The RBA’s job just got harder

Another week, another bank collapse?

Hopefully not this week… we’ve had enough of those, thank you very much.

The RBA’s next rates call gets tougher

And it seems the US Federal Reserve and the Bank of England (among others) are suitably confident that there’s no looming crisis that they actually decided to raise rates over the last couple of days.

Either that… or they’re so worried about inflation, that they’re prepared to take the risk!

In all likelihood, it’s probably some combination of both.

And that means the RBA has a tough call to make.

They want to tamp down on inflation.

And they know that if the others go, and we don’t, it’ll push the dollar down and import more inflation.

So those are the cases for increasing rates.

On the other hand, they seem concerned about ‘mixed’ data, and the million-odd fixed rate loans that will convert to variable over the next 20 months will do a lot of the heavy lifting for them – long after they’ve stopped raising rates.

I haven’t seen the month-by-month fixed-to-variable rollovers, but if they’re going to happen soon enough – and keep happening – I’d reckon that’d be enough for me to sit pat if I was in Governor’s chair. If the bulk of those rollovers are too far away, I think I’d press the ‘up’ button.

Of course, you might be surprised that Phil Lowe doesn’t consult me on rates decisions. Who’d have thought, right?

So, like the rest of the country, I’ll just wait and see. And wish him luck.

Another day, another hack

Apparently Rio Tinto Limited‘s (ASX: RIO) employee details were accessed by a hacker this week.

That’s on the back of Latitude Group Holdings’s (ASX: LFS) customer data breach last week.

And Optus, Medibank Private Ltd (ASX: MPL) and plenty more over the past few months.

This is the new normal.

I still don’t reckon companies have come to grips with what customer data they should (and shouldn’t) retail.

I still don’t reckon they’ve come to grips with the challenges of effective cybersecurity.

And I still don’t reckon governments have a good framework for preventing, dealing with, and punishing these things.

Investors? I think we should expect that any/every company we own will be hacked at some point. It’ll hurt share prices, temporarily at least. But there’s no way to know who’ll be next, so it’s a case of being ready, then grinning and bearing it.

As Spock (didn’t really) tell Captain Kirk, ‘It’s life, Jim, but not as we know it’.

We’d better get used to it.

Buy Now Pretend Later?

Good news, Australia.

We – private and public alike – are now debt free.

No, seriously.

See, Afterpay has decided that what it offers isn’t really ‘credit’ but ‘working capital’, as reported in today’s AFR.

So, I’ve taken their very impressive lead and reclassified all Australian debt – government debt, mortgage loans, bank overdrafts, credit card debt… the lot! – as working capital.

And just like that, we no longer have any debt.

You’re welcome. Take the weekend off!

(Yes, apparently they seriously said that. And yes, of course that’s absolute tripe. Well, it would be tripe, but I’ve decided that tripe isn’t really an animal’s stomach lining. It’s caviar. You’re – again – welcome.)

Quick takes

Overblown: Predictions. Especially about interest rates. People can have a view on what the RBA should do. But trying to guess what it will do is a mug’s game. The board will make its own decision, based on its own collective judgement. Predictions are a parlour game – sometimes fun, but always useless.

Underappreciated: Quality. Yes, seriously. Now, I mean proper business quality, not just what everyone agrees are ‘blue chips’ (plenty of those have done very poorly). Great businesses tend to win. And their shareholders most often do, too.

Fascinating: It’s too complex to go deeply into for this little space, but Credit Suisse bondholders got wiped out, while shareholders got (some) value for their shares. That’s the opposite of how these things are supposed to go. Why did it happen? Because the people buying bonds couldn’t imagine a scenario in which it would happen, even though it was there in the contract. Buyer beware, indeed.

Where I’ve been looking: For quality (see above). If you have a long term perspective, I reckon you should be putting quality above (almost) everything. Price matters, of course, but what if you could identify quality companies with long term growth potential, available at a decent price. That search is what I’ve been focused on this week.

Quote: “Chains of habit are too light to be felt until they are too heavy to be broken” – Warren Buffett

Fool on!

The post The RBA’s job just got harder appeared first on The Motley Fool Australia.

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Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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