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 19 Jun 2020
The ASX 200 added 1.62% for the week with Industrials dominating Resources.
Midcap and small cap stocks continued to outperform the top 20 – it’s been a theme of the market recovery.
I’ll never tell you the market is going to crash
Plenty of clients and advisers that I talk to each week are still finding it hard to invest. Ironically, while I keep hearing this sort of talk, it makes me more confident to keep investing. As I’ve said before, without elevated volatility its much harder to generate elevated returns… they just go hand in hand.
This week a client rang thinking the market was going to crash again. I managed to allay their fears with logic but it still puts someone like me in an unenviable position, let me explain.
Lets say the market does crash next week – the client is going to blame you for the loss they incur.
But if the market doesn’t crash, they aren’t going to ring up and thank you. They are just going to go about their business as they normally would and forget they ever made the phone call.
It’s the easy road to just agree with your clients and let them sell. If the market falls, everyone’s happy. If it keeps going up, the client only has themselves to blame… but unfortunately, this easy road doesn’t result in the best client outcomes.
I’ve written it many times, but you can’t time markets consistently. You might get lucky, you might be unlucky, but it doesn’t change the data. Nobody knows if the market is going up, down or sideways with any degree of certainty in the very short run.
I have clients trying to tell me all the time, they are “nervous” about the market, they want to hold more cash, they want to try and buy things cheaper and for every time the clients are right, there’s 100 times that they are wrong. The problem is, generally, clients don’t understand/study their own biases, they don’t know what they don’t know and often, just simply want to believe what they already believe to be true.
Personally, and how I advise clients, is just keep it simple. Set your asset allocation based on your risk profile and return requirements and leave it alone. If making as much money as possible is your goal, go as hard as you can at growth assets while maintaining great sleep quality. But be consistent. Constantly changing your strategy or allocation to the market is dumb and eats away at your long term returns in my experience. You might get lucky, you might not, but regardless of the outcome, the dice is still loaded against you.
Friday 12 Jun 2020
The ASX 200 followed Wall Street lower early this morning, falling from 5960 to 5756, by lunchtime though the market had recoved to 5875.
I’m going to tap this note now (about 1.30pm) because I’ve got plans tonight (occassionally I like to spend my Friday night not in front of the monitors!)
The market has put on 14% this quarter so far which is nice.
Financials gave up half their gains, energy slipped back while defensives sectors outperformed… the reverse of the catch up rally of the past two weeks.
It’s a battle between value/cheap/rubbish stocks and growing/well run/expensive ones. Here’s a fancy chart of the S&P500 Value stock index vs the S&P500 Growth stock index, both indexed to 100, 1 month ago.
You can see value had a nice run during the end of May/start of June but gave back most of its lead this week.
Looking over a longer time horizon (last 10 years), you can see why I think all you baby-boomber, Buffett-idolising, Alan-Kohler-watching “value investors” need your heads read.
Growth stocks have outperformed Value by 160%.
Friday 05 Jun 2020
The ASX 200 had pretty dull old day, +0.12%. Market had a ripper of a week though, adding another 4.2%. As you can see below, industrials slightly outperformed resources and again, financials the bigger winner (+15%).
Quick public service announcement… last week’s note was a ripper (at least I think so!) and its the first note in a long while that hasn’t ticked over 50% open rates. So if you missed it, go and read it!
Friday 29 May 2020
The ASX 200 fell 1.63% on Friday, though still had a really strong week, adding 4.71%. It really was a ‘catch up rally’ week, with anything that’s underperformed in May to date catching a serious bid.
Is the market about to crash again?
If I had a dollar for every client who thinks “the worst isn’t over” I wouldn’t need to spend my days talking to them!…What you need to realise is that you are wrong!
Well, not wrong in the sense that the market is going up (or down), but wrong in the sense that you don’t, can’t and won’t know. Someone will be right in hindsight, someone will be wrong in hindsight. It doesn’t mean either of you had any idea to begin with. Remember this next time you’re reading/watching/listening to the talking heads (and me!).
While on the topic of guru’s, one of my favourites Howard Marks put out another great note on uncertainty this week. You should read it. I’ll illegally reproduce a fabulous extract:
It reminds me of a coversation I had with a client/friend/successful business owner who emailed me saying, and I paraphrase him:
“I read in The Australian that Macquarie Investment Bank are recommending these 10 stocks and we don’t have a single one in our portfolio, what’s going on?!?!”
My communication style can best be described as “arrogant little shit”, so I responded with:
“What did UBS, Merril Lynch, Morgan Stanley and Goldman Sachs recommend?”
The moral of the story if you aren’t a student of the game, if you aren’t a practioner, a professional, someone who’s spent a lot of time, money and effort getting good at something, and kept up with the modern developments, particularly in this game (investments/finance), a little bit of knowledge can be more dangerous than none.
Particularly, beware of infromation asymmetry. Not only might someone know more than you, they might know how to use it. Remember, just because you know boxing involves punching your opponent, does not mean you are adequately prepared to fight Mike Tyson for the heavyweight title.
OK enough morals. I talked about the equity risk premium (ERP) last year (or maybe early this year) and said it was entirely plausible for the market to be materially higher. Obviously this didn’t happen but I still kind of think this is how it’ll play out medium term.
As a refresher, the ERP is the difference between the yield on earnings (the inverse of the market PE ratio) less the yield on risk free government bonds. It’s essentially the “extra” return we require as investors to buy shares rather than just hold risk free, low return government bonds.
Morgan Stanley put out a nice little reminder that the ERP could still fall
Friday 22 May 2020
The ASX 200 closed down 0.96% today, pretty much at day lows. As pulled the data during the day, it flatters the actual 4.10pm close by about 10bps. ASX 200 was +1.71% for the week (I’ve got a bit on outside of work this weekend, sorry to those who prefer the Sat notes.)
Resources (6.2%) and Energy the real winners (+5.2%) with tech and real estate also doing well.
Seneca Australian Shares Portfolio
Has had a nice little start to life (still early doors) +4.13% vs the ASX200 Accumulation Index benchmark of 2.70% (not bad for 14 trading days.) (Obviously unaudited and past performance is not a future predictor of returns and all that jazz…)
Discounted fees for the first $10m in is still on the table, but I’ve already got over half way there so drop me an email if you’re intending to put some money in and want the discount.
Portfolio has 20-40 ASX200 stocks (limited to that universe) with a max position size of 15% and a minimum position size of 1%. By design, its not supposed to shoot the lights out, just be a steady performer.
Biggest contributors to returns so far are ANN, BHP, BRG, JHX, NEA and TPM. Detractors ANZ, CBA & CSL.
Spotify (SPOT on the NASDAQ)
Spotify Technologies shares jumped almost 21% this week, and the stock is up 50% since the start of the year, after the leader in audio streaming announced it was acquiring the exclusive rights to the Joe Rogan Experience (JRE) Podcast.
For my non-podcast-listener readers, 190 MILLION people (about the population of Mexico) download the JRE every MONTH. Take that in for a second. SPOT reportedly paid about c.$100m (or 1% of their projected 2020 gross profits)