In Asia-Pacific countries, the Pacific Ocean weather phenomenon El Niño is regarded with dread, which isn’t surprising, given that El Niño brings with it severe drought and heavy monsoons. The Japan Meteorological Agency’s announcement last month that El Niño emerged this spring and might last until autumn means that it’s officially time to worry again.
A precious few, too, might actually welcome its arrival. China's weather bureau expects the pattern to cause high temperatures in the north, setting companies that make air conditioners up for a boom year. Since 2004, the four best years for air conditioner sales in China coincided with El Niño.
This year, a Credit Suisse survey shows most manufacturers in China believe there is a strong chance of high temperatures this summer, and they expect a bump in sales as a result. So far in 2015, year-over-year sales have grown some 5 percent. A heat wave would clear out inventory and boost that figure toward double digits. (May 2015)
Horological History On Sale
This Thursday, more than two centuries of horological history will go under the hammer. The Sotheby’s Important Watches sale in New York will feature more than 250 timepieces dating back to 1780, including a rare 1951 Patek Philippe pink gold open-faced watch.
The piece depicts a map of North America and nearly two dozen musical automata created by Swiss artisans during the Industrial Revolution. Some of the items are expected to go for more than $1 million, including a “Singing Bird Scent Flask” automaton that was crafted by Swiss watchmakers Jacquet-Droz & Leschot.
The exquisite machine made for a Chinese buyer around 1785 is decorated with gold enamel and jewels and features a timepiece and articulated ivory bird whose song is played through a miniature six pipe organ.
Another highlight of the auction is a gold snuffbox from circa-1815 that is adorned with pearls and an enamel painting of a fortuneteller reading a palm. Inside there’s an automaton featuring a woman playing a harp, a man playing a lute, and a large timepiece. (May 2015)
Spin-offs Take Off
Do spinoffs create value? Credit Suisse analysts looked at a series of 16 recent instances thereof in Australia and found that on average, spun-off companies – so-called “Newcos” – dramatically outperformed parent companies.
On average, two years after a spin-off, parent company returns were statistically equal to those of the market. But Newcos outperformed the market by an average 30 percent. That average jumps to almost 50 percent when excluding three companies in the study that ran into regulatory trouble. (Of course, that might be why they were spun off in the first place, so to be fair, call it 30 percent.)
The analysts hypothesize that new managers running Newcos are more motivated and able to focus more narrowly on operations than they did when part of a larger organization. The finding isn’t unique to Australia. Credit Suisse carried out a similar study in the U.S. two years ago and found that spin-offs performed more than 10 percent better than the S&P 500 beginning eight months after the separation.
But buyer, beware: Results obviously vary considerably. Two-year returns among Australian spin-offs had a standard deviation of about 53 percent, with the worst performer earning a relative return of negative 68 percent and the best beating the market by 127 percent.
First published in The Financialist
In 2013, Ted Wiard shared his tragic and moving story for an episode of Bravery Tapes. This week, Ted remembered the episode on Facebook, I watched it again and was re-inspired. I went back to the original video we did and transcribed it, surfacing many details that weren't in the original video and article. I'm publishing here the first part of that transcription: Ted's telling of the death of his brother and his wife Leslie's battle with cancer. I will post subsequent segments soon. I hope you find his story as moving as I did.
Jens: Take us through everything that happened, beginning with Richard.
Ted: My life story changed heavily in 1989. Before that, I was a tennis pro and a 5th grade school teacher. In 1989, my brother Richard died in a shipwreck up in Alaska. He was as commercial fisherman and it was a strange wave that flipped his boat. Our whole family was devastated, shocked and freaked out.
Jens: What was it like for you when you found out?
Ted: I was super intense. I was actually in Phoenix, taking my USTA exam to be a tennis pro. I had just finished my last test and I was with a bunch of people and we were getting ready to leave the next morning. I was driving back with a pro from Santa Fe. We were planning to leave and I decided I just shouldn’t leave.
And at 5 that morning, I got a call from my mom telling me there had been horrendous shipwreck. They didn’t know who was alive. They had found one body and no other bodies. I knew Richard died. There was something in me that told me he had died.
About a year before that, I had actually been very sick and had almost died. He had made me promise that I would live from that sickness. As a mid 20-year-old, I thought I had that control and I promised him. The first thought was, “you made me promise to live and now you’ve died.”
