesday 12th August 2020
CBA Australia's biggest bank today announced its full year results. It's paying a dividend of $0.98, for a total dividend of $2.98 down 31% from $4.31 the past couple of years. This is a significant pay cut for retirees reliant on dividend income. I wonder if they’ll qualify for Job Keeper now? (It’s a joke…).
Interestingly their payout ratio was 49.95% of their second half statuary earnings. APRA the bank regulator said banks could pay out no more than 50% of their earnings, so CBA have paid out as much as they’re allowed too.
Another interesting number I learnt today is the 890,000 people who own CBA shares. We have approx. 25,500,000 people in Australia. Minus the kids too young to invest, I’m guessing we’re left with around 19,000,000 people, meaning less than 5% of the working Australian population invest in the second largest (according to market cap behind CSL) and one of Australia’s most well known businesses. And CBA is a popular listed company.
No different than most people would rather own an iPhone or use Facebook than own the businesses of Apple and Facebook via owning their shares.
Note: I’m in no way recommending CBA, Apple or Facebook as an investment.
Thursday 13th August 2020
Australia officially has over one million people unemployed with unemployment currently at 7.5%. It’s predicted to hit 10% later this year.
Gyms and fitness studios have been under some pressure financially with the COVID lockdown. Today some hit back in the media https://www.news.com.au/world/coronavirus/australia/live-coronavirus-nsw-sydney-covid19-updates/live-coverage/e93a9ccb146207a1dc37550dd33001fb
Having physically prepared athletes professionally for over 20+ years and being in gyms since the early 1990’s when I first signed up for a membership and being involved in martial arts training since the 1980’s I feel it’s going to be a long slow road back for many operators. The strong will get stronger due to the weak businesses not surviving. Survivorship bias in action.
I was training up on Mt Tambourine this morning and one of the guys training is a mortgage broker. He told me his contact at one of the 'big four' banks said their mortgage departments aren’t even picking up a contact for 26 days at the moment. The law is 21 days…
Friday 14th August 2020
Listened to a great William Bernstein interview today on Ben Felix's Rational Reminder podcast. Recommend checking it out.
A couple of years ago I read a bunch of Bernstein's work which I found excellent and helpful.
Today on his blog, I read his 'Rightful Owners' article http://www.efficientfrontier.com/ef/0adhoc/Rightful.htm
This stat blew me away:
"Today, the top quintile of the population owns 92% of stock wealth, and the bottom four quintiles own 8%. This discrepancy is likely to grow in the coming decades as the upward distribution of equities towards their "rightful owners" plays out, most of the time gradually, but sometimes in paroxysms".
Wow.
Tuesday 18th August 2020
Yesterday xxx reported their full year results with comments about economic uncertainty in the months and year ahead.
Today, Westpac bank announced there’d be no dividends paid in the 2020. This will hurt a lot of retirees. That’s a 100% income cut for investors in WBC. Add the share price contraction and even with low inflation, there’s a stack of people going backwards financially holding WBC in the 2019/2020 financial year.
COVID update. Other than the state of Victoria, currently there are 11 people in hospital nation wide and 7 people in intensive care. Yep, those are the numbers in Australia as of today…
In New Zealand, at the time of typing, 12 active cases exist and 1 person in hospital (https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-novel-coronavirus/covid-19-current-situation/covid-19-current-cases). Auckland is in Stage 3 lockdown and the rest of NZ in Stage 2 lockdown…
Not sure I’ve ever seen such commitment to economic collapse. Nor such a lack of commitment to empowering people to improve their health during a health pandemic…
Add to this, the number of people who would be delaying getting to a doctor for tests/diagnosis of chronic degenerative conditions that are developing. Pushing back these early stage appointments and tests is never a good idea. It wouldn't surprise me if the death toll from this is greater than anything COVID related.
On a far brighter and empowering note, the Virtual Convention over the w/end was outstanding. The theme was ‘adaptability’ and USANA is clearly leading the way.
