A group of ultra wealthy people are donating millions to a super PAC backing Donald Trump for President.
Elon Musk is leading the charge with $US45 million per month to get Trump elected.
Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast site, my own website, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz or at Banking Day.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
I am Leon Gettler. My job is to review and monitor the week’s news in business, finance and economics. I bring it all to you, every week.
This is episode number 25 in our series for 2024 and today’s date is Friday July 19
First, I’ll be talking to Alex Perry, the managing director of investment company Sharewise. Alex has a strong history of working in the Investment Management industry. We will talk about how geopolitical conflicts in the Ukraine and Gaza are affecting markets. And we’ll talk about the market impact of US presidential election in November.
And I will talk to RMIT economist Sinclair Davidson about whether this downturn is worse than the GFC.
But first let’s talk to Alex Perry.
So what’s happening in the news?
As world financial markets reopened after the attempted assassination of Donald Trump, one thing seemed likely: The Trump trade will get even more momentum. The series of wagers — based on anticipation that the Republican’s return to the White House would usher in tax cuts, higher tariffs and looser regulations — had already been gaining ground since President Joe Biden’s poor performance in last month’s debate imperilled his re-election campaign. But the trades took deeper hold, with Trump galvanizing supporters and drawing sympathy by exhibiting defiant resilience after being shot in the ear on stage at a Pennsylvania rally. There was no commentary about him going off to play golf the next day. Treasuries fell as trading kicked off on Monday, with long-dated bonds underperforming on anticipation Trump’s fiscal and trade policies will fan inflation. The dollar edged higher against most peers, Bitcoin rose above $60,000 while futures on the S&P 500 Index for September climbed 0.2%.To be sure, there’s still plenty of room for surprises with almost four months to go in the US election campaign. The emergence of political violence may deepen concern about instability in the US and push investors into haven assets, potentially overshadowing some of the market positioning that has already taken place in the run-up to the election. Moreover, some investors may want to book early gains or be wary of getting deeper into an already crowded position. While traders generally don’t expect Trump’s assassination attempt to derail the stock-market trajectory in the long run, a pick-up in near-term price swings is likely. The market has already been contending with speculation that valuations have become too stretched, given the boom in artificial-intelligence stocks and the risks posed by elevated interest rates and political uncertainty. But investors have also been anticipating that bank, health-care and oil-industry stocks would benefit from a Trump victory. “The attack will boost volatility,” said David Mazza, CEO at Roundhill Investments, predicting investors could seek temporary safety in defensive stocks like mega-cap companies. While bond traders have been pricing in at least two interest-rate reductions in 2024, a major boost in Trump’s election odds could push the Federal Reserve toward staying on hold for longer, according to Michael Purves, CEO and founder of Tallbacken Capital Advisors. “Trump’s stated policies are — at least now — more inflationary than Biden’s,” he wrote, “and we think the Fed will want to accumulate as much dry powder as possible.”
Elon Musk has said he plans to commit around $US45 million a month to a new super political-action committee backing former President Donald Trump’s presidential run. Other backers of the group, called America PAC, include Palantir Technologies, co-founder Joe Lonsdale, the Winklevoss twins, former U.S. ambassador to Canada Kelly Craft and her husband, Joe Craft, who is chief executive of coal producer Alliance Resource Partners. Formed in June, America PAC is focused on registering voters and persuading constituents to vote early and request mail-in ballots in swing states, according to one of the people. The coalition assessed that the Democrats have historically had very robust “get out the vote” campaigns and took note of the amounts of money that the Biden camp has dedicated to so-called on-the-ground efforts in swing states. America PAC will try to counter that. Musk in March tweeted that he didn’t intend to donate to either Trump or President Biden’s campaigns. But the billionaire Tesla CEO has gotten closer to the former president in recent months. On Saturday, Musk formally endorsed Trump for president after a shooter attempted to assassinate the former president at a Pennsylvania rally. “I fully endorse President Trump and hope for his rapid recovery,” Musk said on X. In a subsequent post he said, “Last time America had a candidate this tough was Theodore Roosevelt.” Musk and Trump had been talking frequently in recent months and were developing a friendly rapport, and that Musk was helping organize a data-driven project to prevent voter fraud that Trump was briefed on. The two men had also discussed a possible advisory role for Musk in a potential second Trump administration, something Musk later denied.
