Podcast appearances and mentions of chris joye

In this Australian Property Podcast episode, your hosts Pete Wargent and Chris Bates discuss the bullish property markets from Chris Joye of Coolabah Capital and from KPMG. They also discuss whether regional housing markets are getting a second wind from buyers seeking affordability, and the Coalition's proposed foreign buyer ban, and its potential impacts on the property market.  If you like this Australian Property Podcast episode on property markets, you'll love the series. Don't forget to subscribe for weekly shows on Apple, Spotify, YouTube or wherever you get your podcasts. Topics covered today: Housing to benefit from rate cuts Dutton propose foreign buyer ban Second wind for regional property?  Resources for this episode: 1 – Housing market to welcome rate cuts (Joye) House and Unit Prices to Rise in 2025 KPMG Residential Property Market Outlook January 2025 Housing Market Will Welcome RBA Rate Cuts 2 – Dutton proposes ban on foreign buyers (but may bring back Significant Investor Visa) Real Estate Agents Face Costs to Meet New Money Laundering Rules Peter Dutton's Housing TikTok Dutton's Pledge to Curb Foreign Buyers Australia's Biggest Cities Built with Chinese Cash Dutton's Two-Year Foreign Investor Ban and Migrant Intake Slash Peter Dutton's "Golden Ticket" Visa for Wealthy Foreigners 3 – Second wind for regional exodus? Second Wind for Regional Housing Markets Other news of interest: Listings Off to a Strong Start in 2025 Melbourne CBD Office Vacancy Rate Stuck at 18% Support Surging for Higher Density Development Building Approvals Rise to 15,000 Bensons Property Possibly Insolvent in 2023 CBA to Offer Loans for Prefab Homes NIMBYs Oppose Highgate Hill Apartment Development Inflation for Essentials Eases, Allowing RBA to Cut Has the RBA Got Any Choice but to Cut in February? Ask a question (select the Property podcast): https://bit.ly/R-quest  Rask Resources Pete's Buyers Agency: https://www.allenwargent.com.au Alcove mortgage broking: https://www.raskmedia.com.au/services/mortgage-broking  All services: https://bit.ly/R-services Financial Planning: https://bit.ly/R-plan  Invest with us: https://bit.ly/R-invest  Access Show Notes: https://bit.ly/R-notes  Ask a question: https://bit.ly/R-quest  DISCLAIMER: This podcast contains general financial information only. That means the information does not take into account your objectives, financial situation, or needs. Because of that, you should consider if the information is appropriate to you and your needs, before acting on it. If you're confused about what that means or what your needs are, you should always consult a licensed and trusted financial planner. Unfortunately, we cannot guarantee the accuracy of the information in this podcast, including any financial, taxation, and/or legal information. Remember, past performance is not a reliable indicator of future performance. The Rask Group is NOT a qualified tax accountant, financial (tax) adviser, or financial adviser. Access The Rask Group's Financial Services Guide (FSG): https://www.rask.com.au/fsg Learn more about your ad choices. Visit megaphone.fm/adchoices

One rare point of agreement ahead of Trump's presidential win was that his policies would be highly inflationary, and likely to result in a higher for longer rate environment. This has enormous implications for all asset prices – including yours. So where to now? Coolabah Capital's Chris Joye joins the podcast to discuss: Why venture capital, high yield bonds and property should suffer in a higher rate world How the global growth in public spending is already affecting markets Which assets have outperformed as the rates environment has normalised, and How APRA's hybrid securities proposal could affect fixed income options for investors. You can access this and previous episodes of the Your Wealth podcast now on iTunes, Podbean, Spotify or at nabtrade.com.au/yourwealth If you're short on time, consider listening at 1.5-2x speed, which should be shown on the screen of your device as you listen. This won't just reduce your listening time; it has also been shown to improve knowledge retention.

