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Only one you can’t stop crashing at your place during COVID19 is the economy

Warning Signs Investors Ignored Before the 1929 Stock Market Crash ...

Brace yourself.

COVID19 will be defeated but the cure is turning out to be way worse than the disease.

Unfortunately, the sad reality is that at the rate governments are tightening legislation to keep us in shut down mode, we are day-by-day staring at a great depression.

While some will praise governments for throwing the kitchen sink at the economy with all manner of stimulus packages, the relief will be temporary because all of the ammunition for a sustainable recovery had been depleted years earlier. It is like supplying an alcoholic on rehab with an all-you-can-drink open bar.

Our feckless RBA has just embarked on QE, a mission that has failed every other central bank that has tried it. The velocity of money has been falling for decades. Who will be given access to borrowing at zero interest rates when the economy is in freefall? Which banks will lend against properties that will likely implode in value? 50% down? To think of all the reckless “first home buyer” schemes that loaded young people at the top of the property market. The RBA has been complicit. Not wanting to put pressure on the government to reform, it just kept cutting rates to keep housing afloat. It was totally negligent in its duty even though it will signal its role as a rescuer of last resort.

When will banks be forced to mark to book the value of mortgages on their balance sheet? Equity is thin as it is. 15-20% equity buffer to mortgages is pretty wafer-thin. They need to do this immediately so we can properly assess risk. Forget stress tests by APRA. They’re meaningless. Our housing market will collapse with higher unemployment. 50% falls from here are possible. Remember there will be hardly any buyers. Prices fell up to 90% in Japan after its property bubble popped.

Worse our regulators have been asleep at the wheel chasing financial institutions on their commitment to climate change, the absolute least relevant metric to save them from here. It shows how complacent they became.

Australia has made some interesting crisis policy choices. For instance, PM Scott Morrison is trying to pass rent moratoriums where landlords suspend payments from tenants until things return to normalcy. It is not enshrined in law yet. In principle that is a nice gesture even if the government is subsidizing the banks for forgone interest due to short term loan repayment moratoriums. Let’s assume this continues for 6 months. Apart from the astronomical size of the subsidy, who will ultimately end up sacrificing the 6 months? Landlords? It won’t be the tenants.

Shouldn’t landlords be free to choose whether they are prepared to forgo rent or not as a purely rational business proposition? Shouldn’t a landlord be free to enforce a rental agreement? Will contracts matter anymore?

At some stage, the free market must be allowed to function and the government will hit a tipping point of weighing stopping economic armageddon by allowing businesses to function and the marginal risk of infections. The people will be crying for this if shutdowns remain.

Landlords may be labelled un-Australian or worse but in 6 months time, if unemployment has surged to nose bleed levels well above the 6% we saw during GFC at what point will disposable income be able to support a daily coffee at a cafe?

A cafe might soldier on for a further 3 months on skeleton staff before realising that they can’t cover costs. A landlord would be well within reason to demand that early cancellation clauses and fees are enforced.

Then what of all the invoices to coffee suppliers, bakeries who provide muffins and croissants and utilities? Who misses out? What about the invoices of the coffee supplier? Will the bakery get called on by its flour supplier to pay upfront for future deliveries when it has no operating cash flow, instead of the long-standing 60-90 day terms? That happens overnight. It isn’t a managed outcome. Cash is king.

The question is why hasn’t the government taken advice from the banks on business lending so it can better assess the risks involved from those that deal every day with small companies?

We can’t just shut an economy down for 6 months and expect a return to normal when it is all over. Unemployment rates are likely to surge well above 10%.

As we wrote in an earlier piece, there are 13.1 million Australians employed as of February 2020. Full-time employment amounted to 8,885,600 persons and part-time employment to 4,124,500 persons. Retail trade jobs come in at a shade over 1.2 million jobs. Construction at 1.15 million. Education 1.1 million. Accommodation/restaurants /bars etc at 900,000. Manufacturing another 900,000. Noticing a trend in our employment gearing?

We can fudge the unemployment figures however we like. We can pay $1,500 a fortnight for 6,000,000 workers to pretend they still have a job. That is $18bn a month. The PM can talk about how this will help us bounce on the other side. If it continues for just over 6-months can the budgeted $130 billion will be spent. This is separate to NewStart payments too.

Yet, will people lavishly spend or pay down debt and economise as best they can? We think the latter unless moral hazard has truly sunk in.

