Jeor

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.

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.

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.

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.

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).

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).

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.

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.

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.

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.

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.

I can't quite believe that Gareth Ward is holding on. While you always want majority government, Minns could actually hide behind the minority if he were clever. Labor promised a lot in the election campaign and may find it hard to deliver on all priorities, a minority government allows Minns to blame problems with delivery on the composition of the NSW parliament.

Property prices are a big problem that is affecting most Western countries, though admittedly in Australian capital cities the problem is accentuated more than most. I think the fundamental issue is that property acts as a giant store of wealth which transfers on death, so the rich get richer and so on. This is where @Paxter's inheritance tax could make some sense, though there's no chance of that passing in the near term as it would be political suicide. The other fundamental issue is that current policy settings encourage people to own multiple properties (negative gearing for property investment). When you have so many investors in the market competing with limited stock with owner-occupiers, you either have to increase the stock or you have to limit the demand (ie crowd investors out of the market, as by definition they already should have one occupied property and don't need another as an essential).

Doesn't sound much different to what short sellers do. And I understand they don't get into any trouble unless the company successfully sues them, which is usually tough for the company to win (though a win isn't necessary if the company can just throw money at it and drag it out). See the recent Hindenburg report on Block, where Hindenburg alleges Block has massive fraud and compliance issues etc. The share price crashed by 15%, Block threatens to take legal action...etc etc.

This is going to be surprising coming from a conservative like me, but I think the churn of giving and taking is not necessarily a bad thing if government can allocate the capital better than the individual (which admittedly is a big if). I just don't think it's possible to leave lower-income people alone. By their own nature they will need government support and benefits in various areas (e.g. Medicare) and relying solely on a limited segment of the population (rich) to keep this working for them is not as reliable as having a broader base where government can tweak the dials. Wow. Voting Labor in the state election, talking about trusting the power of big government....what's happening to me!!?

I know most people on this thread aren't fans of the GST, and I acknowledge that it is regressive by definition which is not a good thing. However, it is one of the very few taxes that is broad-based and I agree with @ants that this can be offset in other ways (e.g. government spending). The tax base in Australia is still heavily reliant on income tax and we shouldn't be leaning so heavily on one section of the population (workers) for revenue when that pool of people is demographically shrinking. A GST in isolation is a terrible thing, but I would argue GST with low-income offsets or support, working in concert with much more progressive taxes (income tax with steep brackets, proper CGT, inheritance tax etc) can be a legitimate part of a fair system.

Turns out Matt Kean has refused the job. Not surprising really, it's a hard road picking up in Opposition and there would always be question marks (like there are with Dutton federally) as to whether the next leader lasts long enough to contest the next election, which in state terms is 4 years away. Kean is also still quite young with at least 20+ years in politics ahead of him if he wants it, and has the genuine excuse of having a young family. Minns looks sensible, he hasn't announced anything outlandish and I suspect it will be a "steady-as-she-goes" type of Labor administration. Still, they've been out of power for a long time so there isn't much experience of governing, so they'll need to learn fairly quickly.

The Perrottet government has fallen. And I did end up putting a (1) in the Labor column for once to stick the boot in. Perrottet - I liked his conviction in things like the cashless pokies but not much else. He had a few other odd ideas (future fund for kids) and he never really recovered from his "let it rip" COVID stance. Furthermore, the rest of the Liberals are a rabble and most of the sensible experienced folks (Hazzard, Stokes, Dominello) were heading for the exits while others (Barilaro, Ayres, Elliot) had some question marks around ethics or incompetence - it isn't a strong lineup and it showed, with frequent train disruptions in Sydney, a ballooning public service "fat cat" layer of consultants, etc. On the Labor side, what I heard from Minns was sensible and measured. The only question mark for me was the budget, releasing the wage caps on teachers/nurses/etc is a great thing, but it might end up costing quite a lot. So, not a huge amount to make me vote Labor, but it was more a case of feeling the Coalition were tired and not likely to govern well. Time to give someone else a go and we'll see a bit more energy in government. It's a shame because the Liberals generally have done quite a good job over the past 10 or so years. They had competent, moderate leaders in O'Farrell, Baird, Berejiklian and there is no doubt that they thoroughly invested in infrastructure - there has been more building and infrastructure development in the state than ever before. So they'll always have that legacy. The One Nation swing hasn't happened, thank goodness. Labor also likely to win majority government so they won't need to rely on crossbenchers.