Welcome to the Financial Secrets Revealed Series 3 podcast episode from Meet the Experts.Amanda Cassar meets with Chris Joye here, Founder of Coolabah Capital.Chris has been selected as one of FE fundinfo's Top 10 “Alpha Managers” based on his risk-adjusted performance throughout his career. He has previously worked for Goldman Sachs in London and Syndey, the Reserve Bank of Australia and founded the award-winning research investment group, Rismark.  He regularly advised governments, developing unique policy proposals. We discuss what fixed interest portfolios are all about, risks inherent in Private Debt portfolios, the interest rate cycle and whether mortgage holders can expect a reduction in their home loan rates any time soon.We're enjoying Meeting the Professionals in Season 3 and hope you enjoyed learning more about the ins and outs of fixed income portfolios with Chris.This podcast is for general information purposes only.  It does not take into account your personal circumstances or goals and is not to be considered personal advice.  Please discuss your needs with your financial adviser.Offer Financial Secrets Revealed on Amazon: Financial Secrets Revealed: Cassar, Amanda: Amazon.com.au: BooksBooktopia:  Financial Secrets Revealed, Collective Wisdom from Business Gurus, Financial Geniuses and Everyday Heroes by Amanda Cassar | 9781925648546 | BooktopiaBarnes & Noble: Financial Secrets Revealed by Amanda Cassar, Paperback | Barnes & Noble® (barnesandnoble.com)Connect with ChrisChristopher Joye | LinkedIn  Chris Joye LinkedIn profileHome - Coolabah Capital Investments  Coolabah Capital Website Christopher Joye (afr.com) Chris's Financial Review ColumnsPodcast - Coolabah Capital Investments  Podcast Follow Catch up with Amanda Cassar, host of Financial Secrets Revealed on Twitter and Instagram @financechicks and @Wealth_Planning_Partners or on LinkedIn at Amanda Cassar | LinkedInWebsites: https://amandacassar.com.au/ https://www.wealthplanningpartners.com.au/ (company website)https://trustedagedcare.com.au/ (company website)Financial Adviser - Amanda Cassar (adviserratings.com.au)Support the Show.

With rates at current levels, investors are increasingly focused on investing for income and rebuilding their defensive portfolios. But bonds, particularly in the US, have had a rocky ride. Coolabah Capital founder and CIO Chris Joye joins the podcast to discuss: where he thinks rates are heading the best opportunities in the fixed income sector why some ‘credit' investments are much riskier than you may expect, and how to position yourself for income and capital growth potential in the current environment. You can access this and previous episodes of the Your Wealth podcast now on iTunes, Podbean, Spotify or at nabtrade.com.au/yourwealth If you're short on time, consider listening at 1.5-2x speed, which should be shown on the screen of your device as you listen. This won't just reduce your listening time; it has also been shown to improve knowledge retention.

Joining me on the podcast for this episode is Chris Joye, Founder and Chief Investment Officer of Coolabah Capital Investments in Sydney Australia, a multi-billion dollar long/short credit fund founded in 2011. I've been following Chris for a number of years and was delighted to finally get the chance to talk to hm and the conversation more than lived up to my lofty expectations. Subjects under discussion include why Chris believes the market is underestimating how long higher inflation will persist (and the ramifications that will surely follow), why he believes this time the world's central banks will be forced […] Every episode of the Grant Williams podcast, including This Week In Doom, The End Game, The Super Terrific Happy Hour, The Narrative Game, Kaos Theory and Shifts Happen, is available to Copper, Silver and Gold Tier subscribers at my website www.Grant-Williams.com.  Copper Tier subscribers get access to all podcasts, while members of the Silver Tier get both the podcasts and my monthly newsletter, Things That Make You Go Hmmm… Gold Tier subscribers have access to my new series of in-depth video conversations, About Time.

In this episode, David is joined once again by Chris Joye, Chief Investment Officer at Coolabah Capital. They discuss the current state and future of various asset classes, including residential property prices, cash, and bonds. David and Chris also delve into the basis for the RBA's 2-3% inflation target and its significance in forming their cash rate decisions. Chris emphasizes the importance of liquidity, optionality, and risk management for investors, favouring cash and high-grade floating rate bonds issued by governments, banks, or too big to fail companies. He warns of potential disaster in commercial real estate and retains his prediction for a peak to trough correction of 15-25% in Australian residential house prices. Chris argues that booming asset prices over past years have been driven by cheap borrowing costs, which are now reversing, leading to a significant change in financial market dynamics. He also touches upon the Reserve Bank of Australia's interest rate decisions, suggesting there may be a few more hikes to come. With his contrarian views and successful track record, Chris provides valuable insights on navigating the market.

