Uncategorized – TurnerStreet

October 10, 2024 PPD1962 Uncategorized

EQUITIES: Is Nvidia fabulous or just fabless?

QUESTION: Should I buy Nvidia Corporation (NASDAQ:NVDA)?

ANSWER: No, as NVDA is outrageously expense on the back of AI hype.

Fabulous technology companies come and go (e.g. Silicon Graphics or Sun Microsystems) because they either can’t innovate, don’t have a sustainable advantage or their margins are so large that competition ruthlessly expands. OK, today, NVDA designs good chips, but they are beholden to TMSC to make them. Other foundries might become manufacturers of the NVDA AI chips or may partner with NVDA, but it is inevitable that margins will fall as it moves from fabless to a fab or fab-lite.

Now to the AI hype….is it going to be the same as dot.com, blockchain, Web2.0, etc bubbles? TSA thinks so because no one is trying to attempt to quantify the revenue upsides or cost downsides of the application of AI, and this is because there really are limited useful applications of AI (e.g. creating potential pharmaceutical molecules to investigate). In most cases an ordinary algorithm is a better solution than AI because you don’t need to consider the multiple solutions or need to evaluate every solution for “hallucinations“,

Fun facts: Sun Microsystems’ campus is now owned by Facebook and Silicon Graphics’ campus is owned by Google. In short, today’s roosters can become tomorrow’s feather dusters.

Contact TurnerStreet if you wish to buy our current asset allocation recommendation (we do cash and equity only allocations for our wholesale clients), and the list of the stocks TurnerStreet would buy for a typical wholesale client, or if you would like TurnerStreet to manage your equities and derivatives portfolio.

IMPORTANT: This Q&A is general product advice for wholesale or sophisticated investors, and NOT

December 10, 2023December 10, 2023 PPD1962 Uncategorized

Equities: are short-sellers evil?

QUESTION: The Economist recently had an article on short-sellers. Do you think they are evil?

ANSWER: No. With more and more funds under management moving from active to passive equities managers, there is an increasingly important role for short-sellers: informing the market that maybe something is not right with the stock. Passive equities managers don’t take a view whether something is going to be the next Enron or Wildcard, even though they tend to be wrecks that happen in slow motion, and the portfolio managers read newspapers. Active managers who should be have done their homework on the fundamentals, sometimes will be alerted to do it again when short-selling happens, so are more likely to avoid the Enron-like corporate disasters.

Licensed investment managers who are active managers take note of short-selling, and so should you.

IMPORTANT: This Q&A is general product advice for wholesale or sophisticated investors, and NOT suitable for retail investors. Retail investors should seek advice specific to their circumstances and not rely upon general product advice written for other types of investors. Retail investors acting like wholesale/sophisticated investor are likely to experience inappropriate and/or excessive risk for their circumstances, and unacceptable losses.

November 6, 2023 PPD1962 Asset Allocation|Cash|Debt|Equities|Uncategorized

Debt: bond v. term deposits

QUESTION: Vanguard wrote an article on why bonds are better than term deposits for investors, do you think they are correct?

ANSWER: yes, but...

Simplistically, and generically, the answer is obviously yes. However, investors do not come all in the same size (of portfolio assets). Investors who have a large enough investment portfolio, which means they are non-retail investors might be able to take a much more efficient, riskier and more profitable route of having only two asset classes in their portfolio: cash and equities. This might seem strange to exclude bonds, but in a higher inflation environment bonds and equities are positively correlated. Also, moving from cash to equities (and back) is far cheaper than the transaction costs of a bond portfolio. Additionally, in many jurisdictions bank deposits are government guaranteed.

In the words of the prophet, Brian, “you are all individuals” so think carefully before acting on publications aimed at a mass audience.

ACTION PLAN:

Put together a list of your assets and income, and determine what return you are looking for and how much you are willing to lose in the first year of your new portfolio strategy.
If you don’t have a view on the expected returns/risks of the different asset classes, you are just punting securities, derivatives, etc, rather than investing. You should get a licensed investment manager.
The most significant means to increasing your wealth is getting the asset allocation correct. For most people, that means knowing when to put money into equities, bonds, et al and when to take it out. The first thing you need to ask your investment manager (or yourself if you take the DIY route) is what is the expected 10-year US Treasury yield and the percentage of a portfolio that should be equities, bonds, realty or cash (the other asset classes are so speculative, they should be only for the very brave).
Once you establish how much to allocate to each class, then it is a question of which security or property in each class to buy. For the DIY folks, that will most likely be an index. For professional investment managers, it will be buying individual stocks, bonds, realty or leaving money in cash.
Contact TurnerStreet if you wish to buy our current asset allocation recommendation (we do cash and equity only allocations for our wholesale clients), and the list of the stocks TurnerStreet would buy for a typical wholesale client, or if you would like TurnerStreet to manage your equities and derivatives portfolio.

IMPORTANT: This Q&A is general product advice for wholesale or sophisticated investors, and NOT suitable for retail investors. Retail investors should seek advice specific to their circumstances and not rely upon general product advice written for other types of investors. Retail investors acting like wholesale/sophisticated investor are likely to experience inappropriate and/or excessive risk for their circumstances, and unacceptable losses.

AA: debt markets can drive equities and other markets

QUESTION: the New York Times is concerned enough by the bond market to write an article on the matter, so are you concerned too?

ANSWER: yes.

Again, Finance 101 says that an asset is worth its cashflows in perpetuity, discounted by an appropriate rate. The appropriate rate is almost always related to the 10-year US Treasuries, who when their yields go up, valuations go down! Why, and how far, yields rise or fall is subject to lots of analysis by pseudo-scientists (also known as economists and chartists). It is fair to say that with lots of government debt to refinance, political pressure, a great economic resurgence, low unemployment, on the balance of probabilities, US yields are likely to rise. How much is debatable, but for anyone older than 60, another 1% would be at the lower end of expectations.

