At Seneca, we believe that at the core of any relationship is trust. And that trust is earned through consistent excellence and courageous transparency.
Having spent many years working at large organisations, we learned that it’s not the institution that our clients trust, but the people who work there every day. It’s about the careful consideration of each individual client’s unique needs and consistent application of the advisor’s expertise to the changing economic conditions.
As the CFO of one of the world’s leading specialist natural resources investors, and after having employed Luke in a previous role, I’ve been thrilled with the efficiency, capability and service-offering Seneca have been able to offer my SMSF. Relative to the conflicted banks and standard ‘stockbrokers’ they provide me with unique investment opportunities, considered financial advice and most importantly, really tailor their advice to my circumstances and investment preferences. I think their innovative approach is set to really corner the market.
Rob Bishop - CFO, AMCI Investments Pty Ltd
Luke and the team at Seneca have been instrumental in driving returns for our SMSF in recent years. As the CEO of one of Australia’s most innovative organic fertiliser company’s, whilst I’ve been busy operating our business, Seneca has been able to provide us with a diversified set of direct and indirect investment opportunities, provide timely and strategic advice and educate us on our behavioural biases, resulting in excellent compounding returns. We’ve been strong supporters of Seneca since day 1 and enjoy the high-touch, often daily interactions we have with the team and appreciate the respect they show us and our money. We look forward to a long associate with Luke, John, Victoria and the rest of the team.
Anton Barton - Executive Chairman, BioAg
As retirees, the staff at Seneca have done a wonderful job managing our super fund and our additional family financial assets. Their attention to detail, willingness to go the extra mile and friendship is something we value immensely.
Stan W. - Family Office, VIC
The team at Seneca are a refreshing mix of capital markets expertise and client-centric wealth and investment advisory. They have an ability to deeply and quickly understand equity capital market transactions and work with the corporate advisor, such as Cadmon, to devise a client-focused, favourable deal structure, find the appropriate investors and support a company from its first external capital injection through the various stages of development. We continue to enjoy working with Luke, John and the team.
Cameron Low - Managing Director, Cadmon Advisory
Friday 27 Mar 2020
If you’re trying to reign in your expenses, worried about losing your job or concerned about the future rent returns from your investment property, now might be the perfect time to consider refinancing.
Seneca are seeing deals from the major banks that have interest rates under 3.00% and some include a cash-back incentive of up to $4,000.
If you’d like us to take a look at your current loan and see if we can save you some money, drop me an email and I’ll be happy to assist. We take care of all the running around, paperwork and admin for you, comparing loans from over 40 lenders nation-wide.
ASX 200 is down 5.3% today (after market on Friday) despite a strong lead from the US/Europe overnight (S&P 500 +6.24%, FTSE100 +2.24%)… there’s no conviction in this rally in my opinion.
From the best of the modelling I’ve seen (and there’s plenty more getting around!) this virus looks like it’s going to stop accelerating around the 25 April – 5 May period here in Australia, with peak infections around that 10,000-12,000 cases mark.
The US is similar but just at a larger scale, maybe more like 400-500,000 infections at peak if they get their response sorted.
Observationally, I think there’s a real risk the US get’s closer to ~1m infections as the political divide seems to be hindering a coordinated and decisive response. I don’t care how many MAGA hats you own, you couldn’t argue that Trump has been anything but woeful to-date and unless they get on top of social distancing, contact tracing and isolation, the market will start pricing the dire economic consequences of a health crisis at that scale in the US.
And while the Australian response so far has been good (ok, not perfect but relatively speaking), if the US share market is going down, its unlikely ours goes up!
Below is a chart of the Australian All Ordinaries Index, the S&P 500 and the MSCI All World Ex-US index over the last 20 years. These numbers are all normalised to USD and include dividends (total return).
Friday 20 Mar 2020
The ASX 200 is up 3.32% as I type this after lunch, but I mean, the thing could close down 5% or up 8% from there if this past few trading sessions are anything to go by. If you’re asking me, it closes flat/down. No faith in people wanting to carry long positions over the weekend.
Resources outperformed this week, as did the Supermarkets again (Coronavirus hoarding only brings forward spending, it does’t actually increase it! You aren’t eating any more food or using toilet paper at a faster rate!)
Real Estate the big loser, with all the countries largest landlords feared to be facing lockdowns of shopping centres and tenants closing their doors.
House prices probably the next asset class to feel the pinch. Wages going nowhere fast and I can’t see credit expanding rapidly with credit spreads where they are. I don’t think the RBA can’t save the property market this time.