As interest rates fell over the last decade, investors sold their fixed income portfolios and sought yield in property, equity and other higher risk sectors. Now rates are normalising, a defensive holding in your portfolio becomes much more attractive.  Fixed income portfolio manager Chris Joye of Coolabah Capital joins the podcast to discuss: How dramatic rate rises have affected fixed income and other asset classes The 101 of investing in fixed income assets  His outlook for rates, the property market and broader asset prices, and  His preferred opportunities in hybrids, corporate debt and more. You can access this and previous episodes of the Your Wealth podcast now on iTunes, Podbean, Spotify or at nabtrade.com.au/yourwealth If you're short on time, consider listening at 1.5-2x speed, which should be shown on the screen of your device as you listen. This won't just reduce your listening time; it has also been shown to improve knowledge retention.

Are you curious about what the future holds for the Australian property market? Do you want to stay ahead of the game and make informed investment decisions? Look no further than our annual Fool or Forecaster report! We provide a detailed analysis of the latest trends and predictions in the market, including a comparison of these predictions to what actually happened in the previous year. In this year's report, we take a deep dive into the tumultuous year of 2022, examining the unexpected events that impacted the Australian property market. We explore the effects of these events on the current state of the market and offer valuable insights for investors and anyone interested in the property market. But we don't stop there. In addition to the usual property price predictions, we also track interest rate predictions and their influence on property values, providing a comprehensive view of the market outlook for 2023. Join us for a thought-provoking exploration of the Australian property market, where we highlight those who predicted market trends accurately and those who missed the mark. Tune in to this must-listen episode, for anyone who wants to stay informed and ahead of the curve! Episode Highlights: 00:00 - Listen to our NEW Fool or Forecaster Reporter for the year 2023! 02:12 - The surprising effects of the global economy on the Australian property market 05:16 - Chris Joye and his prediction of the property market downturn 07:37 - Key factors that influenced predictions about the Australian property market early 2022 09:25 - What can we learn from past property market forecasts and outcomes? 13:27 - The rollercoaster unpredictability of the RBA's inflation forecast 15:04 - Can we REALLY trust the "expert's" housing market forecasts? 19:42 - Human side of property market: Why forecasts fall short 21:52 - Beyond numbers and predictions: Insights from the mortgage cliff 25:10 - Waiting for the "magical moment" in the property market can sometimes backfire 28:47 - Gong! The truth about how the media handles poor economic predictions 31:18 - How to avoid being misled by economic news and media sensationalism 33:24 - How can you stay confident in your investment decisions despite market noise? Resources: Let's take a look at the Fool or Forecaster Report of 2022: https://www.theelephantintheroom.com.au/fool-or-forecaster Visit our website https://www.theelephantintheroom.com.au If you have any questions or would like to be featured on our show, contact us at: The Elephant in the Room Property Podcast - questions@theelephantintheroom.com.au Looking for a Sydney Buyers Agent?http://www.gooddeeds.com.au/ Work with Veronica:https://www.veronicamorgan.com.au Looking for a Mortgage Broker?https://www.wealthful.com.au Work with Chris: hello@wealthful.com.au Enjoyed the podcast? Don't miss out on what's yet to come! Hit that subscription button, spread the word and join us for more insightful discussions in real estate. Your journey starts now! Subscribe on YouTube: https://www.youtube.com/@theelephantintheroom-podcast Subscribe on Apple Podcasts: https://podcasts.apple.com/ph/podcast/the-elephant-in-the-room-property-podcast/id1384822719 Subscribe on Spotify: https://open.spotify.com/show/3Ge1626dgnmK0RyKPcXjP0?si=26cde394fa854765 See omnystudio.com/listener for privacy information.

We're joined by returning guest - Coolabah Capital portfolio manager - Chris Joye. According to recent analysis by the Australian Bureau of Statistics - at a cash rate of 3.6% - 15% of all Australian borrowers are at risk of default. So, with the RBA continuing to raise interest rates, there are concerns that the country's housing market could face a significant upset in the near future. Chris warns that when one in four Aussie home loans in 2023 switch from their 2% fixed rates to 6% variable rates, it could be the "mother of all shocks" for household balance sheets.But it's not just the housing market that Chris is worried about. He also believes that equities have been a bit of a Ponzi scheme for a long time, and that the world is not growing, but contracting. He warns that there's going to be no freaking growth for the next few years, and this could spell disaster for everything...So, a lot to think about in our conversation with Chris today! Check out Chris' previous appearance here.Zombie companies are starting to collapseWhy SVB collapsed. If you looking for a way to level up your investment game, then you should consider TIKR Terminal. This platform is designed to provide retail investors with institutional-grade research on public equities.Join now via Equity Mates and receive 15% off an annual subscription. Use code Mates15 – offer runs between 20/02 – 15/04. Link hereIf you want to let Alec or Bryce know what you think of an episode, contact them here. Stay engaged with the Equity Mates community by joining our forum. Have you just started investing? Listen to Get Started Investing – Equity Mates series that breaks down all the fundamentals you need to feel confident to start your journey. *****In the spirit of reconciliation, Equity Mates Media and the hosts of Equity Mates Investing Podcast acknowledge the Traditional Custodians of country throughout Australia and their connections to land, sea and community. We pay our respects to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people today. *****Equity Mates Investing Podcast is a product of Equity Mates Media. This podcast is intended for education and entertainment purposes. Any advice is general advice only, and has not taken into account your personal financial circumstances, needs or objectives. Before acting on general advice, you should consider if it is relevant to your needs and read the relevant Product Disclosure Statement. And if you are unsure, please speak to a financial professional. Equity Mates Media operates under Australian Financial Services Licence 540697.Equity Mates is part of the Acast Creator Network. Hosted on Acast. See acast.com/privacy for more information.

