NEWS
28 Mar 2024 - Hedge Clippings | 28 March 2024
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Hedge Clippings | 28 March 2024 Taylor Swift saved the day for February retail sales - or possibly just diverted the consumers' spending away from their normal patterns. Without the one-off impact of 600,000 "Swifties" (including Albo, who took time off from the affairs of State to attend at least one of the seven concerts) the month's retail sales at 0.1% would have only just made it into the positive. Add in the combined effect of concert tickets, clothing, merchandising, accessories, and dining out, and the number nudged up to 0.3%. While some of that would have diverted spending from other outlets and spending, much of the hard earned cash of the Swifties would have left with Taylor herself partly as ticket sales, and partly royalties on clothing and merchandise. News & Insights New Funds on FundMonitors.com Market Update | Australian Secure Capital Fund February 2024 Performance News Bennelong Australian Equities Fund Digital Asset Fund (Digital Opportunities Class) |
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22 Mar 2024 - Hedge Clippings | 22 March 2024
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Hedge Clippings | 22 March 2024 While everyone (or nearly everyone) is comfortable that the direction of the next interest rate move is downwards, anyone hoping for clarity on the timing of a cut in Australia would have been disappointed by the RBA's post meeting statement this week. Just take the final paragraph of Michele Bullock's media statement: "While recent data indicates that inflation is easing, it remains high ... it will be some time yet before inflation is sustainably in the target range. The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain, and the Board is not ruling anything in or out ... and will rely upon the data and the evolving assessment of risks. In other words, we a) either don't believe the numbers, or b) don't want to fall into the trap that Philip Lore did, and make any prediction. Over in the US Jerome Powell wasn't much more helpful: While noting that inflation has cooled considerably from its peak, he added, "inflation is still too high, ongoing progress in bringing it down is not assured and the path forward is uncertain." "The risks are really two-sided here," Powell said. "We're in a situation where if we ease too much or too soon, we could see inflation come back. And if we ease too late, we could see unnecessary harm to employment." In spite of Powell's two-bob-each-way comments, the market took notice of the US Fed's "dot plot" that there would be three movements of 0.25% later in the year. To be fair to the RBA, there are still some known knowns and resulting known unknowns clouding the issue. In July the Stage lll tax cuts take effect, last week aged care workers were (deservedly, in our opinion) awarded wage rises of up to 28%, and there's a risk of flow ons to other sectors as a result. On top of that unemployment unexpectedly fell to 3.7%, in spite of Australia's population growing by 2.5% to September 2023, 83% of which came from net overseas migration totalling 548,800 people. Given housing starts have been inadequate for the past 10 years to cater for the increase in population, that's likely to keep the cost of buying - or renting - a home higher, adding to the inflation pressure. Hedge Clippings has been saying for a while that inflation's "last mile" down from 3.4% to a sustainable 2.5% is going to be a slow process, and the RBA's comments above would seem to bear that out. Meanwhile back to one of our regular, and we have to admit favourite subjects on a Friday afternoon, "The Donald." Trump, who along with his adult sons, is facing somewhat of a liquidity crisis as he battles multiple court cases, ranging from fraud over the value of his New York property empire (bond required of US$355 million, plus interest), through to damages and defamation of E. Jean Carroll following a finding of sexual assault. To give an Australian flavour to the Donald's news feed, this week he gave a little slap to another of our old favourites, ex PM and now ambassador to the US, none other than Kevin '07 Rudd. It turns out that like us, Rudd has been less than complimentary in the past when referring to Trump, who in turn has added our Kevin to his "List" of those he thinks poorly of. The only hope for Kevin is that while Trump is quick to add names to his list, he is equally quick to remove them if it suits the moment. Hedge Clippings has an old (nameless) friend who has also been known to add the names of those who have displeased him over the years to his own list, but unlike Trump, once on, the names very rarely, if ever, are taken off! News & Insights New Funds on FundMonitors.com Fund Monitors | Custom Statistics February 2024 Performance News Emit Capital Climate Finance Equity Fund Skerryvore Global Emerging Markets All-Cap Equity Fund 4D Global Infrastructure Fund (Unhedged) Argonaut Natural Resources Fund Insync Global Quality Equity Fund |
