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Everything posted by Jeor

  1. Yes, no one saw that McGowan thing coming. He was invincible and could have gone on as long as he wanted, but I guess politicians are real people and get tired and exhausted after a while. Six years in the job, three of them COVID, would test anyone's nerves and McGowan picked a particularly combative path. Still a long way back for the WA Liberals though.
  2. Yes, hence my use of the "vaunted" adjective. It would be amusing if the House Republicans have the votes to roll McCarthy but don't have the votes to decide on another Speaker again, but I doubt that will happen in practice. Given the farce it was the first time, the majority of the caucus wouldn't vote him out unless they knew for sure who his replacement was going to be e.g. Scalise.
  3. In theory he's supposed to if he's going to bring it to the floor (the vaunted Hastert Rule). But I wouldn't be surprised if he circumvents it given current circumstances. Regardless of how it comes to the floor, if it ends up passing I'm sure McCarthy will face a motion to vacate the Speakership, which will mean breaking out the popcorn. There will be plenty of Republican House members who will be unimpressed with McCarthy's negotiating (not that any of the hard right have ever had to actually be pragmatic themselves).
  4. Will be interesting to see how the debt ceiling deal affects the markets. I suspect it's only going to be a light and short-lived bounce, if any, given that there hadn't really been any major market drops in the past few weeks. It seems everyone was expecting a deal, so I think a couple of days of exuberance before resumption of normal service in the equities markets?
  5. What are the chances of this actually passing, though? There will be lots of Republican defections, but I guess Dems will have to do the heavy lifting. What was the reason Dems didn't get rid of the debt ceiling when they had control of the White House and Congress again...? I don't know why you wouldn't just have gotten rid of it in that lame duck session.
  6. I have wondered myself on how to handle a possible debt ceiling disaster in the equities markets. In my one-page investment manifesto I do make reference to avoiding single-issue investments (i.e. don't invest in a biotech company that is dependent on one drug being approved) which is what this debt ceiling feels like. My largest positions are in (roughly equally) cash, gold miner, telco and a Vanguard Global fund. Apart from the global ETF, the others are quite resilient in a default disaster, and I am comfortable holding onto the ETF as it's always been a long-term buy with no intended exit point. What I'm a bit more worried about are my middle-weight positions in BHP (diversified iron/copper miner), a lithium miner, a rare earths miner, and bank. All of those are susceptible to a market crash.
  7. Term deposit rates are quite healthy. All the Big Four are offering 12-month term deposits at rates exceeding 4% (i.e. greater than the RBA cash rate) which isn't to be sneezed at. Deposit rates in more flexible savings accounts are lagging but every bank actually has a decent interest-bearing account, it's just often of the "bonus" nature requiring a few hoops to jump through, growing balances, depositing more money etc. I'm glad we don't have the patchwork of banks that the US does, and most importantly, that all banks in Australia have to abide by the same regulation (rather than the two-tier system). When your whole business is in confidence and trust, you want there to be a pretty high bar for entry into the market.
  8. In some ways it is actually a confirmation that the Big Four government policy is working. With four major players there is enough competition to keep prices rational. This doesn't help the non-bank lenders or regionals, but it's at least proof that the dominant market position of the Big Four isn't a cartel.
  9. In some ways the rapid interest rate rises have not been their friend. The cost of living crunch has put much more onus on mortgagees to shop around and find any deal that is better which is why the competition is so high and banks are having to offer inducements to keep good customers and hence undercut their own profits. Sort of the way a free market is supposed to work, but it does mean money isn't automatically flowing into the bank coffers as easily as it used to. They're still making big profits overall, of course. But a lot of the Big Four strategically concentrated their businesses into the mortgage lending book, divesting their wealth management, insurance, and financial advice arms. They might be regretting that now.
