Gotti: CBA warns on property for private clients

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From Gotti today comes details of a CBA email to private clients:

The CBA private client email makes the case that the Australian economy has been held up because mining exuberance has been replaced by housing exuberance. But now, not only is mining investment set to fall further, but the contribution of housing is likely to fall.

…CBA concludes: “And thus we wonder, when was the last time we grew without a market that is, by definition, devoid of over-exuberance? What would GDP growth have looked like without an unsustainable mining boom? What would growth have looked like without the over exuberant housing market? How do we engineer a broad-based recovery, rather than an economy that fires for a period of time on just one or two cylinders?

…“To protect the portfolio from this form of left-tail risk (meaning a low probability, high impact outcome) we are moving to a more substantial underweight to property, across both direct property (commercial real estate) and REITs (real estate investment trusts), and allocating that capital towards fixed income (defensive assets).

Sounds like they’ve been reading MB. Or, can just see the obvious.

They can’t say it, of course, but the way to “engineer a broad-based recovery” is marginalise CBA.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.