What We Liked
- Telsa – Tesla Shares are hitting record highs after informing the market of their last quarterly result. Recording net income of $311.50 million versus a loss of $619.40 million this time last year. Revenue was also half a billion higher than forecast. Management expect this trend to continue in the fourth quarter. Add this to Musk’s announcement that the Model 3 was the best-selling car in the US, and production was tracking well, he also announced a net $5,000 reduction in the Model 3, and a reduction in options on the more expensive models which will allow production to be increased substantially. Lastly, they have started rolling out their Chinese expansion with the purchase of land for a new
- We applaud the government and FPA on the new requirements that all financial planners must have a relevant university degree. It has been a stain on the professional industry that just about anyone can hang their shingle out as a financial planner or adviser, with as little as a few weeks of study. From the 1st of January, new advisers will be required to hold a relevant degree before they are eligible to commence a ‘supervision year’ and to sit the exam. Existing advisers will have two years, until 1 January 2021, to pass the exam and five years, until 1 January 2024, to reach a standard equivalent to a degree. We would have liked to see the requirement for existing advisers to be more aggressive, however it is moving in the right direction finally. The change is likely to see a substantial reduction in planner numbers but particularly accountants who also offer
- A bear market creates opportunities, and after disliking the lack of real investment opportunities in the previous month, the horror month in markets has actually given us a few.
What We Disliked
- The blood bath in risk assets in October was a function of heightened fears of declining profit margins from rising input This should also lead through to greater inflation pressures (which was covered in detail in the latest UWJ Quarterly) in the U.S. and higher bond yields. Even though the rate of inflation dipped last month in the U.S., rising output prices from manufacturers (who themselves are facing higher input costs) will be passed through to the economy and other companies. The ability for companies to protect margins will depend on the price elasticity of their products. Inflation still remains the number one concern in our mind.
- The S&P 500 dropped 9% over the month, and our local market was down 6.1%. The bears are out, and they are not happy. The risk of higher rates, inflation and a trade war has terrified the market throughout October. Investors should know by now that cash is king, especially when the market gives you an opportunity to buy everything at a discount.
- Property prices in Australia have kept falling, with an overall fall from the top to the bottom of 15% generally It’s the “house price fall we had to have”, according to Deloitte Access Economics’ latest business outlook. Our final thematic printed issue of Unconventional Wisdom journal is dedicated solely to the Australian property market and the outlook ahead.
- Trump has again shown that he is more a smart businessman than a politician, when markets seem very gloomy, he talks to Fox News about how confident he is that a ‘Great deal’ with China can be done at his meeting with China’s President Xi Jinping. Market sentiment rebounded substantially with the hopes of a trade war between the US and China being short lived. Probably the real issue is whether 2019 is a Bull year or Bear year.