What people need to understand is that our Treasury expects to raise $472.8 billion in taxes for FY2019-20. Throw in sales of services, interest and dividend income and that climbs to a total of $511 billion. Expenses are forecast at $503 billion. In the following three years Treasury anticipates $490.0 billion,  $514.4 billion and $528.9 billion in taxes. Expect those totals to be cut significantly.

So if ScoMo’s JobKeeper rescue package for workers goes beyond 6 months, that is equivalent to 27% of annual tax revenues. That doesn’t take into account the slug to tax collections of lower GST and vastly lower income tax for individuals and corporates. That is just at the federal level.

Note, states such as NSW have recently waived payroll taxes for small businesses in a  $2.3bn stimulus package. We shouldn’t forget that the NSW Government is the largest employer in the Southern Hemisphere at 327,000 staff.

We remind readers that according to the RBA small businesses employ 47% of the workforce. Medium enterprises employ 23%. That is 70% of the entire workforce who are most at risk from a slowdown.

In 2019-20 income tax collections will make up $220 billion. Company tax was forecast to generate $99.8 billion. GST $67.2 billion. Excise taxes (petrol, diesel, tobacco etc) $44.7 billion. This data can be found on page 21 here.

Local cafes are reporting a 60~80% fall in revenue. Pretty much all casuals have been let go. It is a bit hard to survive on coffee when a lot of stores aren’t stocking pastries for fear of spoilage.

It is not hard to assume a scenario where government income taxes fall to $160 billion (-28%) due to mass layoffs. One assumes many people will be able to get a tax rebate come June 30th. So this number may end up being conservative on an annualised basis.

Company tax could plunge to $40 billion annualised due to the drastic fall in revenues as customers change the manner of contracts and reign in their own spending. Anyone that thinks that business will resume as normal is crazy. The ripple effects will be huge.

Excise taxes may drift to $35 billion as people cut back on drink (currently $7bn in tax revenue), are limited in places to drive negating the need to fill up (currently $18bn in total tax take). The $17 billion in tobacco excise may weather the storm better than most.

GST could fall to $50 billion. People just aren’t spending much outside of food. Massive retail discounts will not make much difference. GST will be the best indicator of how much the economy has slowed. Even if we start to see a massaging of the GDP numbers, GST won’t lie. It will be the safest indicator.

If our assumed tax revenue sums to $285 billion annualised from the budgeted $472 billion that equates to a 40% haircut.

Trim the ‘other revenue’ column to $30 billion from $39 billion and we have $315bn. Will the government then chop away at the $503 billion in expenses? All of the stimuli doesn’t arrive at once but a lot of it in relatively short order. Surely a $300~400 billion deficit is a fait accompli?

We should also anticipate forward year tax revenues be cut c.30% for several years after. The question is when does the government realise that it must cut the public service and scrap wasteful projects like French submarines and other nice-to-have quangos? We won’t see a budget surplus for decades.

We must careful not to fall into the trap Japan finds itself in. It has a US$1 trillion budget funded by US$600bn in taxes and US$400bn in JGB issuance. Every. Single. Year.

Nothing short of drastic tax and structural reform will do. Instead of behaving more prudently by cutting budgets when we had the chance, instant gratification created by governments desperate to stay in power has only weakened our relative position. Since 2013, the Coalition has been responsible for 46% of the total amount of all debt issued since 1854.

States should quickly realise that the $118 billion in federal grants going forward will also be curtailed. NSW will likely fare the worst because its financial position is by far the best.

If the government had a proper plan, it would be looking to what essential industries have been given up to the likes of China that we need to onshore. Medical equipment, masks or sanitiser. For cricketer Shane Warne to be converting his Seven Zero Eight gin factory to produce hand sanitiser shows how much of a joke our local manufacturing has become.

We must never forget that a Chinese government-owned company displayed the Communist Party’s mercenary credentials by (legally) buying 3,000,000 surgical masks, 500,000 pairs of gloves and bulk supplies of sanitiser and wipes. So not only was it responsible for covering up the truth surrounding the virus in the early stages of the pandemic, we openly let it compromise our ability to combat the virus when it hit our shores.

China has shown it doesn’t give a hoot for ordinary Australians. So why should we continue to fold to its whims and cowardly surrender our industries for fear it’ll stop dealing with us? It is nonsense. We have some of the highest quality mineral resources which it depends on. We can bargain. We have chosen to appease a bully.