I also felt I’d failed. I was the bigger brother, the protector and all of sudden my little bro was gone. I was fully confused. I went and woke up my other friend and he drove me to the airport and I flew home. The illusion of safety was gone. The whole way home I thought the plane was going to go down. It wasn’t for the fear of my death, it was the fear that if I died too, my parents would not be able to handle that. But finally, the plane landed safely and I was home.
And then I just felt so numb and so hollow inside. There was nothing I could do. It was the first time I really felt that surrender of total helplessness. Nothing I could do to protect my brother, which had been my job, I felt, growing up in Taos. A role was gone, my brother was gone, and I was completely devastated.
Jens: Did you recover from that before Leslie was diagnosed?
Ted: I don’t think so. Richard was supposed to be the godfather of Amy, who wasn’t born yet. Because I had a little girl already and Amy was about to be born, I didn’t realize it but life, instead of sneaking back in, engulfed us. We were busy being pregnant and we were a new couple trying to make our mortgage payment and hopefully having enough to eat halfway decently. Life just sucked us back into trying to do everything.
Pieces would come and I’d feel really sad and I’d miss Richard. But because then Amy was born and we were so busy, there was part of it that was just shelved away. There was grief, there was ceremony, we spread his ashes. We did all of the rituals but there was a part deep, deep down that really didn’t have Richard physically gone.
There’s death and then there’s this new birth of this little baby who came out and immediately laughed and so Amy just brought all this celebration of life in. The death piece was just an undercurrent.
Jens: What happened next?
Ted: So, we started life again. Amy was one and Keri was three. We went to Phoenix once again and she got really tired. We couldn’t understand why. We were at my step-dad’s house and he’s a doctor. She thought she had one more rib on one side than the other side. It was a tumor coming from her kidney, protruding out the front. It was a five-pound tumor.
My step-dad called people and we started the process. My step-dad came to tell me the next day that Leslie was really sick. The oncologist said, “you have a tumor the size of a softball and a tumor the size of a golf ball on your skull.”
Right there, our whole world changed. We died in the form we had known ourselves. She started having her surgeries. This information changed our world immediately. In some ways, I became a single dad, even though she was an amazing mom through her whole sickness.
All of a sudden, all those logistics I could take for granted were gone. I no longer rock climbed because I couldn't take that chance. I was just overwhelmed. I remember lying in bed and going, “what am I going to do? How am I going to take care of this if she dies?” Leslie looked over and said, “I’d like you to get married again someday.” So, I knew she was having the same thoughts. “How the heck is Ted going to do this if I’m not here, with one and three-year-old daughters?” It was like being in a wave and losing your surfboard and slamming that sand and having no idea what direction is up or down. And everything just hurt and was coming in so fast. The chaos was so intense.
We were making sure everything was ready for death. Luckily, we made it through the six months of chemo. Nothing fit. Everything was so overwhelming. Leslie almost died four or five times during those two years. Finally, as things increased and got worse and she became more and more in pain, I was tying Keri’s shoe in the hallway, and Leslie called me. I ran to check on her and Keri started crying. Leslie said, “Ted, no one is living in this house. It’s time to be reborn.”
We cut back on the steroids that were stopping the swelling and she died that February. And Keri and Amy and I started our life.
Leslie’s lessons still run so deep in me, celebrating every moment and every breath, and honoring death so that we live better. In that, she’s one of my biggest teachers.
So that’s the story of those two years. There’s a cancer bubble and a sickness bubble and nobody really knows what goes inside that bubble except the people who are actually in it. There’s the day in, day out, 2am talks of quality versus quantity, [the questions like] “I’m going to die right now. Should the girls be here?”
All those difference pieces as well as the medical needs are so intense. All of a sudden, when that bubble bursts and that person dies, I lost my role as a husband, as a caregiver. My buddy was gone, my high school sweetheart, my friend.
And all of a sudden, I had these two little girls looking up at me, waiting for me. I was having those same thoughts. “How am I going to do this? What am I going to do?” Keri came out and she was next to me and she goes, “Daddy, look, mother Earth is crying for mommy. And you get to spend more time with us.” And so out of the mouths of babes, comes the truth. Leslie’s belief that we were all being reborn — here was the beginning of that.
So luckily, with good family and good friends, Keri and Amy and I started out on the next piece of the journey.
