We’re being a little dramatic, we know. Last week’s note stressing the closeness to the recessionary precipice on which Australia currently stands is still being circulated and we still stand behind it. (The note, not the precipice)
We, as a country, are in real trouble and the market is screaming that at us as well.
Something very important that we noted this week was from a UBS research piece on the 5th June is about Bendigo Bank reclassifying how it treats cash earnings from its Homesafe investment.
(Stay with me, I know it’s dull. Please just stay with me)
Put simply, UBS (and us) see the move from Bendigo AWAY from marking to market the value of the homes in which they own equity as cash earnings is the bell ringing on the Australian housing market, to paraphrase the excellent UBS work.
(That’s it, that’s the most balance sheet talk you’ll get from me, possibly forever)
Put even more simply, Bendigo is getting the jump on the housing market flattening and/or correcting by changing how they fiddle the numbers now as opposed to later when it would look terrible to do so.
The team at Business Insider covered the note and I ask you to read at your own leisure.
Celebrating 30 years of the ASX!! Courtesy Bloomberg & ASX
So the top in the housing market has been rung and we look to our market to respond, which it has….badly.
I include the above image regarding our top ten stocks on our exchange as a snapshot in 1987 and today. In the month we celebrate the 30th anniversary of the ASX we see that in term of what represents us as a market, we haven’t changed much. The top names in the US are companies in industries that didn’t exist 30 years ago. Apple, Google, Amazon, Facebook alongside the old dogs like GE & Exxon etc.
Australia: Same banks, similar miners, fresh trouble.
We still have the legalised & protected monopoly of our banks, severely levered to a booming housing market along with the reliance on China buying our resources and continuing to do so. Right now all of this is taking a big breather.
I’ve mentioned wage growth before so won’t again but please be very much aware of the GDP numbers tomorrow morning (11.30 AET). We strongly believe that if the GDP number is a negative, it will be followed by another negative in Q2 which means Recession, which we haven’t had in this country for over 25 years.
Around the time Daryl Braithwaite’s “The Horses” was released. Coincidence? I think not.
We think there’s a strong likelihood of this happening and again with all the factors weighing on our economy having so much to do with the makeup of our market we hold very little faith for both. As mentioned last week, we have protective strategies in place and none involve buying the banks.
All the best,
James Whelan & the VFS Global Macro Fund
Level 30 Australia Square, 264 George Street, Sydney NSW 2000
+1300 220 360 | gmf@vfsgroup.com.au | www.vfsgroup.com.au
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