It’s another slow news day so it’s an opportune time for some constructive self-reflection. Yesterday I contacted an editor at BusinessDay to let them know that they were shifting between trend and seasonally-adjusted employment figures depending upon which was more favourable. I received a reply that said something like “at least we’re not permabears”.
Permabullish data distortion is, of course, OK!
Anyways, I thought it an opportune time to take stock on where the MB view on things has been for the past few years and where they are now to test the allegation.
Regular readers will know that I find the entire frame of reference of bulls versus bears kind of silly. A much more useful lens is opportunity versus risk and that’s the basis on which I’ll do my stock take. In a blog that puts out 20 or 30 posts per day it’s not so easy to track but the larger themes have been thus.
Where we see risk now
- Australian house prices as the fundamentals of the economy deteriorate around the capex cliff. More generally, we see it as a “bubble”
- Chinese reform process and its attempts to rein in its credit bubble
- commodity prices and miners as an extension of the above, as well as dramatic supply expansions
- Australian recession if it goes wrong
Where we previously saw risk
- in an unruly European unwind pushing up Australian bank wholesale debt costs
- in the 2010/11 housing “slow melt” as the bullhawks rampaged
- Chinese reform process and its attempts to rein in its credit bubble
- commodity prices and miners as an extension of the above, as well as dramatic supply expansions
- Australia transitioning to greater dependence upon the above
Where we see opportunity
- big falls in the Australian dollar to continue
- Australian international industrial stocks
- S&P500 after the European bailout and still today on the basis of the Yellen put (though not for too much longer)
- daily iron ore price fluctuations, sometimes up, sometimes down
- tracking the Pacometer’s counter-contrarian sell signals!
Where we previously saw opportunity
- Leith called the housing recovery in Sydney early last year but was bearish on Melbourne. I thought national prices would rise at the rate of inflation so was obviously too cautious but half right in the minor capitals
- Australian dollar falls from early 2012 and rises in Australian international industrial stocks, as well as the S&P later that year post the European bailout
- daily iron ore price fluctuations, sometimes up, sometimes down
MB is obviously a strategic not tactical service, focused on the structural drivers of the local and global economies more than cyclical factors. That means we miss all sorts of stuff and have no interest in specifics. It may mean we appear more “bearish” than we are sometimes when cyclical factors move against our structural framework. For instance, we see big Australian imbalances that are going to hurt in the not too distant future, but still monitor the obvious cyclical recovery in the mean time, even if the bigger picture is more important.
But the purpose of this is to ask you, readers. Is BusinessDay right? Is MB a permabear?
