Hedge Clippings | 01 December 2023

Just as the new RBA Governor Michele Bullock made her mark on monetary policy by increasing rates to 4.35%, (the thirteenth rise since May 2022) so the CPI numbers for the September quarter were released, coming in at 1.2%, and a 12 month figure of 5.4%, showing inflation continues to decline from the peak of 6.8% reached last December. The question now for Bullock will be the ongoing speed of further falls, as that seemed to be one of her primary reasons for the RBA's latest rise.

In spite of the better than expected CPI numbers, it's too early to speculate on any relief for home owners in the near term. Both Bullock and her predecessor Philip Lowe were at pains to point out that it was the stubborn persistence of inflation which was one of their primary concerns, but one also gets the impression that Lowe was prepared to tread his "narrow path" more patiently than his successor. Time will tell, but we suspect the final 2-3% reduction in inflation required to get it back to the RBA's desired range of 2-3% is going to prove the most difficult.

Drilling down into the CPI numbers shows that the RBA's efforts to date seem to be having the desired effect on discretionary spending, but not on the unavoidables: Against the overall increase of 1.2%, transport topped the list at 3.2%, followed by housing at 2.2%, and communications at 2.1%. On the other side of the ledger, discretionary items such as recreation and culture rose only 0.2%, while furnishing and household goods fell by 0.8%. The latter would seem to reinforce Gerry Harvey's recent comments that things are tough in retail land, and given the blanket discounting over "Black Friday", that might continue through to the December results in due course.

Michele Bullock's comments that interest rates were a necessary, but blunt instrument against inflation were one issue - the other being they have a variable "lag" time to take effect, in addition to some of the above items being unavoidable. Interestingly, (or possibly of self interest to Hedge Clippings) Food and Non-alcoholic Beverages brought the average down, only rising 0.6%, while Alcohol had the opposite effect, rising 1.4%! On the lagging side mortgage costs don't impact the entire population, and impact those with mortgages to different degrees.

As such we won't know if the most recent rise was a step too far, or was a "goldilocks" move - about just right - until it is either too late, or just part of history.

News & Insights

New Funds on FundMonitors.com

10k Words | November 2023 | Equitable Investors

Acceleration of innovation now spells danger for investors | Insync Fund Managers

Events & Webinars
Getting the most out of the Fund Monitors Database

October 2023 Performance News

Insync Global Capital Aware Fund

Equitable Investors Dragonfly Fund

Delft Partners Global High Conviction Strategy

Insync Global Quality Equity Fund

If you'd like to receive Hedge Clippings direct to your inbox each Friday

JOIN OUR MAILING LIST

ESG in 10: Episode 12 -

What is AMR and why is it important for Investors?

Fidante Partners

November 2023

Funds operated by this manager:

On the road: is India starting to live up to its promise?

abrdn

November 2023

Funds operated by this manager:

Aberdeen Standard Actively Hedged International Equities Fund, Aberdeen Standard Asian Opportunities Fund, Aberdeen Standard Australian Small Companies Fund, Aberdeen Standard Emerging Opportunities Fund, Aberdeen Standard Ex-20 Australian Equities Fund (Class A), Aberdeen Standard Focused Sustainable Australian Equity Fund, Aberdeen Standard Fully Hedged International Equities Fund, Aberdeen Standard Global Absolute Return Strategies Fund, Aberdeen Standard Global Corporate Bond Fund, Aberdeen Standard International Equity Fund, Aberdeen Standard Multi Asset Real Return Fund, Aberdeen Standard Multi-Asset Income Fund

10k Words

Equitable Investors

November 2023

November Edition

Funds operated by this manager:

Equitable Investors Dragonfly Fund

Disclaimer

Nothing in this blog constitutes investment advice - or advice in any other field. Neither the information, commentary or any opinion contained in this blog constitutes a solicitation or offer by Equitable Investors Pty Ltd (Equitable Investors) or its affiliates to buy or sell any securities or other financial instruments. Nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.

