Bitcoin isn't worth $US100k, airfares too high, good news on rates

1. Is Bitcoin worth $US100,000

2. Banking Stage 3 tax cuts is good news for inflation

3. Airfares are rising and that's why Canberra should save REX

4. Value investing is making a comeback

What's a property listing really telling you? There's a bunch of words and phrases that signal you might end up with a bargain - and a few that mean you should run in the opposite direction. The Property Pendulum, presented by Domain and Fear & Greed, decipher the hidden codes of property listings.

Listener Marg asks:

"Why does oil seem to affect the price of everything? I get it having an effect on petrol prices - but it seems everything else is tied to the price of oil. Is it just because of manufacturing? Or is there more to it?"

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Bitcoin investors love Donald Trump and his Republican army, who want to make the United States the crypto centre of the planet. But it is still Bitcoin, a cryptocurrency using blockchain technology, as opposed to a legal tender controlled by governments. Making the US the centre of the crypto universe is slightly ironic given one of the benefits of cryptocurrencies is that they are borderless. But I get having a government more friendly on regulatory matters is good for digital units. The value of all the Bitcoins on offer is now around $US3 trillion. One unit has more than doubled in value, peaking just under $US90,000 this week, and the question is can it reach the mythical $US100,000 mark. Bitcoin ETFs trading on Wall Street have experienced billions of dollars of inflows over the past week, so demand is there. But it is still a cryptocurrency, with an uncertain regulatory future, and limited practical uses compared to US or Australian dollars. It is an investable asset with a very volatile profile, it uses enormous amounts of energy and governments have been able to track down ownership of Bitcoin's when they've been used to pay ransoms. So its secrecy benefits are questionable. Bitcoin has no intrinsic value. It is not worth $US100,000 a unit. It may not be worth $US10,000 a unit unless it is accepted by governments and central banks. That is a big ask, even with Donald Trump in power. 

One of the great unknowns in the economic puzzle for 2024 was whether people would spend or bank their Stage 3 tax cuts, which commenced on 1 July. The evidence so far suggests they've banked them and that's good news for inflation. The Commonwealth Bank this week said borrowers were using the tax cuts to pay more off their mortgages, thus keeping loan arrears stable. The bank has about $8.8 billion worth of home loans in trouble, but as a percentage of its total loan book, that hasn't changed. Retail trade figures from the Australian Bureau of Statistics back up the commentary from the country's biggest bank. There has been no great surge in spending as a result of people receiving more money in their pay packets. For anyone hoping interest rates will fall, this is very good news. The fear was that people would spend their tax cuts keeping pressure on inflation. The Commonwealth Bank expects that interest rates will start falling early next year, probably February. I don't think it will be quite so soon, but the data out of the bank certainly supports the February rate cut argument.

The Trump trade is finally starting to slow but not before a bunch of asset classes have surged over the past week. Bitcoin is probably the best example, but Wall Street and particularly the share price of Tesla, is another beneficiary. The hopes on Wall Street are that Donald Trump enacts big tax cuts for large businesses, helping earnings. Trump Administration 1.0 did exactly that. The difference this time around is that in the year before Trump was elected in 2016, Wall Street went backwards. In the year to last Tuesday, Wall Street is up more than 25 per cent. Back in 2016, Wall Street was undervalued. Not so today. Tesla's share price is flying, notwithstanding it came off six per cent overnight as the Trump trade unwound a touch. Ahead of last night, it was up 40 per cent in a week. The expectation is that CEO Elon Musk will get what he wants on regulation and support from Donald Trump. Undoubtedly he is close to Trump. For now. Both men have histories of fall-outs with friends. Betting too much on a harmonious Trump-Musk relationship is fraught. So too is betting too much on the Trump trade being sustainable on Wall Street.   

The local share market has become a tale of big winners, big losers and not much in between. Over the past year, the S&P/ASX200 is up 18 per cent, but of the top 30 stocks, only four - CSL, Coles, QBE and Cochlear - have performed anywhere near that level. Thirteen of the rest, led by Pro-Medicus, Wisetech Global and Goodman Group have done much better. Commonwealth Bank is in that group and briefly on Monday its market capitalisation topped $250 billion for the first time. Another 13 companies, including Woodside, Woolworths, BHP and Telstra, have done much worse. It has been a stock pickers market with technology companies and the banks doing well, while the resources companies have struggled. When there's such volatility in stocks, value investors come to the fore. They are the investors who look at the fundamental worth of a company, compare it to its trading price, and decide whether or not to invest. Value investing, with a few notable exceptions, has largely been overshadowed by growth and momentum investing for many years. That might be about to change. 

According to the competition watchdog, fuel costs make up about 20 per cent of an airline's costs. Jet fuel is 40 per cent cheaper today than a year ago. Yet airfares on big city routes in Australia in three months to the end of October were up 13.3 per cent. The reasons, according to the Australian Competition and Consumer Commission, is that the demise of Regional Express (REX) means passengers have less choice when flying between the capital cities. Qantas and Virgin now have 98 per cent market share and they can put prices up, subject to demand, without too much fear of losing customers. Qantas said the comparison period used by the ACCC coincided with high demand for routes to Melbourne, because Coldplay were performing. Even so, a 13.3 per cent jump when fuel prices have tumbled! By contrast, international flight prices have, on average, fallen by five to ten per cent for the 12 months to the end of September. Competition works and what's happening in the airline sector is a great demonstration of how it helps customers to have three carriers competing. The federal government is putting in another $80 million to ensure regional routes are still being flown by REX. Finding a buyer that wants to compete in the capital cities would be even better.

5. Why the Trump trade is a short term bubble

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What do fizzy drinks do to you body, and which are the worst. Is a Coca-Cola better or worse than a Monster Energy Drink. What do sugary drinks mean for weigh gain, type 2 diabetes, and heart and liver disease. Are they significantly worse for children than adults. The Australian Financial Review is running a somewhat disturbing story about sugary drinks. Read about it here (paywall).