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Developer: Build-to-rent “economically stupid”

Melbourne apartment developer and AFR rich lister, Tim Gurner, has attacked the emerging ‘build-to-rent’ sector, describing it is “economically stupid” and will “wipe out mum-and-dad investors”: “I am incredibly against build-to-rent, purely because I think economically, it’s a stupid model in the sense that a 4.5 per cent return on costs [the magic number according

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Grattan: Social housing stimulus better than home owner grants

The construction sector employs more than one in every 10 Australians, but it has lost almost 7% of its workforce since March because of the impact of COVID-19. With the Morrison Government expected to this week announce a stimulus package for the sector, centred around grants to those who buy newly built homes and renovations,

1

Defining the new Australian profits cycle

Via the excellent Damien Boey at Credit Suisse: Two different approaches to modelling ASX 200 earnings, with two different answers. We use two different top-down approaches to explain and predict the cycle in ASX 200 real earnings per share (EPS). The first simply correlates market real EPS with economic activity as measured in the national accounts. The second is more

5

Data dump mixed for Aussie GDP

The ABS has dumped a whole bunch of partial data which paints a mixed picture for March quarter GDP, which will be released tomorrow. On the negative side, inventories declined by 1.2%, versus an increase of 0.3% last quarter. This should detract 0.4% to 0.5% from GDP: On the positive side, the ABS expects a

13

Shane Oliver: Aussie home prices to fall 5-10%

AMP Capital chief economist, Shane Oliver, has trimmed his forecast for Australian dwelling value declines, now predicting falls of between 5% and 10%: Key Points: Australia capital city home prices fell -0.5% in May. Significant policy support & the earlier reopening of the economy have made our worst-case scenario for a 20% decline in average

4

Australia’s terms-of-trade unexpectedly surges

Within today’s dump of balance of payments data that feeds into tomorrow’s March quarter national accounts release was the important news that Australia’s terms-of-trade unexpectedly surged by 2.9% in seasonally adjusted terms. This result was unexpected because it contradicted both the RBA’s index of commodity prices, which fell by 2.3% over the March quarter: As

59

Will riots help or hinder Trump re-election?

If America were a society of browbeaten conformists like Australia then riots would unquestionably favour the opposition. But will it be so in a state defined by personal power? Recent polling has Biden with a comfortable lead as Trump slides on the COVID-19 policy disaster: But the lead is far from huge. Trump is actually

33

Means-tests for new home stimulus

Via the AFR: Grants to stimulate the residential construction sector will be means-tested to include upper-middle-income singles and couples, and will be in place for only a short period to try to avoid causing a blowout in house prices. The construction package, to be signed off on Tuesday by the expenditure review committee, is one

20

Retail collapses to surge once welfare stops

PwC partner Stephen Longley expects a surge in retail collapses once the federal government’s JobKeeper wage subsidy scheme ends in late September. Longley has been appointed administrator of retailer PAS Group, which went into voluntary administration on 29 May. Meanwhile, KPMG restructuring partner James Stewart forecasts the use of what he terms ‘tactical’ administrations, whereby

5

Macro Morning

By Chris Becker  Stock markets continue to diverge from economic reality with Wall Street lifting higher despite rising civil unrest and growing tensions with China over Hong Kong and other trade disputes. The latest ISM manufacturing survey had some glimmer of hope within but still showed extremely weak conditions across the US as unemployment ravages

15

Which universities are most exposed to international student losses?

Ian Marshman and Frank Larkins from the Centre for the Study of Higher Education at the University of Melbourne have released research assessing which Australian universities are most exposed to the downturn in international students. Below are key extracts: Summary The predicted revenue losses of 38 Australian universities to 2024, as a result of the

36

Industry funds bleed as early super withdrawals top $12b

APRA has released its weekly update on the federal government’s early superannuation release policy, which reveals that another $1,590 million funds were withdrawn in the week ending 24 May, with total withdrawals topping $12.2 billion: As illustrated above, just over 1.6 million applications have been paid averaging $7,252. Breaking down withdrawals at the individual fund

1

Commodity price rebound continues

The RBA has released its commodity price index for May, which rebounded 1.8% in SDR (currency weighted) terms – the key determinant of the terms-of-trade – but slumped by 7.4% over the year: Preliminary estimates for May indicate that the index increased by 1.8 per cent (on a monthly average basis) in SDR terms, after

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Links 2 June 2020

Global Macro / Markets / Investing: Uber Destroys More Value: Demolishes Bikes from Failed Rental Businesses Rather Than Donate Them – Naked Capitalism Citi warns markets are out of step with grim reality – FT Coronavirus is our chance to completely rethink what the economy is for – The Guardian Bitcoin Mass Adoption Would Benefit

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Macro Afternoon

A modest start to the week as Chinese equity markets react to the wet lettuce rhetoric from Trump on China’s boot on Hong Kong’s neck as most capital cities in the US burn, which should send housewares/DIY/retail stocks up when Wall Street opens later tonight. The USD is falling sharply, particularly against the Aussie dollar,

9

In the Vicinity of doom

Lordy, this is what a commercial property crash looks like. Via VCX: These are not run-down suburban malls we’re talking about. This is the Strand Arcade, Chadstone and DFO. With values down 11-13% in four months, you’d be hard-pressed to say that this is the bottom. There has been some rebound in foot traffic but

17

The Economist: Chinese wolf wankers alienate all

Via The Economist: It is not hard to find Chinese who cheer the foreign ministry’s pugnacious new style. Against that, some members of China’s foreign-policy establishment express alarm over this assertiveness, calling it a mistake born of inexperience. That is letting foreign ministry hotheads off too easily. A well-travelled bunch, China’s quarrel-picking diplomats know how

5

SQM: No imminent rebound for Aussie property

SQM Research’s managing director, Louis Christopher, has doused hopes for an imminent rebound in the Australian property market: “It’s starting to look like it’s [auction clearance rates] topped out. If that is the case then what this reveals is that for now [it’s] a weaker market, a market that is very patchy”… “There’s not strong

5

ANZ forecasts small business jobspocalypse

The ANZ’s head of retail and business banking, Mark Hand, suggests that 2021 will be a very difficult year for small businesses. Plank claims many small and medium enterprises will not recover from the COVID-19 crisis, even with loan deferrals from banks and wage subsidies from the federal government. He says the best move for

2

US households save like the end of the world

Via the excellent Damien Boey at Credit Suisse: US household saving rate at 33%! A lot happened in April. There was a very sharp downtun in the labour market, households received an enormous boost to disposable incomes from fiscal stimulus, and consumers significantly pared back their spending amid shutdown restrictions. The net balance of these forces