MORE ON YIELD INVERSION The following points came out of PIG’s April 2019 meeting. Yield curves as shown in the Forum show rate inversions in USA and Australia. In USA a rate inversion typically precedes a recession by 15 months but in Australia the linkage is not as definitive. A look at bond mechanisms showed the following relationships: Bonds yields (Govt in this example) are inversely related to bond value. If bond yields fall, bond prices increase. Conversely, if bond yields rise then bond prices fall. USA and AUS monetary policy post GFC was to stimulate the economies by increasing money supply and decreasing interest rates. USA Federal Reserve did this by buying bonds in the open market. Bond prices lifted, Govt funds were thereby injected into the economy (quantitative easing). In AUS the RBA seems to prefer public announcements via the management of the cash rate that influences the economy and perhaps some money supply management. In USA in early 2018 the FED commenced quantitative reduction with the effect that interest [...]
We have discussed yield curves at several PIG meetings and noted their conventional, upward slope from low short term rates to higher long term. In recent weeks there has been a rare shift in the short term to below the medium term rates. This has happened mostly in the US but Australia also shows this trend although at a lesser difference. US experience has been that forecasters link inverse yield curves to a declining equities market. I am attaching the latest yield curves for the US and Australia and would like to discuss their position at next week’s PIG meeting.
The Wesfarmers Coles demerger is certainly worth discussing, particularly considering the size of the Coles Listing coming within the top 30 ASX companies. Some items of interest/concern – The Coles Board expects to have a dividend payout ratio of 80 to 90 per cent. The New listing will be carrying a debt facility of $4 billion. What is going to be the future direction of Wesfarmers post demerger. In a year or two will Wesfarmers get Coles to buy Kmart and Target from them The continuing impact of on-line shopping on bricks and mortar retail outlets What is the real reason for the demerger as I find some of the verbiage by Wesfarmers a little contradictory – ie: “Demerging Coles shifts our investment weighting and focus to businesses with higher growth prospects” whilst in the next paragraph they say “Coles is well positioned to grow as a defensive business with strong investment characteristics” Additional issues to keep in mind with such a large new listing coming to the market is that Investment Funds managers have to re [...]
Marcus Today 30th August, 2018 In March this year Bill Shorten pledged that should Labor win the upcoming election they will axe cash refunds for excess imputation credits paid to individuals and in superannuation funds. This would reverse the cash refund of imputation credits introduced by John Howard two decades ago. It would also be introduced with no grandfathering or transition arrangements. Malcolm Turnbull rejected it as a “cash grab”. The removal of Malcolm Turnbull means the Liberals can renege on that position and even adopt the changes should they feel it politically expedient. Read the complete article here:
Gentlemen Following on from Roman’s investigations into Cannabis and your obvious interest in the subject, I am enclosing an interesting article on the subject. Does anyone know Barry Lambert? Regards John H
It is no secret that Australia’s Lithium stocks have staged a spectacular run of late. The share prices of miners such as General Mining Corp (GMM:ASX), Pilbara Minerals (PLS:ASX) and Neometals Limited (NMT:ASX) skyrocketing several hundred percent. https://www.australianstockreport.com.au/asx-lithium?campaignid=819500343&adgroupid=44644641800&gclid=EAIaIQobChMIhs6hy42l3AIVRUgBCh0-2Q3wEAEYASAAEgLvU_D_BwE