If housing is the business cycle, which I think it is, channelling our inner Leamer, then the collapse in building approvals by volume is highly problematic.
By value, it is a touch less dramatic. But there’s plenty of inflation to affect nominal aggregates these days.
This is why it is right to be nervous about the outlook for the discretionary retail names, too.
We recently unwound our JBH exposures, a fantastic business with some of the best turns in the industry, but the negative wealth effect from housing related spillovers looms large.
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