Kochie’s Market Update: Stock Market and Reserve Bank Update

market-update-feb-14

Hey gang, get up to speed on this week’s financial trends with my market updates.

We’re in the midst of the profit reporting season from Australia’s major companies. 

Stocks which are meeting their performance expectations are being rewarded… but those which aren’t are really being caned by investors.

Out of the results this week, for me, two are worth focusing on:

Electronics retailer JB-Hifi: Over the last couple of months a string of high profile retailers have gone broke. It has captured a lot of headlines and a lot of jobs have been lost. But JB-Hifi produced a record profit, increased dividends and its share price rose to record level. 

This is a great example of a good business, understanding the changing needs of its customers, operating a good digital strategy with a great shopping site. 

Traditional retailing has been disrupted by online shopping. JB-Hifi hasn’t fought this disruption, they’ve re-engineered their business model to take advantage of it.

It’s a great lesson for all companies… and investors.

Appliance manufacturer Breville: What a great brand name that goes back to our grandparents. Well this old girl has a new lease of life which produced strong profits and a 28 per cent rise in share price yesterday.

A couple of factors are behind the good result. Firstly, the company anticipated supply disruption out of China because of the US trade war and Brexit… and now unexpectedly Caronavirus has weighed in as well. So they’ve been ordering well in advance and stockpiling inventory. So while competitors are suffering shortages out of Chinese factories, Breville has plenty to sell.

Secondly, their “bluicers” are selling like hot cakes. This is a combination blender/juicer… go figure.

So good planning and innovation are keeping a great brand at the forefront.

Reserve Bank update

Reserve Bank Governor Philip Lowe attended the 7th Australia-Canada Economic Leadership Forum in Melbourne this week and it’s always interesting to hear how he’s thinking. 

– On climate change Lowe said that Australia was already paying a price and that climate change may already be affecting spending and investment decisions. Insurance costs had already been boosted by the effects of climate change. Lowe is quoted as saying that “the economic effects of weather-related events are really profound.”

– On interest rates he apparently said ”We’re going to be in this (low interest) world for a long period of time” that low interest rates could be around “for years, possibly decades.”

The message is becoming really clear for all of us. Cheap money is here to stay for a long, long time.

Great news for borrowers who want to gear into appreciating investments and assets. Bad news for investors who depend on income from their investments to fund their lifestyle. Traditional income producing investments like term deposits and bank accounts are going to continue to be horrible.

Earning investment income will be finding the delicate right balance between extra risk and higher returns.

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