Recession. If you feel like this word is everywhere at the moment and everyone is talking about it, you would be right. Google searches for the term have spiked and every finance program and publication is covering it. So, let's take a look.
This week we visit a topic that has been prominent in the headlines and one that has already got the new government on the backfoot. That is, the almost exorbitant rise in the price of utilities for the Australian consumer. More importantly for the investor, this has implications on inflation data (and monetary policy imperatives as a result).
This week we look at a new government in Canberra and what, if any, are the implications for markets? Before proceeding into what is intrinsically a divisive topic, we’ll start with the conclusion, the answer is the implications are negligible.
This week we continue with our examination of the news flow that has been rocking markets. We find it interesting that the headlines have inextricably linked the latest burst in inflation and energy prices squarely with the Russia-Ukraine escalation story. However, for those of you that have been long-term readers, you may remember that we had previously made the call for triple digit oil prices even before the Putin-made fiasco. The latest round of sanctions may have only sped up the process. Similarly, we made the call that higher inflation numbers were likely to be printed due to the fiscal impetus and the nature of the responses to Covid-19. Alongside this, we posited that central banks may find it more difficult to normalise policy than the markets may be expecting.
This week we would like to offer our thoughts on certain megathemes that are impacting investment markets. Firstly, credit where it is due, this is a topic inspired by an oped in the AFR by James Thomson who summarises what he sees the recent bid by Cannon-Brookes for AGL represents. He categorizes the bid as representing three broad megathemes: 1) Energy Transition; 2) Private Capital; and 3) The Billionaire Activist. While we broadly agree with this categorisation, we would like to give our take on them and add in a final component that we feel is missing: the politicisation of everything.
Growing up it was ingrained that two topics are rather taboo to discuss at the dinner table; the first being politics and the second money. So, with the hope that you’re not having dinner as you read, this week we discuss the former while touching on the latter. Perhaps a subject that you may not be expecting to read about in an investment newsletter.
We begin the New Year with some interesting times in the market (has it ever been different?). Inflation Stateside is running at the highest pace in nearly four decades (i.e. 1981), the markets are expecting a tightening by major central banks, the PBOC being the outlier in going the other way in being increasingly accommodative, and Omicron continuing to gain traction. These are just a few of the headlines grabbing investors’ attention. So, with that in mind, let us go back to a basic question to begin the year, where to next? And more importantly where do we allocate? This week we seek to look at two elephants in the room, in answering these questions: monetary policy and geopolitics (which may very well present the next leftfield event).
Our friends at Merricks Capital, an allocation in the TAMIM Credit portfolio, take a look at changing shopping and consumption habits in the wake of COVID-19. An important consideration for anyone with exposure, equities or otherwise, to these sectors.
This week we make a perhaps controversial call that goes against the grain of what every leading economist, including the RBA governor, has consistently said. That is, the cash rate will go to 0% before the end of the calendar year (which I previously alluded to in my article last week, though I did say 0.1%) and negative in the first half of next year assuming the current economic trajectory holds. How is this going to affect us in Australia? Bear with us, we’ll get there.
Following on from the exploration of the ASX20, I would like to visit the topic of large caps vs. small caps. What has been apparent in a world of low interest rates and QE has been the stellar outperformance of larger companies over smaller. On an intuitive basis this makes sense, since a negative economic environment should benefit larger companies who should, unlike their smaller counterparts, have the balance sheets and immediate access to a lower cost of capital to ride it out. Large caps often benefit from a flight to perceived safety during uncertain times too, though this may not be the case at the moment. So why hasn't this been the case in Australia?
This week Sid Ruttala gives his cursory thoughts following the introduction of Appropriation Bill (No. 1), alternatively referred to as the budget. And what a budget it was, a lot was at stake given that it is arguably the most important budget since WWII.
This week we revisit the most over-researched and perhaps over-discussed sector in this nation, namely the financial sector. More specifically I would like to touch upon the short-to-medium term outcomes of recent policy decisions.
