The Reserve Bank of Australia (RBA) was close to suspending the entire Australian property market in April, according to reporting from the ABC.

The RBA has been putting on a happy face of sorts during the recent economic and financial turmoil. 

But the reporting (obtained under Freedom of Information laws) reveals that behind closed doors, the RBA’s outlook was less optimistic. 

Speaking notes from RBA Assistant Governor, Luci Ellis report her stating:

“Demand for new housing has declined substantially since mid-March and is expected to decrease further [with] sharp falls in sales, enquiries and foot traffic [and] increases in contract cancellation rates… Housing prices are expected to decline by around 7 per cent over the next year. Prices are expected to remain around 10 per cent lower than at the February Statement over the forecast horizon”.

Shockingly, the ABC also reports that the RBA was advised to consider implementing a ‘pause’ to the housing market. This was in order to dampen reports of a ‘housing collapse’ which had the potential to spook nervous investors.

Notes from RBA economist, Nick Garvin reveal that Garvin wrote to the RBA board and recommended the pause. Garvin stated, “I think it’s dangerous for regulators to be reporting on housing prices as though the market is currently functioning.”

The article also reports that this attitude towards housing may have influenced the government’s HomeBuilder program, announced in early June. Under HomeBuilder, new home constructions, as well as renovations, can attract government grants up to $25,000.

What does all this mean for ASX shares?

Although they are not too closely correlated, the housing market and ASX share market walk hand in hand to an extent. The real dangers (in my view) of a housing collapse stem from what’s known as the wealth effect. This refers to the tendency of people to ‘feel poorer’ if the assets they own fall in value. Although many people will be materially unaffected if property value drops, they will be less inclined to spend and more inclined to save or pay off the mortgage.

This is bad news for the Australian economy, and therefore bad news for the ASX-listed companies that dwell within it.

We’ll have to wait and see for the full impacts from the coronavirus pandemic on Australian house prices. But I think early signs say the worse is behind us. The real test will be when government assistance programs like JobKeeper are wound back, come September.

More reading

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking to generate strong long term returns from the share market, then I think the three ASX shares listed below are worth considering.

Here’s why I would buy and hold them until at least 2030:

Altium Limited (ASX: ALU)

The first ASX share to consider buying with a long term view is Altium. It is a growing software company which generates the majority of its revenue from its Altium Designer platform. This is an award-winning printed circuit board (PCB) design software platform which is experiencing very strong demand thanks to the Internet of Things market. And with this market expected to continue its rapid growth for many years to come, I expect Altium to profit greatly from increasing subscription numbers. In addition to this, the company has a few other businesses which have the potential to contribute strongly to its earnings over the next decade.

CSL Limited (ASX: CSL)

Another share to consider buying and holding is CSL. I think the leading biotherapeutics company is a great long term option due to its high quality businesses and their portfolio of life-saving therapies and vaccines. Another big positive is that CSL invests materially in research and development. This means the company has a large number of therapies in its pipeline that have the potential to generate significant sales over the next decade. Overall, I believe this leaves CSL well-positioned to continue growing its earnings at a solid rate throughout the 2020s.

Kogan.com Ltd (ASX: KGN)

A final share to consider as a buy and hold investment is Kogan. I think the rapidly growing ecommerce company is one of the best long term options due to its exposure to the structural change that is happening in the retail industry. In addition to this, I like Kogan because of its strong product offering, growing active customer base, and its merger and acquisition opportunities. Combined, I believe Kogan is capable of growing its earnings at an above-average rate over the next decade and beyond.

More reading

• 3 ASX shares I’d buy because of the online sales boom
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• Up 250% since March: is it too late to buy Kogan shares?
• 2 ASX shares to buy for beginners
• Why Zip Co and these All Ords shares have doubled in 12 months

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium and CSL Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Has the great Warren Buffett – chair and CEO of Berkshire Hathaway (NYSE:BRK.A)(NYSE: BRK.B) – lost his magic?

Known as the Oracle of Omaha, Buffett is generally regarded as one of the greatest investors of all time. His holding company, Berkshire Hathaway is one of the greatest American success stories of the 20th century. Since 1964, Berkshire shares have grown by an average of 20.9% per year. In other words, back in ’64, a share in Berkshire would have cost you approximately $12.37. Not bad considering one BRK.A share will cost you US$275,000 today.

But Berkshire’s performance over the last 10 years, and particularly during the 2020 market crash, has some investors wondering if Buffett has lost his mojo. According to reporting in the Australian Financial Review (AFR), Berkshire had it’s worst performance against the US S&P 500 benchmark in 2019, and 2020 is looking to be just as bad.

Has Buffett lost his magic touch?

Recent Buffett deals – specifically involving Kraft Heinz and Occidental Petroleum – have been hugely damaging for Berkshire’s balance sheet. And his now-infamous selloff of US airline shares in March looks to have been executed pretty close to the market bottom. To make matters worse, all 4 of the airlines Buffett unloaded at multi-billion dollar losses have rebounded strongly since March.

Berkshire was seemingly ready for the market wipeout in March with more than US$137 billion of cash ready for deployment. Stockpiling cash late in the market cycle has been Buffett’s modus operandi for decades now. Many of Berkshire’s biggest moneyspinners over the past decade stemming from the global financial crisis in 2008-09.

But Buffett didn’t end up putting even a dollar to work in the 2020 market crash, telling investors in May that, “we haven’t seen anything attractive”.

What’s going on at Berkshire?

The unfortunate reality is that Buffett is now close to 90 years old. He openly admits that the tech companies that now make up the lion’s share of US equity markets are mostly outside his circle of competence. Apart from a gargantuan stake in Apple (initiated in 2016), Berkshire has largely stayed away from tech shares. This appears to have cost the company dearly in recent years.

It has been a challenging few years for Berkshire Hathaway and Warren Buffett. But he has managed to come back from periods of underperformance before. If you look at the history of this iconic investor, you’ll see that it’s never been a great idea to bet against Berkshire Hathaway. So I’m not giving up on Buffett just yet.

More reading

• 3 Warren Buffett quotes to start your week off right
• How to be like Warren Buffett and not lose money investing in ASX 200 shares
• 3 top Warren Buffett quotes to start your week right
• Why Warren Buffett’s net worth has cratered in 2020
• Why didn’t Warren Buffett buy more shares in the recent bear market?

Sebastian Bowen owns shares of Kraft Heinz. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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