Our Foreign Investment Review Board (FIRB) needs to be far more vigilant to prevent takeovers by Chinese businesses. We should openly accept the way China conducts business practices and recognise that it is often incompatible with ours when national security is at stake. Surely this crisis has highlighted the true colours of the political system in Beijing.

That leads us to Japanese companies. Many are seriously cashed up, have a favourable exchange rate and have a long-standing history of partnering with local businesses. We should be prioritising our relationship with Japan and look to have them invest in our inevitable capital works programs – specifically high-speed rail. It is the type of project that has meaning for the future and a long enough timeline to turn an economy around.

People need to be prepared for the reckoning. There is no point softening the blow. The brutal truth will eventually arrive and we will have only put ourselves in an even weaker position with the policy suite enacted so far. Time to be rational about risk/reward. Whether we like it or not, the minimum wage will need to be cut substantially in order to get the jobs market alive again. Don’t worry, unemployment will be so high that people will demand minimum wages are cut because it is far superior to the alternative!

(Time to ditch your industry super and start shovelling your superannuation into gold)

Unlimited QE and a reminder of discontinued series

Just when you thought it couldn’t get crazier, the Fed has announced that it will buy unlimited sizes of treasuries, mortgage-backed securities and corporate bonds. Recall our comments in 2018 when the Fed discontinued its reporting of assets. We noted that the Fed discontinued M3 money stock in 2006, two years before the GFC. Coincidence?

We were always struck by former Fed Chair Janet Yellen’s comments in 2016:

Monetary and fiscal policy is far better prepared for large positive shocks than negative ones

and 2017:

Don’t expect another financial crisis in our lifetime

The only thing left is to buy equities outright which would require an act of Congress. Such moves once again only highlight just how bad the situation has become. The Bank of Japan can hardly be credited with success over its ETF based equity purchases. It has now lost $30bn in this recent market rout. We should mention that the BoJ is a top 10 shareholder in almost 50% of listed stocks, creating an overhang of epic proportions should it ever announce it wants to reduce holdings. It now owns $300bn and due to be $400bn by year-end.

The irresponsibility of socially responsible investing

United Nations Sustainable Development Logo

Socially Responsible Investment (SRI) has been heavily pushed by members of the Australian Council of Superannuation Investors (ACSI) for a while now. Apart from cynically cashing in on the generally higher fees generated by these “woke” funds, the returns have been nothing much to write home about. As Milton Friedman once said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.

If we look at YTD, 1 or 10-year performance all of the SRI portfolios as indicated by published performance (listed on their websites) of local ACSI members, they have “underperformed” the benchmark index. One outperformed in the 5-year category. Hardly anything to crow about. So as much as they might feel warm and fuzzy for turning these funds into virtue-signalling investment vehicles, the outcomes for the monies entrusted to them is far from ideal. While investors should bear ultimate responsibility for where they deploy retirement funds, do they realise how much money they are torching by believing in this nonsense?

So why do these funds try to bully top-performing companies to conform to their irrelevant ideals which on the face of it do not appear to be working? If one reads through the fine print, many superannuation administrators pat themselves on the back that they are aligning portfolios to the United Nations Sustainable Development Goals (SDGs). If one wants to champion best in class ethics, the UN is the last place anyone should look. Just look at the unethical scandal that occurred at UNAIDS. 

It doesn’t take a rocket scientist to work out what these SDGs are – eliminating hunger, wiping out poverty, promoting gender equality, good health, clean water and sanitation, affordable clean energy etc. All wonderful things in and of themselves, but surely if the market agrees with them,  shouldn’t share prices reflect that?

Friedman spoke of free-market economics, “Well, first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus [including the UN]. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.

In Australia,  it would seem that many high performing companies, that aren’t ‘compliant as they should be‘, are being pressured to increase diversity, women on boards and all manner of meaningless benchmarks preached by the ACSI and its members.

Take the 30% Club which pushes to have 30% women on boards. While this started in the UK in 2010, it has spread across multiple jurisdictions including Australia. The 30% Club emphatically quotes from a McKinsey study,  “Companies in the top quartile for gender diversity on their executive teams are 21% more likely to experience above-average profitability than companies in the fourth quartile.” What this study doesn’t say is that the bottom quartile of companies maybe just poorly run, in spite of the genitalia of the board.

