1. The economy is sweet & we should stop complaining about rates
Australia is in an economic sweet spot. Growth figures released later today will show an economy still expanding. Yes, interest rates are high compared to the last 15 years, ever since the global financial crisis. But that was the exception period. Rates are relatively low compared to the three decades before the GFC. Australia is going through an adjustment period whereby home owners and borrowers need to get used to "normal" rates again. Rates might fall next year but they won't drop by much. There are plenty of retirees delighted rates are higher again. Pretty much everyone who wants a job can find one - that is critical to economic wellbeing. Inflation remains a challenge, but not a big one. At 3.5 per cent, underlying inflation is still too high, but it isn't overly damaging the economy. Productivity is the biggest clunker. Australia needs to work smarter and that needs strong management and government. And the cost-of-living crisis is real! We are going through an adjustment process to the new normal and that hurts. People are struggling, but they will adapt.
2. Investors understand the economic sweet spot, too much
If we were in economic trouble, why would investors push the sharemarket to a record high? Why would nine of the top 25 stocks - Commonwealth Bank, Goodman Group, Macquarie, Aristocrat Leisure, WiseTech Global, REA, Xero, Brambles and Pro Medicus - be trading at, or near, record highs? The sharemarket reflects future earnings, so investors are predicting that things are going to be very good over the next six to 12 months. The market itself is up 11 per cent in 2024. That doesn't happen in an economic crisis. In fact, the only sectors not to perform well are those that rely on commodity prices - the big miners and the energy groups. However, keep in mind that markets tend to overshoot. They rise too much and fall too much. The top 100 stocks are trading on a forward price-to-earnings multiple of close to 19 times. (The PE multiple measures a current share price based on expected profits). The long term average is 15.5 times. The sharemarket is expensive, in historical terms. Add in the fact that the PE multiple is high at a time when one of the engines of earnings growth in Australia, mining, isn't firing and the S&P/ASX200 looks over-priced.
3. New Woolworths CEO deserves some sympathy... maybe
Spare a thought for new Woolworths CEO, Amanda Bardwell. She took the job five weeks ago, after a horror run for the supermarket giant. This year it has faced allegations of sham discounting and fronted an inquiry from the competition watchdog. It has had a CEO, Brad Banducci, sensationally walk out of an interview with ABC's Four Corners, endured enormous public backlash, and had a share price that's gone south (unlike most of the rest of the market). Ms Bardwell now has to explain why warehouse workers aren't working, and why shelves aren't fully stocked. The workers are demanding a 25 per cent pay increase over three years and changes to new productivity rules introduced by the company. The strike has been going on for weeks and will cost the supermarket group at least $50 million in earnings. The timing is horrendous. November and December are when Woolies does about 20 per cent of its annual turnover. Woolies can only sell when there is stock on the shelves. Most industrial disputes reflect poor management. Mostly unions are reasonable representatives of workers, because their members need to get paid. Woolworths looks to have done a poor job handling this one. I almost, but not quite, feel sorry for Ms Bardwell.
4. Is Elon Musk a genius or a tool?
Elon Musk is a genius. And he is a tool. It's hard to marry the two attributes in your mind. Without Musk, we wouldn't have the boom in electric vehicles globally. Musk's SpaceX has pushed space travel further than any other private company, and in recent years, further than any other government. Starlink, which is owned by Space X, has provided satellite internet connection to over 100 countries, often in very remote locations, thereby changing people's lives. But why does Elon Musk have to be such a prat? This week, in response to a Delaware judge upholding her own decision against awarding a $US56 billion pay package to the Tesla CEO, Musk tweeted: "Absolute corruption". Musk, like his friend Donald Trump, now seems to believe he is above the law. Musk's attacks on challenges to his economic interests, such as the social media ban in Australia, are loud and sometimes brutal. And he has a megaphone - social media platform X - to shout from. Musk is a conundrum. A genius and a tool. I both admire and deride him. It is very confusing.
5. Crisis in the world of coffee
If you're still paying less than $5 for your small flat white, then you won't be for long. The price of arabica beans - the variety favoured by baristas around the world - is up 70 per cent this year. Arabica beans are fetching their highest price in more than 40 years. Brazil is the world's biggest grower and exporter of coffee beans, and its biggest drought in history has hit harvests for several years running. Producers in the country are facing bankruptcy because of a lack of supply, even though prices are sky-high. The second biggest producer in the world in Vietnam. It too has been suffering from drought, fuelled by El Nino weather patterns and global warming. The fear is the changes are structural, not cyclical, meaning coffee prices aren't coming down. There was rain in Brazil in October, which relieved the pressure slightly. But still, the price of your morning shot is going up.
BEST OF THE WEEK
IF YOU MISSED THIS ONE, CATCH-UP NOW
Infrared saunas are in. TVs over the fireplace are out. The Property Pendulum by Domain and Fear & Greed reveals the latest property trends, and how buyers and sellers can use them to their advantage.
"I'm 13 years old and just getting into investing but me and my dad have been listening to you for over a year in the car on the ride to school.
How can people invest in the dollar and how does the price fluctuate?"
AND ONE LAST THING...
Jaguar has done an extraordinary (and controversial) rebrand, and now they've revealed the radical electric cars they hope will save the company. These have to be seen to be believed.
It's a far cry from the legendary E-Type Jaguar, one of the coolest cars of the 1960s. But as luck would have it - if you're in the market for an E-Type Jag, here's one that comes with a lot of Hollywood connections (and a very distinctive paintjob).
And if you fancy a vintage numberplate to go on your new Jag, then check this out. The number '32' is the highlight of this range up for auction in NSW - but be warned, the way the bidding is going, you'll need deep pockets.
