Insightful Insights

  • Successful Branding: Bulls vs Dinosaurs

    Ben MacNevin
    December 13, 2012

    Players at next week’s Australian PGA Championship have been reminded to be careful of their comments of the event with social media. Ironically, it has become one of the most talked about events in Australian sport – and this all due to the erection of a few dinosaurs around the golf course.

    With all the comments about whether this detracts from the traditional form of the game or whether it is good for the game itself, it is generating “buzz”. And in business, sustainable value can be generated by transforming “buzz” into intangible assets – just look at the story of Red Bull.
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    by Ben MacNevin Posted in Insightful Insights.

  • Heads in the Sand on LNG Economics?

    Tim Kelley
    December 12, 2012

    One of the issues attracting media and analyst commentary recently is the potential impact of American shale gas exports to the economics of Australia’s large LNG projects.

    The theme of many of the comments is that there is no cause for alarm, at least for the time being. Some of the reasons advanced include: the reluctance of US policymakers to permit exports; the time taken to ramp up supply if the US does export; and the fact that LNG contracts tend to be linked to oil, rather than gas prices.

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    by Tim Kelley Posted in Energy / Resources, Insightful Insights, Value.able.

  • NOT FUNNY!

    Roger Montgomery
    December 11, 2012

    In my late twenties I stopped listening to commercial radio. It was ‘breakfast radio’ that turned me off. As a bit of a fan of music in all its forms, all I wanted to hear was the next song. Inevitably I arrived (at my destination) long before any music did. But worse it was the nonsense proffered as humour by some amateur comedian hosting the breakfast show that was the last straw.

    Spend a bit of time listening to comedians and the very best make you laugh at no-one’s expense. Its a special skill that not many have. The very worse do the opposite. With the exception of a few, breakfast hosts are simply not funny and so the only way they can attract an audience is to make fun of others. It is puerile.

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    by Roger Montgomery Posted in Insightful Insights.

  • Montgomery Funds’ Performance to 30 November 2012

    Roger Montgomery
    December 11, 2012

    We are again delighted to provide an update on the results for The Montgomery Fund.

    Whilst it is still early days and you must understand that past results are not a reliable guide to future returns, we continue to be encouraged by the combined performance of The Montgomery Fund’s 33 constituents.

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    by Roger Montgomery Posted in Insightful Insights, Value.able.

  • Creating the perception of a superior product

    Ben MacNevin
    December 10, 2012

    It was pleasing to see figures released last week by Tourism Research Australia that revealed Chinese tourists were still flocking to Australia’s shores. According to the report, there were 573,071 Chinese arrivals in the 12 months to September, which was a 17 per cent increase over the previous corresponding period.

    While there has been a lot of commentary on the state of the tourism industry, there is one company that is frequently cited as the shining example of a group that can successfully capture the opportunities in this growing tourism market, and that is Crown Ltd.

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    by Ben MacNevin Posted in Insightful Insights, Tourism.

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  • What is the ‘new normal’ for housing?

    Russell Muldoon
    December 10, 2012

    A few months ago we commented here on an article in the AFR speculating that Gen Y may soon be buying a house cheap from boomers who have no-one else to sell to and why renting makes more sense than buying. Since Roger bought the bigger family home in 2006,he has argued that house prices would cease rising to new highs – especially the six and seven bedroom variety.

    Whilst the mere mention of Australian housing and prices can stir up passionate and spirited argument for and against house price rises, just this morning I stumbled across the below series of charts produced by Citigroup’s Matt King.

    Similar to the M/O ratio which plots P/E ratios against the ratio of the middle-age cohort, age 40–49, to the old-age cohort, age 60–69 from 1954 to 2010, Matt looks at the relationship between the inverse dependency ratio (the proportion of population of working age relative to old and young) and maps that against real house prices over time. This produces a longer-term measure of prices home owners are willing to (or have to) pay for housing.

    The charts are a powerful representation of a force driving all economies and prices: demographics. Whilst prices have somewhat lagged the dependency ratio on the way up, give or take a number of years and almost every country here shows that the peak in real estate prices is highly correlated with the peak in dependency ratio.

    Its worth contemplating whether the recent past, characterised by rising gearing levels and falling price to income ratios (affordability) is the new normal, or whether, as we transition into an environment where there are more pensioners than workers and therefore fewer people to ‘downsize’ too,what may transpire in the future in Australia is anything like the experience in the US, Japan, Ireland, Spain and the UK.

    As always, delighted to hear your thoughts.

    by Russell Muldoon Posted in Insightful Insights.

  • Steady as she goes

    Ben MacNevin
    December 10, 2012

    Few Australian management teams and their boards have been successful over long periods of time in ‘rolling’ up businesses under one roof. Inevitably, too much is paid; they struggle to deploy systems to drive scale and efficiencies; and retaining key management becomes a key problem once their lock-in period expires. It’s why we are so cautious of business strategies that revolve largely around acquisitions to grow the business. While it is easy to ‘grow’ by simply purchasing another business’ earnings, unless the return on the equity employed remains stable or improves, such capital allocation decisions will erode shareholder wealth over time.

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    by Ben MacNevin Posted in Companies, Insightful Insights, Insurance.

  • RBA Cash Rate to the lowest level in 53 years?

    David Buckland
    December 6, 2012

    Prior to 1990 the Reserve Bank of Australia did not publish an official cash rate setting and cash rates going back to 1960 was a proxy of the current measure. Historical data shows the lowest cash rate proxy was 2.89% in January 1960.

    As detailed in yesterday’s blog, “data points from manufacturing, the job market and the terms of trade are all pointing to weaker GDP growth”.

    Assuming the Reserve Bank of Australia cuts the cash rate from the current “emergency low” level of 3.0% to 2.75% in early 2013 this will be the lowest level in 53 years.

    by David Buckland Posted in Insightful Insights.

  • More choice and lower prices? Fat chance.

    Roger Montgomery
    December 6, 2012

    Rising costs, lower productivity and a strong Australian dollar will inevitably be blamed for the collapse of another food manufacturer in Australia this week.

    Gourmet Group, the company that owns the iconic Rosella Brand of tomato sauce has been placed in receivership with reports it owes as much as $50 million.

    But this additional nail in the coffin of our collapsing food manufacturing industry is exactly what the government wants, it may also be what the ACCC wants and it is what Australian consumers want. And if they all complain that they don’t want it, it’s what they’re going to get.

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    by Roger Montgomery Posted in Insightful Insights, Manufacturing.

  • Cash rates do the round trip to 3.0% on slowing growth

    David Buckland
    December 5, 2012

    Yesterday, the Reserve Bank of Australia cut their cash rate to 3.0%, down from 4.75% at October 2011, and the lowest level since mid-2009. Data points from manufacturing, the job market and the terms of trade are not cheery reading – all pointing to weaker GDP growth – and we expect the cash rate to fall further in 2013.

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    by David Buckland Posted in Insightful Insights.