Sid Ruttala delves deeper (pardon the mining wordplay) into Australia's largest export, iron ore. Looking at the future of both the supply and demand side and what this means for mining stocks in Australian's portfolios going forward. Is there a substitute for the banks in there?
This week we visit perhaps one of the most prominent and divisive topics in investing at present. That is the future of energy markets and, in particular, where the price of oil heads to from here.
As always, take our ramblings with a grain of salt since, like you, we are trying to make sense of an investment universe that gets ahead of us. One recollects the words of Jean Baudrillard in this environment for “We live in a world where there is more and more information, and less and less meaning.” As such we shall try make use of our limited rationality to extrapolate as much meaning as we can.
With governments and central banks throwing the kitchen sink at the current crisis caused by CCOVID-19, where does this leave us? More specifically, we will try and focus on where we see the biggest risks.
These are unprecedented times. A once-in-a-hundred-year event. Forget the GFC, 1987 crash or any other correction in human history, the world has never shutdown (stopped) in the manner we are experiencing now. With markets down almost 40% in a month, we dare to begin digging for a bottom and look at some of the signs we are looking for.
This week we would like to revisit a topic on everyone’s minds, that is the impact of the SARS CoV-2 or Covid-19. With the WHO declaration of a pandemic and emergency, we figured that it might be worthwhile digging a little deeper into the actual virus.
This past fortnight we have seen a lot of panic buying (mostly toilet paper and pasta) and selling. But why? Are people being rational or just following the herd?
This week we would like to discuss a topic that is probably one of the most contentious and hotly debated in the investing world at the moment. This is the future of retail, specifically the commercial viability of the traditional retail sector in the face of increased competition both as a result of online (i.e. the Amazon effect) and low cost providers such as Aldi.
Due to popular demand and in light of his recent strong performance, we have decided to publicly release the recording of Ron Shamgar's recent Webinar and Q&A. Ron is Head of Australian Equities at TAMIM and currently oversees the All Cap IMA portfolios along with the Small Cap Income portfolio for the TAMIM Fund.
Ron Shamgar takes a quick look at five reasons he is currently bullish on the Australian equity market in spite of its recent run. With the significant intervention we are currently seeing into financial markets by both government and the central bank, Ron discusses his views on the equity market and the key top down drivers of potential return over the remainder of the calendar year.
So here we are, official interest rates are now at 1% with a further 25bps cut possible in August which would take the cash rate to 0.75%. While there has been much speculation in the media about the flow on effects for both the property market and consumer spending, it would be prudent to ask the question (as indeed Governor Lowe did) as to how much stimulus this really brings to the table. Even assuming that the full extent of the cuts are passed on by the major banks (not happening), the actual impact this will have on a consumers propensity to spend remains somewhat unclear. What this does to asset prices is however another story altogether.
This week we would like to revisit the topic of the Australian banks in the wake of the Royal Commission. It seems that the markets have shrugged off the doom and gloom with bank-bashing relatively out of vogue in the mainstream media. Indeed, CBA has finished, at the time of writing, with its share price back to the pre-Royal Commission days. This brings us to the question, where to from here?
Heading into election weekend, Ron Shamgar, Head of Australian Equities and Portfolio Manager of the Small Cap Income and All Cap portfolios, takes a look at some of Labor's key policies and analyses some winners and losers should they win .
This week we present a piece by Ben Goodwin, from Merlon Capital Partners who power the TAMIM Australian Equity Income IMA, examining the changing nature of the iron ore industry. The effect of Vale’s tragic dam collapse in early 2019 has seen iron ore prices rally. As a result of forced mine closures, the global seaborne supply of iron ore is expected to be 20mt lower in 2019 than in 2018, or 1.2% of the total seaborne market. Despite a slowing economy, Chinese steel demand in 2018 remained relatively strong, albeit importing ~10mt less iron ore relative to 2017 as use of scrap steel increased, a trend expected to continue for some time. This note summarises the implications of these factors and how they affect the longer-term market balance and pricing.
Markets & Commentary
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.