Here’s what you need to know today

• The NSW Government Valuer General has predicted Sydney house prices will flatline this year, as higher interest rates temper demand and increasing volume of houses being keep supply high. While many would welcome a reprieve from the growth of the past few years, we’ll believe it when we see it.
  
  

• On the same day that the US Federal Reserve cut interest rates by 50 basis points, the Australian Bureau of Statistics released data that showed Australia is still some way off. Despite record levels of immigration, jobs continue to grow stronger than expected, suggesting the economy is absorbing current rates and that people and businesses will continue spending (meaning inflation may be stickier than hoped). All-in-all, don’t believe anyone who says Australia will see multiple rate cuts in the coming months. We may have a further way to run.
  
  

• It was a bad week for hybrid work, with both Amazon and Tabcorp mandating full five-days-in-office. KPMG’s 2024 CEO Outlook surveyed 400 American CEOs on a range of topics, one thing most of them agreed on: 79% believe we’re near a return to working full-time in the office. That is up from 34% who said the same in the CEO survey last year.
  
  

• In 2021 Woolworths demerged its liquor and hotels business Endeavour Group. Now, three years later, investors are pressuring the supermarket giant to demerge its New Zealand business as well as Big W.
  
  

• India has overtaken China in the MSCI All-Country World Index, representing the changing fortunes of the two most populous countries. India’s stock market now represents 2.3% of the index while China represents 2.1%. Both of these countries pale in comparison to America, which represents 63%.
  
  

• Just when European regulators thought they’d finally got Google for abusing its market power, the American tech giant slips out of their grasp. Google appealed a €1.5bn (A$2.45 billion) fine to the European Union’s General Court, and the Court agreed the European Commission had made a mistake in its assessment.

What the…?

Here’s a reminder why it is important to get on top of inflation early: Turkey has interest rates at 50% as it tries to manage inflation that peaked at 72% in June and came in at 52% for the 12 months to August. As the economy struggles, 15,000 Turkish businesses have had to close so far this year, a 28% increase from the last period last year.

Investing is a lifelong journey

Here’s what you can learn today.

Dealing with Aging: Updating the Intel, Walgreens and Starbucks Stories!

Aswath Damodaran is one of the best investing minds of his generation. As a Professor of Finance at New York University, he has been labelled the Dean of Valuation for his work on valuing investments. In this article he writes about something that is counter-intuitive to the perpetual-growth view of capitalism many in finance seem to hold. He argues: some companies should embrace their death.

While the stock market index powers on, fuelled by new companies, new innovations and new business models, there is a long history of companies that are in decline. The traditional view is that these companies should continue to find ways to innovate and return to their former glory. Damodaran argues that they may be better off accepting their fate, managing their decline and returning as much money to shareholders as possible in the process.

In this article, he builds his case with three companies: Intel, Walgreens and Starbucks. But perhaps the poster child for this way of seeing the world is the tobacco companies. Their fates have been sealed for 20 years. Tobacco will never again be a growth industry. But the way these companies have managed their decline have been a boon for shareholders that stuck with them.

In our book Don’t Stress Just Invest, we wrote that “since 1950, 28,853 companies have traded on the US stock market. And that 22,469 of those companies had gone bankrupt by 2009. That is 78% of companies that have listed on the stock market going bankrupt.” But in that time “the US stock market index has grown 23,249%”. (A key reason we love index funds). Companies declining is a fact of life. Damodaran thinks more companies should accept that and manage accordingly.

And if you want to enjoy more of Aswath Damodaran’s wisdom, check out our interview with him on the Equity Mates Investing podcast (Apple | Spotify) and YouTube:

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