Dunotter Strategic Wealth

 With concerns around climate change and human welfare growing, investors are increasingly looking for investment options that do not harm society or the planet. These investments are generally referred to as Environmental, Social & Governance (ESG).  The managers of such investment funds seek to meet an investor's desire to help by typically ensuring that they do not invest in certain industries. The likes of munitions, fossil fuels, and gambling are typically excluded.  This process is known as "negative screening". So it  excludes  those investments that fail to have the correct criteria. However commentators and investors are increasingly querying this approach.  For example, what about the impact of supply chains? Should you not also exclude a firm or even an industry that relies on the use of an excluded industry's product? If the manufacturing of a device entails a huge amount of oil to be burnt, then shouldn't the firm producing the device also ...

If there is one asset class (type of investment) which seems to defy all price predictions, it is oil.  Every time an expert publishes a seemingly rational article, events seem almost bound to turn out differently. Oil is not alone in this of course. Many try to predict the price of gold without success. However in the case of oil is not just the size of the error, it is also the direction that the experts seem to get entirely wrong! Conventional wisdom gets turned on its head time and again.  Whether it's prices hitting  $140  per barrel in 2008, and apparently heading to one hundred and seventy (by December of that year they'd  fallen  almost  60%  to $55); or US Fracking putting a lid on prices at  $50  per barrel in 2017 (by June 2018 they were at $77); or predictions by the US Energy Information Administration that prices in 2020 would be around $59 per barrel, near where they had been through most of 2019: by  April  they...

  Crypto currencies have made headlines from time to time and supporters offer a variety of reasons as to why they are important. Investment is just one of them. But is it valid? Bitcoin was among the first (if not the first) cryptocurrency and is by far the most famous version. A cryptocurrency is a "digital asset". It exists only in cyberspace.  The coins are "mined" using extremely powerful computers, and ownership is recorded on a database known as a blockchain. Incidentally the energy consumption involved in the mining process is huge: equivalent to the electricity consumed annually by Switzerland ( article )! So what are the benefits of Bitcoin?  Purchasing power One of the main benefits of the currency is that there is a finite number of coins. A total of 21 million coins can be mined. That is all. (the good news for the environment is that we are almost there, with around 90% now in circulation , and once all are extracted, the energy consumed by the sector ...

  11th December 2020 Over the past century academics and practitioners have increasingly espoused theories that have become part of almost every investment doctrine one could name. Theories that have tested and refined over time but now essentially taken as simple fact. One of these relates to the construction of an investment portfolio, where the asset allocation is dependent on an investor's attitude to risk. As Investopedia explains: Over the decades, this has been borne out repeatedly. Equities are the most volatile asset class but produce the highest overall returns. Money is the most stable but the returns are the lowest. Bonds fall in between these two. Increasingly, however, people are querying whether this is still accurate.  Equities certainly still produce the highest returns, money still the lowest, and bonds in between the two. But what about the associated risk? Since the dawn of Quantitative Easing (aka QE. Massive bond-buying by central banks) in 2008, the bond...

  “Neither a borrower nor a lender be; For loan oft loses both itself and friend.”  That famous line by Polonius in Shakespeare's Hamlet would seem prudent advice in most ages. However in today's world, we find our economy awash with debt as never before. The reasons for this are numerous.  One could argue that it starts with perhaps perverse tax incentives, whereby companies are essentially encouraged to borrow by being able to offset interest costs against their profits. The original rationale for this was the belief that borrowing would only occur in order for the company to grow. This therefore makes sense: a tax regime that encourages growth is of course a good thing.  But when investor demand for debt is such that a major cash-rich firm borrows to fund a dividend payment, as Apple has repeatedly done ( Apple ), then many would argue that something has gone very wrong with the system. Then of course there is the ongoing fall out from the GFC. For twelve years no...

  5th December 2020 The Financial Services Council of New Zealand recently published this paper ( research paper ). It stated a number of areas in which those who used financial advisers were in a better position than those who did not. One of the findings that advisers in New Zealand and the media have latched onto is:                      "New Zealanders who receive financial advice end up with around 50% more money in their KiwiSaver (personal                     pension)". As my wife noted on hearing this: "It's probably because those who use advisers are typically wealthier than those who do not". This is indeed what the paper went on to state. So the massive difference is clearly not down to the skills of the advisory community. So the headline-grabbing figure is therefore pretty misleading. This may cause many to dismiss the whole report as propaganda. But ...

1st December 2020  Welcome to the inaugural post for this blog. While I am completely new to blogging, I have almost twenty five years of experience in the financial world and so sincerely hope that you find my summaries and observations of some interest. When people mentioned investing in gold, I'd always thought of line that Warren Buffet apparently gave during a speech to Harvard business students in 1998 :  “ It gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head .” Similarly I'd always ignored analyst speculation as to what the price "should be". They never seemed to be even close to what it turned out to be. The other central reason given for investing in gold never seemed to be borne out in reality either.   It's an "inflation hedge". So you while it doesn't pay you inter...