Silicon Valley Bank (SVB) has collapsed and now Credit Suisse is in trouble. Should we be worried about Global Financial Crisis 2.0? Have the policy responses been sensible? Economics Explored host Gene Tunny provides his initial thoughts.Please get in touch with any questions, comments and suggestions by emailing us at contact@economicsexplored.com or sending a voice message via https://www.speakpipe.com/economicsexplored. Links relevant to the episode:Chris Joye's article on SVB:https://www.livewiremarkets.com/wires/why-silicon-valley-bank-died-updated-2NPR Indicator episode:https://www.npr.org/2023/03/13/1163157993/silicon-valley-banks-three-fatal-flaws Sebastian Merkel's paper on narrow banking:https://scholar.princeton.edu/sites/default/files/merkel/files/narrow_banking.pdfWorld Bank paper on Bank Runs and Moral Hazard:https://documents1.worldbank.org/curated/en/548031537377082747/pdf/WPS8589.pdf Bloomberg article on policy response:https://www.bloomberg.com/news/articles/2023-03-12/us-moves-to-help-depositors-offer-bank-backstop-in-wake-of-svb?leadSource=uverify%20wall Breaking Points video SECRET Fed BAILOUT Pumps BILLIONS Into Bankshttps://youtu.be/Lj5BE951aP8 

Stock markets are down, superannuation funds diminished, and property prices sliding as Chris Joye’s Latest missive shows. So, the answer to my question is probably no, unless you are a politician still receiving a generous pay rise, or a high-flying executive or you are working in high demand areas like information technology or finance, or … Continue reading "Are You Feeling Wealthy Then? The Wages And Inflation Problem! [Podcast]"

Find the full episode here: https://youtu.be/7oohbq6GomI

Crypto's hot streak has ended and a freezing cold winter has set in, with losses topping $2 trillion and counting. There was always a threat the crypto bubble would burst and no shortage of people saying 'I told you so,' including Chris Joye from Coolabah Capital. Others are looking through the losses and focusing on how to keep building this Megatrend, including Michael Addison from Tasmanian Data Infrastructure, with his plan to build a new bitcoin mine on the site of an old lead and zinc mine. See omnystudio.com/listener for privacy information.

In a rising rate environment, Chris Joye joins David to discuss where investors should look for returns going forward. Throughout the episode, Chris covers a range of different asset classes, such as Private Debt, Bonds, Property, Equities and Cryptocurrencies. Chris also touches on how far he expects the RBA to raise rates, and the broader consequences on asset prices such as his expectations of a 15-25% reduction in residential real estate prices as rates continue to rise. Finally, David and Chris also discuss recent geopolitical events such as Russia's invasion of Ukraine, as well as the additional ongoing risks that geopolitical events pose to financial markets and asset prices. Chris founded Coolabah Capital back in 2011 and is also contributing editor to the AFR. Prior to starting Coolabah, Chris worked at both Goldman Sachs and the RBA.

Watch the full video here: https://youtu.be/j5pV9Bm9uLU

In this week's episode of Talk Ya Book we welcome back CIO of Coolabah Capital and AFR columnist, Chris Joye. On this special episode, we dive into the Federal Reserve's interest rate dilemma, the prospect of another recession, and Chris' global conflict predicting model. Proudly presented by Honan. See omnystudio.com/listener for privacy information.