Don’t mistake the most important point to be made. If a board is best served by all women, you won’t hear a peep from investors if they can produce the best results. As soon as we start to try to enforce gender quotas, performance becomes predicated on chromosomes rather than capability. What next? Ensure fair representation of LGBT on boards? Religions? Races? Disabilities? Where does it stop when all that matters is ability that produces performance?

Take a look at the disaster that has befallen PG&E in recent times. In the interests of pandering to all these irrelevant SDGs, it can tell you the exact breakdown of the diversity of its workforce but can’t tell you the status of much of its infrastructure, some which have been directly responsible for the devastating wildfires in California. The company was forced into Chapter 11 bankruptcy. Did diversity help shareholders? If one’s house is on fire, do we worry about identity? Or who has the skillsets to put out the blaze the fastest? QED.

Yet our woke investors keep pushing these trends. IFM Investors waxes lyrical about its climate change, 30% Club and carbon disclosure project. Good for it. It has a choice. It should live by the sword and die by it. If that is what it wishes to focus on why not allow the free market to; a) decide whether superannuation holders want to deploy funds in such a manner and b) let corporates decide if SRI is good for their businesses.

Yet, the latest push by these socialist fund administrators is to ensure that companies conform to the ‘Modern Slavery Act.’ Are these people for real? Who are they to try to enforce federal law? Talk about self-imposed authority. It is a safe bet that 99%+ corporates listed on the ASX behave are compliant in this regard because if not the punitive outcomes will be severe.

Moreover, if some of these funds own stocks like Tesla in their international portfolios, perhaps they might consider such a hip and trendy investment has an indirect connection to child-slave labour in DR Congo where 70% of the world’s cobalt is mined to go into the Li-ion batteries.

There is one absolute truth in finance. In good times, any mug CEO can be successful. It is only when markets turn sour that the “quality” of decent management is truly appreciated in how they successfully manage to mitigate risk in an ugly downturn. In a difficult market climate, only the fittest survive and if companies have strayed off the reservation to appeal to investors, it will soon become self-evident in the results.

As we stare at the precipice of a potentially deep global recession, the previous paragraph will be all that matters. Because those corporates too busy hitting diversity targets, installing genderless bathrooms and ensuring they have double-checked all employees have complied with Earth Hour will be slaughtered when markets take a pounding.

These SDG focused funds will soon see that they are part of one giant herd and as performance starts to suffer in this crowded trade, the stampede toward the exit will reveal just how irresponsible the push to ram through such irrelevant metrics at the very companies who caved in was.

As a contrarian investor, the best investments will be in exactly those companies that shun(ned) this foolhardy exercise and forged a path in the spirit of Milton Friedman. Afterall they understood what it really means to be “free to choose.” So back up the truck in tobacco, mining and fossil fuel stocks on any pullback. After all, mean reversion will see these stocks outperform if nothing else.

Don’t forget Harvey Norman (HVN). How could it be that the company is worth 4x the combined value of Myer and David Jones, the latter two businesses focused on pleasing the United Nations rather than customers?  Hmmm.

Isn’t that the ultimate ready reckoner for these SDG funds? The market is always right. If the performance of the funds deployed isn’t making the grade, don’t attempt to force the best of breed to comply to your self imposed standards. Embrace companies that follow their lead. Not the other way around. It begs the question, what on earth are people who should believe in free markets doing to thwart it functioning efficiently?

Perhaps investors have the clearest indication of socialist activism by the very requirement to join the club. “ACSI drives strong ESG performance in companies in which our members invest because ESG creates long-term value…We use our collective impact to influence companies and financial markets in the interests of our members as long-term investors…Commitment to these beliefs is a pre-requisite for membership of ACSI.

Never has it been a more sound decision to set up an SMSF.

Westpac reported a 40% increase in home repossessions

Mortgages Westpac

Don’t get CM wrong – this is still the law of small numbers.  Westpac reported this week that it repossessed another 162 properties in the latest fiscal year.  That is a 40% increase. While it is but a dribble compared to the 100,000s of total loans outstanding it is none-the-less a harbinger of things to come. Westpac made clear, “the main driver of the increase has been the softening economic conditions and low wages growth.”

The current status of 90-day+ delinquencies has been rising over time. As have 30-day +. While nothing alarming, the current economic backdrop should give absolutely no confidence that an improvement in conditions is around the corner. We are not at the beginning of the end, but at the end of the beginning.

