Population trends

The Australian Bureau of Statistics published population data for March 2021, which showed an increase in population of 21,000 people, to be 36,000 higher than in March 2020. The Corona crunch for population growth, which was 376,000 in the year to March 2020 (pre-crisis). So population growth has slowed to one tenth in approximate terms. Net overseas migration was -95,000 over the year, with natural increase of 131,000 over the year. In fact, the March 2021 quarter saw a little baby boom of sorts.

Interestingly, NOM was -53,500 in Victoria over the past year, whereas NSW only had an exodus of -13,500. That indicates the world’s most locked down city has taken a toll on residents. Many Aussies are moving interstate, while others are fleeing the country entirely.

The Chart above shows Victoria has shifted from being a net attractor of residents to now losing around 1,500 residents (net) every month. No small change. Queensland remains the preferred haven, with over 30,000 net residents gained over the past year. Who wouldn’t mind beaches, cheaper housing (though not by heaps admittedly), less lockdowns and better weather?

Other States are doing better as well, with South Australia, Western Australia and the ACT all swinging to positive NIM over the year ending March 2021. With current events in Victoria, this trend looks set to continue. It’s certainly interesting times if nothing else.

Until next time.

Population trends

Iron ore crash worsens

Time to eat some humble pie.

I’ve been on record saying commodities were a preferred exposure this year. Markets were discounting sky-high prices as if they would quickly vanish. And perhaps, they are.

It’s been a truly precipitous decline for iron ore to have fallen by over half, from circa US$230/ton to US$100/ton.

Iron ore equities have been savaged, unsurprisingly. FMG, which I bought a few months ago at $22, is now in the $15 range (granted, its paid out a $2.11 dividend). But still, with the benefit of hindsight I was bedazzled by sky-high iron ore prices and massive dividends.

Australia’s majors will still be fine at US$100/ton. The bigger risk is something very sinister in China, such as a desire to cut out Australia’s iron ore industry, regardless of the consequences to itself in the process. It could prop up inefficient domestic iron ore production, prefer exports from Brazil and elsewhere, and leave Australia’s massive industry without its main buyer. No doubt, that would be a disaster, not just for share prices, but the Australian economy. Iron ore is our largest export and a rare bright spot in the CV-19 economy.

Perhaps its surprising the A$ has held up as well as it has, still buying over US72c. If iron ore continues to hurtle lower, surely sub-70c beckons, at a minimum.

On the positive side, the iron ore price looks like it might be at trend line support (see Chart above). Evergrande, an insolvent Chinese property developer, has caused a lot of concern (likely feeding into the IO crash through bad sentiment). Evergrande may alleviate some of its woes if investors take up the offer of discounted properties to redeem their owing investment money. And of course, in a communist country, the government may step in to avoid broader contagion.

At the moment, fear is high and so (at least from where I’m standing), it’s probably too late to jump ship on iron ore equities down by 30/40%. I’ll be riding out the storm. Thankfully, other investments have done better.

Iron ore crash worsens

Housing roars higher

The housing market surged 6.7% higher in the June quarter according to ABS data to be 16.8% higher over the June quarter in 2020. Some truly remarkable rates of quarterly growth across all capital city markets. The weakest annual growth is 13% (Darwin) with some markets pushing 20% annual growth.

The market is now surging higher at rates not seen since coming out of the GFC in 2009.

Housing roars higher

Market positioning

Actions speak louder than words.

It’s a common adage for a reason. Whether we are talking about romantic relationships, friendships, or indeed views on the market.

Recently, a selection of Fed Presidents in the US have announced they are selling their shareholdings, ostensibly due to a conflict of interest / ethics concerns. It’s true they could be selling individual stocks to buy index funds thus still remaining positive on the market.

https://finance.yahoo.com/news/fed-officials-sell-stocks-avoid-224555386.html

Another much watched name, Warren Buffett, appears to have been downsizing his shareholdings over Q2.

Could I be jumping at shadows? Quite possibly.

However, markets have had a massive rebound since their March 20 lows. Further, risks seem to be intensifying – particularly political risk, which could lead to havoc in financial markets. For instance, vaccines mandates could lead to resignations and significant fall in employment/spending, that will flow through to share prices. If the mental health crisis continues unabated, suicides could rise, again undermining the economy/share market. It sounds macabre to speak so clinically, but I’m simply looking at the macro (the point of this blog).

Personally, with stock prices at all-time highs and risks elevating, I’d no longer be charging into the market right now. Keeping some powder dry may prove beneficial.

Market positioning

Housing market chugs on

Despite a rather surreal August, with much of the country locked in their homes for the vast majority of the day, the housing market kept moving higher. The five-city capital average advanced a strong 1.5%. The trend is a gentle slowing, but still very strong growth. Stock on market remains very low, indicating strong demand. The rental market remains tight (we touched on this a few posts ago) while mortgage rates are dirt cheap.

Canberra, Hobart and Brisbane (incl. Gold Coast) led the charge, all moving higher by more than 2%. Sydney (+1.8%) remained strong despite lockdown, as did Melbourne (+1.2%).

Housing finance data separately released showed lending remained extremely strong in July 2021, although it is no longer shooting higher. Banks would still be licking their lips with this amount of lending.

So far, the housing market remains bullet proof.

Housing market chugs on