For a variety of reasons, it's been a while between drinks for my now-normal Friday format. So let's get back into it.
ANZ's warning for businesses… and investors
ANZ Group Holdings Ltd (ASX: ANZ) CEO Shayne Elliott was in today's Australian, quoted as saying:
"It's been the fastest increase of interest rates globally in history. They have gone from zero to a hundred in a very short time.
"These businesses were set up in a different environment of low interest rates so many of them don't have any experience on how to deal through this."
Who are the 'these businesses' he's referring to?
"…it's starting to get rocky and the casualties will be those businesses with too much debt and those with no pricing power".
And he's not just talking about small or unlisted businesses, either.
I've been saying it for a while… there will be opportunities (and risks) as we go back to the 'old normal'. Make sure you understand what you own, and the risks those companies face.
Another one bites the dust
Vitamin company Blackmores Ltd (ASX: BKL) (full disclosure: I'm a shareholder and former employee) seems destined to leave the ASX, having accepted a $95 per share bid from Japanese conglomerate Kirin (best known to Australians for its eponymous beer, but it also owns the old 'Lion Nathan' beer brands: XXXX, Tooheys and others).
Largest shareholder (and son of founder, Maurice Blackmore) Marcus Blackmore has committed to selling his shares, and the board has recommended the takeover, unless there's a higher bidder. The deal has to get regulatory approval, but that also seems likely.
I don't love the idea of the ASX losing yet another consumer branded business to an overseas buyer. But Kirin is notoriously long-term focused, and sees value in Blackmores. Value that Australian investors didn't seem to see. Perhaps Kirin is wrong. But if it's right, there's a lesson for investors – buyers that take a long term view often recognise more value than the ASX does, given its notoriously short-term view.
As individual investors, there's not much we can do to change the market… but we can learn some lessons and invest accordingly.
If the cap fits…
Look, I don't love getting involved in political fights – each team tends to think their side is whiter than white, while the other mob have never had a good idea in their lives – but I don't mind putting my head above the parapet on policy.
The federal government has today been reported as announcing a cap on the growth in NDIS spending. And is considering a cap on rental increases. That's after announcing a cap on the gas price and, in more familiar territory, a cap on Super balances (after which a different taxation arrangement applies).
I mean, I don't mind the odd Akubra, but as far as caps go, I think the government has me covered.
Now, before half of you send me hate mail and the other half are happy that I'm bagging the government, let me say the NDIS is a great scheme, but also seems prone to rorting and mismanagement. And that I'm in favour of large Super balances being taxed less generously. I also think we need to help people who can't afford power, and fix the broken rental system.
But you'll notice my comments, above, relate to the issues. And there's a difference between acknowledging a problem and believing that a solution – any solution – must be right.
We've had caps before. They don't work and create perverse outcomes. Better than nothing, you say? Maybe. But not as good as actual structural changes. And that's what governments (and Oppositions) should be focused on.
Overblown: The changes to the rate-setting committee of the RBA are underwhelming. The current board has got stuff wrong. But I'm not sure how a structural change makes any meaningful difference.
Underappreciated: As above, but with a twist. The new committee, composed of different people, may take the same approach as the current lot. Or a very different one. And they might be very good at the job. Or awful. In trying to 'solve' a current perceived problem, a new board adds a whole lot of uncertainty… right at a time when stability would have been much better.
Fascinating: Wow, is AI on the march. I have no preconceived view where it ends up, but when you consider what is now possible, using ChatGPT and other 'bots', it doesn't take much imagination to consider how meaningfully AI could impact many, many parts of our lives. The question is whether it becomes its own thing, or just an enabler, much the way we use the internet today.
Where I've been looking: I've written before about what I expect to be the continued growth of online retail, both from pure-play companies and those who make the bricks-and-clicks / clicks-and-mortar change successfully. Amazon (I own shares) and Kogan.com Ltd (ASX: KGN) (ditto) have made good strides recently, and I think other retailers, on cheap multiples, might make for market-beating investments.
Quote: "Only when the tide goes out do you discover who's been swimming naked." – Warren Buffett