Piccolo

01 / Global perspective

World

The price of growth

Artificial intelligence promises to change how we work. Investors are now asking a more immediate question: will the returns justify the enormous amounts being spent?

Recent selling in technology shares suggests confidence is becoming more selective. A technology can transform the economy while some investors still pay too much for the businesses building it. Innovation and investment returns do not always move together.

Money has also moved towards US government bonds as investors seek safety. That is a useful reminder: bond yields reflect more than inflation. They also respond to changing expectations for growth and investors’ willingness to take risk.

Meanwhile, rising oil prices are adding pressure. Tensions around Iran matter economically because energy costs flow through transport, manufacturing and household budgets, making inflation harder to contain.

My view: this calls for greater attention to price and profitability. Exciting growth stories still need to produce cash, and a strong business can become a disappointing investment if expectations run too far ahead.

02 / Closer to home

Australia

The squeeze before the payoff

Australia faces an uncomfortable combination: persistent inflation and the risk that higher interest rates will weaken growth.

Recent RBA warnings have brought another rate rise into focus. This week’s inflation figures will help shape expectations, with consequences for mortgage holders, businesses and investors.

But interest rates cannot solve every problem. They can restrain demand; they cannot directly build more homes, improve infrastructure or make businesses more productive.

That leaves productivity at the centre of the longer-term challenge. Better living standards depend on producing more value from our people, capital and resources. The quality of spending and investment matters alongside the amount.

There are opportunities. Australia’s energy resources, critical minerals and dependable trading relationships could attract investment as countries seek more secure supply chains.

My view: the test is whether that investment expands our capacity to produce. The payoff should be stronger businesses and higher living standards, rather than simply more activity competing for the same limited resources.

03 / A closer look

Opportunity

Banks, and getting paid to wait

Australian financials are an area I’m watching closely. Banks keep money moving through the economy, financing homes, businesses and investment. Their importance makes them worth studying, although a strong business still needs an attractive purchase price.

Higher interest rates create competing pressures. Banks must protect their net interest margin—the gap between what they earn on loans and pay for funding—while managing deposit competition and borrowers under strain.

One approach worth understanding is a cash-secured put. An investor receives a premium in exchange for accepting an obligation to buy shares at an agreed price if assigned, while keeping enough cash available to fund the purchase.

The appeal is getting paid while waiting for a price you are comfortable paying. The trade-off matters: shares can fall well below that price, and the premium only cushions part of the loss. If shares rise instead, the investor may miss the rally.

For me, the starting point is valuation and willingness to own the bank. The options strategy comes second.