Here’s what you need to know today

• Australian inflation fell to 3.5% for the 12 months to July, down from 3.8% in the 12 months to June. Good news? Not so fast. The biggest driver of the fall was a 6.4% fall in electricity prices due to government rebates including the $350 one-off rebate from the federal government. Without the rebates, electricity prices would have risen 0.9%.
  
  

• Australia’s Reporting Season continues. Ex-AFL CEO Gillon McLachlan shared his first report as Tabcorp CEO, and with higher than expected costs and lower than expected market share the share price fell 15%. Woolworths lost market share to Coles after a tough year headlined by CEO Brad Banducci abruptly resigning after an ABC interview. Nine Entertainment’s profit fell 22% as legacy media continues to struggle.
  
  

• The iron ore price has dipped below $100 USD a tonne, the lowest level in almost 2 years. China’s steel mills are seeing weaker demand from a weak property market, and in turn they’re buying less iron ore. BHP cut its dividend, despite underlying profit rising 2%, with plans to use those savings to increase investment in copper and potash projects.
  
  

• Activist short seller Hindenburg Research has disclosed a short position in Super Micro Computer. Hindenburg alleged a number of frauds including “accounting manipulation” and shares fell 9%. Super Micro has a history of problems, but investors may not be too worried, shares are still up 2,800% in the past 5 years as it benefits from the AI thematic.
  
  

• America’s consumer-confident index rose to its highest level in six months, suggesting consumers have improving feelings about their economic situation. Depending on which indicators you look at, America’s economy is either falling headfirst into a recession or holding up okay.

What the…?

Long term price predictions are sometimes made more for headlines than anything else (ahem, Cathie Wood). But this one still seems extreme. A US analyst believes Apple’s new iPhone 16 with Apple Intelligence (Apple’s push into AI) could eventually add $4 trillion to the company’s value.

To put that in perspective: that would be like adding the current value of Microsoft, Tesla and Netflix to Apple’s existing $3.5 trillion value.

Join our first YouTube Live Q&A

We’re trying something new on YouTube. Today at 12pm, we’ll be going live with Chris Bates for our first YouTube Live Q&A.

Chris is the mortgage broker that helped each of us get into our first homes and he’ll be answering whatever questions you have for him.

Investing is a lifelong journey

Here’s what you can learn today.

Question: I'm increasingly coming across private credit funds, what do you think of private credit?

We put this question to Luke Laretive, CEO of Seneca Financial Solutions

It’s like investing in anything else, if you have some expertise and ability, you can make reasonable returns.

What is private credit?  Essentially, it’s making privately contracted loans to individuals and businesses.  Compare this to say a bond which is a publicly contracted loan that is turned into securities.  Think of private credit as you walking around with your cheque book and lending money to businesses at your local shopping strip – the butcher, the newsagent, the café… 

In practice, the asset class has increased in popularity because the historical returns have been decent and with no liquid market for these securities, they appear free from the daily mark-to-market volatility that is associated with bond, hybrid or equity markets.  It’s a compelling story for an advisor to tell a high-net-worth client that they can get a high-single digit distribution yield and “no volatility”.  This of course, is complete fugazi bs. 

More savvy investors will know that this kind of infrequent measurement does not equate to low/zero volatility.  Refusing to value something does not mean the market value of the securities does not change frequently or in large quantum.  It just means there’s no market currently being made for that security/contract/loan (same goes for most real assets, including real estate.) 

In terms of risk and return, private credit is similar to most other loans you could make:

• You make money through the interest payments received over the life of the loan

• You lose money through the fees you pay to the manager (usually origination fees, transaction fees, ongoing management fees & performance fees.)

• You also take the risk of default (the interest payments don’t get made in full) and

• Insolvency, where you don’t get your loan repaid in full at the end of the term.

• You also face the risk you can’t on-sell these loans at fair value, should you want to make a change to the portfolio during the loan period (liquidity risk), 

• There’s also structuring risk – i.e. is the loan you have made a variable or fixed rate loan? How do potential interest rates impact the value of the loan contract?  What about inflation-adjustments to protect your real returns?  Is the loan collateralised by any assets? 

I could go on and on and on… but hopefully that gives you a basic understanding of the asset class.

Want to speak to Luke or one of our hand-picked financial advisers? Fill out the form on website and we’ll put you in touch.

Today’s sponsor is iShares by BlackRock

With iShares S&P ETFs like IOZ, IVV and IOO, you can get low-cost access to hundreds of the world’s largest companies in a single trade to help diversify your portfolio and help reduce the stress of selecting single stocks. Visit blackrock.com.au/ishares for information about their ETF range, or visit nabtrade.com.au to explore further insights, education and tips for getting started with ETFs.