Announced was a totally new way to generate income for business owners (to be launched here in Australia and New Zealand September 5th) that can be summed up in three incredibly simple steps.
A new product line, some new products added to existing lines, more environmentally friendly product packaging, new company/product branding, the purchase and set up of a new food manufacturing plant for our foods line, and fantastic coaching, education and motivation from the CEO, Dr Oz, Singer Keith Urban, Dr Denis Waitley and company founder Dr Myron Wentz.
Wednesday 19th August 2020
Twice a year (March and September) the government increases the Age Pension indexed to offset inflation. Interestingly, today the Department of Social Services, confirmed there would be no income increase for pensioners next month.
Interesting.
A stack of listed company’s reporting this week here in Australia. It’s been a real mixed bag of results.
Thursday 20th August 2020
More companies reporting annual results today. Qantas profits down 91% not surprisingly, while Westfarmers (which owns Bunnings, Office Works, K-Mart, Target, used to own Coles, etc) profits also down overall. They held the final dividend flat at 77cents and also paid a special dividend of around 18cents.
Friday 21st August 2020
Suncorp reported today and cut their dividend 46.8% compared to last year. What caught my attention was this from their CEO Steve Johnston.
“It has been a challenging 12 months for Suncorp and for the customers and communities we support: first a season of extreme weather conditions, and then the global COVID-19 pandemic which will result in long lasting economic disruption and fundamentally change the way we live”.
It’s tough to know how much of his outlook is recency bias. But we cannot say we’ve not been warned.
So far around 80% of companies have reported and are forecasting a cutting of estimates in 2020 and 2021. 67% of companies have reported falling earnings and 53% so far cutting dividends according to The Australian.
The media are doing a fantastic job, keeping people in unnecessary fear. xxx told me every house he goes in to inspect (4-5 houses everyday) the people inside are not shaking hands, are staying away and in fear of proximity to another human being. It’s over the top. We’ve got no COVID cases on the Gold Coast…
Saturday 22nd August 2020
USANA brunch at www.thehenchman.com.au this morning. Was great to see everyone in person!
There was a stack of discussion around COVID and also around vaccines. I’m grateful to be surrounded by such critical thinkers. The new preferred customer rewards program and customer connect app were also high on the agenda.
Monday 24th August 2020
CEO of the National Australia Bank came out in their quarterly update saying to home owns who we’re struggling financially before COVID:
“There will be some circumstances where people are better off selling out early and taking some equity out of their homes, or keeping some equity, before it disappears.”
He went on:
“We’ve seen in other crises around the world, when people try to hold on they end up walking away with nothing.”
Sobering words from a bank CEO.
Tuesday 25th August 2020
In the June 2020 quarter Australians pulled more money out of Super than put in for the first times since compulsory Super was introduced in the early 1990’s.
Victorian Premier Dan Andrews continued his leadership circus over night with plans to extend the ‘emergency powers’ for another 12 months. Essentially meaning he could lock down his state, as he currently is, for a further 12 months.
We’re in such a crazy time in the world; he’s likely getting the powers to do so. Watch people leave Victoria permanently in droves after this is over. I feel southeast Queensland property values will increase as some Victorians move to a far better place to live and enjoy life.
Wednesday 26th August 2020
I forgot to mention a while ago I learnt the DOW is largely an irrelevant measure. If you go back to April, May and June updates I was quoting it often. I stopped, not because it’s a poor measure, instead I felt the point had been made, watching the daily ebbs and flows of price changes in the market doesn’t help much.
What does help is focusing on things we can control like sticking to your investment plan (whatever that is) no matter what.
You've got a written investment plan right?
Friday 28th August 2020
Speaking of sticking to investment plans, I did just that today, adding to one of my holdings. Buying every month is part of my plan. On to next month…
xxx called today, he said it’s weird, we’re in recession but everyone he knows is flat out. People are spending. His friend is looking to buy a new Lexus and it’s a 3-month wait. Apparently June was the best month that Lexus dealership has had in history by a whopping 20%!