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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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