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Title: Market Update - March 2019
Created: 2019-03-27

Good afternoon all,

I just thought I would do a quick catch up with you on what is happening in the markets at the moment and the noise around the volatility and give you some commentary from some very astute commentators on what is happening. As we have seen there has been a big upswing in the market with the majority of you gaining all the losses that happened over the October to January period with most of you now in positive territory and going well. Over the years we have discussed the market and the pullbacks, swings and roundabouts that occur depending on what stage in the cycle and various economic events occurring at the time.

Regardless of where your investment dollars are placed there is going to be some volatility with some fund managers in various sectors saying things do not affect them. If a fund is in a listed environment, meaning it is available for anyone to invest in and is valued on a daily basis, as the market moves up and down you are going to get a far more transparent valuation than those funds that are unlisted. Unlisted investments are bought direct and are valued whenever so they do not move up and down with the market and the real value can be distorted. The reason I am telling you this, is many industry funds i.e. Hostplus, AustralianSuper etc. have large amounts of unlisted infrastructure in their portfolios and the valuations of these unlisted infrastructure funds do not reflect the real valuation at any given time. Time will tell what they will really be valued at, but we shall wait and see on many factors that value infrastructure. Historically, infrastructure runs at about 8-9% per year not valued at 13% and left at that value for years on end. Just a note to Mr Barefoot on real valuations.

I just thought I would be more reactive for a change at the difference between industry funds and non-industry funds. There is no way that these industry funds can claim to be better fund managers than the best fund managers in the world, what they do is hide behind these infrastructure funds keeping the high valuations which tilts the return to the high side. Also as far as these industry funds investing with the best hedge fund managers is an interesting concept as most hedge fund managers over the last year have failed miserably returning between -5% to 5% at best. I study these returns with a passion and I must also add that the best hedge fund manager in the world Ray Dalio of Bridgewater Associates would not take any Australian fund as they would not have enough money for him to consider investing. The last person through his door that he has taken an investment from was Bill Gates and his endowment fund worth Billions.

There you go, my passion for what I do has taken a beating over the last six months with the Royal commission and all the bad things spoken about the financial planning industry. We charge too much, industry funds are the way to go and investing in index funds are better than investing in the wider market. Talking heads in the media who have no qualifications and have no real experience in the investing world can talk the talk but have never walked the walk. They get paid for being controversial and at the moment they are feeding off peoples fear due to all the bad things that have been spoken about and done by a few bad people.

The bottom line is simply you need a good return over a long period of time which is consistent. Fund managers performance comes and goes, flavor of the months come and go and my job is to make sure you get a good consistent return that is real and measurable. Do I get it correct all the time? NO, but I work as hard as possible to regain that position if it falters. My job is also being there to answer any questions regarding tax issues, estate planning, budgeting issues and overall financial wellbeing. If I don’t know a legal question I have the resources to get them answered quickly as well. So my role is taking care of you through thick and thin regardless of the economic time or state of your affairs. For this I get paid just like any other profession.

I hope you don’t mind my little reply to the naysayers who are feeding off peoples fear with propaganda around how fantastic and cheap they are, but there is one saying that always remains true is cheap is also nasty so we shall see in a few years when the real valuations come into play and how they are going to fair in the real investment world. Buying a football stadium or toll road is no quick way to riches and infrastructure loses value very quickly. I rest my case.

On a final note I have attached some great articles regarding the state of the economy and what stage in the cycle we are currently in. The problem we are having is that some countries are going well such as the United States whereas China is currently slowing down which does affect the World economically. However the Chinese government has access to both lots of money and reforms that can increase output at any time. Overall there are problems but not enough to tip the world into a recession. Finally I have attached great budgeting tools which most people are scared of J.

I found this on the Betashares website and thought you might be interested :

Until next time happy investing


Allan Butson

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