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The Business Ethics Debate: What Impact?

The recent concern about executive ethics should re-enforce some investment decision-making guideposts.  Companies which communicate well-defined corporate objectives and which consistently report performance against those objectives are to be preferred.

Resource Prices Never Lower

Long term investors have great difficulty getting value from a resource investment.

Investor Confidence: How Companies and Analysts Collude

Private investors, unsuspectingly, have become the losers in the relationship between companies and analysts.

Employee Share Options: Too Quick to Judgement

The move to expense employee share options is a knee-jerk reaction which fails to come to terms with the fundamental problem.

The Demographic Big Picture: Older and African

Changes in the underlying pattern of population growth will have far-reaching economic, investment and geo-political implications.

Corporate Sustainability: Capital v People

Organizational sustainability could be put at risk by attitudes towards employees.  The high profile chief executive whose arrival is accompanied by expectations or radical change could well be a destroyer of value over time.

Weak Australian Corporate Profitability

The underlying profitability of the Australian economy still seems inadequate for the level of the Australian market.

Economy Not Helping US Market (and vice versa)

Weakening US manufacturing conditions are signaling further weakness in US equity markets.

CLERP 9: Not What Investors Need

The Treasurer’s latest proposed changes to corporate governance practices should not make investors feel more secure about committing funds to public companies.  The proposals try to deal with the few horses that have conspicuously bolted, not the many still to escape.

Declining Commodity Prices: More Evidence

There is broad evidence of a long-term decline in commodity values.

Housing: Yes, There Will Be A Fall!

History says that the housing market will weaken but not until interest rates begin to rise.  Could some of the more dire warnings of housing price falls come to pass?  The answer is ‘yes’.

Markets: "Start Shooting or Give In"

Simply from the perspective of equity market impact, it might be better for shooting to start in the Middle east or for Iraq to capitulate.  Either would do.  The least desirable outcome is for a lengthy standoff.

Required Returns: Investment v Speculation

Investors need to have a clear view of their required rate of return to be able to make effective investment decisions.  Having a target or required rate of return differentiates investment from speculation.

Equity Valuation Guideposts

A stable or appreciating Australian dollar could persuade overseas investors that the risks from investing in the Australian market have diminished.  The prospect of the Australian market rising at a faster rate that the underlying growth in profitability might become a realistic expectation.

Inflation Statistics: What to Worry About

The question for investors is whether there is any new information which indicates that the 3% assumed in the required return calculation is no longer applicable.

Growth and Returns: How the Companies Line Up

Equity market valuations have become more reasonable but the growth expectations implied by current prices are still likely to be testing.

Looking For Messages From The AGMs

Thebigpicture suggests you take the time to attend because AGMs can say a lot about a company – even when it is unintentional.

'Market Darlings' to 'Fallen Angels': How Investors Can Cope

Several pending corporate restructures highlight how short-lived is the success of the typical Australian listed company.  This should be a genuine concern for long-term equity investors because it affects adversely the overall valuation accorded the Australian market.

Beating The Expectations

Once information comes to hand which changes views about the sustainable potential growth rate, the higher the previous growth expectation the more dramatic will be the price effect.

Bond Yield Guideposts

Cyclically higher inflation in the USA which would tend to drive rates higher would be offset by a decline in the Australian yield premium as the relative inflation performance converges.

Developing Asia: Real Potential, Different Timing

The announcement that China is to open negotiations on a free trade pact with the ASEAN group of countries highlights that this will remain one of the most vibrant regions of the world economy.

Australia and Asia: Good News and Bad

For Australia, the changes underway in Asia are likely to provide both good news and bad news.

Monetary Policy: A Blow With a Blunt Instrument

There is an element of panic in the latest US interest rate cut by the Federal Reserve and the reaction by Australia’s Reserve Bank.  That should not be surprising at this point in the cycle. It is also better for markets than the alternative courses which were open to the authorities.

US Elections: Now Less Uncertainty

The almost unprecedented US mid term election outcome is a good stepping stone for markets because it takes away one further element of uncertainty.

Vale: Australian Resource Investments

The foreshadowed merger of MIM Holdings with Xstrata, a Swiss-based resources company, highlights how the Australian resource major, like the dinosaur, has failed to cope with its environment and is disappearing.

Still Awaiting the e-commerce Revolution

The build-up in e-commerce sales in the USA remains slow.

Succession Planning: A Test of Sustainability

The announcement by Foster’s Group Limited that it had changed its executive responsibilities in a management reshuffle highlighted succession planning as an issue for listed companies.

Government Changes Forecasts

With prices now expected to be increasing at a rate of 2½ to 3 percent and output growth around three per cent, underlying profit growth could be expected to be 5½ to 6 per cent, substantially below the longer-term average.

Australia’s Export Performance

Export growth has stopped. Export volumes peaked in the September quarter of 2000 due to the slowdown in the international economy and the Australian drought.

Exiting Australia: The Search For Greener Pastures

Many hitherto Australian companies are voting with their feet and, unless they have an explicitly Australian market to service, are seeking to leave because they feel that they will be appreciated better overseas. They are effectively saying that it is not possible to do international business from Australia.

How Can Hedging be Harmful?

The term ‘hedging’ has been used misleadingly by companies to describe outright speculative activities which add risks shareholders might never have envisaged.

Australia’s Asian Relationships: Being Secure Within the Region

Australia's interests require that Australia be secure within the region in which its standard of living will be determined rather than buttress itself against the region which will determine much of its future welfare.

Board Composition: The Need for Diversity

Board selection criteria should emphasize the importance of independence but they should also be extended to  include diversity as an equivalent criterion.

Australian Profit Update

There has been above average profit growth reported for the September quarter.