Vocal market commentor and fund manager, Chris Joye wrote in the AFR in November last year that Australian house prices could fall by 15% to 25% after the RBA starts increasing interest rates (here's a copy of that article).Of course, there are many property doomsayers that perpetually (and often inaccurately) predict property market crashes. However, Chris is not one of these people. In fact, Chris' predictions are usually quite accurate. However, on this occasion, I disagree with his prediction, and I share the reasons why below.However, more importantly, I wanted to discuss what impact rising interest rates might have on the property market.It's interesting that almost everyone disagrees with the RBAThe RBA has persistently reminded us that it will not raise the cash rate until inflation is sustainably within its 2% to 3% band. And for that to be the case, the wage inflation rate must be sustainably in the 3% to 4% range, according to the RBA. Price inflation can't remain sustainably high unless it's supported by rising wages. Last week, wage inflation printed at 2.3% p.a., so we are some way off the RBA's target.Despite the RBA's clear indication, the market stubbornly predicts that interest rates will rise quickly over the course of this year. In fact, this chart shows the money market is currently pricing in 7 to 8 rate hikes (of 0.25% each) over the next 16 months. This seems over ambitious.So, why would the market ignore the RBA's commentary and price in more rate hikes? The RBA's in full control of the cash rate, so shouldn't we listen to it? It's like your child telling all her friends that she thinks she's coming to the party when she's grounded. I suspect the answer is that markets are imperfect, especially in the short run.It is worth noting that Australia is in a much different position to the US. In the US, inflation is very high (at 7.5% p.a.) which is underpinned by historically high wage inflation (at 4.5% p.a. which is a 40-year high). One of the main problems is that the US participation rate hasn't bounced back like it has in Australia and other countries, which results in a tighter labour market. The high Covid death rate per capita in the USA might be responsible for this.It is therefore very likely that the US (Fed Reserve) will hike rates by 1% or more during 2022, but the RBA is likely to do very little until wage inflation increases.Higher rates do impact asset valuesTheatrically, increasing the cash rate should result in lower asset values. There are a few fundamental reasons for this.Firstly, as it becomes more expensive to borrow money, people become more careful with how they invest these borrowings i.e. they are more careful to not overpay for a property. Also, demand for new borrowings falls. Less capital flowing into the market results in lower demand and all things remaining equal, it will lead to lower prices.Secondly, as interest rates rise, lower-risk investment options such as term deposits become more attractive, compared to higher risk options such as shares or property. Many investors prefer lower risk options but have been forced to invest elsewhere (in higher risk investments), whilst interest rates are close to zero.Therefore, theoretically, higher rates should lead to lower asset prices.Firstly, owner-occupiers don't care about financial theoryAs the ABS' chart below illustrates, owner-occupiers have been responsible for driving property demand since May 2020 (dark blue line) – contributing an additional $10 billion per month of lending compared to pre-pandemic levels. Whilst investor lending has increased too (orange line), it was coming off a lower base and has only recently increase by circa $5 billion per month from mid-2021. Investors were a bit late to the party as property prices had already risen substantially by mid-2021. Therefore, I conclude that owner-occupiers have driven prices higher during the pandemic, not investors.Loan volume chart Owner-occupiers are influenced by financial theory to a much lesser extent. People buy (upgrade) homes primarily for lifestyle reasons, not financial. Decisions tend to be relatively long dated i.e. a 10+ year time frame. Home buyers tend to think very carefully about affordability and factor in higher interest rates – it's more a question of affordability than asset valuation. Finally, and perhaps most importantly, a home is not a discretionary asset (unlike a pure investment such as stocks). It's a necessity and people know that the same home will probably cost a lot more in 5 to 10 years from now, irrespective of what happens to interest rates. Therefore, they buy when they can afford to do so.Secondly, demand has been driven mainly by higher income earnersIt has been well documented that Covid lockdowns and restrictions over the past two years have adversely impacted the lowest 40% of households by income (here and here, for example). Conversely, the highest 40% of households by income are typically in a stronger financial position compared to the start of Covid. The main reasons for this are that lower income occupations typically are not