  10. Pacwest stock tanking. This could become a neverending hunt for the next-weakest wildebeest to pick off, until there's an explicit government guarantee for all banks including the smaller regionals who don't have the systemic protection. Who would've thought that alongside "Too Big To Fail" there was also "Too Small To Fail"?
  11. Yes, NAB's stock price (and the other Big Four) all tanked today. I think people are sensing any coming recession isn't going to be pretty for the banks. I think banks generally have come a long way - especially after the Royal Commission. I remember in the mid 90s my uncle had his house repossessed and he was thrown out of it after his life went in a downward spiral (my parents took his children in and they lived with us while he got himself back on track). These days I think there are a huge amount of hoops banks have to jump through before they can take that kind of action. But yes, if a banker called me and asked if I needed help I can understand why some might be suspicious at first blush.
  12. I think it really depends on your demographic. A lot of older Australians are doing pretty well, sitting on big property gains, at higher income levels with lower (or no) debt, and not doing as much travel as before. Interest rate rises won't do much to them because they don't have big mortgage balances, and if they're saving money they would have usually spent on a big overseas trip, their incomes will have "gone up" regardless of inflation. Most people in this older, richer demographic also have much more controllable spending. They don't have to spend on young kids, education, activities etc. At the other end you have younger people on lower incomes (early career), much higher expenditures if they have children (and the type of expenditures that are beholden to inflation), and much higher mortgage balances. Interest rate rises are killing this group and it's a real shame that as such it really is widening the inequality gap. I'm fortunate to be somewhat in the first group despite still being youngish (37). Our household has a boatload of expenditure (two young kids) which seems neverending and doesn't allow for any level of savings, but our mortgage balance is comparatively low (about 3 times my gross income, which would be even less when/if wife goes back to work), and we had the presence of mind to fix our rate until August 2024. At the moment, on my income, we're just about breaking even. No real ability to save, but if a big bill did come up, I held onto some liquid assets (shares, from the time when I was single and actually had excess money!) that I could sell if we needed to cover a big emergency. I'm banking on the fact that wife will be back at work by the time we come off the fix in 2024, assuming rates are still pretty high then.
  13. And the RBA surprises with another 0.25% rate increase, just one month after they had paused.
  14. Yes, First Republic might end up being an orderly sale which wouldn't shake the markets too much. The debt ceiling battle is going to be the next major market-mover. Surprised that McCarthy managed to get the House Republicans to pass something but he probably only got the votes from detractors because they knew it wasn't actually going to get up. On the banking front, it will be interesting if the Fed can keep up the hard part of the bargain. Raising rates when inflation is high and well above target - while unpopular - is pretty orthodox and textbook defensible. But the market is expecting them to cut later this year when inflation hasn't returned to target yet. And leaving rates on hold when the economy is going downhill (But inflation is still high) is going to be the hard part for the Fed. Various banks and market participants banking on cuts may get stung if they hold their nerve.
  15. Couple First Republic's resurfacing with Congress's debt limit brinkmanship and I think there will be a lot of nervous bankers around. The bond market is already reacting to the debt ceiling with 3 month bonds tanking. And the $30bn deposits in First Republic from fellow banks is technically withdrawable around the same time. It is going to be a bumpy ride for a while yet.
  16. Defence review paper has landed with a pretty hawkish stance. Ballistic missiles, nuclear subs etc. Likely to cost a bomb (pun intended). In these tough economic times with many calls on the budget, it's difficult to see where the money comes from. Also, it may be a little late as these defence projects typically work in decades and a major conflict might happen sooner than that.
  17. There was a small chance Dutton might have personally opposed it but allowed the caucus a conscience vote, but he's probably decided that he needed unity. Of course in doing so he has lost the respected Wyatt and cemented his position as a spoiler and wrecker rather than an alternate leader. I daresay there will be more until we reach Peak Dutton, at which point someone more moderate might get a shot. As always, the electorate tends to vote for centrist PMs from both parties rather than those at the far ends and most parties realise that when an election draws near. Abbott was probably the main exception in the last 40 years.