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15 Mar 2024 - Hedge Clippings | 15 March 2024
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Hedge Clippings | 15 March 2024 You can take your pick when it comes to forecasts for inflation in both the US and Australia. The general consensus being that while declining from the levels of 12 months ago, the rate of decline is slowing. The same goes for Europe - according to forecasts from the Federal Planning Bureau in Belgium, (surely the World's centre of bureaucracy and bureaucrats) the average CPI in 2024 should be 3.0%, dropping to 1.8% in 2025, compared to 4.06% in 2023, and 9.59% in 2022. While European inflation has been more severe than either the US or Australia, we live in a global world and the overall trend is likely to be much the same. News & Insights New Funds on FundMonitors.com Wrestling the gorilla | Insync Fund Managers Market Commentary - February | Glenmore Asset Management February 2024 Performance News Bennelong Emerging Companies Fund Glenmore Australian Equities Fund Delft Partners Global High Conviction Strategy Bennelong Twenty20 Australian Equities Fund |
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1 Mar 2024 - Hedge Clippings | 08 March 2024
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Hedge Clippings | 08 March 2024 This week saw a slew of Australian economic data released, including Housing, Labour and Employment numbers, and National Accounts. News & Insights New Funds on FundMonitors.com Social and Regulatory Risks of AI | Magellan Asset Management February 2024 Performance News |
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1 Mar 2024 - Hedge Clippings | 01 March 2024
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Hedge Clippings | 01 March 2024 This week's inflation figures were encouraging, but unlikely to prompt the RBA to change their approach at their next board meeting. Annual inflation stayed steady at 3.4% in the 12 months to January, well down from the peak of 8.2% in December 2022, while the number for underlying inflation, excluding volatile items, dropped fractionally to 4.1%, also well down from its December 2022 peak of 7.2%. We have long held the view that getting inflation down the "last part" to the RBA's target of 2.5% will be the most difficult, and the RBA has been consistent in its guidance that they won't be rushed into cutting rates too soon - at least not until they are convinced the battle has been well and truly won. So while there will be calls from some quarters for a cut sooner rather than later, the RBA is more likely to reverse that, (i.e. later rather than sooner) particularly as the Wage Price Index (WPI) for the December quarter came in at 4.2% - indicating that wages rose faster than inflation. Until the RBA sees the unemployment rate, currently 4.1%, nudge higher they're not going to feel comfortable cutting rates and sending a signal that the inflationary problem is over - even if the actual inflationary cycle has turned. Normally we'd be waiting until the RBA's meeting next Tuesday, but under the board's new structure the normal first Tuesday of the month meeting is now postponed to 18-19th of March, by which time the ABS will have released a slew of data to keep economists busy, with next week seeing National Accounts (including GDP) on Wednesday, and of particular interest to Hedge Clippings, the statistics on the Managed Funds sector due on Thursday. Elsewhere next week our attention will be piqued by Super Tuesday in the USA, when 16 states vote for their preferred Republican and Democratic candidates. Both Joe Biden and Donald Trump would appear to be a shoe-in for their respective party's nominations, with Nikki Haley hanging in there in the hope of a Steven Bradbury like finish if Trump can't overcome his multiple issues with various court cases, and Joe Biden just hoping to hang in there, full stop, or as they say in the USA, period! Both Biden's and Trump's greatest hope for a clear - if not clean - result in November, would seem to be the other's failings. News & Insights New Funds on FundMonitors.com Market Update | Australian Secure Capital Fund Global Matters: Gridlock - the vital role of Australia's transmission infrastructure | 4D Infrastructure January 2024 Performance News Emit Capital Climate Finance Equity Fund Argonaut Natural Resources Fund |
