Founder CEO Endeavour Equity Strategy Macro /Research/ Technicals. Aust Treasury, Strategist ABN-AMRO. Ski, Ocean Swimming & Surf. Sydney Swans
Sydney, New South Wales
Joined March 2014
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US Semis took a pasting this week down nearly -20% ex-$NVDA.
Catalyst included:
* China Kimi K3 AI competition;
* TSMC raising CAPEX guidance/ questions on sustainability;
* $GOOG is months behind in delievering Gemini 3.5 Pro
* Jittters on US-Iran Conflict & Concern Semis are a bubble
* BUT ARE SEMIs A BUBBLE? *
Yes – in our view…(though it could run furthe)
i) Ex $NVDA SEMIs are on 40X forward PE🔥👀⬇️
ii) $NVDA is on 19X – not expensive – BUT * EPS is a bubble * spurred by Vendor Financing & Off Balance sheet leverage.
The Circular Financing deals have boosted EPS 🧵1/
Prepare for more hikes:
Sarah Hunter (RBA Chief Economist) on 60 Minutes overnight repeated themes from the RBA Minutes & Hauser interview last week:
· RBA minutes: pass through will be faster and more extensive" and "risk of inflation expectations drifting higher is elevated".
· Hauser last week: cited from the RBA liaison survey "an increasing share of businesses who are thinking that, maybe, sort of 3 per cent, 3.5 per cent [inflation] is the new normal". “Look, that is the central banker's nightmare. ”We can't allow expectations to shift away from target."
Hauser highlighted the RBA had hard choices for 'Laying shorter-term pain on top of pain' in order to avoid potentially far worse pain down the track if inflation expectations get locked in.
Punters aren't stupid
They can read the tape...
And know when the "cupboard is bare" due to 5 years + of mission fail by the RBA
A hawkish deputy RBA Gov Hauser notes:
"The inflation outlook looks materially worse than we projected in the August report..."
"...inflation's been high for a very long time now"
"people in the community are not sure if we're going to bring inflation back into target at all."
Doesn't sound like a central bank that thinks it can raise rates once in September and be confident all its work is done.
Douglas Orr, CFA retweeted
RBA's Deputy Gov Hauser Hawkish Panic?
Hauser sounds RBA alarm inflation expectations untethering at 3-3.5%. Endeavour Base case rides as 2ndOrder Oil Shock effects light Australian Tinderbox of Inflation again (like 1974, 1979, 1987) after years of RBA over-stimulus & Government Overspending & Surge Immigration.
Hauser highlighted today:
"We are beginning to see some signs that some people in the community are not sure if we're going to bring inflation back into target at all, or certainly not for an extended period,"
Hauser today highlighted the RBA liaison program and surveys showed there was
"an increasing share of businesses who are thinking that, maybe, sort of 3 per cent, 3.5 per cent [inflation] is the new normal".
“Look, that is the central banker's nightmare.”
"We can't allow expectations to shift away from target."
🧵
Better SELL quick!
This home - if you can call it that - has recently been completed in Sydney - and put to sale.
It is a good 35 minutes drive from the city in good traffic conditions.
Does this mark a top?
vimeo.com/1232269137
I would state it as
RBA has been reckless & negligent in their overstimulus - contrary to RBA research & global peers. Conventional wisdom is NAIRU is 5% meaning *no cuts* in 24/25 with Unemployment ar 4.2% + Inflation not sustainably at target!
Douglas Orr, CFA retweeted
Australian House Prices
Median Price to Income 9.5X just shy of most expensive in history....
= NB last time Australian House Prices facing high 6s Mortgage Rate P/ I was 7X not 9.5X
=> that was with negative gearing
I dont think a lot people truly grasp how much social mobility in terms of housing has been absolutely decimated.
In 1999, you could afford to buy a median house in every capital but Sydney on a median household income, in some cases absurdly easily.
Today, a place like Albury is unaffordable and in price to income terms is roughly in the same ballpark as California.
Dual income households in the top 20% of earners are today fighting tooth and nail for homes in same percentile that a bus driver and a part time canteen lady were buying at a canter at the turn of the millenium.
And it is entirely underappreciated what a major social issue this is.
If you cant build a decent life even with hard work and a huge income relative to the median, whats the point especially after all that tax.
