Good Morning,
Penned on Wednesday September 1
Been a long time between Trade That Paid's so thought I'd pour a glass of something my local sommelier needed sampled (Soho's "Peggy" NZ Sauv Blanc- strong buy- available from The
Wine Stores at Northbridge)
Anyway it was this on this day in 2002 that I was still coming down from the first date with my future wife. We went to the Castle Hill Tavern and I pretty much fell right in love that night but had to keep it to myself. Funnily enough (because I'm organised that way) it was on this day that we were heading up to Lilianfels to be married on the 2nd September, 2006. 15 years later and the gifts we've given each other is (future past-tense) breakfast ordered online (long Hey You) which I'll pick up from over the road and we have a new outdoor setting we bought and put together so that's all the gifts we have the time or the constitution for.
We're busy and it's lockdown.
19 years knowing someone who I met because of a series of events beginning that evening of September 11, 2001. Those events which are now, 20 years later, still echoing through history and will continue to do for most of us.
However it is on the topic of the home that I wanted to focus because that was our guest this week on the BIP Show: Adelaide Timbrell- Senior Economist ANZ with the first big call on house price growth. 20% year on year.
Link Here to Listen
It's actually not that bullish when you're coming from the POV that we're already up 14% so the jump to 20% isn't that huge. However it's interesting to hear the takes on where the buying is coming from.
What's good about this episode is that Paul and I stay the hell out of Adelaide's way and just let her speak knowledge. It's good to listen to.
Firstly I have to take issue with the people located within the red box.....
One key thing mentioned by Adelaide in the podcast was regarding the back to work figures. As such because it ties in with my own predetermined thinking and I'm lizard brain thinking still, becomes the trade that paid.
Put simply, and we do cover this, there's a few factors at play in the next few months. For me the biggest one is the kid thing. Now you know I'm US focussed, that's part of the gig, but the big thing out of there in the next few weeks is literally the simple fact that kids are, kicking and screaming (in masks) getting dragged back to school. Delta be damned, and we've all seen the debate in the US about the "mask vs no mask on kids" debate, but kids in schools does mean a huge proportion of the US workforce can go back to work.
So for mine the Trade That Paid is simple: kids back in schools unleashes the beast of jobs numbers. This will combine with the last of the benefits running out in some states in the US. September/October will be something else.
Now back to current day September 3.
Interesting situation coming out of China at the moment (when isn't there) where pork prices skyrocketed with swine flu leaving a shortage of pork which has now led to oversupply of swine which has led to a massive decline in prices. Pork is now affordable, brilliant.
Economics 101, nothing amazing there. However the interest to me is while pork couldn't be placed on the table it had to be replaced. Quote here...
But reports from local markets said demand had not returned to previous levels, which suggested that many Chinese consumers have permanently switched to other proteins. “We’ve entered a period of structurally lower demand. We had years where [pork] prices were high and people switched to beef, chicken or fish,” said Darin Friedrichs, an analyst at Shanghai-based StoneX. “It definitely seems like we’ve reached peak pork in terms of China’s consumption.”
So keep that in mind as you crack open a beer today and remember what a small shift in the desires of the Chinese middle class have to downstream suppliers. Remember dairy?
In other news GM announced cuts to production of its best margin vehicles, Ford has done the same. Toyota did it a few weeks ago. All because of the semiconductor shortage. Weird because here is GM's stock price....
And here is the semiconductor ETF
You've had major news that another couple of car companies are short of semis (it'll cost GM about $1.5-$2bn in sales) and the stock price doesn't move, neither do semis..
I stand here before you and say that, in my view, the semi-shortage is now fully priced in. Oversupply comes next and companies that double booked orders receive a glut of semis.
Just like Chinese pork!!
Happy to be on the sell side of the semi stuff.
All the best,
James
James Whelan | Investment Manager
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