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24 Feb 2024 - Hedge Clippings | 23 February 2024
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Hedge Clippings | 23 February 2024 This week for a change, Hedge Clippings is going to ignore the Reserve Bank, inflation, interest rates, and even politics, as Barnaby's retired to the bush, and Donald Trump has seemingly even gone quiet as he considers his next legal option. Instead, we're reverting to our bread and butter, the performance of markets and managed funds. It's been just over 3 months since the extraordinary rally in equities kicked off last November. At the end of October last year, the ASX200 Absolute Return Index (ARI) was negative (just) YTD since January 2023, and up only 2.95% over 12 months. By the end of December, the index was up 12.4%. Things did slow down somewhat in January, with a return of 1.19%, by which time the 12 month rolling return had fallen to 7.08% thanks to its performance in January 2023 "falling off" the 12 month's numbers. In the small cap sector, the numbers were even more extreme as risk appetite among investors, plus limited liquidity in most stocks in the sector took a toll. At the end of October '23, the ASX Small Ordinaries ARI was down 6.05% YTD, and -5.11% over 12 months. By the end of December, it had risen over 14% to finish the year up 7.82%, before dipping to a 12 month number of +2.09% by the end of January. Small caps of course are notoriously volatile: In September 2022 the index was down 22% over 12 months, but a year earlier, September 2021, the index was up 30.4%, having risen no less than 52% in the 12 months to March '21 in an amazing rebound from the initial depths of COVID in March 2020 of -21% over 12 months. Experienced investors and advisors will correctly point out that when investing in the market, and managed funds in particular, it's the long (term) game that counts. Most offer documents (and ASIC) suggest a 5-7 year term to ride out the swings and roundabouts. Taking that approach, and the long term suggests an 8-9% annualised return (including dividends) from the Australian equity market and 10-12% from global equities based on the MSCI All Countries World Index. Over the same 5-7 year period, managed funds in AFM's Equity Peer Groups - both Large and Small/Mid Cap - have on average largely provided the same returns after fees as the index: The issue of course is volatility, or standard deviation of returns, but as shown below, so is the concept of average. Many will correctly point to the fact that individual stocks and fund's performance varies dramatically and with careful selection, performance can far exceed the above (although passive investing in an index ETF doesn't provide this, but that's a discussion for another day). Of course equities aren't the only game in town, particularly in volatile markets. Over the past 2-3 years, Private & Hybrid Credit funds have proven that they can return the same as equities (8-10% plus) with a fraction (or none) of the volatility, plus a regular income stream paid monthly or quarterly. We're currently preparing our Fixed Income Private Credit Sector Review to shine a light on this emerging, and increasingly popular sector which features a surprisingly diverse range of strategies and underlying assets. News & Insights New Funds on FundMonitors.com Market Commentary - January | Glenmore Asset Management Stock Story: Charter Hall | Airlie Funds Management January 2024 Performance News Glenmore Australian Equities Fund Insync Global Capital Aware Fund Bennelong Emerging Companies Fund |
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16 Feb 2024 - Hedge Clippings | 16 February 2024
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Hedge Clippings | 16 February 2024 Hedge Clippings copped some flak from some quarters recently when we suggested moving Australia Day from the end of January to somewhere nearer the beginning of the month. Our comments were nothing to do with the celebration - or commiserations - that are normally associated with the arrival of the First Fleet, but all about getting workers off the beach, out of the bar, or away from the back-yard barbie and back to work. To put it bluntly, Australia is largely a "no-work" or "no-deal" zone from at least mid-December (and post Cup Day in Melbourne) through to the beginning of February. For the record, Federal politicians leave Canberra at the end of November, not to return until early February. Of course, that generally keeps them out of the news, or in some cases off the streets - Barnaby, please note!