End of Season Sales take on a new meaning
Retail stocks have had quite a couple of days. Take fast-fashion, jewellry and accessories firm, Lovisa (LOV), down 40% in the first 2 hours of trade on Thursday and then up 40% in the first 2 hours of trade today!
Saturday 14 Mar 2020
The ASX 200 down 11.5% for the week as Coronavirus fear increased and the virus started to spread throughout US, Europe and Australia.
Healthcare (COH, CSL) and Consumer Staples (Grocery) the best performers, Energy and Mining the worst. Including gold (it’s a crappy hedge, look at the correlations through time.)
It was all looking pretty ugly on Friday morning with the ASX200 down 8%, it bounced around most of the day between -5% and -7% before one of the craziest rallies I’ve ever seen saw the ASX200 close UP 4.4% on the day.
Below is the ASX 200 over the course of Friday’s trade… lunacy.
Stepping back though, it’s still not pretty. 5 year chart of the ASX200 Accumulation Index below, added 50% in 5 years and then gave up 20% in 2 weeks.
I read an excellent research note from Goldman during the week. They looked through history at bear markets and categorise them into 3 types:
Structural: Think the GFC. The financial system is broken and nobody realised until now.
Cyclical: The normal corrections that come from interest rates getting ahead of growth. The business cycle.
Event-driven: War, oil price shocks, 9/11, Coronavirus etc. Random, hard/impossible to predict and what I’d call “sh*t happens”. You might be surprised to learn this is not how GS described it.
I’ve chopped up a big table from the report below. The table shows the average decline, and duration of decline, in the S&P500 when we look at Structural, Cyclical and Event-Driven bear markets.
As you can see, event-driven bear markets typically see a 29% decline top to bottom, last 9 months and take 15 months to recover.
Friday 06 Mar 2020
The ASX 200 down 2.8% for the week with Financial hit hardest as the RBA (25bps) and Federal Reserve (50bps) both cut official interest rates in response to the slowdown in economic activity resultant from Coronavirus. Resources again underperformed Industrials on the whole though, as Healthcare globally rallied and supermarket names rallied on toilet paper demand.
The same people who are hoarding toilet paper also buy and sell shares. So next time you think “the stockmarket is always right, I should just buy a market cap weighted ETF and go to sleep”… remember the toilet paper shortage of 2020 and just how dumb the herd can look to a more level-headed, patient observer.
As you can probably tell, I’m a bit miffed by this virus-driven fear. I read the general media then I look at the numbers. I read the media again, and then I look at the numbers again. a) The numbers might be wrong/made up/false (conspiracy) or b) the media might be incentivised to sensationalise. I think (b).
I had a flick through Twitter this morning and so many #chartcrimes about the virus fatality rates getting around. So much information, so little critical thinking.
(For the un-initiated: A chart crime is when a dataset is presented on a chart in such a way to inaccurately influence the reader. Think 2 comparison charts but the y-axis one chart 1 is a log scale while chart 2 has a linear y-axis.)
Things to cheer about
I had a bit of a minor revalation at 3am one morning this week, PMI’s/ISM”s are as good a predictor of general market conditions as we have, see below 15 year chart of US Manufacturing ISM and the ASX 200 Earnings Per Share (yoy%).
Friday 28 Feb 2020
The ASX 200 is down over 200 points today as Coronavirus fears have spooked investors. Since I went under general anesthetic two weeks back (10 Feb) the index has fallen 8%, though if you add back the dividends received over that same time, we are only down 4.5%.
Chart below shows ASX 200 Index and ASX 200 Accumulation Index over past 12 months.
Industrials outperforming resources dramatically!
Nobody has a crystal ball
For all the fund managers on the internet and the television talking up their forsight of these events (I saw one fundy saying he was prepared for this event because he had 12% cash… 12% cash ain’t saving you!), nobody knows what’s next and that is precisely why the market is falling.
I’m not an expert on how viruses spread or the likelyhood of a cure, it’s also really hard to accurately model the economic impact on specific companies (let alone the global economy) – most companies in reporting season seem to be “heavily impacted”, “slightly impacted” or “negligibly impacted”
What is fairly simple is to look at the facts and be aware of your biases. So, here my friends are some facts that I think are important to remember:
Death toll nearly 3,000 (as per CNBC)
The normal flu kills an estimated 300,000-650,000 people (according to the World Health Organisation)
A total of 8096 SARS cases and 774 deaths across 29 countries were reported for an overall case fatality rate (CFR) of 9.6%.
I found this website, got some good, live information