- Right now, the biggest criticism of the Labor Party is that nobody can tell a damn difference between them and the Liberals.
They just revealed that, as far as housing policy goes, the critics are right.
There isn’t one!
What makes me say that?
The Party announced recently that their solution to the housing affordability crisis is for the government to take a stake in new homes for first home buyers. The initial eligible number of people would be 10,000.
Yep. More subsidies, grants, breaks, and fiddling. Blah. Blah. This will achieve nothing because it leaves the two gorillas in the room untouched: tax reform and credit restrictions.
We could solve the housing affordability crisis tomorrow by raising tax revenue on land and removing taxes from profits and labour.
And then we could really hammer it home by getting the Aussie banks to fund businesses and entrepreneurship instead of real estate.
Will this happen? No way!
Onwards and upwards the property roller coaster we go. All this current kerfuffle about interest rates is a massive distraction.
Terry McCrann summed it up perfectly in The Weekend Australian:
‘If the RBA does what it should do and lifts it to 0.5 per cent, on what planet in what universe could that be considered anything other than still softer-than-soft? With inflation at 5.1 per cent?
‘It would still be a negative real rate of 4.6 per cent.
‘With the standard home loan rate going up to around 2.5 per cent, borrowers would still be getting their money at a significant negative real rate.’
Here’s the other thing…
As long as loan growth and government money are still being pumped into the sector, housing inflates. It’s about as sure as you and I can be about anything in this market.
Yes, Sydney and Melbourne might be cooling off. Someone should remind the editors of the daily newspapers in each city that Australians live in the other states.
It’s about half the population of the country from memory. What’s true of Toorak and Mosman may not be true of Brisbane and Hobart.
I just recommended three stocks to benefit from the disconnect from the mainstream narrative about the housing boom being over and the reality on the ground.
The market is handing them to you on a platter. The three recommendations I have for you are down 48%, 36%, and 32% from their all-time highs.
This comes about because the general understanding of what drives house prices up — despite endless drivel about it — is as sophisticated as a 1990s mobile phone.
It’s also why everyone thought housing would collapse during COVID. I wrote a report saying the opposite. The irony is hardly anyone read it because to claim such a thing seemed so preposterous.
That the strategists behind the Labor’s Party policy think it’s a genuine vote winner tells us that. Everyone likes to think of themselves as a contrarian in the market.
Now’s your chance…
Make sure you check those three ideas out here from my last monthly issue.
Again, grab those ideas while the stocks are on sale.
- The market has been very volatile in 2022. You know we had the big 11% crunch in January. Then we just had the 5% dip. And the US markets were down big on Friday after the ASX closed for the week.
How to deal with this volatility? One idea is to only invest in trends that can run for years. Think ahead 12–24 months.
The reality is that whatever is concerning the market now will probably be forgotten and we’ll be worrying about something else.
Clearly the rise of renewables and electric cars is one such trend.
From the Australian Financial Review this morning:
‘Renewables and battery developer Maoneng has revealed ambitions to build an almost one-gigawatt solar and battery farm in NSW’s Upper Hunter region in a $1.6 billion project that chief executive Morris Zhou says has attracted interest from infrastructure investors and construction groups.
‘The proposed Merriwa project would be one of the largest renewable energy hubs in the country, involving a 550-megawatt solar farm and a battery with a power output of up to 400MW and four hours of storage.’
We talked about being contrarian up above. The rise of lithium on the back of all this is now clearly consensus. But that doesn’t mean there isn’t opportunity. You just have to come at it from different angles.
One is what my small-cap team and I are calling lithium’s ‘little brother’.
Curious?
Learn more here.
All the best,
 |
Callum Newman,
Editor, The Daily Reckoning Australia
PS: If you’re interested in renewables, my colleague Selva and I chatted about it last week, and the investment opportunities on my podcast. All free. No ads, sign-ups, or anything else. Just a good chat you can tune into here!