Douglas Orr, CFA retweeted
Hauser & RBA now panic as Inflation runs away due to 2nd Order effects post the Oil Shock of Q1-26
LOOK BELOW the RBA has run REAL RATE 160bps below NZ/ Canada for 5 years
=> no wonder Australian House Prices & Inflation/ Cost of Living has run away from them!!!
RBA's Deputy Gov Hauser Hawkish Panic?
Hauser sounds RBA alarm inflation expectations untethering at 3-3.5%. Endeavour Base case rides as 2ndOrder Oil Shock effects light Australian Tinderbox of Inflation again (like 1974, 1979, 1987) after years of RBA over-stimulus & Government Overspending & Surge Immigration.
Hauser highlighted today:
"We are beginning to see some signs that some people in the community are not sure if we're going to bring inflation back into target at all, or certainly not for an extended period,"
Hauser today highlighted the RBA liaison program and surveys showed there was
"an increasing share of businesses who are thinking that, maybe, sort of 3 per cent, 3.5 per cent [inflation] is the new normal".
“Look, that is the central banker's nightmare.”
"We can't allow expectations to shift away from target."
🧵
Hauser & RBA now panic as Inflation runs away due to 2nd Order effects post the Oil Shock of Q1-26
LOOK BELOW the RBA has run REAL RATE 160bps below NZ/ Canada for 5 years
=> no wonder Australian House Prices & Inflation/ Cost of Living has run away from them!!!
RBA's Deputy Gov Hauser Hawkish Panic?
Hauser sounds RBA alarm inflation expectations untethering at 3-3.5%. Endeavour Base case rides as 2ndOrder Oil Shock effects light Australian Tinderbox of Inflation again (like 1974, 1979, 1987) after years of RBA over-stimulus & Government Overspending & Surge Immigration.
Hauser highlighted today:
"We are beginning to see some signs that some people in the community are not sure if we're going to bring inflation back into target at all, or certainly not for an extended period,"
Hauser today highlighted the RBA liaison program and surveys showed there was
"an increasing share of businesses who are thinking that, maybe, sort of 3 per cent, 3.5 per cent [inflation] is the new normal".
“Look, that is the central banker's nightmare.”
"We can't allow expectations to shift away from target."
🧵
RBA's Deputy Gov Hauser Hawkish Panic?
Hauser sounds RBA alarm inflation expectations untethering at 3-3.5%. Endeavour Base case rides as 2ndOrder Oil Shock effects light Australian Tinderbox of Inflation again (like 1974, 1979, 1987) after years of RBA over-stimulus & Government Overspending & Surge Immigration.
Hauser highlighted today:
"We are beginning to see some signs that some people in the community are not sure if we're going to bring inflation back into target at all, or certainly not for an extended period,"
Hauser today highlighted the RBA liaison program and surveys showed there was
"an increasing share of businesses who are thinking that, maybe, sort of 3 per cent, 3.5 per cent [inflation] is the new normal".
“Look, that is the central banker's nightmare.”
"We can't allow expectations to shift away from target."
🧵
2/ RBA faces issues similar to Fed/Bond market – inflation threat is real
The problem for the Bond markets & the Fed in 2026 is two fold in our view:
i) “Inflation fight” is substantial & real - elevated services inflation, tight skilled labour markets. Oil Shock/ Spike again +60% y/y more for diesel. 2nd Round Effects are real ie Wages Atlanta Fed
ii) Real Rates are relatively low – much lower than vs previous Oil shock inflation fights
The Fed will likely need to do a series of rates hikes as a result of:
i) Oil Break out to > $100 USD
ii) PCE Services Inflation running at >3.75%
iii) ISM Prices (Manuf & Services ave) running > 70bp
ð Net the Inflation outlook appears incendiary
Chart: Aust CPI – on track for high 3s by end of 2026 (our base case of 3.5% by Jun26 looks likely to be exceeded)
Canada/ NZ with "grown up" CB & Government Policy has disinflated Covid Housing Bubble & made great inroads to Covid *Cost of Living* surges
=> House Prices back to pre covid multipes
vs
AUSTRALIA: RBA/ Canberra that has blown the #1 Cost Housing ever higher with their * Narrow Path * fantasy narrative - slow to hike/ quick to cut
=> House Prices +25% higher vs pre covid
Thx Tarric @AvidCommentator Very Kind!
