Morningstar runs the numbers

We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 23 April.

18,000

Mark LaMonica takes a journey through the weird, wacky, and overvalued in his three-part series (part 1, 2 and 3) on Bubbleville. He writes,

“I’m on a call with a finfluencer about doing a joint webinar with Morningstar and I’m barely through my introduction when I’m told that guests pay an exorbitant fee to participate in her webinars. None of which is disclosed to webinar attendees.

"I want to tell her to spend part of the fee on a textbook so she can stop telling her audience that small cap stocks are anything trading under $5 a share. I repeat a mantra about taking the high road and I politely decline to pay for the privilege of reaching her 18,000 Instagram followers.

"To help her followers transform their lives, she implores them to repeat their Monday Money Mantra each morning for a week because success grows where attention flows. This week I’m told there is money all around me and I just need to grab it. At least she practices what she preaches. In Bubbleville it is pay to play, and the finfluencers don’t come cheap.”

43 per cent

Where Australia once rode to economic development on the sheep’s back, today’s success is dangerously reliant on mineral exports to Asia, a majority of which is destined for China, writes Peter Warnes.

“In 2020 Australia exported US$254.3bn worth of goods. China accounted for 43 per cent of the total. Japan was the second largest customer with 9 per cent, the US third at 6.2 per cent.

"From a continental perspective, 78.2 per cent of our goods were exported to Asia, 9.5 per cent to Europe and 6.7 per cent to North America. Ores US$91.3bn (35.9 per cent of total goods exports); Energy fuels, including coal US$65.4bn (25.7 per cent); Precious metals US$19.6bn (7.7 per cent) Mined commodities accounted for US$176.3bn, or 69 per cent of total goods exports. Australia is now a drill, dig and ship nation after riding on the sheep’s back for many decades.”

$25 billion

It was a big week for the environment. The US, Canada, and Japan all announced ambitious new carbon reduction targets, while China promised to strictly control coal-fired power plants. Reflecting on Earth day last Thursday, Emma Rapaport outlines how to invest for a sustainability revolution.

“Morningstar data shows the number of sustainable exchange-traded products listed on the exchanges has mushroomed, from just two in 2016 to seventeen today. With the click of a button, investors can send their cash to ETHI – an index-tracking ETF that exposes unitholders to global stocks identified as leaders on climate – or CLNE – a portfolio of 30 of the world's largest clean energy production, technology and equipment companies. Across all Australian sustainable funds, retail assets topped a record $25 billion in 2020, up 35 per cent on the previous year.”

8 to 1

The fallout from the collapse of hedge fund Archegos is still rocking financial markets, Morgan Stanley lost nearly US$1 billion. John Rekenthaler chronicles the lessons we might learn from the disaster, writing “Bill Hwang certainly showed the courage of his convictions. He grew the fund to $10 billion by borrowing mightily, and after that triumph, continued borrowing mightily. Estimates for the fund’s final leverage ratio range as high as 8 to 1, meaning that even a modest loss would have consumed the fund’s equity. Which is in fact what happened. Archegos wasn’t destroyed by a huge bear market--it suffered what should have been a temporary decline, but which became permanent.

“Pride went before the fund’s fall.”

27.8 per cent

That’s how much the Russell 3000 value index returned between 1 September 2020 and 30 March 2021, beating its growth counterpart by 19.3 per cent. Still, this could be a false spring, writes Lewis Jackson.

“Growth stock are on the rise, raising questions about whether this reprieve for names benefiting from the economic reopening may be short lived. Morningstar fund analyst Ross Macmillan isn't surprised by this turn of events. He says uncertainty about the economic recovery and interest rates could have markets see-sawing between growth and value for the foreseeable future. ‘Every time you see long government yields rise, you'll see a rotation. If the market calms down and regains its feeling about growth stocks, it will rally back again.’”

Chart of the week - $846, 505

Counterfeit notes in Australia (March 2003 - September 2020)

Source RBA

Since 2003, the Reserve Bank has kept records of all counterfeit notes detected. Counterfeits peaked at 15,827 notes, or 28.5 counterfeits per million banknotes in Q1 2015. The total value of the counterfeits discovered then? $846,505.

In response the RBA began introducing a new series of notes with special security features, starting with the $5 note in 2016.