Hedge Clippings | Friday 22 November, 2019

Hedge Clippings remains in distant parts, and thus well out of the daily face-to-face contacts we're used to, and with limited access to the usual internet and email overload we're normally dependant on. The challenge, therefore, is to pick up what one can - partly to keep in touch with events in Australia, and possibly bring some relevance from an offshore perspective.

Over the past months it would be impossible not to have noticed an increase in anti-Chinese rhetoric in Australia, possibly partly in response to Donald Trump's trade war, but also locally as well.  This has seemingly ramped up this week with former ASIO director Duncan Lewis saying that the Chinese government is trying to "take over" Australia's political system through foreign influence operations, with any person in office a potential target.

The same goes for business and commerce in general.

We might think the Chinese government is focusing on Australia, but this situation seems to be replicated around the globe. Currently we're in Barbados, famous for Sir Garfield Sobers' exploits in the cricket pitch, and of course rum, which by the way is excellent! The point is that even on this tiny speck of an island (21 miles by 14), and throughout the region, today we had exactly the same conversation with a leading local business identity.

Moving on, it seems that Australia's economic growth forecast has been downgraded, which shouldn't come as too much of a surprise. Household debt is at record levels fuelled by ultra low-interest rates which are likely to go lower. In response the government has announced a major $3.8 billion infrastructure investment program, but is it enough?

Hedge Clippings has long called for an investment of superannuation fund assets into infrastructure.  Both have a long term horizon, and one would have thought the political or legislative issues to be easily managed.

The infrastructure sector is of increasing size and interest in AFM's database. Steady returns, steady income streams, and both local and offshore exposure - both to emerging and developed economies. Watch this space!

Hedge Clippings | Friday 15 November, 2019

As indicated last week, this edition of Hedge Clippings comes to you from London. From the outset we'll seek forgiveness for typos, or ramblings over and above the norm, which we will put down to the effects of jet lag. It is irrelevant which end of the plane you are in, 24 hours cooped up with 450 others in a noisy tube and an 11 hour time difference at the other end is no fun.

Hedge Clippings has yet to establish the best routine to handle long distance flights. One school of thought is the David Boon approach: Stay awake, if barely conscious, while consuming as much alcohol as possible. That certainly makes the flight more bearable, simply because by the time one is flying over Darwin the senses become, shall we say, "dulled".

Alternatively, take the airline's good advice; drink plenty of water, avoid alcohol, and put up with the discomfort, bored out of your tree. And try to resist the atrocious food, which in any other environment you wouldn't feed your dog. We're now of the opinion that the onboard food is as bad for jet lag as the booze. Hedge Clippings' solution: Stay hungry, both during the flight and post arrival, and if you can find such a thing in London, hit the (good) caffeine.

But we digress. There's an election in the UK in less than a month, and the outcome will determine Britain's future for some time to come - if not forever. We had thought the result could go either way given the variables at stake, but based on a very small survey, the feedback is for a Boris victory.

Firstly, a couple in their 60's who voted to remain in the referendum, along with their children. Wind forward three years and they're sick of the whole thing and just want to get on with it, as do, less enthusiastically, their children.

Next, a more analytical view following a meeting with Chris Watling of Longview Economics, who in their usual fashion have numerically quantified their forecast result - namely that Jeremy Corbyn's Labour is committing political Hari Kari, and that Boris Johnson, having hit the ground stumbling, is likely to end up with a likely majority of 60 to 90 seats - if not more.

Longview's senior market strategist, Harry Colvin, goes on to conclude that "that outcome should crystallise certainty in markets around (i) the shape of Brexit, and (ii) business friendly government policies.  

There are reasons given for their view, with extensive and detailed analysis as usual, including no compulsory voting, and the UK's "first past the post" system. Not to mention that it seems Jeremy Corbyn's extreme socialist views are a step (or ten) too far to the left, akin to him committing political Hari Kari.

If you're into the minutiae of UK politics, Longview's definitely worth a week-end read.