  18. I agree, the fundamentals point towards much lower valuations when you see the risks that don't seem to be priced in. However, markets are in a bit of a Wile E Coyote moment where they've run off the cliff and they're still airborne - the question is whether another bit of land will appear on the other side that they can run to in time, or whether we'll take the plummet. I'm still 30% cash in case of a big downturn. And another 30% is in defensive stocks (gold miner and telco) so you could say I'm positioned bearishly.
  19. Referendums are particularly difficult for oppositions to fight as the governments can usually wedge them. The Opposition will generally know there are people who will vote "No" and hence feel an almost visceral need to court them. I do wonder what will happen if the Liberal party room is divided (which it probably won't be).
  20. Yes, to be sure I still have a generally defensive position with 30% cash. My portfolio is now very slimmed down and concentrated, and geared towards the defensive - in addition to the cash, I have the large-cap gold miner, a telco, and then a Vanguard Global ETF, a Big Four bank and a large-cap iron ore miner (pretty much a given in the ASX).
  21. Markets seem to have calmed down over the past week and the banking situation has remained quiet. There are still a few challenges though and much will depend on central bankers' responses - we're entering that awkward period where no one quite knows when or if "the pause" will come, while bond markets are still pricing in cuts at the end of the year (which I personally think is unlikely unless there's a major financial crisis, and it would have to be a big one for the Fed et al. to cut while inflation is still high). I've doubled my position in a major gold miner (Newcrest) in my portfolio now. The price may dip a little as people realise the banking situation is stabilised, but I think gold is positioned well in the next 12 months - whether it's a financial crisis (safe haven) or an interest rate pause, gold ought to benefit from both. And central banks have been buying a lot of gold lately, perhaps as a reserve buffer for a rainy day. With my gold producer (Newcrest) also having copper account for 30% of revenue it's also positioned for an economic recovery, so they have most bases covered.
  22. It comes in cycles...this is evidently the low part of the Liberal one. There aren't really any major alternatives to Dutton and I think he's safe for the next year or two, no one really wants to do the hard yards in Opposition until an election is around the corner. The problem for the Liberals is that the internecine wars between Abbott, Turnbull and ScoMo eventually had the effect of clearing the frontbenches of any talent. Most of the second tier of leadership have now retired or gone on to other jobs (Cormann, Pyne) or they're in the Senate (Payne, Birmingham) where they can't lead. Paul Fletcher is a possible transition leadership candidate (in my old seat of Bradfield) and seems a steady hand having run a few second-tier portfolios e.g. Communications and now being the Liberal manager of opposition business. He's 58 though and a moderate, if people start souring on Dutton and the hard right then Fletcher might come through. The other possibility is Julian Leeser, who is younger and a possibly more long-range future leader, and in between the moderate and right factions so could be an acceptable compromise candidate. I don't really rate Angus Taylor, I think he's a seatwarmer at this stage.
  23. On the contrary, given her radar is so off, sometimes if Pauline condemns you for something it means you've done the right thing! Clearly not in this case though.
  24. Yes, plenty of shorts get run over. It's hard to hold onto your bets when a gravity-defying stock continues to ignore the fundamentals, even when your short thesis is correct. Part of the run-up in Tesla this year is due to short sellers closing out their positions once it dropped low enough - you'd find a brave short willing to go against the fanatical Tesla stockholders, even though the stock does seem wildly overvalued.
  25. Some of these arguments are why I'm actually against bans on short-selling. For sure, some hedge funds and other outfits overdo it and go on the attack just to land a quick buck, even if their facts and case aren't all that solid and they're relying on fear to make the short attack work. But in the long run very few sound companies get done over and some short bets have famously blown up - Bill Ackman vs Herbalife, for instance. At their best, short sellers are vigilantes going where an under-resourced SEC can't or won't - a necessary evil to keep the market honest.
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