Raining money on fools

Delivered on By Justin Pyvis

Good morning! With Peter Dutton about to be confirmed as the leader of the opposition (there’s a ballot later today with only one name on it), his past comments will inevitably start being dragged up by the government in an attempt to discredit him – that’s politics, after all.

But former education minister Stuart Robert really took the cake with this… odd defence:

“You can’t judge someone on either comments they’ve made or decisions… when they’re exercising their personal conscience or their particular viewpoint.

That has got nothing to do with the size of his heart, the quality of his character or the capacity of his intellect.”

There you have it. Apparently you can’t judge someone on comments or decisions they’ve made in the past. 🤔


Reading the tea leaves

Daily % change

AUD/USD

71.6

+0.8%

AUD/CNY

4.80

+0.4%

AU Bond

3.25

-0.5%

US Bond

2.74

-0.5%

ASX200

7,183

+1.1%

S&P500

4,158

+2.5%

Brent (bbl)

119.3

+1.6%

Gold (oz)

1,851

+0.2%

Iron ore (t)

132.9

+2.5%

Bitcoin

29,145

+1.1%

Ethereum

1,794

+2.1%

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

The US S&P500 added 2.47% on Friday to end its run of seven consecutive losing weeks, gaining 6.6% last week in what was its best since November 2020.

Friday’s rally was triggered by better-than-expected consumer spending (+0.9% last month) and the smallest gain since November 2020 (0.2% from the prior month) in the the Fed’s preferred measure of inflation, the personal consumption expenditures (PCE) price index.

Locally, the ASX200 closed up 1.08% on Friday thanks to a strong US lead and local retail sales data, which rose well above expectations in April at a strong rate of 0.9% month-on-month, reaching a fresh record high.

Also helping sentiment were slow but still positive earnings reports from China, with Alibaba reporting 9% revenue growth in the March quarter, Baidu gaining 1% sales growth and JD.com experiencing an 18% increase in revenue.


Food for thought

Calling the top: Channelling his inner Austrian, Elon Musk tweeted that he expects a recession, which would be a “good thing” because:

“It has been raining money on fools for too long. Some bankruptcies need to happen.”

Recessions can be caused by decisions made in the preceding years. All the stimulus pumped into the global economy following the pandemic may have led to many poor decisions that are only now – as interest rates rise and government payments slow – starting to be revealed.

Crypto’s hard lessons: Co-founder of Ethereum, Vitalik Buterin, warned that “the crypto space needs to move away from the attitude that it’s okay to achieve safety by relying on endless growth”.

He called for more “principles-based thinking”, i.e. boring old legacy finance stuff such as stress tests and “whether or not they can safely wind down”.

The fall of Sri Lanka: Blogger Tyler Cowan linked to a long FT article on Sri Lanka’s woes following the election of Gotabaya Rajapaksa in 2019, with the island going from “an upper-middle income country” with “a per capita income double that of neighbours such as India”, to being embroiled in a:

“…debt crisis [that] is the product of the hubris, mismanagement and alleged venality of political elites including the Rajapaksa family, as well as irresponsible lending on the part of its creditors.”

Poverty is the default state and prosperity can be squandered remarkably quickly.

Schools into prisons: During a speech at the National Rifle Association’s annual conference – at which guns were banned for safety reasons – former US President Donald Trump called for a “top to bottom security overhaul” at schools, including exterior fencing, metal detectors and mandating every building to have a single point of entry (better hope there’s never a fire!).

He also said every school – there are over 130,000 in the US – should have a police or armed resource officer on duty at all times.


Chewing the fat


Bits and bytes

🔫 “90 minutes elapsed between the time the gunman entered the school and when U.S. Border Patrol agents unlocked the classroom door and killed him.”

🏝️ Samoa signed a “bilateral agreement” with China on Saturday promising “greater collaboration”, although no details have been released.

📉 Quantitative tightening is going to be a doozy: According to newly released financial statements, the US Fed has unrealised losses of $458 billion on its balance sheet.

💉 The WA and SA governments joined QLD in making this year’s flu jab free of charge in June.

🙅‍♂️ “More than 100 Russian national guardsmen have been fired for refusing to fight in Ukraine, court documents show, in what looks to be the clearest indication yet of dissent.”

🚘 The price system at work: US “demand [for petrol]… hit its lowest level during this time of year since 2013, excluding the pandemic-outbreak period in 2020”.

💸 More demand stimmy: “The Biden administration is leaning toward forgiving $10,000 in student loans per borrower.”

🏭 Profits at China’s large “industrial firms fell at their fastest pace in two years in April [-8.5%] as high raw material prices and supply chain chaos caused by COVID-19 curbs squeezed margins and disrupted factory activity”.

☢️ “Japan will take firm steps to restart idled nuclear power plants to make maximum use of nuclear power to stabilise energy prices and supply.”

🕵️‍♀️ “A Human Rights Watch report said 89% of remote-learning platforms it reviewed spied on children… [collecting] personal data and some sent it to tech companies for advertising purposes.”