For years, television advertisers have targeted what they call the “key demo” – people between the ages of 18 and 49. But when Credit Suisse set out to determine which demographic actually spends the most money, it turned out to be the silver-haired set. In the G6 — France, Germany, Italy, Japan, the U.K. and the U.S. — consumers over the age of 50 account for the majority of consumer spending.
The result isn’t entirely surprising, as unemployment is relatively high among young people the world over. In the U.S., they’re often loaded down with student debt, too. Net wealth, meanwhile, peaks in the 55-to-64 age bracket, an age at which many people have finished raising families and are paying down big debts such as mortgages.
Thus, older people tend to have a larger pile of disposable cash than their younger counterparts. The 50-plus age bracket accounts for 58.1 percent of total spending in Germany, 54.2 percent in the U.S. and 59.7 percent in Germany. And don’t make any assumptions about what this “key demo” buys – their consumption of goods normally associated with youth—such as video games – is on the rise. (May 2015)
Global Energy Subsidies Exceed Health Spending
Governments spend more on energy subsidies than they do on healthcare. That’s the conclusion of an IMF report released this month, which estimates the global cost of energy subsidies will be $5.3 trillion in 2015, or 6.5 percent of the world’s GDP.
Government health spending, by contrast, is expected to total just 6 percent of GDP. Mind you, the report defined the “total costs” of energy subsidies more expansively than usual combining both the government measures that keep consumer energy prices below market levels and the costs of damage to people and the environment caused by energy consumption, such as the negative health effects of air pollution and traffic congestion.
Eliminating energy subsidies completely would boost government revenue by $2.9 trillion, the study claims. Those resources, write IMF directors Benedict Clements and Vitor Gaspar, “could be used to meet critical public spending needs or reduce taxes that are choking economic growth.” (May 2015)
For shoe designers in the 19th century, it probably would have seemed ludicrous to suggest that grooms would one day wear rubber-soled sneakers at their weddings. And yet, here we are. This unlikely evolution will be the subject of an exhibition at the Brooklyn Museum this summer. “The Rise of Sneaker Culture” will look at how technical innovation, fashion trends, and celebrity endorsements have transformed the humble sneaker from a piece of footwear reserved for sport to a high-style item that actors like Robert Downey Jr. pair with tuxedos at the Oscars. Among the roughly 150 pairs to go on display are running shoes made by boot makers Thomas Dutton and Thorowgood in the 1860s, a pair of well-worn Converse All-Stars created circa 1917, and an impractical pair of high-heeled women’s sports shoes from the 1920s. The exhibit will also include multiple pairs of Nike Air Jordans as well as a pair of gold-studded roller boats designed by Christian Louboutin. (May 2015)
Another False Start for Brazilian Equities
Brazilian equities have had a volatile time of it of late. In November, stocks embarked on a nearly uninterrupted five-month decline, driven by a stalled economy and the government’s inability to find political consensus about how to promote sustainable growth. But things started to turn around in mid-March, thanks in large part to a recovery in global oil prices. Over the last two-and-a-half months, the Ibovespa index has risen 12 percent and the real has gained more than 6 percent against the dollar. But Credit Suisse’s Private Banking and Wealth Management division cautions investors not to get too excited. Over the past seven years, the benchmark index has risen more than 10 percent eight different times. Each time, the rally fizzled quickly, largely due to weak commodity prices and a lack of competitiveness. The current rally seems destined to meet the same fate. Brazilian corporate earnings are stagnant, and price-to-earnings multiples are a full standard deviation above their long-term average. Meanwhile, economic growth was flat last year, and GDP is expected to contract 1 percent this year. These are hardly the signals of a long-lasting recovery. (May 2015)
Articles first published in The Financialist
For years, tourists have been able to experience a taste of Europe at hotels in Las Vegas – the gondolas at The Venetian, the Eiffel Tower at Paris Las Vegas, and the fountains at The Bellagio are examples. In Dubai, however, developers are taking the concept to a much more luxurious level.
After delaying construction due to the global financial crisis, the Kleindienst Group is starting work this year on an island resort called The Heart of Europe, which is part of Dubai’s The World islands development. Six man-made islands—named after Europe, Sweden, Monaco, Germany, Switzerland, and St. Petersburg—will be located about 2.5 miles off the coast of Dubai and will offer visitors a taste of European architecture, culture and food.
Travelers who are already familiar with Europe – the real one – may be more interested in the project’s luxury villas, called Floating Seahorses. As the name suggests, the villas will float in an open aquarium featuring an artificial coral reef and marine life, including endangered seahorses. Each villa will have three levels, and the main bedroom and bathroom will be underwater—meaning guests can view the sea life from the comfort of their own beds.
