Investment Ideas From the Edge of the Bell Curve
Lithium stocks tumbled in a Friday sell off.
On Friday, the Australian Bureau of Statistics released the latest refinancing figures for Australian households.
Refinancing between lenders rose 9.1% to a new high of $13.4 billion in November while total new loan commitments for housing fell 3.7%.
How to make sense of the numbers?
ABS’s Dane Mead said:
“More borrowers switched lenders for lower interest rates as the RBA’s cash rate target continued to rise. The number of owner-occupier dwelling commitments also continued to fall in November to below the pre-pandemic level for the first time.”
Source: ABS
The ABS reported that first home buyer loans in November were fully 51% below their January 2021 peak and 16% below the February 2020 pre-pandemic level.
Australia’s Housing Industry Association said lending for construction or purchase of new homes fell to the lowest level since June 2013.
The association’s Tom Devitt told ABC News:
“Investors and owner occupiers alike are retreating from the market. The contraction in lending occurred before the RBA increased the cash rate in December and we expect an ongoing decline in lending as the full impact of the increase in interest rates flows through to households. The RBA has already undertaken the steepest hiking cycle in a generation, and it needs to hold fire on further hikes to give their actions to date time to play out.”
The price of Bitcoin — buoyed by optimism over easing inflation and the concomitant belief the US Federal Reserve will tamper interest rate hikes — briefly crossed over US$19,000 on Friday.
The original cryptocurrency last traded at US$19,000 in November 2022.
Bitcoin has started 2023 well, up 13% in January so far.
At the height of the pandemic, you may recall the huge delays in freight and shipping.
Not only was COVID causing big headaches, but rampant demand from stuck-at-home consumers led to huge congestion and costs. Even well into 2022, it was hard to see any signs of the shipping boom easing.
But that is finally changing.
Just take a look at this chart for container wait times at Los Angeles’ Long Beach port:
Source: Bloomberg
It’s not just a decline in volumes, either.
This chart shows that most shipping costs are also cratering back to pre-pandemic levels:
Source: Zero Hedge
Demand is finally catching up with interest rate pressures (or is supply finally catching up with easing demand?) It’s the clearest sign yet that the central bankers’ fight against inflation is pushing the global economy into a major slowdown and probably a recession.
Whether markets are prepared for that possibility is hard to tell.
It may be Friday the 13th, but markets aren’t spooked.
With US inflation showing signs of finally cooling, investors jumped back into stocks overnight. That is set to push Aussie shares higher, too, despite the already strong performance this week.
So, are we finally past the worst of this inflation/interest rate pandemonium?
Maybe.
It seems as though everyone is expecting a couple more last-minute rate rises and then a possible return to cuts. That’s what markets are trying to anticipate anyway, with their forward-looking nature.
There is plenty of capital on the sidelines waiting for confirmation of a lower-rate future.
But while this optimism is certainly positive for now, I worry that investors are glossing over other factors. After all, you can’t hike rates as fast as the Fed has and not expect consequences for growth.
And when it comes to such consequences, shipping containers are one thing to watch closely.
Because as we’re already seeing, American imports are slowing down dramatically…
https://www.moneymorning.com.au/20230113/easing-inflation-could-lead-to-a-case-of-premature-celebration-from-markets.html
Data centre operator NEXTDC (ASX:NXT) inked a new senior debt facility worth $400 million to ‘fund ongoing incremental growth’.
The new facility expands its debt capacity, with NEXTDC already having undrawn facilities of $1.5 billion at of 31 December 2022.
On a pro-forma basis, the data centre company now has liquidity of about $2 billion, which includes about $465 million in cash.
The new facility has a December 2026 maturity.
Source: NEXTDC
Junior explorer European Lithium (ASX:EUR) entered a non-binding memorandum of understanding to ‘build and operate a hydroxide plant’ in Saudi Arabia under a potential joint venture scheme.
EUR signed the MoU with Obeikan Investment Group to build a hydroxide plant for its 100% owned Wolfsberg lithium project in Austria.
However, the explorer gave no assurance that a binding agreement between the pair will be executed.
EUR chairman Tony Sage explained the rationale for the proposed JV:
“The JV with Obeikan will allow EUR to focus its efforts on building the facilities to start mining concentrate in addition to benefiting from the JV opportunities. The huge energy cost savings will make Wolfsberg even more robust.”
European Lithium didn’t provide further detail on how the JV would work or the strategic benefit of building a hydroxide plant in Saudi Arabia for its Austria-based lithium project.
EUR shares are down 40% in the past 12 months.
Family safety and location sharing platform Life360 (ASX:360) cut 14% of its workforce as it chases positive operating cash flow.
The ‘workforce restructure’ is expected to deliver ‘positive operating cashflow and adjusted EBITDA from CY23 Q2’, a quarter earlier than previously announced.
Life360 expects the staff cull to yield $15 million in annualised cost savings.
Life360 expects CY23 total revenue growth ‘in the range of 35%’, with positive operating cash flow for the full CY23.
The US CPI actually fell 0.1% in December after rising a modest 0.1% in November.
Source: Bureau of Labor Statistics
However, core inflation — measured by excluding the volatile constituents food and energy — rose 0.3% in December, up from 0.2% in November.
Source: Financial Times
3-month annualised core CPI is also coming down, now sitting at 3.1%. It was over 10% at one point in 2021.
Source: Wendy Edelberg
For the first time in a long while, core inflation in the Euro area exceeded core inflation in the United States.
Source: Jason Furman
US #CPI print — the key charts.
US headline #inflation actually declined 0.1% in December.
3-month annualised core CPI is coming down, now sitting at 3.1% (h/t @WendyEdelberg ).
Core inflation in the Euro area now higher than in the US (h/t @jasonfurman). pic.twitter.com/03BT40gyu2
— Fat Tail Daily (@FatTailDaily) January 13, 2023
The December CPI print from the US showed inflation falling to its lowest level in more than a year, a sign the US Federal Reserve’s aggressive rate hikes are percolating through the economy.
The US consumer price index, published overnight by the Bureau of Labor Statistics, declined for the sixth consecutive month, registering an annual increase of 6.5%.
This was the lowest level since October 2021 and is a far cry from the 9.1% level reached in June 2022.
Source: Wall Street Journal
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Investment ideas from the edge of the bell curve.
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