Month: June 2019

June 2019 – End of Month Update … and “nudging” to good financial habits

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100.  If last month was a “Risk Off” then for the month of June they have slapped on the crazy pants and become definitely “Risk On”. The Slack Investor followed overseas markets have bounced back from a shocker last month (FTSE100 +3.7%;  S&P500 +6.9%) and the ASX 200 powered on with +3.5%. All markets are above the monthly stop losses – but feeling a bit “frothy”. However, checking out the US Yield Curve indicator at GuruFocus shows a weak positive result (Near zero, Just … +0.09%) so my monthly stop losses for Index funds are temporarily “switched off”.

All Index pages and charts  have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). – As it is the end of the Financial year and quarter, the Slack Portfolio has been updated with some stock exits and a gradual build up of cash. Now over 8% – A slack record!

Give us a Nudge

The classic Monty Python “Nudge Nudge” sketch – the full delights of this 3-minute romp can be found on youtube

We frail human beings do not behave rationally. It is easy to project a path to a well funded retirement on paper – yet so few really achieve it. A couple of clever cognitive psychologists , Danny Kahneman and Amos Tversky put some effort into studying human behaviour.

Mr Kahneman, an Israeli-American psychologist and Nobel economics laureate, has delivered a full catalogue of the biases, shortcuts and cognitive illusions to which our species regularly succumbs. In doing so he makes it plain that Homo economicus—the rational model of human behaviour beloved of economists—is as fantastical as a unicorn.

From The Economist – Not So Smart Now

To account for our lack of rational behaviour -it is sometimes necessary to give ourselves a nudge in the right direction by tricking our feeble brains into good habits.

Compulsory Saving

The best way to save money is to convince yourself that you didn’t really have it in the first place – and, as the new financial year starts, this is the time … seize the day and quarantine some of your hard earned cash.

There are lots of ways to do this

  • Direct debit funds to your Savings account from your transaction account – After every payday, set up a regular direct debit instruction with your bank to divert funds to your online savings account
  • Add to your Super – Set up with your paymaster to add to your superannuation through salary sacrifice – the first $25000 is taxed at only 15%. Or, you can make a contribution straight from your bank account directly to your super fund but there is a bit of ATO paperwork to claim its tax-free status.
  • Use a bit of robo technology to set up periodic payments and rounding up of your daily transactions – Use Raiz to set up a savings account that invests your savings in shares and bonds or Longevity to add to your super account – More on these robo bits next post.

Robo-Advice – Disruptor Beams are ON


The Class M-3 Model B9 – From Source

The Class M-3 Model B9 (Pictured) was one of the first examples of Robo-advice and would always issue Will Robinson, of the 1960’s TV show, Lost in Space with sage guidance. Can we expect the same from this new generation of Robo Advisors? My Star Trek knowledge tells me one thing for sure, the Disruptors are on!

Slack Investor has already had a bit of a rant on the layers of fees that you can expect from seeing a Financial advisor. But many would benefit from financial advice – Can we get it from the Robots? There are quite a few Financial Robo-advice companies emerging. Lets begin with a couple that have caught Slack Investor’s eye – Plenty and Stockspot.

Plenty – A Good place to start

Plenty is a new service that, after a 15-minute online questionnaire, develops tailored (up to a point) financial advice for no cost. Plenty offer more than most robo advisors. In addition to an automated platform for investing, they offer a whole advice product similar to more conventional financial advisors. Their basic service is free and, if you need it, they charge fees to help you implement the plan. Their Blog is pretty good too. Due to high demand, unfortunately, Plenty are not taking on new clients at present. But this doesn’t stop us using their structure to develop your own financial roadmap. An example of the financial plan that it robo-generates is here.

Image from From Plenty Blog – What Do Financial Planners Do?

When Plenty takes on clients again, to get their online plan you must divulge your financial details (bank accounts, super, etc) – this is a bit scary and is usually the point where Slack Investor … Says NO!

However, the way that Plenty provides a free robo-way towards your financial goals is fully Slack Investor approved. They claim to be “product agnostic” and will only recommend the lowest fee (best!) products that aim to get you in a good financial state. The Plenty example financial plan contains plenty of good ideas!

  • Lower Fees – Oh Yeah!
  • Smarter Investments – Through ETF’s and Listed Investment Companies (LIC’s) – Sounds easy doesn’t it!
  • Lower Interest on Debt – Making sure you get the lowest interest rates on your debts
  • Save Tax – Thanks Kerry Packer!
  • Spend appropriately – Budget … and measure what you spend
  • Protect your financial position with insurance – Very important for those with dependants or a big mortgage. Slack Investor does not have financial insurances now that he is in retirement mode with little debt. However, when I did need insurance, I would get my income, death & disability insurance through my super fund – as this was the cheapest way.

