Awash with cash
By Justin Pyvis – Delivered on 14 Oct 2021

Good morning! Vaccine mandates are becoming more widespread by the day, with the latest cab off the rank being the ACT government, which announced that COVID-19 vaccination will soon be required for all teachers, early childhood educators, admin and support staff (including building/general services), canteen workers,... it's a long list.

Not wanting to be left out the NT also joined the party by revealing the nation's strictest mandate to date, requiring COVID-19 vaccination for all frontline workers by Christmas, that Chief Minister Michael Gunner said "is a very broad, principles-based vaccination policy that's based on health advice... most people in the Northern Territory are one degree away from a vulnerable person".

From early next year the territory will also "take more steps, bigger steps, to safely relax quarantine restrictions". Options include "reducing the 14-day quarantine period of vaccinated people or allowing vaccinated people to leave quarantine as soon as they've returned a negative test result and comply with an ongoing testing regime".

A full Australian Christmas reopening may not happen but early 2022 is looking a pretty decent bet for relatively free (vaccinated) travel between states and territories.

Fully vaccinated population (aged 12+)

NSW
ACT
TAS
VIC
NT
SA
QLD
WA
Markets

Daily % change

AUD/USD

73.8

+0.4%

AU Yield (%)

1.63

-3.7%

US Yield (%)

1.50

-6.3%

ASX200

7,273

-0.1%

S&P500

4,364

+0.3%

Brent (bbl)

83.3

0.0%

Gold (oz)

1,794

+1.9%

Iron ore (t)

122.0

-5.3%

Bitcoin

57,018

+2.8%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

The US S&P500 gained 0.30% overnight despite the latest US consumer price index data showing inflation accelerated again in September, hitting a 13-year high 5.4% from a year earlier. However, despite the higher inflation read US 10-year Treasury yields slipped following the latest Fed meeting minutes, which revealed no intention to accelerate the planned winding down of asset purchases and repeated that line that the current price increases are "transitory".

Locally, it was another day in the red for the ASX200, which dropped -0.11% thanks to declines in materials (-1.1%) due to weaker iron ore prices and financial stocks (-0.6%) following Bank of Queensland's (-4.3%) underwhelming full-year results.

Economy

Lockdown slowdown: Treasurer Josh Frydenberg said he now expects Australia's September quarter GDP to fall by 3% or more, up from his previous estimate of 2% or more. In terms of the economic cost of the lockdowns in NSW and VIC, Frydenberg put the figure at a whopping $A2 billion a week but that a "bounce back" is inevitable, as "vaccines are the cheapest form of economic stimulus available".

Relatively upbeat: The October Westpac-Melbourne Institute Index of Consumer Sentiment fell slightly to 104.6 but remained positive. Interestingly, those vaccinated or intending to get vaxxed had a hugely optimistic index read of 122.0, while those unvaccinated and intending to stay that way (accounting for only 6% of respondents) had an index read of just 84.8.

Green gamble: The NSW government is backing hydrogen as the technology of choice in the transition to greener energy, making $A3 billion in financial incentives available to those who take part in commercialising the hydrogen supply chain. The announcement follows a recent $A1.2 billion hydrogen commitment from the federal government.

Symbiotic: "Chinese imports from Australia surged about 50% year-on-year to $US15.04 billion in September, while exports climbed nearly 24% year-on-year to about $US6 billion."

Deteriorating: Industrial production in the eurozone "fell back below pre-pandemic levels in August as supply chain bottlenecks restricted production of many products". Higher prices and reduced output, also known as stagflation.

Feature
Awash with cash

As at the end of September global initial public offerings (IPOs) reached $US421 billion, a new record that more than doubled the proceeds raised during the same period last year.

Why this matters: The world has been awash with cash yielding nothing for the better part of a year, helping to drive up the value of future earnings for companies that might not ever turn a profit. So far this year there have been over 2,000 IPOs, and that doesn't even include direct listings or SPAC mergers (special-purpose acquisition company, AKA a "blank check company").

There's so much money sloshing around that some are starting to worry it could be unsustainable. For example, Former US treasury secretary Larry Summers warned that traditionally, the US Federal Reserve sought to "remove the punchbowl just before the party starts. Now the party's gotten great and the Fed's not removing the punchbowl until they've seen... conclusive evidence that everyone's going to get plastered".

Looking forward: There are signs that we may have reached peak IPO. For one, the initial gains on offer have started to fall, with shares of US companies that went public in the last four weeks up 26% on average, compared with a 42% rise in value for those that went public this time about four months ago. In Europe, more than 40% of the largest deals are now actually trading below their IPO prices.

Another warning sign is that the cash on offer is so ridiculously attractive that even founders who had repeatedly promised they would own their companies until they died are selling out, such as the blokes at Mailchimp who are now two of the richest people in America.

A rising tide of easy money lifts all boats. But as famed investor Warren Buffett once said, "Only when the tide goes out do you discover who's been swimming naked."

The Wrap Up
⚖️The High Court ruled against Clive Palmer and his company Mineralogy in their claim against the WA government for damages relating to the stalled Balmoral South iron ore project.
🆓Residents of SA, WA or QLD who book a holiday in Tasmania for Nov/Dec can grab a voucher worth $A300, courtesy of the state government.
🥑Your smashed avo probably won't be any cheaper in a cafe but good news for the home cooks: Avocado prices in Australia have dropped from $3 to $1 following a 65% increase in production this year.
🚀The Australian government announced a partnership with NASA to develop a $A50 million Moon rover that could be launched as early as 2026.
🐱‍💻Victoria's vaccination certificates, contained within the Service Victoria app, can be faked in minutes.
🧳The US will reopen its land borders for the first time in 19 months in early November, allowing fully vaccinated foreigners to enter regardless of the reason for travel.
🤫The Australian government spent $250k in legal fees as part of an attempt to keep the original submarine contract price quoted by French company Naval Group a secret.
⛈️Australia's Bureau of Meteorology increased the odds of La Niña occurring this year from 50% to 70%, which could cause heavier than usual summer rainfall across the north and northeast.
🗾Japan's ruling party, the Liberal Democratic Party, made an election pledge to increase military spending to 2% of GDP, double the country's post-war commitment to keep military budgets within 1% of GDP.
💉Australia's drug regulator, the TGA, granted Pfizer "provisional determination" to apply to vary its existing approval for the COVID-19 vaccine to include children aged 5 to 11 years.
👨‍🚀Star Trek actor William Shatner became the oldest person to visit space, completing his voyage on Blue Origin's second crewed mission. at age 90.
⚠️Queensland's Premier Annastacia Palaszczuk fired off a warning on Twitter to the unvaccinated, saying "We've done all we can to keep you safe... We cannot protect you if you won't protect yourself", dropping a possible hint about a reopening date by noting that "Five weeks from today [the time it takes to be fully vaccinated] is the 17th of November – that's getting very close to Christmas".
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