Back to the unemployment numbers, the economy, and inevitably the outlook for interest rates: While employment has been steadily rising (excluding a slight hiccup in the 3rd quarter of 2021) since March 2020 (when all we could think or talk about was COVID), the number of hours worked has been much more volatile, and has been steadily falling since April last year. There are a whole range of statistics around employment - unemployment, underemployment, the participation rate, and employment to population ratio, and even the NAIRU (or 'non accelerating inflation rate of unemployment') - which collectively leave Hedge Clippings with a headache, but the bottom line, according to the ABS, is they "all point to a slowing labour market during 2023-24, although this follows a particularly tight market in 2022-23." This shouldn't upset RBA Governor Michele Bullock, given she was on the record in a speech she gave in June last year while Deputy Governor, saying the RBA was forecasting unemployment to hit 4.5% by late 2024, with employment growth still intact, and (and at that time) inflation returning to target by mid 2025. Under these circumstances, she said, "the economy would be closer to a sustainable balance point." Not wanting to fall into the same ditch as her then boss Philip Lowe had done, she was careful not to make any predictions on interest rates, but did cover herself by adding "Of course these forecasts are subject to a considerable amount of uncertainty." However, at this stage it looks as if she's on track with the employment forecast, and provided she doesn't ease rates too quickly, she may even get inflation back to the 2.5% target by mid (or late) 2025. At her most recent press conference, she sensibly covered all bases on the next move in official rates - possibly up, possibly down (but don't get excited), or (more likely) on hold for a while longer while waiting for more data, all aiming for the happy space of a "soft landing". Across the Pacific in the US it's much the same, as Fed Chair Jerome Powell also disappointed the market by dampening expectations for an early easing, in spite of falling inflation, 3.7% unemployment, and solid economic growth. Having faced, and to date turned, the direction of inflation with 11 rate rises, he'd rather keep them where they are, and things going as they are, until the gains are locked in. News & Insights New Funds on FundMonitors.com Investment Perspectives: Global real estate - the outlook and themes for 2024 | Quay Global Investors A few charts from our Micro Caps CY2024 Overview | Equitable Investors January 2024 Performance News Bennelong Long Short Equity Fund Bennelong Concentrated Australian Equities Fund Insync Global Quality Equity Fund Delft Partners Global High Conviction Strategy |
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9 Feb 2024 - Hedge Clippings | 09 February 2024
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Hedge Clippings | 09 February 2024 Last week's Hedge Clippings didn't linger too long on the potential outcome of Tuesday's RBA Board meeting - the first to be held under the new two-day format - so it wasn't difficult to forecast "there's little chance of a rate rise when the RBA meets next week for their first meeting of the year". However, the statement issued following the meeting - the first issued by the Board as a whole, rather than just by the Governor - was pretty clear in its warning that the economic outlook is "still highly uncertain" and that inflation, or returning it to "target within a reasonable timeframe" remains the Board's highest priority. No doubt the Board's collective statement indicating that inflation's return to target was taking too long - but pointedly including that further increases in interest rates could not be ruled out - was part warning, and part risk-covering given the problems Philip Lowe encountered by making a prediction. However, Michele Bullock's opening statement at her appearance in front of the House of Representatives Standing Committee on Economics, delivered this morning, gave further detail on the Board's thinking, including that their inflation target is actually in the middle of the 2-3% range, specifically 2.5%. Inflation peaked at 7.8% in December 2022, falling to 4.1% in December 2023. Now for the difficult task of squeezing the next 1.6% out of the system while maintaining full employment and avoiding a recession, against a backdrop of geo-political strife, supply side issues, weak labour productivity, and across-the-board cost increases thanks to increased wharf costs. A balancing act indeed. As such the Board is not expecting their inflation target of 2.5% to be met for at least 2 years, or until sometime in 2026. As Bullock put it in her address this morning, "we have some way to go..." which we'll take to mean that barring a recession, don't expect any significant easing in the cash rate in the next 6 months or so. On to