Stockspot

“I started Stockspot five years ago because I saw too many people getting poor investment advice from stockbrokers and financial advisers”
“The evidence shows that simple, low-cost ETFs [exchange traded funds] beat picking stocks or paying expensive fund managers over the long run.”

Chris Brycki – From article in Business Insider

Stockspot was started by Chris Brycki, is Australian owned, and has excellent intentions. Their investment vehicles are low-cost ETF’s and through a quick online questionnaire you can determine your risk profile and suggested pre-determined mix of investments. For example, the Emerald growth portfolio is shown below

An example of one of the five Stockspot recommended portfolios

There are no entrance and exit fees, the fee structure is based upon the amount invested. For a $30 000 account, the fees are .055% (or $16.50 per month). This works out as a yearly fee of 0.66% (or $198). The fees are a bit annoying on first glance – However, Stockspot do not charge for brokerage and rebalancing your portfolio – this is a good deal for the more hands off investor.

You could save $100 per year to set up a similar bunch of ETF’s as those shown above and do the rebalancing yourself. Let us say, your target portfolio had 5 ETF’s and you rebalance them once per year, using the rock bottom brokerage of SelfWealth at $9.50 per trade – 10 trades per year would cost $95.

However, the whole idea about Robo Advice is to make things simpler and combat the inertia to action that gets in the way of our accumulating wealth. If embracing the full robo, then the extra hassle of doing everything by yourself is probably not worth the money saved.

Lets Robo On, there are plenty of other players in this exciting new area. Six park, Raiz, Clover, QuietGrowth and FirstStep will get a bit of a look next month.

May 2019 – End of Month Update … and, that recession vibe

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100.  In what the cool investor analyst types call a “Risk Off” month there were big falls in Slack Investor followed overseas markets (FTSE100 -3.5%;  S&P500 -6.6%) – but for the moment, still above the monthly stop losses. Checking out the US Yield Curve indicator at GuruFocus shows a negative result  (Just … -0.05% though!) so my monthly stop losses for Index funds are definitely “live”.

The Australian ASX200 had a positive month (+1.1%) – but this was due mainly to the election of a “business-friendly” government on May 18. General nervousness prevails though.

All Index pages and charts  have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). 

That Recession Vibe

Trump and Xi are shaping up for a trade war and I don’t like the smell of it … especially with news reports such as “If you want to talk, the door is open; if you want to fight, we’ll fight to the end,” said a Chinese TV anchor, capturing the mood in Beijing. – Image from Business Insider

Slack Investor is no great predictor of trends – But, whenever things are going well in the stock market, experienced investors naturally get skittish – Particularly when two belligerent world leaders are at loggerheads. There is a chance that all of this will get solved at the next G-20 in June. But Bloomberg analysts think it is more likely that the trade war will be long, messy—and expensive. Thanks Donald!

(The US economy is going OK) but … other countries remain sluggish or are slowing. Diminishing global growth could drag down the U.S. also. … although the Federal Reserve is now signaling a halt in its rate hiking, it has raised interest rates nine times since December 2015. At some point, those higher rates become the gravitational force that pulls down stock prices.

From Ray Martin at CBS News

All of this uncertainty is talked about constantly in the media and with trade war stuff thrown in as well, as all fans of The Castle know … ” It’s the Vibe!”, When all of this negative stuff gets too much. for a quick recession-busting refresher, try this Youtube highlights clip from the film.

Slack Investor has mentioned one of the pre-indicators of a recession, the US Bond Yield Curve, which has just gone into the “Red Zone”. The economist boffins have been very diligent at Citibank and have tracked a range of 18 economic statistics up to the end of April. The US Yield curve is just one of these and is #6 on the list. They compare current statistics with those from previous “proper” recessions.

The Citibank Global Bear Market Checklist

Citi’s Bear Market Checklist (BMC) shows only 4 out of 18 red flags, and suggests that it is too early to call the end of this ten year bull market. In previous cycles, the BMC red flags have accumulated gradually before rising exponentially in the last year of the bull market. Citi analysts would be more concerned when 7-8 factors are flagging caution.

From Citi Insights

So Slack Investor does what he does best … and leaves the economics research to those who can do it well … business as usual. There are a couple of my individual stocks (CTD, CGC, PMC) that are on the slide and may need attention. I will look at their numbers and outlooks (and charts) again this week on Market Screener . But other than that, I will ease, ever so slowly, into the couch.