Hedge Clippings | Friday, 04 September 2020

We're not sure if it is the combined effects of lockdowns (or in Hedge Clippings' case, "significantly reduced social activity"), overexposure to COVID news (is there anything else happening?) or just the fact that it's already September (and therefore only two months before the Melbourne Cup), but the weeks seem to be just flying past.

Maybe it's a combination of all three, but there seems little difference between one week and the next, particularly for those unfortunate enough to be locked down in Victoria, who this week suffered the insult of having the AFL Grand Final moved to Queensland. What next? Did we mention the Melbourne Cup? Surely not...?

The past week hasn't been all boring however, although we have noted some predictable news items, and some equally predictable comments from various quarters, including three relating to, or by former prime ministers, namely Tony Abbott, Paul Keating and Kevin Rudd. More of that (or them) later.

Two pieces of unsurprising, and predicable economic news this week included the RBA holding interest rates at 0.25%, and the fact that Australia is, after 28 years, officially in a COVID induced recession. Not that anyone would have suspected otherwise, although perhaps some thought the numbers might have been worse. Undoubtedly they would have been without the extraordinary lengths that governments at both Federal and State level have gone to by pumping billions into personal and business support.

As we have noted before, Australia has been fortunate in having a large moat around our island's shores which has limited the health effects of the virus, while effectively going into the economic abyss with virtually no debt, providing the government with the ammunition it required.

From a market perspective it hasn't been all gloom and doom either - depending on which sector one looks at, and hence why the GDP fall was only 7%. With the ASX200 up 38% since its lows in March, and the tech heavy NASDAQ up 67%, there have been some well-documented winners - and losers. Earlier this week we spoke with two fund managers, Dean Fergie from Cyan Investment Management, and Rodney Brott from DS Capital, each of whom have successfully navigated the rebound since March to achieve record monthly returns and, in spite of the market's +38% rise, outperform the ASX200.

Delving deeper, and in spite of both being in lock-down in Melbourne, some common views and themes were apparent - the ability to switch sectors from those such as travel, tourism or commercial property, to areas that have benefited from COVID - tech and communications for example.

You can watch our recording of the Zoom call (recorded yesterday afternoon) with Dean and Rodney here. With today's market down sharply after last night's NASDAQ sell off wiping out the local market's gains in August, their views on investing in quality companies with good economic tailwinds are worth listening to.

To close, back to our reference to former prime ministers. Firstly, Keating and Rudd's call (in Keating's case, "salvo" is probably a better description) that the government shouldn't mess with the planned rise in the SGL, and lambasting the emergency early $20,000 early release opportunity. Normally we'd agree that super should be maintained, and the SGL should increase over time, but these are not normal times.

Messrs. Keating and Rudd as ex PM's and politicians of many years standing are both on highly generous pensions - and the beneficiaries of 15% taxpayer-funded non-contributory super. For those who suddenly had no income, credit card debts attracting 20% interest rates, rent or mortgages to pay, it wasn't so simple. Certainly, they'd be better off in their retirement in 30 years' time, but a bird in the hand.... The point is they have time to recover. Could the scheme have been more tightly controlled or available? Undoubtedly. However, at the time it was also undeniably welcome.

Finally, to that other ex-PM in the news, Tony Abbott, who appears to be a surprise appointment to the UK Board of Trade or whatever. No doubt HRH Prince Philip wrote a reference in return for Tony's equally surprising and generous Knighthood back in 2015. Surprise is probably not the word, with Scotland's First Minister Nicola Sturgeon singularly unimpressed, and calling him out on UK TV.

It didn't take British humourist and Sturgeon impersonator Janey Godley long to give her version of the First Minister's opinion of our onion eating ex PM which you can see here. Although most of Janey's rendition of Nicola's Scottish accent is unintelligible, the odd four letter word is unmistakable, so if that offends please accept our apology, or skip the link!

According to this morning's ABC news, Tony Abbott declined to comment, with a spokesperson advising that he wouldn't comment on "personal abuse". Maybe he's becoming sensitive in his retirement, or maybe he realised that sometimes it's best to keep one's mouth firmly closed.

News & Insights

VIDEO: Interview with Sean Sequeira, CIO at Australian Eagle Asset Management

VIDEO: Interview with Rodney Brott from DS Capital and Dean Fergie from Cyan Investment Management

Time to Move on? Go East? by Delft Partners