Today’s News

The Big Picture

• Lowe and Chalmers go toe-to-toe over inflation. Former RBA governor Philip Lowe and Treasurer Jim Chalmers have traded barbs in recent days. Lowe blamed government “handouts” for Australia’s stubborn inflation, while Chalmers suggested the comments may be motivated by Lowe’s non-reappointment, after he was replaced by Michelle Bullock in late 2023. Drama! (ABC)

  
  

• Australian unemployment holds steady at 4.1%. The jobless rate remained unchanged in December, with 18,000 Australians finding work. But with the economy still running relatively hot, economists are now warning another RBA rate hike could be on the cards. (AFR)

  
  

• Excuse his French! Macron calls free speech defence “pure bullshit” over social media age limits. French President Emmanuel Macron took aim at social media companies at an AI summit in New Delhi, slamming their free speech arguments against tighter age restrictions. Platforms have pushed back, with Snap CEO Evan Spiegel calling such rules “premature and performative.” (AFR)

  
  

• UK to force tech firms to remove abusive images within 48 hours. New UK laws would require platforms to take down explicit or abusive images within two days. Companies that fail could face fines of up to 10% of global revenue — or even be blocked entirely in the UK. (BBC)

  
  

• IMF warns China’s industrial subsidies are hurting other economies. The IMF has urged China to scale back state support for its industrial sector, arguing it’s driving “resource misallocation” and “overspending.” The fund estimates China spends around 4% of GDP subsidising domestic companies and recommends cutting that closer to 2%. (FT)

Companies in the news

• Zuckerberg defends Meta in landmark social media addiction trial. Meta CEO Mark Zuckerberg appeared in court as part of a major case examining whether social media is addictive for children. The trial heard internal discussions about boosting time spent on apps by “tweens,” despite Meta banning users under 13. Zuckerberg said he regretted not moving faster to identify underage users, but believes the company has reached the “right place over time.” (BBC)

  
  

• Earnings season volatility hits Zip and Lovisa, while Telstra and Brambles shine. Zip was the hardest hit, falling 34% after a rise in doubtful debts spooked investors. Lovisa also slid 12% as losses in its startup Jewells business came in worse than expected. Meanwhile, Telstra gained 4% on lower spending, and Brambles jumped 4% after profit rose 11%. (AFR)

  
  

• eBay buys Depop for US$1.2bn. eBay has agreed to acquire second-hand fashion app Depop as it looks to reach a younger audience in the re-commerce boom. Seller Etsy is offloading Depop after buying it for US$1.6bn in 2021. (BBC)

  
  

• Uber to spend US$100m on autonomous vehicle charging. Uber announced it will invest more than US$100m in charging infrastructure for autonomous vehicles, positioning itself for a future where driverless fleets become more common. (Yahoo Finance)

  
   

• Seattle Seahawks put up for sale — proceeds to go to charity. The Super Bowl-winning Seattle Seahawks have been listed for sale by the estate of late owner Paul Allen, with all proceeds set to be donated to charity per his wishes. The team is expected to fetch a record NFL price, after the Washington Commanders sold for US$6bn in 2023. (Seattle Times)

  
  

• New York Knicks IPO? Madison Square Garden explores spin-off. Madison Square Garden Sports has approved plans to explore spinning off the NBA’s New York Knicks and the NHL’s New York Rangers. The company believes both franchises could be worth more as standalone entities than under the current combined structure. (FT)

What the…?

France tells 29-year-olds: have a baby before it’s too late. For the French youth, it’s not just mums and mother-in-laws applying pressure in the baby department anymore — now the government is getting involved too. France plans to send a letter to every 29-year-old citizen reminding them that “fertility is a shared responsibility between women and men.” (Sky News)

The letter is part of a 16-point plan that is focussed on infertility which reportedly impacts 1/8 couples in France. The plan comes as France recorded more deaths than births for the first time since the end of WW2. (Quick side note: President Emmanuel Macron is a part of his own problem with his lack of children.) (The Guardian)

Today’s Insight

Community Question: How Hedging impacts ETFs

This was taken from our recent Equity Mates Investing episode titled ‘Pope-approved stocks, a pitch for the Community Portfolio & currency hedging explained’ (Spotify | Apple | YouTube)

Anna: I'd like to understand more about hedging, whether this is relevant to ETFs and how much it affects the profitability of my investments. Any information you could pass on would be much appreciated. Thanks so much!

Ren: Thanks for the question Anna, so to understand why hedging can play a role in a portfolio, you've got to understand the currency risk. So let’s look at a simple example to illustrate that point. Here in Australia and we want to buy an investment in the US, it can be an ETF, shares, an American house, whatever. To do that, we need to turn our Australian dollars into US dollars and then buy that asset which is priced in US dollars. So we take in this example AUD$130 and turn it into US dollars. We get about US$100 and we buy that investment. Now that a hundred US dollar investment doesn't move, doesn't appreciate or depreciate, but the US dollar becomes less valuable. You sell that investment in the US and you get your US$100 back. But then when you bring that money back to Australia, let's say we only get AU$120 for it, we lost AU$10. It wasn't because we made a bad investment, but because the currency moved against us.

Bryce: Just to be clear here, Ren, for people that are like Anna who are thinking about how it affects their ETFs when we're buying an ETF that's listed on the ASX that gives exposure to underlying US investments like the S&P 500, we're not actually doing the conversion ourselves, but Betashares or Vanguard or iShares, they're actually going and buying the underlying assets in US dollars.

Ren: Yeah, I think that's an important point because if you're buying individual shares through a Stake or a Superhero you have to change the money and you see it happen, whereas with ETFs you don't. So with ETFs there are a lot of ETF providers that give us a choice and you'll often see a hedged or unhedged version of ETFs. To give you some examples here in Australia, the iShares S&P500 ETF, they have a hedged version of that being IHVV. So it owns the same 500 underlying US companies, but one is exposed to currency movements and the other isn't.

Today in Equity Mates