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Does anything else matter? Every poster outside my local newsagent is on one subject:
 

The recent regulator focus on macroprudential controls reminds me of when I started work in a bank treasury in the early 1980s. At the time, a 10% limit was imposed on loan growth, but banks found ways around the rules. They converted business loans to bank bill facilities which were not counted in the loan numbers, but provided the same credit for the client. They required borrowers to repay overnight loans on a Wednesday because it was the reporting day, and then lent to them again the next day. Let's hope those were the bad old days and banks don't behave like that now.   

The regulators are late to the party, and it's not easy to drain the vodka from the punch bowl. The guests have already made merry. Both ASIC and the RBA recently expressed concern at the poor loan serviceability metrics while APRA has reduced the permitted proportion of interest-only loans from 40% to 30%. But banks have many other levers they can pull. They now have open slather to increase loan rates to curb growth, offsetting lower volumes with better margins. 

Ashley Owen's article shows the worrying debt binge fuelling house prices in Sydney and Melbourne, driven by the lower capital adequacy requirements and a confidence that house prices cannot fall. APRA has finally announced its intention to place higher risk weightings on some housing categories.

It's fashionable to talk about 'unintended consequences', and surely the government did not intend to remove incentives to save when it introduced the new rules for age pension entitlements. Andrew Gale argues that black holes in the asset test have created the wrong incentives.

Our article last week on insider share sales prompted Tim Kelley to share some research on director share trading, while Graeme Colley weighs into the super changes debate with five urban myths.

Chad Slater surveys socially responsible investing, and Ian Stewart shares some great examples of the perils of closing borders and reducing trade opportunities (you listening, Donald?). Darren Handley-Greaves explains why the new RG97 rules are tying so many people in knots.

The White Paper from AMP Capital reveals new ESG themes such as market disruption and the link between sugar and obesity. 

This month's LIC Report from Independent Investment Research, linked below, has a good warning about the value of options attached to new LIC issues.

Please look out next week for our Reader Survey. We need your feedback to improve the newsletter and website, and we're doing it over Easter when hopefully you have more time in your busy lives.

Graham Hand, Managing Editor
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Newsletter Edition 197, 7 April 2017


Retirement saving and age pension black holes
by Andrew Gale
It’s surprising there has not been more outcry about the age pension taper test in a low rate environment, where a ‘black hole’ creates a perverse impact of less retirement income the more a retiree has saved. Read more…

Debt binge main cause of house price rises
by Ashley Owen
Household borrowing, mainly for property, now far exceeds business borrowing, but it is businesses that create jobs and wealth. The crackdown on housing debt is overdue. Read more…

When directors sell, should you sell too?
by Tim Kelley
The selling of shares by company directors is not necessarily a sign for other investors to follow, but research into Australian sales seems to be a stronger signal than directors’ buying. Read more…

Five urban myths about super changes
by Graeme Colley
When changes to regulations are as extensive and complex as the coming 1 July rules, many misconceptions about how they work arise for both advisers and their clients. Here are a few common mistakes. Read more…

Can socially responsible investing and good returns coexist?
by Chad Slater
There is gathering evidence that socially responsible investing (SRI) is not just about doing the right thing, but it does not detract from returns and investors who focus on it are likely to be rewarded. Read more…

Of Blackberrys, pineapples and trade
by Ian Stewart
Free trade is more at risk than at any time in almost a century, and yet trade restrictions will increase prices for those who can least afford it, and prop up inefficient industries. Read more…

New RG97 rules will increase disclosed fees
by Darren Handley-Greaves
Superannuation and managed fund providers are finding new product disclosure requirements challenging, but the standards will allow better fund comparisons for consumers. Read more…
Sponsor White Paper  

Update on ESG risks and new trends in sustainable investing

A deep dive into how a fund manager is addressing ESG risks, including emerging new themes and investment insights. Read more.
Additional features this week

Weekly Market Update from David Bell, CIO at Mine Wealth + Wellbeing

Indicative LIC NTA Report from Bell Potter

Monthly LIC Report for March 2017 from Independent Investment Research

PDF version of Cuffelinks Newsletter

Continuing Professional Development (CPD) hours quiz

Plus updates and announcements on the Sponsor Noticeboard on our website
 
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