Today’s News

The Big Picture

• Australian housing used to launder money. All 4 of Australia’s major banks have self-reported to AUSTRAC, with concerns that up to $1 billion of loans have been fraudulently obtained to disguise the origins of illicit funds. Police suspect one criminal network alone is responsible for at least $300 million in fraudulent borrowing. (AFR)
  
  

• US and Israel strike Iran. Iran’s Supreme Leader Ayatollah Ali Khamenei was killed in a strike on Saturday. In retaliation, Iran struck targets in Israel, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman. As of Monday morning, 3 US service members and 9 Israelis have been killed. (NY Times)
  
  

• Iran threatens Strait of Hormuz. The narrow waterway off Iran’s coast is one of the world’s most important shipping lanes, with 20% of the world’s oil and gas passing through it. Iran warned ships not to sail through the Strait as the BBC reported that two ships have been hit. (BBC)
  
  

• Jeff Bezos’ AI play. The Amazon founder has raised billions for Project Prometheus, a plan to acquire industrial companies disrupted by AI and turn them around. Bezos will be co-CEO of the company, his first management role since leaving Amazon in 2021. (FT)
  
  

• Pakistan declares “open war” on Afghanistan. The neighbouring countries reached a ceasefire in October but border clashes over the past week have reignited the conflict. (ABC)

Companies in the news

• 9th times the charm as Paramount wins bidding war. The months-long struggle for Hollywood giant Warner Bros Discovery is over, with Netflix pulling out of the race after Paramount’s 9th offer. Paramount will buy Warner Bros for $110 billion. (FT)
  
  

• Block cuts 40% of its workforce. The tech company behind payments platform Square and buy-now, pay-later Afterpay is cutting 4,000 of its 10,000-strong workforce. CEO Jack Dorsey explained the job cuts were directly tied to AI. Block shares were up 17% in the US as a result. (BBC)
  
  

• Woolworths overtakes Coles. Supermarket giant Coles shares dropped 7% on Friday as it reported 4% sales growth for the first 7 weeks of the year. In the same time, Woolworths has seen 6% sales growth, a notable change after Coles grew faster than Woolworths for the past 7 quarters. (AFR)
  
  

• Anthropic refuses to bend to US Government. President Trump ordered federal agencies to stop using Anthropic’s products, including chatbot Claude, after the AI lab refused to lift safety guardrails for the US military. (NPR)
  
  

• OpenAI’s circular funding continues. The AI giant completed a $110 billion raise at a $730 billion valuation. $50 billion of the funding came from Amazon, but in return, OpenAI committed to spend $100 billion with Amazon Web Services in the next 8 years. An example of the circular AI funding model that has some investors worried. (Reuters)
  
  

• Bapcor halves in one day. The Australian car parts retailer saw its share price drop 49% in one day after it announced it had raised $157 million at a price of 60 cents, a major discount to its $1.72 share price. That is a worrying sign that it couldn’t raise money closer to its share price. (Capital Brief)

What the…?

New Zealand’s brain drain continues. For years, Australia’s smaller neighbour has found it hard to keep residents at home. In the past 3 years, more than 200,000 Kiwis have left the country with more than half coming to Australia. 

Now former Prime Minister Jacinda Ardern is joining the great post-COVID migration, after being spotted house hunting in Sydney’s northern suburbs. A spokesperson later confirmed Arden’s move. (FT)

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Today’s Insight

Active investing vs. passive investing

We spoke to Alex Thompson, financial adviser at Viola Private Wealth, on the merits of active and passive investing and why balance is key.

Where do you fall on active vs. passive investing?

Both! I use a deliberate split of management styles subject to each asset class, meaning that when I’m constructing portfolios, my strategic asset allocation blends both passive & active investing. At the core of our investment philosophy is the view that markets are not equally efficient – therefore it makes sense to use a blend of passive & active.

In highly liquid, heavily researched public markets such as US large caps, it is structurally difficult to consistently outperform the market after fees, therefore I tend to take a broad‑based, low‑cost passive approach to capture market returns. It’s simply too difficult for managers to consistently outperform over the Nasdaq for example.

As for the more illiquid, complex and capacity constrained markets (e.g. small caps, PE & VC), information is less widely disseminated, dispersion of returns is higher, and true manager skill is more likely to be rewarded so I’d seek to deploy an active management strategy that can genuinely add alpha and enhance outcomes.

The passive portion comprises broad based, low-cost investments e.g. index funds/ETFs. These are designed to provide stability, diversification and market returns. For the less efficient pockets, I allocate capital to carefully selected active managers with a demonstrated ability to exploit inefficiencies.

Are you trying to figure out the right balance of passive and active investments for you? Fill out the form on our website and we’ll match you with one of our hand-picked advisers for a wide range of financial advice.

Today in Equity Mates