The Intellectual Edge: Making Every Basis Point Count...

CCI’s macro and quant forecasting prowess is well documented and has included, amongst other things, accurately predicting ahead of other analysts: 

• the record housing boom between 2013 and 2017;
• the need for the bank regulator to introduce macro-prudential constraints on lending in 2014; 
• the dramatic decline in the major banks’ returns on equity between 2015 and 2019 from 16% to 19% to around 11%;
• the record housing correction between 2017 and 2019; 
• the otherwise unexpected upgrade of Australia’s sovereign credit rating to AAA “stable” in 2018; 
• the early return of the federal budget to surplus in 2019; 
• the shock outcome of the 2019 Federal election; 
• the retention of franking credits on hybrid securities; 
• the upgrade of the major banks’ senior bonds to AA- “stable” in 2019; 
• the sharp housing recovery in May 2019; 
• the upgrade of Australia’s economic risk score in 2019; 
• the upgrade of the major banks’ stand-alone credit profiles from “a-” to “a” in 2019; 
• the unanticipated upgrade of the major banks’ hybrids from a high yield BB+ rating to an investment-grade BBB- rating in 2019; 
• the upgrade of the major banks’ subordinated Tier 2 bonds from BBB to BBB+ in 2019;
• in February 2020, the emergence of an extreme liquidity/solvency crisis in global financial markets because of investors’ inability to price pandemic risks, which would necessitate unconditional central bank liquidity and quantitative easing support;
• in February and early March 2020, the RBA commencing quantitative easing to mitigate the COVID-19 crisis, including government bond purchases and the provision of a term lending facility to banks along the lines of a Bank of England model, and the Commonwealth Treasury re-starting purchases of RMBS and ABS;
• in March 2020, the early April 2020 peak in COVID-19 infections in Australia, the US and Europe, months ahead of epidemiologists’ predictions;
• in March 2020, Australia’s early exit from COVID-19 containment in May 2020 on the back of the early peak in new infections and the aggressive flattening of Australia’s curve; 
• in March 2020, aggressive mean-reversion in credit spreads of high-grade and liquid assets that benefited from central bank QE (CCI spent approx. $900m net buying assets during this time as credit spreads blew-out to historic wides);
• in March 2020, the tiny 0% to 5% correction in Aussie house prices (they fell 1.7%) followed by the advent of a recovery six months later in September 2020 with house prices officially increasing on a national basis in October 2020;
• in early July 2020, the late July 2020 peak in Victorian COVID-19 infections;
• in September 2020, the RBA’s QE 1.0 program and in January 2021, the RBA’s $100bn QE 2.0 program;
• in mid 2021, the pre-emptive repayment of $11bn of debt by the NSW Govt;
• In 2021, the large duration, equities, credit spread, crypto and housing shocks in 2022; and
• In 2023, the upgrade of Aussie bank Tier 2 and hybrid credit ratings, and non-major bank senior bond ratings.