There have been reports of mismanagement at Deutsche for a while and in a similar-ish vein to Credit Suisse, the difference between them is that DB is further along their reforms and has actual progress to show for it. The Chancellor wasn't wrong in what he said - it's a profitable enterprise and management has made a lot of changes to transform the business. DB is not in any real trouble but I'm sure there are hedge funds out there stalking the next wildebeest and the time is ripe for them to start picking off banks. DB is a big one to try and take down and I think it will hold, but I expect there will be quite a few of these types of attacks and some will find their mark.

The $30bn bank consortium deposits were only in there for 120 days. That period coincides quite nicely with other challenges like the US debt ceiling fight that doesn't bode well for financial markets in the next few months.

That's a much lower number than I would have thought. I think a lot of it is a function of the recent market. I got into the property market as an owner-occupier mortgage in 2009, which was probably the last realistic time that prices were at a "reasonable" level after the fallout from the GFC. I bought a 2-bedroom apartment for $400K on a salary of about 70K and had saved like a demon for an initial 100K deposit incl 14K first homeowners grant back then (I lived with my parents throughout university and my first year of full-time work), so the mortgage was only a touch over 4x income. Albeit the interest rate back then was around 7% on my mortgage I think. And back then, before I was dabbling in shares, it was pretty easy to put any extra salary into the mortgage as it was a risk-free "earning" of 7%. Plus I was single so disposable income was much higher (than having our family of five now on my income - wife, two kids and mother-in-law living with us). Ever since the GFC, property affordability in Sydney has only headed in one direction. Even now with property prices stalling (or slightly falling), the fact that interest rates are higher actually crimps any affordability advantage because prospective homeowners' borrowing power is reduced. I suspect it's the same in the major cities of most developed countries.

I'd hate for a hung parliament to actually end up handing more power and influence to One Nation, which I fear is going to do very well. I think there will be a bloc of disaffected Liberal voters who are going to flip to One Nation and that will be the bigger issue of the future government. Mark Latham has been getting a bit of a profile and he'll attract some votes. I liked O'Farrell, Baird, and Berejiklian but Perrottet hasn't really resonated with me. The one thing he has had conviction on (cashless pokies) was good. But he's had some odd ideas (future fund for kids) and I'm not sure about the rest of the Liberal frontbench. I think back to the couple of times I've seen Minns in action and he seems reasonably sensible. I'm actually considering voting Labor for once! (I haven't voted Labor since the Bob Carr days...)

Perrottet and the Coalition are giving off late-cycle vibes of a government that is past its used-by date. They've gone on a spending binge and look a bit desperate. Chris Minns sounds like a reasonably sensible Labor leader, and I expect he'll win at least minority government. Generally NSW has had long stretches of one party in power with lots of changes at the end signalling doom (Bob Carr for a long time, then late-cycle Labor with Iemma/Rees/Keneally, then Coalition for a while with O'Farrell/Baird/Berejklian/Perrottet). So it's probably time for another change.

When the AUD briefly hit parity, I changed 2000 USD on a whim knowing that it was unlikely we'd see that happen again in the future. Now several years on from COVID non-travel and lots of inflation which has seen that little cash pile dwindle in value. And 2000 USD doesn't get a family of four very far these days...

The RBA has always had a better hand than the Federal Reserve. For one thing their inflation target is a bit more flexible at 2-3% (as opposed to the Fed's 2%) and their interest rate movements have a far greater transmission mechanism through the variable home loan rates. This does tend to suggest that the exchange rates will not work in the AUD's favour as the Fed would tend to have higher rates than the RBA, which does not bode well for our family's trip to the USA in December 2024...maybe it's time to change some USD now!