MQG overvalued in the current market, page-2

Cont

MACRO picture is what I am more confident will trip almost all equities and even the high-quality ones like Amazon, and Apple. Growth is being punished and will be more relevant for MQG than the other banks.

1. Inflation is not transient. Fed potentially needs many more hikes than what they have admitted in the past. If you look at the "Taylor theory" and do the math to control 8% inflation you would need a rate of around 10%. ( not saying we will reach 10% but anything more than 3% will have serious issues.)This means we are significantly behind the curve. More rate hikes are required. Even in the Australian context, RBA is forecasting a 2.5 to 3% terminal rate. I doubt they will get there and believe we will somewhere between the CBA forecasted rate of 1.6% and the RBA rate of 3%. all these numbers would cramp growth for some time.

2. Very like recession in the USA. Almost all the other trading zones are already in recession. If you look at the Walmart and Target numbers, they were absolutely punished by the market. When you look at the report they missed the EPS by a wide margin. Their ability to pass on the cost was starting to erode. These are the biggest retailers in the USA and they are beginning to struggle. If someone thinks this is the USA and the rest of the world does not matter, I respectfully disagree.

3. Tightening money supply. The majority of people have never lived in a proper tightening cycle when the world is in so much debt. I think there could be many surprising events in the next year or two hence the chance to buy MQG at a lower price.

One last reminder: MQG dropped lower than 87 when the last recession hit and what saved the entire market was the FED Put. This is no longer there. FED is working against the market and their huge political pressure in US to tame inflation. Their is no FED put until their is more pain.

Good luck to holders.