Former President Ronald Reagan once said of the three phases of government, “if it moves, tax it. If it keeps moving regulate it. If it stops moving, subsidize it.” How is that relevant to the banks?

We have already had the government fold and attach a special bank tax on the Big 4. Phase 1 done. Now we are in the middle of phase 2 which is where knee-jerk responses to the Hayne Banking Royal Commission (HBRC) where banks will be on the hook for the loans they make. That is a recipe for disaster that could bring on phase 3 – bailouts.

Sound extreme? How is a bank supposed to make a proper risk assessment of a customer’s employability in years to come? Can they predict with any degree of accuracy on the stability of candidates who come for loans? The only outcome is to cut the loan amount to such conservative levels that the underlying purpose gets diluted in the process and prospective home buyers have to lower expectations. Not many banks will look positively at taking several loans on the same property with different institutions. That won’t work. SO loan growth will shrink, putting pressure on the property market.

What is the flip side? Given property prices in Sydney hover at 13x income (by the way, Tokyo Metro was 15x income at the peak of its property bubble), restrictions on further lending against loan books that are on average 63% stuffed with mortgages (Japan was 41.2% at the peak) won’t be helpful. A property slowdown is the last thing mortgage holders and banks need.

While equity continues to rise at Aussie banks, the equity to outstanding mortgages has gone down since 2007 i.e. leverage is up. If banks saw their average property portfolios drop by more than 20% many would be staring at a negative equity scenario. Yet, it won’t be just mortgage owners that we need to worry about. Business loans could well go pear-shaped as the onset of higher unemployment could see a sharp increase in delinquencies through a business slowdown. A concertina effect occurs. More people lose their job and a vicious circle ensues. It isn’t rocket science.

Of course, Australia possesses the ‘boy who cried wolf‘ mentality over the housing market. Yet it is exactly this type of complacency that paves a dangerous path to poor policy prescriptions.

In Japan’s property bubble aftermath, 40% of the value of loans went bang. 17% of GDP. $1.1 trillion went up in smoke. It took more than 10 years to clean up the mess and the aftershocks remain. Accounting trickery around the real value of loans on the balance sheet can hide the problems for a period but revenue tends to unravel such tales. 181 banks and building societies went bust. The rest were forced into mergers, received bailouts or were nationalised. Now the Japanese government is a perpetual debt slave, having to raise $400bn per annum in debt just to fill the portion of the $1 trillion budget that tax collections can’t fill.

The problem  Japan’s banks faced was simple.  If a neighbour’s $2m home was repossessed through mortgage stress and the bank fire sold it for $1.4m, the bank needed to mark to market the value of the loan portfolio for that area by similar amounts. In doing so, a once healthy balance sheet started to look anything but. Extrapolate that across multiple suburbs and things look nauseating quickly.

This is where Aussie banks are headed. This time there is no China to save us like in 2009. Unemployment rates in Australia never went above 6% after the GFC in 2008/9, unlike the US which went to 10%. We weathered that storm thanks to a monster surplus left by the Howard government, which we no longer have.

Sadly China has had 18 months of consecutive double-digit car sales decline. Two regional Chinese banks have folded in the last 3-4 months. China isn’t a saviour.

Nor is the US. While the S&P500 might celebrate new highs, aggregate corporate profitability hasn’t risen since 2012. The market has been fuelled by debt-driven buybacks. We now have 50% of US corporates rated BBB because of the distortions created by crazed central bank monetary policy, up from 30%. Parker Hannifin’s latest order book shows that customer activity is falling at a faster pace.

Nor is Europe. German industrial production is at 10-year lows. The prospects for any EU recovery is looking glib. Risk mispricing is insane with Greek bond spreads only 1.8% higher than German bunds.

What this means is that 28 years of unfettered economic growth in Australia is coming to an end and the excesses built in an economy that believes its own BS is going to leave a lot of people naked when the tide goes out.

The Australian government needs to focus on more deregulation, tax and structural reforms. Our record-high energy prices, ridiculous labour costs and overbearing red-tape are absolutely none of the ingredients that will help us in a downturn. We need to be competitive and we simply aren’t. Virtue signalling won’t help voters when the whole edifice crumbles.

All a low-interest rate environment has done is pull forward consumption. It seems the RBA only possesses a hammer in the tool kit which is why it treats everything as a nail. It is time to come to terms with the fact that further cuts to the official cash rate and the prospect of QE will do nothing to ward off the inevitable.