My Country for Your Picasso
Could a piece of art be worth more than an entire nation? An auction at Christie’s this week in New York suggested the answer might be yes. On Monday, Pablo Picasso’s 1955 masterpiece “Women of Algiers,” a colorful depiction of several women in a harem, sold for $179.4 million, to an anonymous bidder.
To put that amount in perspective, it’s more than the gross domestic product of the Pacific island nation of Kiribati, which was $169 million in 2013. The previous world record for a piece of art sold at auction was Francis Bacon’s “Three Studies of Lucian Freud,” which fetched $142.4 million in 2013.
There’s so much money floating around in today’s high-end art market that Christie’s set nine more world records at the auction, including the $141.3 million sale of Alberto Giacometti’s “Pointing Man,” more than triple the previous record for the sale of a sculpture.
A rare piece of wartime memorabilia is going under the hammer at Christie’s in London. A mint condition Supermarine Spitfire Mk. 1, an iconic British fighter aircraft used during the Second World War, will be auctioned in July. The P9374/G-MK1A disappeared in May 1940 after its pilot, Officer Peter Cazenove, was forced to crash land on Calais beach during an air battle over Dunkirk.
Cazenove survived the incident, but the plane was swallowed up by the sand and it remained hidden there for the next 40 years. After the much-admired aircraft was discovered in September 1980, a group of 12 engineers spent three years bringing it back to life, using many of its original components.
The owner, American philanthropist and art collector Thomas Kaplan, plans to donate the proceeds of the sale to charities, including the Royal Air Force Benevolent Fund, which helps veterans and their families. Kaplan also owns the only other fully restored Mk. 1 Spitfire, the N3200, which he plans to give to the Imperial War Museum in Duxford, England. The P9374 is expected to fetch up to $3.9 million so its next owner will need deep pockets. A flying license would be handy too.
Looking for Better Growth? Adjust Again.
When U.S. first-quarter GDP growth came in at just 0.2 percent, economists were taken by surprise. They had expected stronger numbers, especially after jobs data ad been so strong. It turns out they may not have been wrong after all. Researchers at the Federal Reserve of San Francisco say that although the GDP data released by the Bureau of Economic Analysis is seasonally adjusted, it still exhibits “calendar-based fluctuations.”
This so-called “residual seasonality” is common in the first quarter because seasonal patterns such as holiday schedules and weather variations aren’t fully accounted for—even in the adjusted data. Because of this, first-quarter GDP has been consistently weak for the past 25 years. In the 1990s, growth averaged 1 percentage point lower in the first quarter than in the rest of the year. Between 2000 and 2014, the shortfall was 2.3 percentage points.
What is the solution offered by economists Glenn D. Rudebusch, Daniel Wilson, and Tim Mahedy? They suggest adding a second layer of seasonal adjustment to ensure all of the seasonal variations are covered, which would boost last quarter’s GDP number to 1.8 percent. That’s means there’s “a good chance,” the economists say, “that underlying economic growth so far this year was substantially stronger than reported.”
First published in The Financialist in May 2015.
Mapping Racism in America
Given its history, the South is often considered to be the area the United States with the most racism. But a study might suggest otherwise.
Using a Google search-based measurement tool developed by data scientist Seth Stephens-Davidowitz, researchers analyzed 196 media markets across the country to pinpoint where most Internet searches for the “N-word” occurred between 2004 and 2007. Granted, performing Internet searches for this racial slur doesn’t necessarily make a person a racist, but the researchers say millions of Internet searches give them a solid idea of where racist attitudes are clustered.
On a resulting map, much of the Northeastern corner of the country is awash in red, indicating “above mean” Google searches containing the “N-word.” The Southeast is also red, although to a lesser extent, and most of the rest of the country is green, suggesting below average searches for the offensive term. (May 2015)
Fly the Disciplined Skies
U.S. airlines’ costs have plummeted due to lower fuel prices, but they aren't all rushing to buy more airplanes or open up more routes. Somewhat surprisingly, given the industry’s history, carriers are instead engaging in so-called “capacity discipline”: they’re cutting the number of available seats on routes that are less profitable or have weaker demand.
