Hedge Clippings | 13 October 2023

Has the Fed lost the (dot) plot?

Australia's RBA has its bulletin to update the rest of us to their thinking after their monthly board meeting, but they rarely spring any surprises. They basically say what they want us to hear, but generally in central banker-speak so as not to frighten the horses, while at the same time having two-bob each way on future decisions. This possibly explains the criticism of Philip Lowe's so-called "prediction" back in 2020, mid-Covid, that rates wouldn't rise until 2024.

As above, good central bank-speak tries to convey calm, whilst leaving the door open to the fact that whilst everything in the past is obvious, nothing in the future is certain. Former head of the US Reserve Alan Greenspan was famously completely obscure in his lack of clarity, once telling a business audience "If I've made myself too clear, you must have misunderstood me."

The US Federal Reserve on the other hand make use of a quarterly "dot-plot" developed by former head honcho Ben Bernanke to convey what the Fed is thinking. Which of course means that 95% of the population either won't take any notice, or if they do, they don't understand, relying instead on the markets to follow the dots, (or at least the change since they last looked) and gyrate bonds rates accordingly.

Just recently the market's done just that, firstly sending bond yields to multi year highs and putting the skids under both bonds and equities, before comments from one Fed member had the markets seemingly backing off that view. Whichever way it turns out, there's little chance of inflation, and therefore rates, falling any time soon, and it's our belief that the Fed's 2% target is a long way off - barring a major recession.

There you go - we've had our two-way bet as well.

Enough of economics, time for politics. Having carefully avoided the referendum for the past few months, Hedge Clippings wonders if Albo lost the (dot) plot when promising a referendum on the Voice, which, if the polls are to be believed, is not going to pass?

Referendums are historically hard to result in change, at least at the ballot box. However had Albo asked Australians to vote to include in the Constitution the fact there were traditional inhabitants or owners prior to 1900, or 1788, we suspect that would have won in a canter (this week's horse references to get you in the mood for Spring Carnival time).

Having got that done and dusted, he could then have set up an advisory body to try to improve the lot of disadvantaged First Nations people, and to make sure that the annual (reported) $39.5 billion allocated from the Federal budget actually resulted in an improvement in their living standards, health, life expectancy and incarceration levels.

There'd be few fair-minded Australians on either side of politics who would object to either of those outcomes. Instead, whatever the result of tomorrow's vote, there's going to be angst and disunity over a subject that everyone agrees is an embarrassing national disgrace.

Finally, going, going, not quite gone yet!

This week saw the announcement we'd all been waiting for, although most had expected it earlier than this: Qantas chairman Richard Goyder will step down - but not for another 12 months until next year's AGM, during which time he'll pick up another $750,000 in salary - assuming the remuneration committee doesn't increase it as they did in 2023.

And of course, Goyder, and eligible family members, will receive two more (free) long, and six short haul flights during his pre-retirement year (turning left at the cabin door we presume). A couple of other Qantas directors will retire pre the airlines half year results in 2024, which will at least give time to find suitable replacements.

Meanwhile, no sign of Alan Joyce, or the $24 million he reportedly trousered before he skipped the country (also presumably first class). 'Nuff said!

It's likely to be another going, going, gone guessing game for both Eddie Jones and his ARU board supporters as the Wallabies come back to the country this week-end, but enough said about that debacle as well. However, even if you have to stay up until 2:00 AM to watch it, or get up early for the 6:00 AM games, there should be some great rugby on the box this week-end.

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