Pain is coming, but the prospects of an orderly exit are so far off the mark they are in another postcode. Roll your eyes at the stress tests. Stress tests are put together on the presumption that all of the stars align. Sadly, in times of panic, human nature causes knee-jerk responses which put even more pressure.

Banks.png

The Aussie banks have passed their best period. While short term news flow, such as a China trade deal, might give a short term boost, the structural time bomb sits on the balance sheet and while we may not get a carbon copy of the Japanese crisis, our Big 4 should start to look far more like the rest of the global banks – truly sick. The HBRC will see that it becomes way worse than it ever needed to be.

Complacency kills.

Tesla is good at digging holes

Tesla shares have rebounded from the $180s so CEO Elon Musk has come out of the woodwork suggesting mining might be on the agenda to lock in its future battery supply.

Tesla might be adept at digging financial holes for itself but we shouldn’t think that will turn it into an efficient miner.

Just typical Musk banter.

Ding dong the switch is dead

Morgan Stanley has finally lowered its bearish scenario on Tesla from $97 to $10. CM wrote in October 2017 that the shares based on production of 500,000 vehicles was worth no more than $28 (refer to report page 5). That was based on rosy scenarios. Sadly CM thinks Tesla will be bought for a song by the Chinese. Maybe $4.20 a share instead of $420 “funding secured” levels.

The stock breached $200 yesterday for the first time since late 2016.

Morgan Stanley analyst, Adam Jonas, has still kept its base case scenario at $230 per share. His bull case is $391.

Where is the conviction? To drop a bear case target by 90% must surely mean the base case is far lower than presently assumed.

Jonas must assume the bear case is actually the base case. Sell side brokers love to hide behind scenario analysis to cop out having to get off the fence. His compliance department probably prevents him from realizing $10 is his true heart.

Tesla was always playing in a market that it had no prior experience. It is not to say the products didn’t have promise. The problem was the execution. Too much senior management turnover, missed targets, poor quality and too many Tweets from Musk.

The amount of bad press arising from a lack of service centers has driven customers to moan on social media at its amateur approach. The fragile dreams of being an early adopter are being shattered. Cash burn remains high and deliveries remain low. Some pundits think Tesla orders are under real pressure in 2Q 2019.

The recent all share deal with Maxwell Technologies has seen those holders -20% since the transaction a few weeks ago. CM argued how a company with such revolutionary technology could sell itself for all shares in a debt-ridden loss making like Tesla? If the technology was of real value PE funds would have snapped it up or at the very least made a bid in cash. That none was made speaks volumes about what was bought.

All of the arguments hold true in the above link, “Tesla – 30 reasons why Tesla will be a bug on a windshield

Tesla below $200 after a successful cap raise is not a good sign. It’s the faithful slowly tipping out. Await another imaginary Musk-inspired growth engine to be announced shortly to try prop up the stock price. Yet the momentum will continue to sink. The market is losing confidence in Musk. The 1Q results were diabolically bad.

Major holder T Rowe Price has stampeded out the door. The stock is too risky. Musk is a brilliant salesman but he has bitten off more than he can chew.

CM always thought that Toyota selling its Tesla stake was a major sign. Acknowledging that under the hood the company possessed no technology that Toyota didn’t already own.

Watch the free fall. The Tesla stock will be below $100 by the year end.

(CM does not hold Tesla stock)

No, ScoMo!

For a Conservative party to push a subsidy of up to 20% of the value of a property for first time home buyers shows how bereft of policy it is. When Vic Premier Daniel Andrews raised a similar plan in March 2017 CM trashed it.

Think about it. Home prices have started to fall in major capitals because of a lack of demand thanks to astronomical prices and tapped out borrowers. This is before the Royal Commission puts the brakes on lending.

Why provide a subsidy to first home buyers toward the top of a bubble? It is not the role of the taxpayer to subsidize nor insure the downside risk in the event of the owner going into negative equity. What happened to free market economics?

What will this 20% subsidy do? If a couple go house hunting with a budget of $800,000, they will be able to shoot for a $1mn property. It might end up being the same property, pushed up by the desperate buyer thanks to the subsidy creating a false sense of security. So the reality is the taxpayer and the homeowner may end up in the red the day they move in. What a policy!!

Has ScoMo just called the top of the property market?