able to work from home. In addition, higher income earners have saved an unusually high amount over the past two years (lower spending due to lockdowns). In fact, nab economics estimate that Australian's have saved $240 billion during the pandemic. Most of these savings would have been accumulated by higher income earners since the “average” Australian tends to have relatively low savings.In short, I posit that higher income earners have been disproportionately responsible for driving higher property prices (through higher demand), which is what I expected back in October 2020.If we agree that Covid restrictions are less likely from hereon in, consumer spending patterns should normalise, including spending on international travel. That may reduce higher-income earners savings rates, but it's likely they are well prepared for higher interest rates.It is also worth noting that lending rules have tightened significantly in recent years which includes testing affordability at much higher interest rates. If you have obtained a new mortgage over the past 5 years, its likely higher interest rates won't cause too much stress.At best, there's a weak relationship between growth and interest ratesThe chart below illustrates the annualised median house price growth since 1980 in Sydney, Melbourne and Brisbane. I have inserted the average standard variable mortgage interest rates in the grey rectangle below each growth period. You will note that there's not a very strong relationship between interest rates and property prices. I suspect that's because home buyers make an ‘affordability' assessment rather than a ‘valuation' assessment. If home buyers conclude they can service the required mortgage, they will proceed with the purchase because they know in the long run, property prices almost always trend higher.Chart: interest rates versus property price growth Covid distorted demand and that will probably normalise this yearThe property market has benefited from an unusually high level of demand over the past 18+ months and this demand is likely to normalise.Firstly, FOMO drove many people to buy property. Commentators predicted that interest rates would remain low for a long period of time and that would lead to higher property prices, so people rushed into the market before prices become more unaffordable.The work-from-home wave created substantially higher demand for regional properties, particularly in coastal locations.Finally, since many people were spending less money on travelling and going out during lockdowns, they redirected these financial resources towards the property market.Things are changing with the reopening of international boarders (and therefore overseas travel), the prospect of Covid restrictions is unlikely, talk of higher interest rates, and higher property stock levels. These factors should result in a more balanced property market.But the value proposition hasn't really changed all that muchLow interest rates stimulated demand for housing during 2020 and 2021. Even if rates increase by 1% over the next 1 to 2 years, they are still low relative to the past few decades. And due to much higher household and government indebtedness, interest rates won't have to rise by much to cool inflationary pressures. It is conceivable that the neutral mortgage interest rate could be circa 5% p.a.Therefore, from an owner-occupier's perspective, the value proposition hasn't changed that much i.e. housing is still relatively attractive due to interest rates being relative low compared to the past few decades.Property prices will be closer to intrinsic values, which means losses for some recent buyersThe chart below was produced by Coolabah Capital and shows the change in property prices since 1850. It puts into perspective the magnitude of the price growth that occurred last year.Property growth since 1850We can argue that the market value of a property is what someone is willing to pay for it. However, it is obvious to me (and lots of other people) that some purchasers were clearly overpaying for property throughout 2020 and 2021. That is, they paid more than its intrinsic value. It is unlikely that level of exuberance (over-paying) will extend into 2022. A more balanced market should result in more reasonable prices.That means people that did overpay over the past 1 to 2 years might find themselves in a situation where comparable properties are selling for less than what they paid.Medium term outlook will be driven by a healthy economyI would not be surprised to see one or two quarters of small (immaterial) negative property price growth eventually i.e. after the RBA starts raising interest rates. However, I would be most surprised to see prices retreat by 15% to 25%, as predicted by Chris.In my view, the property market will be driven by very sound fundamentals over the medium term:§ Interest rates remaining below the average rate over the past 20 to 30 years.§ A low unemployment rate.§ Population growth due to the return of overseas immigration (skilled migrants and students).As such, quality property assets will continue to perform well.

