The past month has certainly been interesting as the stock market gyrated with renewed volatility and the Reserve Bank made moves to reduce the dollar, however this was too late to save Ford who made the decision to close its manufacturing plants in Australia by 2016. Despite the outcry from many that an earlier move on the dollar might have saved jobs, this piece from the Wall Street Journal indicates otherwise. Ford's costs in Australia were double what they are in Europe and four times higher than Asia, so even if the dollar continues to fall it has a long way to go before Australia becomes competitive again. The move by the Reserve Bank to reduce rates, and the indication that it may continue to do so, also saw moves in the stock market which again puts the spotlight on active management with this interesting piece from Abnormal Returns.
Taking a slightly different approach, the author looks at active management not from the perspective of performance (although this is certainly a key consideration), but from an investor's peace of mind. The argument over whether active management generates a long term benefit after fees greater than a passive market approach will be debated until the end of time, however if peace of mind is your goal, perhaps the relentless pursuit of alpha is not for you.
Our Director of Wealth Management, Daniel Minihan, has also regularly weighed in on this debate and most recently posted a piece that looked behind the curtain to the analysts that provide recommendations on what to buy and sell. The results were quite startling, particularly when you consider that only 35% of analysts said that the profitability of their stock recommendations was crucial in determining how much they earned, and an even lower 13% picked retail investors as their most important clients (over 80% picked Hedge Funds!).
Our final piece this month is a short post from Daniel again, looking at the phenomenal amounts of money generated by the U.S. shoe industry, and more specifically by the current king of basketball LeBron James, who in addition to being in the final stages of a second straight championship run, managed to sell $300m of shoes last year!
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