Economy sputters and Wall St darling smashed

1. Economy limps along as households slash spending

2. Has AI hype gone too far?

3. Property prices a tale of two cities

4. Why China's stockpile is causing commodity pain

Only one in four Australians have apparently heard of the energy transition, despite it being the biggest engineering project Australia has ever faced. EnergyAustralia boss Mark Collette sums up the challenge ahead, as well as the progress we're making on this $320 billion puzzle.

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- Fear & Greed

The economy grew just 0.2 per cent in the June quarter, and one per cent over the year. It’s the worst result since the early-1990s, if you exclude the COVID-19 period when the economy was pretty much switched off during lockdowns. Households are tightening the belt even further, with discretionary spending down 1.1 per cent. The flagging GDP figures have caused a firestorm of debate over the past week, particularly after Treasurer Jim Chalmers said higher interest rates were “smashing” the economy alongside global volatility. The challenge is that there is not expected to be a quick turnaround in rates, with inflation continuing to run hotter than the Reserve Bank would like, and the pressure on households and businesses will continue for some time. The government is going to be under increasing pressure to spend to stimulate the economy as the federal election, and perhaps a May budget, start to get closer.

Chipmaker Nvidia recorded one of the biggest tumbles in value ever for a US stock, with shares falling 9.5 per cent in one day. That’s a drop in market value of $US278.9 billion, or about $415 billion Aussie. Just for perspective - the market cap of Australia’s biggest company, Commonwealth Bank, is around $240 billion. Nvidia’s share price has fallen about 14 per cent in the three sessions since it reported results last week (the market had a breather for the US Labor Day holiday). And this is where it gets really interesting. Because the chipmaker actually posted some pretty solid results for the second quarter, up 15 per cent on the first three months at around US$30 billion. That was up 122 per cent year-on-year. But while such figures would be applauded for most companies, investors have punished Nvidia. Why? In part due to its guidance for the third quarter, which was about in line with expectations. Investors’ expectations have been so incredibly high for Nvidia, that they’re now used to being blown away. Analysts are also starting to ask questions about demand for AI outside of the tech sector. It doesn’t help too that Nvidia has received subpoenas from the US Justice Department over an antitrust investigation. Maybe the frenzy has reached fever pitch, leaving plenty of room on the downside when uncertainty creeps in. As the poster child for the AI boom, Nvidia will continue to be a litmus test for the whole AI market.

The investing world is always watching Warren Buffett, so a major sell-off of Bank of America stocks by Berkshire Hathaway has garnered plenty of attention. Berkshire Hathaway’s value hit US$1 trillion just in time for Buffett’s 94th birthday on Friday, marking the first time a non-tech company in the US has surpassed this milestone. But The Economist this week asked whether the Oracle of Omaha has finally “lost his touch”. One of the reasons there’s jitters is because of Berkshire dramatically selling down its Bank of America stake, with 21.1 million shares sold down towards the end of last week. In about six straight sessions it has sold off almost 15% of its stake. Back in May the business sold off $20 billion in Apple. Those were two of its biggest interests. In June, Berkshire was selling down Chinese EV maker BYD stock. Interestingly, the business is backing Ulta Beauty and bought shares right before a recent earnings report that was widely considered disappointing. Still, the long term success of Berkshire Hathaway is something to behold: Class A shares in the conglomerate are now worth 55,000 times what they were when Warren Buffett started building the company in 1965.

China’s economic slowdown has been causing havoc for commodity prices. One of the emerging themes is China’s growing stockpile of resources, which is of growing concern when the economy isn’t running hot enough to burn through the raw materials it has on hand. The concern is that these will increasingly get pushed into the market, with significant supplies in China of soybeans, coal, oil and wheat. Even just the perceived threat of this has softened prices. At the top of the list of concerns for the Australian economy, though, is what China is doing with steel, and as such, what it means for the critical iron ore price. Steel is a major component of residential building, and the Chinese property slowdown has been a big theme this year. With domestic demand slowing, steel exports from China are now expected to reach an eight-year high by year-end or around 100 million tonnes.

5. Has the Oracle of Omaha lost his touch?

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Last week UK Prime Minister Keir Starmer visited Germany, hoping to 'reset relations' across the region and 'turn a corner on Brexit.' We wonder if this video came up in the discussions: an unusual choice of music by a German naval commander sailing his warship up the Thames in London.

Home prices continue to rise, but it’s a tale of two — or maybe multiple — cities right now. The latest CoreLogic data revealed that national dwelling prices surged 0.5 per cent in August. But it was split down the middle, with Melbourne values slipping and its median dipping behind both Perth and Adelaide for the first time on record. Brisbane, Perth and Adelaide have all been growing solidly and Sydney is muddling along in the middle of the pack. As for Melbourne - how this data will be received will depend on whether you currently own a property. Higher levels of building activity is putting more supply into the hands of buyers and is partly the reason for the slowdown in prices. In the middle of a housing crisis, that's not a bad thing for those looking to get onto the property ladder, making the market more accessible - but homeowners certainly don’t like to see values slipping, especially when they're already dealing with higher interest rates and a broader cost of living challenge.