Christopher Joye: the RBA got it wrong, now it will crush housing, growth and the consumer

Today’s guest on The Rules of Investing will be very familiar to subscribers of Livewire. 

Christopher Joye co-founded Coolabah Capital in 2011, and it's since grown to house about $7 billion in funds under management. Coolabah is a leading active credit alpha manager, with 28 portfolios across institutional and retail mandates. 

Chris has storied history analysing Australia’s property market. In 2008, when the world was in the throes of the GFC, the Australian Government ploughed $15 billion into a policy proposal developed by Chris to provide liquidity to the Australian residential mortgage backed securities market.

He also founded research and investment group Rismark International. While there, he designed Australia’s first “quality-controlled” house price indices, the IP for which is used to this day by Corelogic.

In today’s episode, we dive into the RBA’s latest rate decision, the dire outlook for Australia’s housing market, and how Coolabah generate returns by exploiting mispricing in the bond and cash markets.

Along the way, you'll get a front row seat into the inner workings of an active bond fund. 

Chris also spins a yarn about the time he challenged GMO's Jeremy Grantham to put his money where his mouth is. 

Timestamps

2:30 - The RBA hikes rates to a 10 year high

6:00 - Pain on the way for the Aussie household

10:00 - A problem in the RBA's models

12:50 - Housing to fall by 30%

18:55 - Maintaining central bank credibility

22:00 - Zombie haunt the ASX

26:00 - Wait for the risk-free rate to do its work

27:26 - Challenging GMOs Jeremy Grantham

38:30 - How to short the housing market

31:30 - Hunting for mispriced bonds

38:00 - The inefficiency of the over-the-counter bond market

41:20 - How Coolabah builds its portfolios

46:00 - Navigating 2022

48:00 - Choose your hedges wisely

57:00 - How the NSW Government becomes a hedge fund

59:30 - The best value in bond and cash markets

Note: this episode was recorded on February 8, 2023.