Three things that got the team talking this week - Firetrail Investments

Weekly insights from the Trail

Three things that got the team talking this week

September 29, 2023October 6th, 2023

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1. Don’t fall…

We are right in the middle of the steepest fixed rate expiry cliff, according to CBA. Around $52 billion worth of fixed rate mortgages are set to expire in the 6 months to December 2023.

Did you know, over 60% of Australia’s A$2.2 trillion of mortgage debt is linked to variable rates, and around 30% or A$600 billion, was borrowed in the two-year period when interest rates were ultra-low. The RBA estimates that of the fixed-rate home loans taken out during the low-rate Covid period, around A$450 billion are still pending to refinance with only 35% having already matured.

Source: CBA (September 2023)

2. Pizza party…

The NAB online retail sales report out this week showed particular strength in takeaway food. This adds to the positive sentiment for High Conviction Fund holdings Domino’s Pizza, who benefits from consumers trading down in tougher economic environments, and historically makes up a large part of the online takeaway spend.

Source: NAB (September 2023)

Companies mentioned are illustrative only and not a recommendation to buy or sell any particular security.

3. The debt wave is crashing…

Just as US consumers start thinking about holiday shopping, they have their first student loan bills due in over 3 years. As a reminder we noted last month that from September 1 loans started accruing interest again. And come October 1, the first repayments since pre-Covid on the USD $1.77 trillion in federal and private student debts are due. And it looks like the 62+ age group will be hit the hardest, with their average balances at nearly $50,000.

And if you were wondering how US debt is tracking with the higher interest rates – over the last 3 months alone, the US has added $500 billion per month to the national debt, on average. Over the last 5 years, US debt is up 54%. Meanwhile, year to date interest expense just passed $800 billion!

Source: Forbes, UBS (September 2023)

Source: Evans (September 2023)

Disclaimer

This article is prepared by Firetrail Investments Pty Limited (‘Firetrail’) (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email service@pinnacleinvestment.com

This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance.

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