Yields go negative...just

Negative yield

Interesting email in the inbox this morning with a 3-month T-note tender producing a small negative yield. 

Bit of a surprise.

After all the fuss about funding costs in 2019, 3-month bills are at 0.01 per cent.

Job vacancies boom to all-time high

Job openings soar

Job vacancies boomed +23.4 per cent or +48,300 to an all-time high for the ABS series of 254,400 in the November 2020 quarter.

Victoria is understandably lagging post-lockdown, but things are looking absolutely fabulous for Western Australia and Queensland.

The south-east Queensland economy is 'on steroids' right now, certainly for housing. 

Any wage price inflation in the post? 

In short, not yet, with the unemployment rate still elevated at 6.8 per cent, although some industries (mining, real estate) have fared much better than others (tourism, aviation, higher education). 

It was certainly an unusual quarter with parts of the economy reopening, and so on.

But still there's a solid case for the unemployment rate already having peaked and falling towards 6 per cent from here. 

Australia's massive financial super-stimulus package and relatively speaking excellent control of the coronavirus is delivering some remarkable results, and an early Federal election looks to be a solid bet. 

Stock walloped towards record lows

Tightening further

Property listings are 14 per cent higher year-on-year in Melbourne, according to CoreLogic, as the property market works through its post-lockdown spike. 

But stock is getting absolutely crushed lower by the month elsewhere:

Source: CoreLogic

Investors are the missing link still, but as enquiry ramps up it's going to be a flying start to the year for property markets. 

Melbourne vacancy rates still trending higher

Melbourne vacancies spike

An interesting trend over the past year has been that vacancy rates, in aggregate, haven't increased.

The national vacancy rate trended down from 2.5 per cent to 2.2 per cent over the calendar year, according to SQM Research. 

In Sydney the vacancy rate now appears to have peaked, but Melbourne the vacancy rate continued to rise to 4.7 per cent in December 2020. 

Vacancy rates are tight in most of the second tier capitals, and increasingly so in Perth, Darwin, and Adelaide. 

Sydney CBD was one of the major vacancy hotspots, but lower rents are now filling up the empty apartments, with the vacancy rate dropping from 9.5 per cent to 7.8 per cent in December. 

In Melbourne CBD vacancies declined from 9.1 per cent to 8.7 per cent, according to SQM's figures. 

Buying in Bris 30% cheaper than renting

Cash to splash

It's likely to be a big year or two ahead for Brisbane (and Adelaide) property prices.

The interest cost on a 100pc geared purchase is now 30pc cheaper than renting (although there are sundry costs associated with ownership). 

Dr. Cameron Murray has successfully used his index and analysis before to call the direction of markets and this looks bullish for the second tier capital cities. 

Source: Dr. Cameron Murray

It's worth remembering that thanks to government stimulus, early superannuation release, mortgage holidays, and no overseas travel, in aggregate households are absolutely awash with cash. 

The household saving ratio ballooned in 2020, and yet still retail turnover continued to accelerate to a spectacular 13.3 per cent annual gain in November, despite the prior year being a Black-Friday led high watermark.

Online sales have obviously been very powerful this year, but declined in November as Victorians rushed out to the shops. 

Compound growth: it's about time...

It's about time

A new blog post on compound growth - see here (or click on the image below):

Awash with cash

Two-speed prosperity

Morgan Housel is always worth a read, and especially so this week.

See here (or click on the image below):

Housel's cracking book on the psychology of money is also a must-read.

A couple of the key takeaways were:

-understanding 'how much is enough' (instead of succumbing to greed); and

-understanding the power of compound growth to generate wealth and returns.

Because the big gains come later as a result of compounding, the winners are not necessarily those with the fastest annual returns, but those with the stomach to stick with successful strategies for the longest period of time.

It's why Buffett generated most of his wealth after the traditional retirement date.

And it's why the family home so often proves to the only genuinely successful investment many folks ever make.

Not because the returns are spectacular necessarily - often they aren't - but because it's the one asset people stick with long enough to experience the benefits of compounding. 

The problem with more volatile investments is often that investors bail when trouble surfaces, as it periodically does. 

Refinancing begins to work

Rates dropped

There was a significant surge in mortgage refinancing activity in 2020, and it's making a material difference to mortgage rates on outstanding loans.

Australia is looking relatively well placed as we kick off a new year.

The US 30-year fixed mortgage rate fell to yet another all-time low of 2.65 per cent. 

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The Halifax reported a 2.6 per cent increase for UK house prices in the final quarter of 2020.

The annual price gain was +6 per cent.