Quarterly State of Trend report - Q1 2025

East Coast Capital Management

April 2025

Funds operated by this manager:

ECCM Systematic Trend Fund

Chris Gosselin, CEO of FundMonitors.com, speaks with  Michael Poulsen, Co-founder and Portfolio Manager at Canopy Investors. 

Michael shares insights into Canopy's global small and midcap investment strategy, its long-term, quality-driven approach, and how the partnership with Bennelong enables the team to focus on delivering strong returns through concentrated, high-conviction portfolios.

Hedge Clippings | 17 April 2025

You'll probably be pleased to hear that this week's Hedge Clippings will be largely a "Trump Free Zone". Partly on account of the fact that he's been unusually quiet this week, and partly because there's not much more to add - yet - although there's plenty still to play out in his tariff war with the world in general, and China in particular.

If that's the good news, the bad news is that in case you haven't noticed, there's an election on in Australia, and the major parties, plus the Greens, have been falling over themselves to shower various demographics and interest groups with financial enticements, which, irrespective of who wins, they (or rather we) won't have the money to pay for.

The Department of the Treasury (Treasury) is forecasting a deficit of A$28.3 billion for 2024-25, compared to $A18.8 billion in the mid-year economic and fiscal outlook (MYEFO) released in December. This is expected to increase to $46.9 billion in 2025-2026, and $38.4 billion the year after, for a 3-year total of $112.2 billion.

Hedge Clippings isn't sure if the election bribes (sorry, promises) have been costed into the above numbers, but it is also not clear if the revenue side has allowed for the uncertainty, and potential recession, thanks to the current on-again/off-again trade policy from you know where.

What's really disappointing about the offers from both parties, but particularly from Albo, is the unashamed handouts to all, or various sections of the electorate in the name of "cost of living relief" most of which - much like the energy rebates currently in place - are temporary. There's no big picture thinking, and apart from tax benefits, which will buy you two coffees a week if you're lucky, neither party is looking to fix the underlying problem of an outdated taxation structure.

Remember the Henry Tax Review? Most voters don't or won't, as it was 15 years ago, and of course Kevin '07 made sure Henry's terms of reference excluded looking at the GST.

And if, like us, you have been underwhelmed by what's on offer - let alone concerned about the prospect of a minority government with the Greens holding the balance - then last night's leaders' debate was totally uninspiring. Both Albo and Dutton dodged and weaved, failing to answer questions not once, but in some cases three times, more concerned it seems with not putting their foot in it - or in Albo's case falling off the stage.

Most frustrating from both sides is their approach to the housing crisis, which only seems to focus on increasing demand with incentives to (mainly) first home buyers. Forget whether it's a 5% deposit, a government guarantee, or syphoning $50 grand out of your super, both will increase the cost of housing.

That might be good news for existing homeowners, but demand is not the issue or cause of the housing crisis, supply is. Australia as a nation, particularly given a growing population driven higher by immigration, hasn't been building enough new housing for a decade. For instance, in the December quarter of 2024, total dwellings commenced totaled just under 42,000 - a fall of 4.4% over the quarter.

This report from the Master Builders Association, dated October 2024, notes the worst year for new home building in 10 years. The problem for the government, whichever or whoever is successful on May 3rd, is that if they do increase supply, they face a series of problems:

Firstly, it is not a tap that can be simply "turned on". Secondly, the labour and trades shortage in the building sector will drive up inflation, and finally, if the supply imbalance really is fixed (unlikely as that may seem), then economics 101 tells you that existing house prices will fall.

While that might seem far-fetched, it certainly won't please three-quarters of the population who do own their own homes, with or without a mortgage. Nor will it please the banks, who have lent funds on a 5 or 10% deposit.

Neither will it please Albo and Dutton themselves (and a whole raft of other politicians) who are heavily exposed to the residential property market themselves!

And for something completely different, the news this week that five mega-rich and overly indulged American women, including Katy Perry (who I'm reliably advised is somewhat of a pop star) spent ten minutes in space this week aboard a rocket owned by Geoff Bezos. When interviewed on touchdown in a skin-tight space suit, specially designed to make sure her underwear didn't show, she came up with this:

"You never know how much love is inside of you, like how much love you have to give, and how loved you are until you launch".

Really deep and meaningful! Have a Happy Easter!

News & Insights

Manager Insights | Canopy Investors

Trump's Tariffs: A game changer or investment opportunity? | Magellan Asset Management

Investment Perspectives: Not another US recession | Quay Global Investors

March 2025 Performance News

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