Hedge Clippings | Friday 04 October, 2019
 

A predictable week that was.

If Hedge Clippings ever placed a bet on the week's news, this would have been the one to make a motza from the bookies. After all, everything that occurred over the past week was pretty predictable.

Firstly, the RBA cut rates by 25bps as expected. OK, that was pretty easy, and we only came across one person (no names, but they'll know) who thought they wouldn't. Not only had the RBA's governor hinted strongly that they would, but all the economic indicators, both here and overseas, were pointing in that direction.

Next, the big four banks elected not to pass on the full 25bps to borrowers. Then both the Treasurer and the PM got stuck into them for not doing so, while the opposition jumped on the bandwagon to criticise the government. Three out of three, we could have taken out that trifecta with our eyes (and ears) closed.

However, spare a thought for the banks for a moment (we know, that's not always easy, and not predictable). Not passing the full cut on when rates are 1% was never going to happen simply because only a portion of their funding is tied to the RBA's cash rate. According to the AFR, 60 - 70% comes from deposits, including some on which the term is fixed. And for that portion which is in non-interest-bearing transaction accounts, their margins are being squeezed further.

Offshore was just as predictable. China put on a show of military goose-stepping force not seen for 75 years to celebrate the 70th anniversary of their "glorious" revolution, while the protesters in Hong Kong carried on protesting regardless.  

Trump continued to tweet against the injustices of the Democrats and others, claiming he should be impeached or worse, while Boris continued to defy Europe, Jeremy Corbyn, and a fair section of his own party (plus the Speaker) - all of whom he couldn't give a toss about.

Finally, to the sporting field. Richmond flogged the Giants to such an extent that spectators should have asked for a refund on the price of their tickets. We might be biased, but that was mighty predictable as well.

The Wallabies made life difficult for themselves (something they've become experts at over the past few years) by selecting a goal kicker with a success rate this season of just 56% and losing a winnable match against Wales. While not totally predictable, sadly very familiar!

But then, against all the odds, we would have blown all our winnings backing Ireland against lowly Japan, who were inspirational, producing some of the most entertaining rugby seen for a while. Just as well we hadn't placed our bets - or collected our winnings - from the other un-losable wagers.

Hedge Clippings | Friday 27 September, 2019
 

Political intrigue and change seem to be occurring so frequently, and so rapidly, that it's difficult for Hedge Clippings to keep pace.

It was less than two weeks ago that the drone strike on Saudi Arabia's oil facilities knocked out 50% of production overnight, causing a near 20% spike in the price of crude as a result. That had the world on edge and wondering about the potential for renewed conflict in the Middle East, and the potential for Iran's war of words with the US to escalate to military conflict.

That would certainly damage world oil supplies. However the US has a vast oil inventory to last 700 days - plus over 8,000 new shale oil wells that had been drilled, but not yet completed - in other words, additional supply which could come online rapidly if required or when/if prices made it economical to do so.

Not so Australia, which has a minuscule stockpile by comparison. In spite of the International Energy Agency (IEA) mandating that countries stockpile 90 days' worth of crude oil, based on current consumption trends we have just 32 days of total petroleum stocks, 28 days of petrol, 30 days of aviation fuel, and 22 days of diesel.

Of course, there is nothing to say that military action won't occur, but one would hope that all parties involved recognise the risks of that happening.

Key to that must be Donald Trump, never far away from political change or intrigue, who seems to be busy fighting battles over his tax returns, plus his more recent phone records with the Ukrainian government. One hopes he'll be sufficiently occupied with those minor issues and not looking for a distraction on the global stage.

And while on the subject of political change or intrigue, this week's antics of Boris and the UK parliament really must take first prize. It seems somewhat fitting that England is the home of the pantomime. No doubt the musical Boris will be opening in the West End shortly, or maybe they'll just relocate an orchestra to Westminster.

And through all this our own ScoMo seemed to be having a dream run on the world stage. Having enjoyed a State dinner as the guest of the President at the White House, and patching up Malcolm's unfortunate phone call, he even managed to defuse or sidestep the criticism of a Scandinavian teenager.

Having had the turmoil of successive prime ministers from both sides of politics, no doubt it was Australia's turn for some political stability.