$3.00 NTA, page-16

"Next cycle you may get your wish"

Thinking that inflation and interest rates will go higher is an opinion about reality, not a wish. As interest rates rise, you have correctly pointed out that some people will suffer financial stress - which is certainly not my wish.

On the other hand, some people with savings may benefit if they put their money into term deposits instead of into shares if their portfolio is underperforming (also with much less risk). I'm not saying that one balances the other. Financial stress can be a political issue, but it is not a reserve bank issue. It is irrelevant. When inflation rises there is plenty of financial stress for some people, even if interest rates were to be frozen and didn't rise. But the only tool left in the RBA's toolbox for fighting inflation is interest rate rises. So people suffering financial stress are going to be even more stuffed - again an opinion about reality and not my wish about reality.

I think that inflation is going higher than most experts have predicted. If inflation goes higher then it doesn't matter how much financial stress there is. Interest rates will have to be pushed higher to combat the inflation, stress or no stress.


A factor that affects LSF's NTA is currency exchange rates. AUD is weak at the moment compared with USD, which boosts LSF's USA holdings when converted into AUD. When Australia finally gets around to tackling inflation by increasing interest rates properly, then AUD will rise relative to USD. Which will reduce LSF's calculated NTA. It is possible that LSF's NTA could be adversely affected by several percent just by Australian interest rates rising and dragging the AUD higher. Of course, USA interest rates will also be increasing, so there will be a race. But eventually Australia will have to catch up, even if it is later rather than sooner. Australia is currently well off the pace.

I think that LSF with its portfolio of shorts is better placed than most funds, but atm I see too many headwinds generally for funds and markets. Today's strong market rise might be the end of the correction. On the other hand, maybe it is just the start of a relief rally. Time will tell.