The content of this blog should not be relied upon in making investment decisions. Any decisions based on information contained on this blog are the sole responsibility of the visitor. In exchange for using this blog, the visitor agree to indemnify Equitable Investors and hold Equitable Investors, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to legal fees) arising from your use of this blog, from your violation of these Terms or from any decisions that the visitor makes based on such information.

This blog is for information purposes only and is not intended to be relied upon as a forecast, research or investment advice. The information on this blog does not constitute a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Although this material is based upon information that Equitable Investors considers reliable and endeavours to keep current, Equitable Investors does not assure that this material is accurate, current or complete, and it should not be relied upon as such. Any opinions expressed on this blog may change as subsequent conditions vary.

Equitable Investors does not warrant, either expressly or implied, the accuracy or completeness of the information, text, graphics, links or other items contained on this blog and does not warrant that the functions contained in this blog will be uninterrupted or error-free, that defects will be corrected, or that the blog will be free of viruses or other harmful components. Equitable Investors expressly disclaims all liability for errors and omissions in the materials on this blog and for the use or interpretation by others of information contained on the blog

Acceleration of innovation now spells danger for investors

Insync Fund Managers

November 2023

A new app, 'Threads' built by Instagram, which enables the sharing of text updates and joining public conversations, recently reached 100 million users within an astonishing five days.

'This is a powerful demonstration of the lightning speed at which innovation is accelerating,' says Insync Funds Management (Insync)'s Head of Strategy and Distribution, Grant Pearson. 'Make no mistake, the frantic pace of change now spells danger for investors.'

For context, Facebook took 4.5 years to reach 100 million users, Instagram took 2.5 years, TikTok achieved it in nine months, and Chat GPT took two months.

'The reason this means big trouble for investors is that they could be in the right company today and, as little as weeks later, be in the wrong company,' Mr Pearson says.

The pace of innovation does not just affect pure technology plays.

'All companies could be affected as they all rely on technology of some sort,' he says. 'If their competition embraces new technology better and faster, a dominant company today may find its revenues and profits under immediate threat. And let's not forget brand new competitors for firms that technology has opened the gates to.'

Mr Pearson says that while in the past investors had months or even years to discover an emerging technological breakthrough, assess it, seek views, and then act; now they have next to no time and the skills required to do it are often outside the investment industry.

'In fact, the average life span of successful businesses is being compressed into less than 10 years duration,' he went on to say. 'This is disruption accelerating at the same time that time frames are compressing.'

Annual increases in computing processing power are now many hundreds of times faster than previous computers which are themselves under five years old.

'Look out further, say six years, and it's even more profound,' he says. 'Google's latest Sycamore Quantum Computer, testing now with operational status by 2029, is an astonishing 241 million times more powerful than today's fastest supercomputers!'

In other words, Sycamore can solve in seconds a problem that takes today's fastest supercomputer 47 years.

'This first iteration of Sycamore is only the 'Model T' of what is to come,' Mr Pearson says. 'The alarming thing for the investment community is that we are only at the very beginning of this acceleration. It is akin to sitting in a roller coaster as it has just tipped into its near vertical first run.'

Couple this extraordinary increase in power with the advances in AI and Mr Pearson says gargantuan change is afoot, change that will revolutionise our world and turn most industries upside down, along with investor returns.

'Fund managers and researchers need to quickly create robust means to assess and counter the acceleration of technological change and shrinking time frames, to reduce the threats to returns, as well as better understand which companies will deliver the decent performances of tomorrow,' he says.

'Our industry has a reputation for being slow to change, with egos routinely getting in the way of adapting. Investors need to check carefully that their fund managers are very clear as to how these factors impact their investment processes if they are not to be blindsided and saddled with disappointing returns.'

Funds operated by this manager:

Insync Global Capital Aware Fund, Insync Global Quality Equity Fund

Disclaimer
Equity Trustees Limited ("EQT") (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the Insync Global Quality Fund and the Insync Global Capital Aware Fund. EQT is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). This information has been prepared by Insync Funds Management Pty Ltd (ABN 29 125 092 677, AFSL 322891) ("Insync"), to provide you with general information only. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither Insync, EQT nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product.