politics... In Canberra this week Peter Dutton accepted - although he was careful not to endorse - Albo's broken promise on already legislated Stage lll tax cuts. As expected, the decision also opened the door - or debate - for wider changes to the tax system, particularly negative gearing. This takes the government into more dangerous places, as discovered by Bill Shorten when he lost the 2019 election, in large part due to his intention to remove franking credits - which the coalition dubbed a "retiree tax" - and to effectively keep labour in opposition for a few more years. As for Albo's reputation for keeping promises, he's now on the record as having broken one, as well as no longer supporting the whole tax package he and the labour party voted for when they were in opposition. No longer can he claim "my word is my bond," but being a politician, did anyone really believe that in the first place? Finally, over to the USA where Joe Biden has been described (probably accurately) as presenting to a jury as a "sympathetic, well-meaning, elderly man with a poor memory." At the risk of upsetting our Trump supporters, Donald probably also qualifies as presenting to a jury (and recently to a judge) as an "elderly man with a poor memory." We're not so sure about the "sympathetic, well meaning" tag however. Just to confirm the elderly man with a poor memory tag, Biden then proceeded to respond to the accusation by mixing the presidents of Egypt and Mexico. For the record, one's called Abdel-Fattah Saeed Hussein Khalil el-Sisi while the other is Andrés Manuel López Obrador, and while sounding very different, yours truly would probably mix them up as well. Maybe the "elderly man with a poor memory" tag fits closer to home than I'd like to admit! News & Insights New Funds on FundMonitors.com Magellan Global Quarterly Update | Magellan Asset Management January 2024 Performance News Bennelong Australian Equities Fund 4D Global Infrastructure Fund (Unhedged) |
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2 Feb 2024 - Hedge Clippings | 02 February 2024
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Hedge Clippings | 02 February 2024 For most of our readers, this is a welcome back to work in 2024! Notwithstanding the arguments on both sides concerning the rights or wrongs of celebrating Australia Day at the end of January, from a pure productivity perspective, we'd suggest a week into the new year would be a more suitable date. In practical terms by the time January 26th comes along, or more accurately the Monday AFTER the 26th, and taking into account that large sections of the workforce slow down or stop the Friday before the week BEFORE Christmas, that can make it a six week break. Add to that the slowdown in activity in financial markets, and Victoria in particular, following the Melbourne Cup in early November, and no wonder they call Australia the "Lucky Country". Don't expect any politician to hitch their wagon to that idea! Far easier for them to play the divisive wedge on why the date should be changed. I guess it depends on which side of the fence you're looking from. While on the subject of political wedges, reports are that while Dutton might whinge about the government's broken promise around Stage lll Tax Cuts, he's unlikely to actually oppose them given the numbers. And by "the numbers" we mean the number of voters who will benefit from Chalmers' and Albanese's re-adjustments. Don't be surprised if calls for a complete overhaul of the tax system gain traction, but if they do, don't be surprised if GST is left off the agenda, much like it was for the Henry Tax Review almost 15 years ago, which if we recall made multiple suggestions (excluding GST) most of which are still gathering dust. We asked Chat GPT if Henry's Review was successful or not and received this back in a flash: "Ultimately, whether the Henry Tax Review is considered a success depends on one's perspective and the specific criteria used for evaluation. Some may view it as successful for initiating important discussions and influencing certain tax reforms, while others may argue that it did not lead to comprehensive tax reform as originally envisioned." In other words, Chat GPT is having two bob each way, or there's a politician's speech writer moonlighting somewhere in the Chat GPT universe. Where were we? Back to reality. December retail sales were soft, falling 2.7% month on month, and only 0.8% above December 2022. CPI was lower than expected at 0.6% for the December quarter, and 4.1% over 12 months. The quarterly number was the lowest since March 2021, while the annual figure has been falling sharply since its peak of 7.8% in December 2022. We didn't notice any reference or thanks to Philip Lowe in the media - or from his political detractors - but there's little chance of a rate rise when the RBA meets next week for their first meeting of the year. Ditto in the US, but again little appetite