Question 1: It was reported in The Australian that Citi says that banks will tumble by 30% next year. What do you think?
Answer: I understand where they are coming from. I have argued for some time that banks are way over-valued in that earnings growth is minimal and with bad debts at historic lows, the outlook is weak. Further, as “yield” investments, they aren’t that attractive (CBA is yielding less than 3.5%). But the market isn’t able to sell them because they don’t know what else to buy. Commodity prices continue to soften, so the outlook for resource stocks isn’t strong.
If commodity prices start to improve and the market gets more comfortable with resource stocks, bank shares will come under pressure and Citi could be right. Otherwise, unless there is a major crash, I think Cit is going to look a bit silly.
Question 2: What happen to your superannuation after you die?
Answer: If you have in place a ‘binding death benefit nomination’, then your superannuation passes automatically to whoever you have nominated (for example, your spouse or adult child). The trustee of your super fund/SMSF is obliged to make the payment as you have instructed.
If you don’t have in place a binding death benefit nomination, then the Trustee of your super fund determines who receives your super. Usually, the Trustee will make the payment to the Executor of your estate, and it becomes an asset of the estate and is distributed in accordance with the instructions in your will.
This is a link to the ATO’s website https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/superannuation-death-benefits
Question 3: Yesterday’s GDP showed the economy growing at an anaemic 0.3% for the quarter, and just 0.8% for the year. Doesn’t this make an interest cut more likely? Could we see a cut at Tuesday’s RBA Board meeting?
Answer: I think the chances of a rate cut on Tuesday are “Buckley’s”. The RBA is primarily focussed on inflation, and while growth is slow, it wants to see this coming down. There is no new data to suggest that we have beaten the inflation dragon. Almost all the economists are still pencilling in next May as the date for the first rate cut.
Question 4: Aristocrat Leisure (ALL) is doing really well this year. Do the major brokers see much upside?
Answer: The brokers are bullish on Aristocrat Leisure but believe it to be close to fully priced. According to FN Arena, all the major brokers have a “buy” recommendation on the stock. The consensus target price is $70.75, 2.3% higher than the last ASX price of $69.13. The range is a low of $63.50 up to a high of $75.
On multiples, the brokers have Aristocrat Leisure trading on about 26 times forecast FY25 earnings and around 24 times forecast FY26 earnings.