Peter Switzer is joined by Chris Joye who says the stock market will fall anywhere between 30 to 60 percent. The big question is when?

Find the full video here: https://youtu.be/achK25YsVOk

Peter Switzer is joined by Chris Joye from Coolabah Capital who talks about interest rates and where the economy is going

The topic of rising inflation and its potential impact on interest rates has been dominating the financial press over the past few weeks. The bond markets expect that higher inflation readings will force central banks to raise interest rates.It's my opinion that higher inflation is likely to be temporary. And it's also useful to remember that “markets” (and popular opinion) are not always right. Bond markets priced in higher inflation in February 2021 but eventually normalised after a few months.A quick economics lesson: why does inflation lead to higher interest rates?Inflation is a measure of rising costs. Inflation is measures by the ABS using a basket of goods and services. High inflation is bad for an economy because it erodes purchasing power, increases uncertainty and can have a negative impact the value of a country's currency.A key role of the RBA is to manage inflation so that it remains inside its targeted 2% to 3% band. It does that by changing the cash interest rate (currently 0.10%). Increasing interest rates, reduces spending (because the business and private sector must direct more money towards interest costs) and therefore reduces demand for goods and services which cools price increases.Therefore, if markets expect that high inflation will persist, they price in that interest rates will increase, which negatively impacts the value of existing bonds, particularly if the coupon (interest rate) is fixed. This has been happening since August 2021 i.e. bond value have been falling.What's causing higher inflation?As announced by the ABS last week, Australia's inflation is 3% for the year ended September 2021, which is at the top end of the RBA's target band. It was slightly less than expected (3.1%) and lower than last quarters annualised reading of 3.8%.This time last year, inflation was less than 1%, so what has happened since then? The chart below sets out how prices have changes over the past year. Five categories have risen by more than 2% over the past year being transport, furnishings, health, alcohol and tobacco and recreation.See chart here. 1. Transport – driven mainly by the rebound in the oil price. This time last year, oil was trading at around $40 per barrel, mainly because most of the world was in lockdown. Oil has since recovered and is currently trading at over $80 per barrel, which is closer to the long-term average price. Its unlikely the oil price will continue to rise, certainly not at the same pace.2. Furnishings – the cost of furnishings have been driven by unusually high demand and supply shortages (supply chain disruptions).3. Alcohol and tobacco – the main contributor were tobacco prices due to increase in government excise and customs duty in 2020.4. Health – these price rises have been mainly driven by health insurance premiums.5. Recreation and culture – price increases were mainly driven by domestic holiday travel and accommodation due to the closure of international borders.It is likely that inflation is transitoryFrom a review of the above, it becomes clear that inflation has been driven by some unique events which are unlikely to persist. The only exception may be health insurance premiums, which seem to increase each year.The Covid pandemic has caused several issues:§ Supply chain disruption: The China Containerised Freight Index demonstrates how the cost of shipping has risen over throughout the pandemic. This has been caused by a number of things including higher demand for durable goods, stevedoring strikes, container shortages and trucking shortages.§ Unusual demand for durable goods: Australians have spent a lot of money on durable goods throughout lockdown including second-hand cars, furniture, household goods and so forth. Spending is not only likely to normalise once life returns to pre-Covid normal, but it's entirely likely that demand for these goods will be below normal levels for a few years.§ Savings: One of the consequences of being in lockdown is that Australians have been spending less and saving more. Bank deposits have increased by over $140 billion since March 2020, which is more than double the normal rate. The redeployment of these savings into the Australian economy could temporarily fuel inflation over the next 1 to 2 years.It is rare to have persistently higher inflation without income growthGenerally, higher inflation requires higher incomes, because how can you afford to pay more for goods if you are not earning more income? This is the main reason I think inflation in transitory, not permanent.The RBA's wage growth index is well below 2% p.a. Therefore, how can the prices of goods continue to rise if Australians do not have more money to pay for them? At some point, spending and supply chains will normalise, and inflation will subside.Prediction that higher rates will lead to falling house pricesI was most surprised to read in the Australian Financial Review a prediction by bond trader, Chris Joye that forecast a 1% increase in interest rates could lead to a 15% to 25% fall in property prices.I have followed Chris for many years and have found his commentary always insightful and very accurate. However, on this occasion, I couldn't be less agreeable. Coincidentally, I did write in this blog last week that each year a high-profile commentator predicts a property market crash, so maybe its Chris' turn.The chart below illustrates household debts and related interest cost. The dotted lines represent the interest cost after a 1% and 2% interest rate rise. It is evidence that a 1% rise is quite affordable. However, it is conceivable that a 2% rise will probably put pressure on household budgets.Therefore, if mortgages are still affordable after a 1% interest rate hike, why would property prices fall?We shouldn't forget that lenders test borrowers' affordability at circa 5.5% p.a. when you apply for a loan.In addition, most property buyers throughout the pandemic have been owner-occupiers, not investors. Owner-occupiers typically will not sell their homes unless it is their last resort. If interest rates rise, they will reduce discretionary expenditure first before they even contemplate selling their home.Finally, anyone that has applying for a loan over the last 5 years knows that it's a very thorough (understatement) process. That is, banks do not lend money to a borrower if they believe that a 1% rate hike would lead them to experience financial stress.See chart hereProperty prices are not unsustainably highIt's been well documents that property prices have increased a lot of the past 12 months. However, we must put recent rises into perspective. Over the past 5 years, the median house price in Melbourne has increase by 6.9% p.a., Sydney by 6.6% p.a. and Brisbane by 4.7% p.a. These growth rates are all below the long-term average.And growth rates over the past 10 years have also been below the long-term average. What has occurred over the past year is simply mean reversion.Therefore, whilst recent property price appreciation appears unsustainable over the past year (and it is), in longer term context, it's not alarming or unusual. What will happen to interest rates?Raising interest rates probably will not cool inflation since factors other than consumer demand that have caused it. However, it's true that interest rates cannot remain at currently expansionary settings forever.The million-dollar question is what the neutral interest rate is i.e. a level where interest rates are neither expansionary nor contractionary. I suspect that level is in the range of 4% and 5% p.a., particularly as household debt has risen. The RBA should return the interest rate settings to neutral as soon as its confident the economy has recovered from the impact of the pandemic.In terms of the timing and speed of rate increases, there are also two important observations. Firstly, given the rise in federal and state government debt, any increase in interest rates will have a big impact on government budgets (deficits). As such, I'm sure politicians will be keen to keep a lid on rates for as long as possible.Secondly, it's been well documented that lower income earners have been adversely impacted by Covid whereas most higher income earners have not experienced any negative financial implications. Therefore, raising rates will adversely affect the people that can least afford it i.e. lower income earners.I suspect that interest rates will not begin to rise before late 2023. And I suspect that when interest rates do rise that they will do so slowly. That said, it is wise to use low-interest rate periods to reduce debt (i.e. accumulating cash in offset), because low rates won't last forever.