Look below how Canada/ NZ with "grown up" CB & Government Policy has disinflated Covid Housing Bubble & made great inroads to Covid *Cost of Living* surges => unlike RBA/ Canberra that has blown the #1 Cost Housing ever higher with their * Narrow Path * fantasy narrative
Thx Tarric @AvidCommentator Very Kind!
Look below how Canada/ NZ with "grown up" CB & Government Policy has disinflated Covid Housing Bubble & made great inroads to Covid *Cost of Living* surges => unlike RBA/ Canberra that has blown the #1 Cost Housing ever higher with their * Narrow Path * fantasy narrative
Australian House Prices
Median Price to Income 9.5X just shy of most expensive in history....
= NB last time Australian House Prices facing high 6s Mortgage Rate P/ I was 7X not 9.5X
=> that was with negative gearing
I dont think a lot people truly grasp how much social mobility in terms of housing has been absolutely decimated.
In 1999, you could afford to buy a median house in every capital but Sydney on a median household income, in some cases absurdly easily.
Today, a place like Albury is unaffordable and in price to income terms is roughly in the same ballpark as California.
Dual income households in the top 20% of earners are today fighting tooth and nail for homes in same percentile that a bus driver and a part time canteen lady were buying at a canter at the turn of the millenium.
And it is entirely underappreciated what a major social issue this is.
If you cant build a decent life even with hard work and a huge income relative to the median, whats the point especially after all that tax.
Endeavour Base Case forecasts for -20%+ fall in Austrlian House Price falls vs consensus of -7-10% only. We expect 50% of the gains since Covid to be “paid back”
Australia Resi is:
i) 25%+ expensive on valuation: 3 models same conclusion: 9.5X price to income; DDM models & RBA Investor Benefit Model
ii) Since Covid Buoyed 67-80% by 2 major dovish RBA errors which are now being reversed – comparator CB overstimulated during covid, the RBA hiked less & cut well before excess
iii) Driven by a Speculative Investor bubble in 24/25 which drove expected returns/ “Investor Benefits” to historic lows
Catalysts below..
🧵
2/
Catalysts for a material fall are triggered:
i) Sharply higher & persistent RBA Interest Rates fighting the “tinderbox of inflation” including the housing bubble they buoyed further in 24/25 before inflation pressures addressed
ii) Government tax changes reducing Investor demand -20-25% price Canberra has switched to an “affordability” policy from an “unaffordability” policy. 3 key changes in addition to spike in interest rates:
a) negative gearing
b) CGT discounts curtailed &
c) ATO crackdown on owner use during holidays on investment properties.
We estimate these changes have reduced Investor prices by 25% +
AI-Boom has speed wobble with Firmus IPO fail & Credit Concerns
Higher rates & the spectacular IPO fail of Firmus has caused the market to focus on:
i) buildout risk, and
ii) financing pressures vs
iii) relatively risky revenue models (cash flows in FY27/28).
Wider credit spreads for Hyperscaler/ Neo-Clouds are an early warning financing conditions may be constraining the AI CAPEX boom.
AI’s huge CAPEX plans for 2027/8 require substantial debt & equity issuance which will drive the market to focus on cash flows & monetization schedules.
NVDA vs ORCL charts tell the story, NVDA a “shovel seller” to the AI boom is faring much better vs ORCL (& CRWV) the neo-cloud customers that buy GPUs to manufacture compute.
Why the IPO fail? “Pull” of the Firmus IPO may be an important milestone for the AI CAPEX Boom => highlights limits to the “hype” & promise of unproven revenue & profit streams for those offering AI Compute on huge CAPEX bases.
WAS FIRMIS IPO:
A) Over optimistic & greedy Firmus’s EBIT forecasts with a deal structure that reeked of get the money & run/ run with it for the major investors & founders (locked in until debt paid back) respectively?
OR
B) Is the market starting to question the credibility question of “circular financing”, vendor financing & off balance sheet leverage, which is crux to Open AI & NVIDA financial structure & revenues? If Firmus is sign the market is placing more weight/ scrutiny on execution risk, customer demand uncertainties & depreciation rates the top may be approaching for US AI Tech. IMO the IPO was so over optimistic & greedy you can’t say that!
Nvidia-Backed Australian Data Center Pulls IPO As Investors Balk At Valuation zerohedge.com/markets/anothe…
