What we Liked?
- The S&P 500, a good proxy for the US economy, rose by 7.5% in the quarter, the largest such increase since the March of 2013. This was largely driven by an increase in Apple shares, which were up 22%. Similarly, the Dow Jones was up 9.1% for the quarter. As much as the press might have us believe, the US (and most) global sharemarkets don’t really care who is the president (or Prime Minister).
- The performance of Scott Morrison in his first month as our new Prime Minister has been a strong one. We still can’t see how he wins the next election, but saying that the Shorten team has had some trouble pivoting their game to keep up! If we have learned anything over the last few years, it is that there is no such thing as the unwinnable or unlosable election.
- We have loved the fall in the Aussie Dollar, even though it has made travelling overseas a lot more expensive of late. A lot of our recommended investments have had a powerful tail wind over the past 5 years with the dollar falling from over $1.00 to $0.72 today. Having your money exposed to such a change would have resulted in an extra 4% per annum. We love a tail wind!
What we Disliked?
- The Melbourne Institute and Westpac Bank Consumer Sentiment Index for Australia declined by 3 percent month-over-month to 100.5 in September 2018. It was the weakest reading since November last year, amid increases in mortgage interest rates; political instability and household budget pressures.
- The ever-reducing availability of good valued investment opportunities in Australia. It seems to be hard to find any real investment opportunities in many investments at all, from bonds to equities, all looking priced to perfection. The tell-tale sign we are very late in this economic cycle.
- We didn’t like CSL giving up all the gains made this financial year slipping back from a all time high of $232 to $203. (see later in the report for a review of CSL).
- As much as Wattle Partners applauded the Royal Commission, we didn’t like the lack of detail and action points found in the interim report. The issues have been clear for a long time, what we need now is actions to clear the conflicted mess up.
- The egotistical mess that Tim Haywood and Daniel Sheard got themselves into, causing the $7bn dollar fund (GAM Absolute Return Bond fund) to be shutdown. The good news is the sell down process is running smoothly and the portfolio continues to perform well.