In particular, the strong dollar has made it more expensive for foreigners to fly U.S. airlines, cutting demand for international flights. Carriers are responding by reducing the number of those flights they offer, according to Credit Suisse. (May 2015)
Articles first published in The Financialist in 2015.
(Another) Study Debunks Vaccine-Autism Link
It’s been nearly two decades since British researcher Andrew Wakefield’s study falsely linked the measles-mumps-rubella vaccine with autism, and the medical community is still trying to undo the damage. Immunization rates fell significantly in some countries after Wakefield’s now-debunked report appeared in The Lancet. While things have improved since then, in many places they still fall short of the World Health Organization’s recommended level of 95 percent. Although science has since dispelled the myth that the MMR vaccine causes autism, recent measles outbreaks in California and elsewhere suggest immunizations levels are still too low. A recent study published by The Journal of the American Medical Association should put any remaining vaccine-autism doubts to rest. Researchers studied nearly 96,000 children born between 2001 and 2007 who had an older sibling. In a finding that is entirely consistent with previous studies, the researchers found the children, who were selected from a U.S. health insurance claims database, were no more likely to develop autism after receiving the MMR vaccine than those who weren’t vaccinated. Researchers even found the same result for children who had an autistic sibling and therefore were at greater risk of developing the disorder themselves.
Take Off the Hair Shirt, Chile
Chileans are talking about corruption. The right-wing UDI party is under fire for illicit campaign finance, and Socialist President Michele Bachelet’s son allegedly made big bucks off a sweetheart real estate loan. Tax evasion, long ignored, turns out to be widespread. The scandals have given Chileans a bad attitude about their country. Local bankers worry this may tarnish the country’s image of transparency and encourage investors to abandon the Andean nation, according to a recent note by Credit Suisse analyst Alonso Cervera. His advice: Don’t worry so much. With Chile’s strong institutions, the scandals will be investigated, improper deeds punished, and better laws implemented. The bigger cloud is related to global markets: given lower commodity prices, Chile now expects only $65.4 billion in private investment between 2014 and 2018, down from previous projections of $91.3 billion in late 2013.
Articles first published in The Financialist in 2015.
Mapping America’s Religious Beliefs
Oregon is the most godless state in America. That’s according to the Public Religion Research Institute’s American Values Atlas, which is based on telephone interviews with 50,000 people across the country. This year’s results show 22 percent of the U.S. population claims to be “unaffiliated” with any religion, the same percentage of people who describe themselves as Catholic, and four percentage points more than those who call themselves Evangelical Protestants. Those who don’t identify with any religion actually outnumber believers in 13 states, mostly in the northwest and northeast of the country. In Oregon, 37 percent of those surveyed describe themselves as religiously unaffiliated, edging out New Hampshire (35 percent) and Washington (33 percent). Catholicism is the No. 1 religion in 17 states, led by Rhode Island (44 percent). Utah is the least pluralistic state: 56 percent of people there are Mormon, making it the only state where more than half of the population follows the same religion.
The Trouble with Market Expectations
Is the market really all-knowing? Perhaps. But according to the San Francisco Federal Reserve, it isn’t to be trusted when it comes to its “views” of future economic policy, in large part because changes in risk and liquidity premiums can affect asset prices as much as investors’ views about the future of interest rate, inflation, or the like. Consider the breakeven inflation rate, or BEI — the difference between nominal and inflation-adjusted bond (TIPs) yields — which provides a market-based expectation of future inflation. Since the middle of last year, they’ve fallen from 2.5 percent to 1.8 percent. Taken at face value, this would suggest that the market sees future inflation running below the Fed’s longer-term inflation target of 2 percent. If the Fed used a “market-based” approach to setting policy, it would be seriously considering cutting rates in order to get BEI back to the target. But the Fed isn’t thinking about taking on a more accommodative stance in order to fuel inflation; if anything, it’s expected to raise rates. Other factors — such as falling European sovereign bond yields and subsequent increased capital flows from Europe to the U.S.—may have just as much to do with driving down BEI rates than actual U.S. inflation expectations themselves. Policymakers should always keep an eye on financial market prices, but it would seem very unwise indeed to formulate policy solely on the basis of such.
