Today I argue that while Labor have given ScoMo a shot of winning the election with its shocking recent mis-steps and its bizarre tax-everything-that-moves-platform, the media coverage and political analysis has never been more biased in all likelihood because those inside the beltway fervently believe that ScoMo does not have... Show More
First, a big thanks for the incredible interest in, and downloads of, our Complexity Premia podcast! We have just published the third episode where we: discuss analysis showing that the government’s fiscal budget is already in surplus and what this means for the looming election; reflect on the heated and... Show More
Today I show how ScoMo has already delivered a $7bn plus budget surplus on a number of the key measures years in advance of what rating agencies and analysts (save yours truly) expected, which is the best budget outcome since 2008. I then present the evidence I used to demolish... Show More
In assessing whether to get long or short residential mortgage-backed securities (RMBS), we undertake a great deal of quantitative analysis, including revaluing the homes that protect these bonds at regular intervals and developing globally unique RMBS default and prepayment indices. (Regular readers will know that we exited most of our... Show More
Today I argue that the smartest thing RBA governor Phil Lowe could do is get the banks to cut rates for him---preserving his monetary policy ammunition for a real crisis---and show that substantial reductions in bank funding costs might enable our largest lenders to do precisely that. I also reveal... Show More
Coolabah developed the world's first compositionally-adjusted, or hedonic, regression-based index of RMBS default rates, covering all prime deals that Bloomberg reports on (you can download the paper here). We update this index monthly, and the results are enclosed below. Show More
At this time of year many investors look back on the returns achieved in various asset classes in the previous year and reconsider their asset allocations. In 2018, Australian government bonds (+5.2%) soundly beat the ASX accumulation index (-2.8%). The gains for government bonds were driven by yields falling, with... Show More
One of our best “short” (as opposed to “long”) ideas this year has been to bet that the credit spreads on residential mortgage-backed securities (RMBS) would widen—reducing their price—as a function of the toxic combination of falling house prices, rising defaults, surging supply and plummeting home loan prepayment rates. (We... Show More
Here I argue that anyone who tells you they know what's driving markets right now is lying or fooling themselves, which begets opportunity (click on that link to read the full column or AFR subs can click here). Excerpts enclosed: Show More
Today I argue that the Hayne royal commission's interim report is flawed in several respects that will force lenders to hike mortgage rates and reduce access to credit (click on that link to read the column): Show More
We have just published our August RMBS default index report, which you can download here. Key take-aways are as follows: Show More
This week I interview Tim Lawless, the head of research at Australia's largest real estate data company, CoreLogic, who says fears of a future Labor government eliminating negative gearing and doubling capital gains tax on housing (and equities) are one reason why house prices are falling as investors run for... Show More
In the AFR I reveal that luxury home values are tanking, particularly in ultra-high-end beach-side suburbs like Sydney's Palm Beach, and then unveil our new hedonic regression index for mortgage default rates---a global first---that shows that RMBS arrears are increasing sharply in contrast to what the likes of S&P claims... Show More
In my AFR column I lean into the housing and banking debates, and give my old mate Jon Mott at UBS some more heat (click on that link to read for free or AFR subs can click here for direct access). Excerpt enclosed: Show More
I've been asked by a few clients why we exited our circa $250m position in AAA rated RMBS, which was a modest ~10% portfolio exposure that had performed brilliantly over 2017. The four charts below summarise why: house prices are falling; default rates are rising; supply of RMBS has surged... Show More
Switching out of senior bonds and hybrids to invest in Australian residential mortgage-backed securities (RMBS) while house prices are falling---and likely to remain weak for years---is one of the more surprising trades I have seen of late. It is right up there with selling major bank hybrids on the ASX... Show More
The average variable home loan rate in Australia has fallen from 8.3% to 5.1% in the past ten years, enabling households to borrow more and drive house prices higher. Despite higher levels of household debt, Australians’ level of mortgage stress is quite low. But what if interest rates go up?... Show More