Weekend Reading 11-12 July 2020

Global Macro / Markets / Investing: IMF’s chief economist urges ‘equity-like’ governments support for virus-hit firms – Reuters The World Can Show How Pharma Monopolies Aren’t the Only Way to Fight COVID-19 – Counter Punch When Low Yields Can Be a Good Deal for Investors – Barrons Americas: Around 1.3 million people filed for first-time

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Macro Afternoon

Stocks are falling going into the close here in Asia as the trading week ends and markets gear up for earnings season on Wall Street next week. Gold is just hanging on to the $1800USD per ounce level as other undollars feel the rebound of the stronger USD on the risk aversion trade. S&P futures


Westpac: Looming downside risks for US economy

By Westpac’s Elliot Clarke: Currently, the US economy finds itself between fiercely opposing forces. On the one hand is the rapid surge in jobs seen during May and June and the consequent swelling of recovery expectations. Opposing these forces however is the dramatic increase in the COVID-19 new case count this month to worrying new


Victorian Treasurer unveils $6b emergency stimulus package

Victoria has received a grim economic forecast as it heads back into lockdown after the Andrews government reimposed stage three COVID-19 restrictions. State Treasurer Tim Pallas said the unemployment rate was expected to peak at 11% per cent with an extra 270,000 people unemployed after being revised up from 9%. Pallas has also revealed additional


COVID-19 a “middle-class disaster”

Middle-class professionals in inner-city suburbs have been hit hardest by the COVID-19 downturn, according to consulting firm Taylor Fry. This is because income support like JobSeeker and JobKeeper don’t make up for losses of employment income: “You’ve seen in the last few weeks, thousands of jobs lost in accounting, legal and professional services firms,” [Taylor


Australian dollar falls as ANZ cuts GDP forecast

by Chris Becker Things aren’t looking up for the Australian dollar with ANZ out with another downgrade of local economic growth, looking at a 2% drop for the third quarter due to the lockdown in Victoria: with the whole of Melbourne metropolitan and Mitchell local government areas locked down, we estimate the rebound in activity


COVID-19 mega-cluster builds in Melbourne

A disturbing development has emerged in Melbourne’s COVID-19 fight, with a mega-cluster forming: Victoria’s two largest ever coronavirus outbreaks have now been linked, forming one huge cluster that health authorities are scrambling to contain. Investigators say it is now clear the 113-case Al-Taqwa College cluster and the 159-case public housing towers outbreak have strong connections.


TAFE: the forgotten victim in higher education war

Over recent weeks, we have witnessed incessant lobbying from universities over funding, whereby they have demanded a return to the Gillard Government’s failed demand-driven system: Universities face turning away hundreds of thousands of students next year as applications to study surge but available places remain fixed… Professor of education policy at Melbourne University Frank Larkins


Melbourne’s property market is in trouble

CoreLogic’s research director, Tim Lawless, expects Melbourne’s housing market to be “significantly disrupted” from the six week lockdown: Over the previous lockdown period, which was in place between late March and mid-May, housing market activity was significantly disrupted. The previous lockdown period saw real estate agent activity across Victoria slump by almost 70% before gradually


Here comes the second wave of US COVID-19 deaths

by Chris Becker There was an unusual blip in the amount of Americans who died from COVID-19 reported on Tuesday, that could have been written off (as sick as that sounds) as the usual weekend anomaly, whereby deaths over the weekend – in this case a 3 day weekend due to 4th of July holiday


UQ executives referred to Crime and Corruption Commission

Drew Pavlou has taken the fight directly to the University of Queensland’s (UQ) top brass, with his lawyer referring them to Queensland’s Crime and Corruption Commission: The University of Queensland’s two highest-ranking executives have been referred for investigation over claims of corruption and failure to disclose foreign influence by lawyers representing embattled student activist Drew


Paul Keating is a superannuation liar

Paul Keating is at it again, attacking those calling for a freeze in the compulsory superannuation guarantee (SG) at the current rate of 9.5%: The argument that is now being put, erroneously, is that in a period of static real wage growth, any upward shift in the Superannuation Guarantee will cost workers immediate disposable income.


The Australian consumer is drowning

The latest private sector credit data from the Reserve Bank of Australia revealed that the stock of personal credit, which was already in terminal decline, collapsed by 10.2% in the year to May – the biggest plunge in recorded history: As shown above, this decline in personal credit growth easily exceeds the troughs of the


Property insiders: Prices and rents to plunge

The latest NAB survey of property professionals reveals a rather pessimistic industry, with sentiment collapsing both in the short and medium-term: With Victoria most negatively impacted: House price expectations have also tanked, with falls predicted over the next two years, with Victoria leading the declines: The below charts give the longer-term context: Rents are also


Macro Morning

By Chris Becker  Risk sentiment continues to grow negative – outside of tech stocks – with Wall Street falling in response to the US Supreme Court ruling on the fraud-in-chief’s tax returns and the rising death toll and positive caseload from coronavirus. The USD firmed overnight as did bond yields, while only oil fell in


Daily iron ore price update (destocking)

by Chris Becker Iron ore continued its surge yesterday with spot Tianjin prices up above the $107 barrier, while 12month futures gained, but shorter term prices slipped alongside rebar and coking coal. Here’s the table and latest charts: Iron ore imports to China have fallen to their lowest level since October 2016, according to Steelhome,


Scott Morrison: Mortgage collapse no cause for alarm

In yesterday’s press conference at Parliament House, Prime Minister Scott Morrison dismissed concerns around the crash in mortgage commitments, driven by investors: Below is the transcript, with my emphasis added in italics: Journalist: Home lending figures came out today. Huge plunge, double-digit plunge. This is a time with record low interest rates as well. We’ve


CoreLogic weekly house price update: Still sinking

In the week ended 9 July 2020, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell another 0.13%: It was the ninth consecutive weekly decline. The falls were concentrated across the three major capitals: Quarterly dwelling value growth is negative, led by Melbourne: Annual price growth remains strong,


Links 10 July 2020

Global Macro / Markets / Investing: The Fed is reasonably cautious about controlling the yield curve – Economo The world emerges from the hegemony of the United States, but does not take its eyes off them – Economo Tesla mocks shortsellers with sale of red satin shorts – Reuters Global tourism stands to lose up


Macro Afternoon

It’s all green again across Asian stock markets, and despite rising COVID-19 cases in Tokyo, Japanese authorities are looking to ease restrictions within the nation, boosting economic hopes, while locally the chance of further lockdowns has had no impact on the ASX200, at least for today. Meanwhile, gold continues to hold above $1800USD per ounce


MB Fund Podcast: How to find Income in a 0% Interest Rate Environment (updated with podcast audio)

In todays show we focus our attention on an emerging issue faced by both institutions and retirees alike : finding income in a zero interest rate environment, that could last for another decade. Areas of interest today: A philosophical approach to yield Some exploration of commonly available bond options and how they can be used


Foreign buyers shun Australian property

According to NAB, foreign buyers continue to shun Australian property, with demand still well below decade lows in the June quarter: While the prominent role played by foreigners in Australian housing markets has dissipated in recent years, market share in this buyer group in Q2 increased in both new and established housing markets. In new