Go Small or Go Home
When it comes to the performance of developed economies, it turns out that smaller might actually be better. In a new report, “The success of small countries and markets,” Credit Suisse compared the economies of Austria, Belgium, Denmark, Finland, Norway, Portugal, Iceland, Ireland, Sweden and Switzerland to their larger brethren, and the findings were instructive. Small countries’ cash flow return on invested capital, a proprietary Credit Suisse metric, is consistently about 3 percentage points higher in those smaller countries than in larger ones. Equally interesting is the fact that their economies are increasingly useful as leading indicators for the global economic cycle. Fiscal balances in the countries of Northern and Continental Europe, for example, had begun to deteriorate in 2007, about two years ahead of larger European countries. And which small country is a good indicator for the future fortunes of the U.S.? Singapore. The southeast Asian country’s fiscal policy tends to follow the changes in U.S. fiscal numbers, with a track record of creating excess capacity in advance (and apparently anticipation) of American demand.
These articles were first published in The Financialist in April 2015.
Just as the loss of local newspapers has created news deserts in the U.S., budget constraints have led larger news organizations to reduce their coverage of global humanitarian crises. Media outlets are overlooking key topics such as global health, child labor, human trafficking, environmental degradation, hunger and violent conflict in many areas of the world.
This not only hurts journalists and news consumers, but can harm the very people suffering from these crises. That’s because media coverage plays a direct role in drawing attention to these issues, and thereby encourages policymakers and foundations to provide humanitarian assistance. So, when coverage dries up, so can aid.
It’s not a secret that many international crisis issues are under-covered by large media outlets, and independent journalists play a large part in filling the gap.
My colleague, photojournalist David Rochkind, and I experienced this directly when we set out to do a reporting project on global funding for tuberculosis with a grant from the Pulitzer Center on Crisis Reporting. Two years earlier, we had done a similar reporting project on HIV, also with a Pulitzer Center grant, and it had been relatively easy to place articles in top media outlets like National Public Radio and TIME. But this time, we couldn’t place the story. Emails to editors weren’t returned, or turned into endless threads that didn’t seem to go anywhere. Yet we were taking the same steps we had two years earlier.
Maybe freelance budgets had declined more. And perhaps it was that some editors I knew had left those publications. But more likely, it was the subject matter. Tuberculosis just wasn’t a topic that many readers or news organizations were very interested in exploring.
This piece in Slate tells the story. Read it here.
Staring Drivers into Stopping
If the number of pedestrian deaths every year is any indication, the law clearly isn’t enough to make drivers stop at cross walks. Apparently, making eye contact might help. In a recent study published in Safety Science, researchers recruited two men and two women to stand in pedestrian crossings in a town in western France. They were instructed to either stare at the faces of oncoming drivers or look in the general direction of the vehicles but not at the driver. The results showed that of the 2,560 drivers unwittingly involved in the experiment, 67.7 percent stopped at the pedestrian crossing when the pedestrian looked directly at their face. When the pedestrian gazed over their heads, only 55.1 percent of drivers gave way. It also helps to be female: 65 percent of drivers stopped for a woman while only 57.8 percent stopped for men. (April 2015)
U.S. Retirement Savings Still Slim
IRAs, 401k’s and other tax-advantaged retirement savings plans in the U.S. aren’t all they’re cracked up to be, according to a study by three Federal Reserve Board economists. Such defined-contribution plans hold an ever-growing pot of cash, but the ratio of retirement wealth to personal income stopped growing around 2000. The culprit: the wild ride in financial markets so far this century. “Disappointing macroeconomic performance has revealed important concerns,” the study says, about the ability of the current system of “to provide widespread retirement security.” The underfunding of defined contribution plans underscores the continued importance of Social Security to many Americans’ retirement, the study says, and the government will put many families at risk by underfunding it. Social Security, according to the report, “is by far the single largest component of saving for most families, and the most important key to their retirement security.” (April 2015)
Australia’s Selfies a Boon for Stocks
Australia’s self-directed pension savings plans, known as selfies, hold a combined half-trillion dollars, including 16 percent of Australian equities. Their cash holdings have been declining since 2012, recently falling below 28 percent of assets. But they could fall even further. Further interest rate cuts by Australia’s central bank would boost demand for stocks with high dividends, according to Credit Suisse, as each additional quarter-point cut by the central bank would have the effect of reducing the cash yield on government securities by $500 million. To keep income levels steady, investors might very well switch $11 billion in cash over to equities, where they can find better returns through dividends. Indeed, Australia’s top 50 equities have a gross dividend yield of 6 percent, well above the 3.2 percent annual interest on a 1-year deposit. (April 2015)
These articles were first published in The Financialist in April 2015