The International Monetary Fund has warned that high inflation is proving more persistent than expected, potentially forcing central banks to keep interest rates higher for even longer than predicted. Despite the better-than-expected US inflation figures, the IMF warned on Tuesday that momentum on global disinflation had slowed, largely due to ongoing elevated rates of services inflation. “Risks of persistent inflation in the services sector are tied to both wage and price setting, given that labour accounts for a high share of the costs in that sector,” the IMF said in its quarterly update of the World Economic Outlook. In Australia, economists say the June quarter consumer price index on July 31 will be decisive in determining whether the Reserve Bank of Australia will be forced to deliver a 14th interest rate rise at its August 6 board meeting. With underlying inflation running about 4%, markets are pricing in a 16% chance the RBA will raise the cash rate to 4.6%, from 4.35%, when it next meets. Services inflation was 4.8% in the year to May 31, well above the RBA’s 2 to 3% target, according to figures from the Australian Bureau of Statistics. Rapidly rising rents, airline fares, health costs and insurance premiums were among the major drivers of services inflation in Australia, AMP deputy chief economist Diana Mousina said. An increase in the cost of vehicle repairs and haircuts was also keeping services inflation elevated. IMF chief economist Pierre-Olivier Gourinchas said further challenges to disinflation in advanced economies could force central banks to keep borrowing costs higher for longer than markets predicted. “That would put overall growth at risk, with increased upward pressure on the dollar and harmful spillovers to emerging and developing economies,” he said. The IMF revised its near-term forecasts for Australian economic growth slightly lower. It expects the local economy to expand by just 1.4% in 2024, down from 1.5% previously, and by 2% next year. In an unwelcome development for the Australian economy, Chinese economic growth is expected to decelerate to just 3.3% by 2029, down from a forecast 5% in 2024. Despite the upside risk to the global inflation outlook, inflation is still expected to return to central bank targets by the end of 2025 as unemployment inches higher and energy prices decline. “Monetary policy rates of major central banks are still expected to decline in the second half of 2024, with divergence in the pace of normalisation reflecting varied inflation circumstances,” the IMF said.
The federal Labor government has appointed an independent administrator to overhaul the CFMEU and clamp down on criminal elements within its ranks, amid growing concern at the damage from gang-related figures at mammoth building projects. The move will impose tight control on key parts of the union after days of revelations about its ties to organised crime, as employers call for a judicial inquiry into allegations of kickback offers and other deals that have driven up the cost of construction. Prime Minister Anthony Albanese has expressed contempt for John Setka, who has quit as secretary of the Victorian branch of the CFMEU, and vowed to take “whatever action is appropriate” to fix the problems within the union. Senior cabinet ministers have played down the option of deregistering the union because this could repeat the mistakes made with a precursor to the CFMEU, the Builders Labourers Federation (BLF), after it continued its misconduct despite being deregistered. Significantly, and it’s something the Labor government didn’t say, was that when the BLF was deregistered, other building unions recruited tens of thousands of BLF members in NSW, Victoria and the ACT. In the early 1990s, the building unions formed the new super union, the CFMEU. The move to appoint an outsider to run the union gained momentum on Tuesday after the CFMEU national secretary, Zach Smith, voiced his support for Setka and argued that action by the national office would be enough to deal with the problems. The move comes after the federal government said an email about the CFMEU two years ago had not gone to the prime minister’s office. “The correspondence was first sent to an inactive email address,” the government said. It was then sent to the “contact the PM” website and left with the Department of Prime Minister and Cabinet. While the Coalition demanded answers about what the government was told in 2022, the government confirmed the prime minister’s office did not receive the correspondence referred to in this masthead’s report on Tuesday. A key factor in the federal decision to appoint an outside expert to run the CFMEU is the experience of a union scandal in 2012, when Bill Shorten as workplace relations minister named an independent administrator to run the Health Services Union due to fears about the misuse of membership funds by top officials. Ministers believe the decision to appoint an administrator avoids the problem of trying to deregister the union in the way prime minister Bob Hawke moved against the BLF in 1986 due to concerns about corrupt behaviour by its leader, Norm Gallagher. The advice to the government is that deregistering the CFMEU would not work because the union could continue to act against employers, negotiate enterprise bargaining agreements and represent workers without cleaning out any tainted officials. In a legacy from the WorkChoices regime put in place by the Coalition more than a decade ago, unregistered organisations are allowed to negotiate for members as “red unions” without full status at the Fair Work Commission. By keeping the CFMEU a registered organisation with an outside administrator, the government aims to keep the union subject to sanctions against unlawful conduct under workplace relations law. On Monday, Albanese warned that the plans by the CFMEU national office to “clean up their own shop” might not go far enough, and “they’re on notice that we’ll take whatever action is appropriate”. “I mean, I have contempt for someone like John Setka. He has no legitimate role in the union movement,” he said. The federal move is expected to extend beyond the Victorian branch in order to stamp out problems in NSW and Queensland as well. Labor’s national response to the scandal has escalated after party leaders in Victoria, South Australia and Tasmania wrote to the national executive asking for the construction division to be disaffiliated from the party. In addition to banning donations from the construction division, the party will also stop receiving affiliation fees. Many of the nation’s union bosses are refusing to speak out against the CFMEU after ACTU Secretary Sally McManus said on Monday the leaders of the movement stood united against criminality within the movement. A spokesperson for the Transport Workers Union issued a statement supporting McManus’ comments but not mentioning the CFMEU, while unions including the SDA, Australian Workers’ Union, Australian Manufacturing Workers’ Union, and the Rail, Tram and Bus Union declined to weigh in. As the CFMEU national secretary, Smith has stared down the ACTU’s demand to stand aside officials who are the subject of criminal allegations before a crisis meeting of the peak body’s executive. Smith also refused to condemn Setka, who resigned on Friday, blaming media scrutiny, ahead ofthe publication of revelations of underworld infiltration in the union, and footage of him placing a suitcase out the front of another official’s home with the word “dog” on it. Asked by RN Breakfast host Patricia Karvelas whether he accepted Setka had shamed the union, Smith replied: “No, I don’t. I don’t accept he has shamed my union.” McManus has declined to say what the ACTU will do if the CFMEU does not meet its demands. Master Builders Australia chief executive Denita Wawn backed the idea of an administrator being appointed. “We want the government to use all their powers to remove the toxic culture, including through the use of an external administrator,” she said. “Deregistration is not the answer – tighter governance is.”