ACTION PLAN:

Firstly, if you can’t value an asset, including equities, by discounted cash flow, you are just punting securities, derivatives, etc, rather than investing. You should get a licensed investment manager.
The most significant means to increasing your wealth is getting the asset allocation correct. For most people, that means knowing when to put money into equities, bonds, et al and when to take it out. The first thing you need to ask your investment manager (or yourself if you take the DIY route) is what is the expected 10-year US Treasury yield and the percentage of a portfolio that should be equities, bonds, realty or cash (the other asset classes are so speculative, they should be only for the very brave).
Once you establish how much to allocate to each class, then it is a question of which security or property in each class to buy. For the DIY folks, that will most likely be an index. For professional investment managers, it will buying individual stocks, bonds and realty.
Contact TurnerStreet if you wish to buy our current asset allocation recommendation, and the list of the stocks TurnerStreet would buy for a typical wholesale client, or if you would like TurnerStreet to manage your equities and derivatives portfolio.

IMPORTANT: This Q&A is general product advice for wholesale or sophisticated investors, and NOT suitable for retail investors. Retail investors should seek advice specific to their circumstances and not rely upon general product advice written for other types of investors. Retail investors acting like wholesale/sophisticated investor are likely to experience inappropriate and/or excessive risk for their circumstances, and unacceptable losses.

Equities: fear in markets?

QUESTION: why fear is spreading in financial markets?

ANSWER: The Economist, and TurnerStreet, agree it is because of the long-haul reality of high interest rates.

At a recent investment conference TurnerStreet attended, all the speakers, except one, thought it may be late 2024 or 2025 before interest rates start to fall again. However, thinking about want truly is normal for interest rates, shouldn’t interest rates continue to increase by 2-3%? If correct, then the tide is going out for all the financial markets for some time. The best game in equities would then be to seek “alpha” and to hedge the “beta”.

ACTION PLAN:

Firstly, if you have never heard of alpha and beta before reading this article or understand what it signifies, you are just punting securities, derivatives, etc, rather than investing. You should get a licensed investment manager.
The most significant means to increasing your wealth is getting the asset allocation correct. For most people, that means knowing when to put money into equities, bonds, et al and when to take it out. The first thing you need to ask your investment manager (or yourself if you take the DIY route) is what percentage of my portfolio should be equities, bonds, realty or cash (the other asset classes are so speculative, they should be only for the very brave).
Once you establish how much to allocate to each class, then it is a question of which security or property in each class to buy. For the DIY folks, that will most likely be an index. For professional investment managers, it will buying individual stocks, bonds and realty.
Contact TurnerStreet if you wish to buy our current asset allocation recommendation, and the list of the stocks TurnerStreet would buy for a typical wholesale client, or if you would like TurnerStreet to manage your equities and derivatives portfolio.

IMPORTANT: This Q&A is general product advice for wholesale or sophisticated investors, and NOT suitable for retail investors. Retail investors should seek advice specific to their circumstances and not rely upon general product advice written for other types of investors. Retail investors acting like wholesale/sophisticated investor are likely to experience inappropriate and/or excessive risk for their circumstances, and unacceptable losses.

October 3, 2023October 3, 2023 PPD1962 Client Services|Uncategorized

Clients: investment manager services agreement now available

QUESTION: are you ready to invest our money?

ANSWER: Yes. We have an investment manager services (“IMS”) agreement that can be sent to clients who want us to manage their funds in an individually managed account (“IMA”). The minimum investment is A$100k.

ACTION PLAN:

Use the “contact us” tab to let us know you would us to send you the IMS agreement.
Ask your accountant to send us a certificate that you are not a retail investors. (Most accountants would be too embarrassed to charge for the certificate as there is almost no work involved.)
We will call to set up a meeting to discuss the parameters of your porfolio and the administrative set up.

IMPORTANT: This Q&A is general product advice for wholesale or sophisticated investors, and NOT suitable for retail investors. Retail investors should seek advice specific to their circumstances and not rely upon general product advice written for other types of investors. Retail investors acting like wholesale/sophisticated investor are likely to experience inappropriate and/or excessive risk for their circumstances, and unacceptable losses.

May 8, 2023May 8, 2023 PPD1962 Equities|Realty|Uncategorized

Realty: is Australian residential property worth buying?

QUESTION: should an investor buy Australian residential property?

ANSWER: probably not.

Damien Klassen, who is one of the few analysts who does the numbers on Australian property (rather than just saying it will keep going up forever so it is always a buy), wrote a terrific article on affordability Essentially, property is either extremely unaffordable (the mortgage cliff is coming) or we are looking at a global recession: neither will deliver stellar returns for investors in the medium term.

Interesting, while the government regulator in Australia, ASIC, requires entities like us, and Mr Klassen, to be licensed to advise on equities, any body can give unlicensed advice on property. In fact, buyers normally hear from agents (employed by the vendors) that property is going up: no qualifications and no explicit disclosure of how much they are earning in spruiking properties.

March 2, 2023March 2, 2023 PPD1962 Debt|Private Equity|Realty|Uncategorized

REALTY: nobody told Blackstone you can’t lose money on property

In a stunning, and not the first this year, Blackstone is defaulting on a property backed bond it issued: see here.

Investors should note if that with interest rates rising, still, there will in more defaults associated with property investments. Offices are difficult to repurpose into residential, so don’t try to “catch the falling knife”.

Cash is still king.