from the FOMC for a rate cut, even if markets are champing at the bit for one. Having fought hard to rein inflation in, central banks are unlikely to risk easing too fast or too soon, provided they think they can achieve the economic nirvana of a soft landing. That doesn't seem to be the outlook in China: We covered the collapse of Zhongzhi Enterprize Group briefly in last week's Hedge Clippings, and the demise of leading Chinese real estate group Evergrande this week leaves an even greater hole for the Chinese economy. Evergrande owes money to 171 domestic banks and 121 other financial firms, and has an impact on the entire Chinese banking and consumer sector. There are suggestions that Chinese new home sales are down around 40% for January 2024 YoY. Those figures applied to Australia or the US would be on a 2007 GFC scale, but China being China, there may (hopefully) be no global contagion. However, signs that the commercial office market in the US, and possibly elsewhere, are under stress are cause for concern. News & Insights New Funds on FundMonitors.com Global Matters: 2024 outlook | 4D Infrastructure Airlie Quarterly Update | Airlie Funds Management December 2023 Performance News Quay Global Real Estate Fund (Unhedged) Equitable Investors Dragonfly Fund Insync Global Quality Equity Fund |
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25 Jan 2024 - Hedge Clippings | 25 January 2024
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Hedge Clippings | 25 January 2024 Among the various dates and events either celebrated or lamented around this time of the year there is one that may not make the headlines given tomorrow's anniversary of the landing of Captain Arthur Philip taking first place. Today, the 25th of January, is the fourth anniversary of the first reported case of COVID-19 in Australia. Co-incidentally this week Scott Morrison also announced his retirement from federal politics. Whatever else one thought about him, his initial handling of the pandemic was swift and decisive (some will argue possibly divisive as well!). He won't go down in history as one of our more successful Prime Ministers, but Australia's record of 920 deaths per million of population position it at 108 in world rankings for COVID deaths, and 39th in cases per million which allows for debate from both sides of the "who liked Scomo" debating team. Interestingly, when researching the above statistics, China was way down the bottom of the list at number 221 out of 229 countries, with just 4 deaths per million from COVID, which seems about as reliable and credible as their economic reporting. China is facing multiple headwinds: Inflation is -0.3% YoY and PPI is -2.7% indicating low consumer demand. The property market is "soft" at best - some would call it a disaster, - and the collapse of the Zhongzhi Enterprise Group, a wealth manager which was regarded as one of China's largest shadow banks, owing RMB 220-260 billion (USD 36bn) and stating that it is "severely insolvent" won't help consumer confidence. On the trade front, China's trade with the US fell 11.6% in 2023, while trade with Russia increased by 26%. Meanwhile, it has yet to be seen what effect the shipping problems in the Gulf of Aden, and the longer voyage around the Cape of Good Hope will have on China's trade with Europe. Having driven global growth for the past two decades or more, and exported deflation over the same period, China's change of fortunes have yet to play out on the world's economies. Turning to US politics, it seems a re-run of the 2020 Trump-Biden election battle is now almost a certainty, provided each reach Tuesday November 5th (Melbourne Cup) deadline unscathed - Trump from the various legal challenges he's facing, and Biden from his advancing age. As we noted last week, in a country with a population of over 330 million, it's amazing neither party can come up with an alternative. One interesting view we heard this week is that each candidate provides the best reason to vote for the other: Trump has a strong following among his supporters, but is polarising to say the least. Not only will his presence entice many democrats to actually vote, but there's a risk that some disaffected republicans will also turn out to vote - but against him. That could also cut both ways - there has to be genuine concern about Biden's age and abilities given the prospect of an 86 year old being in the White House at the end of his second term. Meanwhile, enjoy Australia's national holiday - whatever you want to call it, and however you want to spend it. News & Insights 10k Words | January 2024 | Equitable Investors Market Commentary | Glenmore Asset Management December 2023 Performance News Digital Asset Fund (Digital Opportunities Class) 4D Global Infrastructure Fund (Unhedged) Bennelong Emerging Companies Fund Skerryvore Global Emerging Markets All-Cap Equity Fund |
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