New job, new firm but the same Free Whelan. Thank you for your continued support and keep unlocking valuable insights into the global market every week with me!
Another absolutely wonderful weekend just gone and if you get the perfect run of Tigers winning at Leichardt, Swans winning in Adelaide and Port losing anywhere then you’re on the right footing for another great week closer to EOFY.
Thanks to our friend and League legend Jonathan Thurston for stopping in last week to talk a little shop and provide insight into resilience and work ethic. Here we are, not holding a football which I forgot to bring with me that day. We improvised.
Now, back to work…
It’s RBA week and as usual, we only look to the view of the Head of Aussie Economics at the CBA, Gareth Aird, for the prediction. (His note is not only publicly available but recommended reading if you want to stay in the loop of what’s happening in Australian Economics. He’s a man of the people)
The meeting will be a straight “no change” but August is live. Of note was a discussion around the $300 energy rebate and how inflationary that would be.
I quote here:
“On that score, the Governor does not consider the rebates to have shifted the outlook for consumer demand or inflation. Indeed the Governor stated, “If you think about the $300, or the $75 a quarter, off your electricity bill, are people going to go out and spend big on that? I really don't think so. It is different than giving someone $300 and saying, 'Here's $300.' I think, at the margin, it's not really going to have much impact in the second‑round sense …….. I think psychologically, they (i.e. people) think of that differently”
Have to also agree here. $300 straight in my pocket will probably get spent on something inflationary (remember Covid) but $75 a quarter is probably going to the right place. FYI the CBA team see the rebates as shaving two-thirds of a percentage point off Q3 2024 CPI. That’s handy for the disinflation yarn.
And just a reminder of what the inflation story is all about by using a graph from some of the larger economies in the world:
Source: dailychartbook - Thread
Food prices, common base to 2020. Courtesy GlobalData. TS Lombard. Sometimes you need to remember what’s actually happened.
And what happens if you worry about each data point? Payrolls and CPI out in the US recently and took yields on a ride:
Source: Invariant Perspective - X
Segue time: This guy explains perfectly what happens if you measure inflation using wider data points.
https://x.com/MyLordBebo/status/1799525065169551751
Now over to Europe (including UK, don’t be that guy) and it’s an absolute debacle.
The comedy act of UK politics keeps me entertained at the best of times and my running joke “David Cameron has a lot to answer for” stays true to its satiric anchor.
Rishi Sunack is ill-equipped for the “sleeves up, modern age man” look of UK politics and every scene in which he tries to relate to people is laughable.
All of these things are connected: he left a D-Day Ceremony early (a sin) so he could get back to England for a PRE-RECORDED interview, an interview in which he apologised for being late and that the Ceremony “ran over”, then in the interview he said he came from humble beginnings and used not having Sky TV as an example of that.
Where do they find these people?
Source: Arron Banks - X
We have a Labour victory well factored in, please reach out for ideas off the back of it.
France, oh my.
How it started…this was the results of the recent European Election divided up by department. The National Front (National Rally or NR) won pretty much every department. This is like Trump winning everything except DC.
Source: Boccaccio ✺ - X
Macron called an early election. “Le Snap”, if you will.
Plenty out there think that’s opening the door for the National Front to sweep it. “He’s daring voters to do it”.
I believe they’re wrong. I’ve done some radio spots with Louis-Vincent Gave (who runs a very sharp macro research house called Gavekal) and he’s always been 1000x ahead of me (which is a low bar at the best of times but still…)
His views are here and I back this take all the way. Macron is bleeding the small parties out financially.
Source: Louis-Vincent Gave - X
However, the chances of French default have gone way up, as evidenced by the cost to insure against it. (The higher your insurance premium, the higher the calculated chance of disaster. Build a house in a flood zone, for example, and find out how much you pay for flood insurance if you can).
Source: Bloomberg
There’s a chance Macron doesn’t do as badly out of this as some yell about. The French voting system is funny anyway with the two rounds of voting.
I’ll have some ideas ready to go this week for those in the space.
UK is July 4th, France is July 7th for results.
Flows
Beware of these headlines because it’s talking about dollar values in a well-regulated market. Of course, the dollar numbers are going to get bigger.
Source: MarketWatch
However, a well-rallied market, supported by a small handful of names that’s gasping at fresh highs on thin volume doesn’t fill me with a great deal of confidence.
New money is not being pushed in at the same rate as recently and I’ll be monitoring for a change to that view.
Finally, India is resolved, get involved(er). Elections are done (finally) and we’re back to business. The best way to get access is via NDIA, Global X’s Nifty 50 ETF. Buy on even the most moderate of dips.
Source: Association of Mutual Funds in India
Stay safe and all the best,
James
A quick detour to announce the BPC NRL Tipping Competition!
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