The corporate regulator has begun a key phase of its investigation into alleged market manipulation by ANZ, informally interviewing staff from the bank’s institutional division over unusual trading activity in government bonds and futures. While the Australian Securities & Investments Commission has started engaging with bank employees, the watchdog is yet to grill staff at the centre of the allegations within ANZ’s markets unit. However, the regulator is now conducting due diligence and firming up a potential case before conducting formal interviews. The latest development comes after ANZ chief executive Shayne Elliott and institutional boss Mark Whelan last week said the bank was co-operating with regulators to get to the bottom of the allegations and would take action if required. The matter concerns ANZ’s bond trading activity and alleged manipulation of bond futures contracts, as well as broader cultural issues within the bank’s markets unit. The big four bank on Thursday confirmed it had brought in two law firms to uncover any evidence of wrongdoing within the division, as it grapples with the fresh accusations of market manipulation. The prudential regulator also has an open file in relation to the bank’s trading in government bonds and futures.
Plummeting valuations and higher financing costs have led wholesale office funds to a 19.5% decline in capital growth over the past 12 months, including their worst quarterly performance since the months following the global financial crisis. ISPT’s 50 Lonsdale Street Property Trust and the Mirvac Wholesale Office Fund were the worst performers. Both suffered a decline in total return of more than 20% over the past 12 months, according to the latest MSCI/Mercer Australia Core Wholesale Property Fund Index. The MSCI index covers the major wholesale property funds, which control about $95.6 billion worth of investment in Australia’s top office towers, shopping malls and warehouses. They are managed by some of the country’s best-known property platforms: Lendlease, GPT Group, Charter Hall, ISPT, Mirvac, QIC, Dexus, AMP Capital and Investa. But there may be more office pain as the write-down of office funds accelerated over the April-to-June period to negative 8.7%, amounting to losses of double those recorded for the first three months of 2024, according to the index. It is not just office that has slipped. The majority of wholesale property funds board posted dropped negative returns, which led to the total return for all funds slipping by 4.7%. In a tough year, retail funds were the best performers, with a total return of negative 7.2%, due to higher rents at malls that offset declining values. Another factor supporting retail funds was that structural headwinds such as the rise of e-commerce have already passed while the office sector still faces changes from the shift to remote work.
Qantas boss Vanessa Hudson says there aren’t enough passengers in Australia to sustain more than three domestic airlines given how expensive it is to provide services across the country. Speaking in Perth for the launch of the airline’s new 17-hour non-stop service to Paris, Hudson said Australia’s aviation market differs from the rest of the world because of the country’s small population and how reliant the airlines are on domestic travel. Hudson said the demise of budget airline Bonza just one year into its operations highlights why the government needs to focus on the sustainability of the market. “If you think about why three airlines really struggle, it’s a number of things – our population; the US has 250 million people, we have 26 million and spread between the economics of being a viable airline, it’s incredibly challenging because it’s capital intensive,” Hudson said. The comments come as Federal Transport Minister Catherine King gets ready to unveil the government’s long-awaited aviation white paper, which will set the policy around the industry to 2050.
And that’s it for this week.
And next week, I’ll be talking to Sonia Schwabsky, the CEO of the printing franchise KwikKopy who is spearheading the company’s strategic vision and transformation. She will talk about how she is delivering growth opportunities for franchisees and clients.
And I will talk to Indeed economist Calla m Pickering about Australia latest unemployment figures
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
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Wishing you all a safe and healthy week, And looking forward to bringing you Talking Business next week