Find the full youtube video here: https://youtu.be/L6KdSx3NnMo

Chris Joye, the founder, chief investment officer and portfolio manager at Coolabah Capital, speaks to Peter Switzer.

For season two of our Market Thinkers series, we focus on identifying and understanding the most powerful, demographic, societal, and technological themes occurring in the global economy right now.This session, with Chris Joye of Coolabah Capital, seeks to take stock of the events of 2020 and where everything from interest rates to property prices are heading. Extraordinary times call for extraordinary measures. In this session with Chris Joye of Coolabah Capital we discuss the evolving nature of monetary and fiscal policy in Australia whilst seeking to understand what's driving property prices.General Advice Disclosure: This podcast is General Advice only. We have not considered investors' personal or individual circumstances. All listeners should seek professional advice before acting on any recommendation.

Masters of the Market is back for 2021 and the first episode of the year is with CIO of Coolabah Capital and columnist for the AFR, Chris Joye. Tune in to hear the method behind Coolabah’s incredible success, what the future of the RBA’s role might look like and his concerns about future conflict with China. Proudly sponsored by AIA Health (http://aia.com.au​). See omnystudio.com/listener for privacy information.

Pandemics, money printing and property pricesCOVID-19 has once exposed to the frailties and inaccuracies of forecasting and long-term economic assumptions. Yet for regular readers of his column, Christopher Joye, of Coolabah Capital stands out as one of the few experts with a knack for understanding the quickly evolving conditions and how they will impact both investors and the economy. In this session Chris will cover everything from how his many years in studying bond prices supported accurate predictions of COVID-19 infections and how this can be applied to both property prices and investments markets. We will discuss the evolution of monetary and fiscal policy in Australia and what this means as investors in 2020 and beyond.General Advice Disclosure: This podcast is General Advice only. We have not considered investors personal or individual circumstances. All listeners should seek professional advice before acting on any recommendation.

Chris Joye is Founder and Co-Chief Investments Officer at Coolabah Capital Investments. He is also a Contributing Editor with The Australian Financial Review.

Peter Switzer and Paul Rickard are joined by Chris Joye from Coolabah Capital to discuss coronavirus data. We hear from Glenn Keys about Aspen Medical's role in setting up Covid-19 clinics and Brad Dunn from Daintree Capital joins the show to discuss how bonds are affected in the current situation.

Chris Joye manages $3 billion as the Co-Chief Investment Officer at Australian fixed-income manager Coolabah Capital Investments, and...

Beyond the eccentric rhetoric and headline-grabbing blustering, many Australians are keen to know what a Donald Trump presidency in the US will mean for their businesses. With this in mind, we invited Chris Joye, a funds manager at Smarter Money Investments and a columnist for The Australian Financial Review, onto the My Business Podcast to share his thoughts for what Trump's policies will mean for Aussie importers and exporters. In a wide-ranging chat, Chris explores the potential policy implications at home, the effects on domestic interest rates for business loans and residential mortgages, as well as where SMEs can get the best returns on surplus capital. Plus much more! http://www.mybusiness.com.au