Friday already? Okay, let's finish the week off with a bang.
Defending the indefensible? Nah…
Are you ready? See, the pile-on when it comes to RBA Governor Philip Lowe is ridiculous.
You can point out his mistakes (I have).
You can disagree with his actions (I don't).
But the pile-on is silly and largely unrelated to the conduct of his job, other than to the extent some people think they can close their eyes, put their fingers in their ears and mumble 'lalalalala' as if that'll make it all go away. Or, well, just pure vengeance. But we'll get to that.
Here's what I wrote on Twitter this week:
I went on to say…
"What would you have Lowe do?
Let inflation run rampant?
It's not like there is a good choice and a bad choice.
There are two bad choices. One is slightly less bad.
That's where we are."
Any RBA Governor would put up rates to curb inflation (which, by the way, is what every central bank head globally is doing).
It's the only option unless you want to make the country even poorer.
Now, let's turn to the pollies.
Under the last few governments, structural budget balance (that probably would have run surpluses in the last year or so) has been jettisoned.
If there'd been structural balance, the economy would have been cooled. Instead, it's running a deficit, adding to demand!
The last government?
They reportedly told APRA to cut the loan buffer, meaning people borrowed more at record-low rates. That's just dumb.
They responsibly supported the economy during COVID but put no plans in place to recover the debt accrued as a result.
They had no plans for deficit reduction, instead aiming to pass yet more tax cuts — Stage 3 (on top of Stage 1 and 2) — that would further juice an overheated economy.
And the current mob doesn't get a free pass. They might have inherited a poisoned chalice, but that's just governing.
As the incumbent government, they have a responsibility to govern appropriately. They get a tick for not opening the floodgates but did almost nothing to fix it.
Of course, it's not only domestic. There are huge global issues.
But the idea of policy is to do what you can to minimise the bad stuff.
Lowe made mistakes on the way in — rates should have been higher and then raised more quickly.
But the amount of attention he's getting, compared to the lack of interest/effort/focus on current and past fiscal policies, is pretty irresponsible from those who should know better and have the megaphones.
Yes, people are hurting.
It sucks.
No one wants this to be the case, but here we are.
The RBA is doing the least-worst thing it can.
The pollies are doing all but nothing.
And the macro environment is unkind.
So here we are.
And remember, most 'cost of living relief' would be 'more money to spend in the economy', working directly against the RBA and making the deficit worse.
We absolutely need to look after people in dire straits.
But we should also be using other tools to slow the economy.
Fin.
*****
That… got a little blood boiling, but also plenty of approval.
Now for something completely different
I've been re-reading some of Warren Buffett's old shareholder letters.
And listening to the audio version of a book called The University of Berkshire Hathaway, which details some of the highlights of 30-odd years of the Berkshire Annual Shareholders Meeting.
(I own Berkshire Hathaway shares, for the record.)
On one hand, it isn't exactly surprising reading.
On the other, it's a reminder that doing the simple things right – and avoiding dumb things – shouldn't be as hard as some people make it.
Reading (listening to) the comments from each year's meeting and knowing what came after is both interesting and maddening.
They — Buffett and his business partner Charlie Munger – talk about the sky-high pre-2000 valuations of tech companies.
They warn about the unrealistic expectations of investors.
They rail against the danger of derivatives (which eventually messed up both Enron and caused the US subprime crisis to become a global financial crisis).
They talk about the risks of poor incentives and bad management.
But, most of all, they remind us to buy businesses, not stocks, and to ignore market gyrations in favour of long-term business earnings power.
If you're even slightly keen – and you should be! – grab a copy of the book.
From one plug to another
I'm one of the luckiest people on the planet, for a dozen reasons. But one of those reasons is that I get to do a job I love.
Part of that job is hosting a podcast that I want to recommend to you – not because of its host, but because of its guests.
It's called The Good Oil with Scott Phillips.
(I cringe at name-checking myself, but the good people at our publishing partner, Southern Cross Austereo, asked that we call it that because there are other podcasts with the title of The Good Oil!)
The most recent episode is Part 1 of someone else's podcast… I was invited to join economist Dr Cameron Murray on the Aussie Firebug pod to discuss superannuation.
It was a fascinating conversation. Hopefully, I added some value, but I loved being able to chat to someone who I agreed with a lot and disagreed with a little, with generosity and good faith, and with a common goal of improving the system.
It's how I like to think politics should be.
But it's not just that episode I want you to check out (though I do want you to listen to it!).
Previous guests have included NSW Treasurer Matt Kean, veteran finance journalist Michael Pascoe, economist Stephen Koukoulas and personal finance expert Effie Zahos.
But it's not just the big names. I've spoken to the Australian heads of Audible and social network Next Door. I've spoken to the CEO of Camplify, to a university professor who specialises in addiction and hosts a podcast on 'gurus', to the boss of music festival The Big Red Bash and heaps more.
In short, I talk to people I want to hear more from… and I hope that means you'll enjoy the conversations, too.
So if you're looking for something to listen to, why not give The Good Oil a crack. Based on feedback from others, I reckon you'll love it.
Quick takes
Overblown: Speaking of Governor Lowe, we humans love a bit of cheap vengeance, don't we? If someone screws up, we want them hung, drawn and quartered. But… don't you reckon someone who's been through the fire, and learned lessons the hard way, might just be the person you want steering the ship, thereafter? No, not just the RBA. Any company. Or sports team. Or government department. No, I'm not talking about incompetence. Or deliberately bad behaviour. I'm talking about the right person who makes the wrong decision. We need less vengeance and more 'benefit of past mistakes', I reckon.
Underappreciated: You know I'm a fan of e-commerce. While it's not in the headlines these days, the online strides being made by 'clicks-and-mortar' companies continue to impress. Make no mistake, the revolution is still well and truly underway. By the time it's in the headlines again… the opportunity may have passed.
Fascinating: Speaking of retail, Myer's phoenix-like resurgence is incredible. Profits doubled in the last half. Its shares have 10-bagged since March 2020. No, I'm not buying. But I've long said if it can shrink its footprint and grow its online business, it has a fighting chance. We'll see.
Where I've been looking: Spurred on by my time spent re-imbibing the gospel according to Warren and Charlie, I've been spending a lot of time thinking about some of the highest quality companies on the ASX that – crucially – have enough growth left and are available at attractive prices. You can find a lot of companies that tick one of those boxes. A few handfuls that offer two. But finding all three is much, much harder. Still, I reckon that's where the real, business-focused opportunity is. Stay tuned…
Quote: "In our view … derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal." – Warren Buffett, 2002 (five years before collateralised debt obligations almost destroyed the global financial system!).
