Free Whelan’: Ugh…election season. Here’s how to position for political tail risk
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In this Stockhead series, investment manager James Whelan from VFS Group offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.
UGH…we kick off the latest (damn) Australian election campaign with another whole raft of nonsense.
Albo comes out with a clanger on day one, not knowing either the RBA cash rate or the unemployment rate.
Apparently interest rates are one of the most important issues to regular Australians, so not knowing this is a sin.
To be fair though, I honestly believe that the only people who know the overnight rate are economists, journalists (even then that’s pushing it), finance bros and you, reading this now.
It’s 0.1% and it’s been that number for over a year.
38 Days to go until election day. About 56,000 minutes. Counting.
Domestically, the biggest risk on my horizon is that a Labor “red wave” — a la what just happened in South Australia — will give the ALP the green light to bring in some things that they didn’t necessarily campaign on.
If some hardcore factional hack wants to start talking about negative gearing or franking credits because they’re in with a 40 seat majority, then you need to factor that into your dim sums.
Since the financial community didn’t have any real answer for what to do in case the ALP won last time (don’t question me on this, we sincerely had no idea) I’m happy to say this would cause a fair amount of panic to housing and to bank shares.
It’s a scenario that I unpacked in more detail on the latest BIP Show podcast with REA Group’s research guru Cameron Kusher.
(That’s the Apple link, but it’s also on Spotify and all the usual podcast streaming services).
On the same show, we also did a state by state analysis of what’s going on with property in this country.
Cam’s very smart, he actually knows the cash rate, and has a good idea about what’s ahead (can’t say the same for the Federal candidates).
There’s lots of talk around the traps of the next leg in commodities coming soon.
I always get a little nervy when everyone agrees but I will repeat this:
Russia could find reverse on their tanks and leave immediately (they won’t), and it will still be a lifetime until Russia is welcomed back into the international community.
For a period of years, Ukraine will be the most well funded industrial state in the region, if not the world.
Billions of private and public dollars will pour in to the country.
Manufacturing will be set up there. Schools and universities will be build with endowments.
The broader goodwill towards Ukraine will be like nothing we’ve seen in recent memory.
Meanwhile, buying Russian oil and gas will be something that’s not done for a while — especially if Putin remains in charge.
Sure, countries will go back to buying as people forget. But don’t forget the original issue which was that one guy (ONE GUY!) held and holds a large proportion of western energy in his hands.
No sane government will allow that to happen.
And the move away from Russian oil and gas really kicks off this week in a meaningful way.
The plays there are alternative providers (thinking Aussie LNG, thinking Shell (SHEL.LSE) , thinking Total (TTE.FP) for those who can mess around in Euros.
Another thing that’s not going away; the next wave of sentiment for the global EV market.
And yes, I’m thinking lithium.
There’s a locally listed ETF for that run by the ETF Securities gang which everyone knows, called ACDC.
If you think the ETF itself is looking a bit ordinary on the charts, just do what I do and filter the holdings to find the names that suit your trading style (value, growth, timeframe, etc)
Also, there’s a Mac Bank Research report that just dropped on Monday and the title is “Australian Lithium and Rare Earths Miners: High petrol prices accelerate EV transition.”
Try and get your hands on it but it’s pretty good at drawing that line between what’s happening now and how it converts to stock prices of Lithium miners.
(Stockhead did a quick wrap of the companies in Macquarie’s sights here).
Finally, please do keep an eye on what’s happening in Shanghai with regards to just how important feeding a population is.
When people scoff at my Long Food thesis, these are exactly the kind of problems I’m thinking about.
Sometimes it’s the difference between civility and revolution.
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