Finance & Fury Podcast

Welcome to Finance and Fury, the Furious Friday edition. A lot of people are talking about how this shut down having a similar or worse economic effect than the great depression. Today, we are going to look at recessions, what happened in the great depression, and compare the governmental policies being proposed to help boost the economy. We’ll look at their theory behind this and consider whether it will it help the recovery? Talk about a recession or depression similar to that of the Great Depression – think about the roaring 20s – I know nobody listening would have been alive – but it had a stigma – the music would never end – western nations were developed – times were good and nothing could cease the music – the depression kicked in – After an initial recession Recession - a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. 6 months of negative – Before now - We haven’t had a recession under thi

Welcome to Finance and Fury, the Saw What Wednesday edition, where every week we answer questions from each of you. This week’s question is from Adam  “Hi Louis - Really enjoy your podcasts.  Not sure if this is too outside of your comfort zone but I would be really interested in hearing a podcast on whether it is still viable to set up an off shore investment company.  as we move into a period where the government is taking on more and more debt I've started looking into offshore options on the internet. I know the Turnball's etc have offshore companies to manage investments, but has most of the advantages largely disappeared through inter-government transparency?” Investing Offshore – look at how it is done, if it still can be with increased transparency – and the pros and cons Why would you want to invest overseas – create an offshore investment? Reduce tax and reduce transparency – but these things aren’t so easy as they were 20 or 30 years ago In Australia – and most western countries – we have high le

Welcome to Finance and Fury. What investments will do well and those that wont in a world with higher levels of inflation Financial investments – Been talking about MMT and inflation – but what hasn’t been mention – a lot of these intentions of providing business with credit, helicoptered money, ensuring government is financed and QE have had a secondary objective - to support and prop up financial asset and markets – but these policy efforts favour some asset classes over others Uncertainty and risk Risk and uncertainty are related but different Risk = speculative/volatility Uncertainty = Unknown risks – generally creates freeze response initially – just don’t do anything – spend or invest Uncertainty creates an environment where people avoid risks but then once they become afraid exit from existing risks In shares – creates selling – not sure what is going to happen – we are loss adverse = sell to avoid losses The important point is 1) have confidence in assets to avoid absolute losses and 2) getting

Welcome to Finance and Fury, the Furious Friday edition. Today we’re looking at Modern Monetary Theory action. The first stage, how this is going to be practically done, involves the merging of the central banks and Government Treasury. We’ll also look at the increase of Crony capitalism that will emerge out of this. Large companies in debt get bail outs, but most get to remain open and actually profit out of this.   The first step of long term implementation – Central banks and treasuries merge MMT proposes governments that control their own currency can spend freely, as they can always create more money to pay off debts in their own currency – The theory suggests government spending can grow the economy to its full capacity, enrich the private sector, eliminate unemployment, and finance major programs such as universal healthcare, free college tuition, and green energy. If the spending generates a government deficit, this isn’t a problem either. The government’s deficit is by definition the private sector

Welcome to Finance and Fury, the Say What Wednesday edition. Today’s question comes from Mario. “With the success of Warren Buffett’s Berkshire Hathaway would it be wise to invest in their Class B shares? It is often said that Berkshire Hathaway is one of most successful investment houses and so I wonder if it’s a really good long term horizon investment? Class A shares are so high and out of the reach of most people but I note Class B shares are more accessible but come with risk of changes and further dilution from Berkshire Hathaway. Also from a yield perspective I was unable to understand if they actually pay consistent dividends but then given Berkshire Hathaway view is about value investing am correct in thinking this stock is more growth oriented?” Thanks so much for your thoughts and views - Mario   In this episode – Look at difference between class a and b shares – long term growth prospects and dividends, then the difference between growth and value Berkshire – Difference between class A and B The

Welcome to Finance and Fury. With everything going on in the world, the notion that inflation could return with a vengeance may materialise. This will be a two part episode. Today, we’ll look at the potential paths for inflation and quickly assets to hold and those not to. Next Monday, we’ll go into further detail about the investment strategies and why each investment does well in certain conditions.   First, what is inflation: In economic terms – Inflation is the measurement of the increase in prices of goods = CPI in measurement terms – basket of goods and how the costs to purchase them changes Central bankers try to use inflation to reduce the real value of the debt to give debtors some relief in the hope that they might spend more and help the economy get moving again Therefore – inflation erodes the real value of a currency – due to prices of a good increasing – reducing your purchase power unless wages increase at same or greater rate – Technically – Extreme levels = Hyperinflation is when the pri

Welcome to Finance and Fury, the Furious Friday. Last episode, we went through the combination of monetary and fiscal policy, larger scale of QE and the quick introduction to modern monetary theory. Today I was going to go through the recovery of the economy today, but will  do more on modern monetary theory instead, as this is part of it and needs to be explained further before looking at the future working of the economy and how it is shaping up.   Conventional economics has struggled to explain much of what’s happening in the world today – Examples - How can we have record low inflation and interest rates at the same time? How can some governments continue to increase their deficits and yet their bond yields go down and currencies go up? How Governments issue bonds with a 30-year negative yield as who would buy them? Economists always are looking for new theories to explain these antithetical phenomena but also to rectify the problems created by the original theories This has triggered the current obso

Welcome to Finance and Fury, the Say What Wednesday Edition. This weeks question comes from Gab. “I had a question regarding a leveraged ETF from Betashares called GEAR. It is designed to offer around 2:1 exposure to the ASX 200, with 0.8% management cost. Looking at the long term growth and dividends, it seems like an excellent way to get exposure to the market and bank in around 20% franked divided (at 107% ??). Also no margin calls .... Am I missing something? It seems too good!” Not personal advice – Just general information GEAR The Fund is ‘internally geared’, meaning all gearing obligations are met internally by the Fund. How this works - combines funds received from investors with borrowed funds and invests the proceeds The Fund’s gearing ratio (being the total amount borrowed expressed as a percentage of the total assets of the Fund) is managed between 50-65% This is the LVR - rebalance the LVR to the middle of the range (i.e. 57.5%) whenever it reaches either the minimum 50% or maximum 65% thresho

Welcome to Finance and Fury. Credit cards and pay day lenders are on the rise, as some of those out of work are becoming strapped for cash. Today, we look at this further but also look at some alternative strategies to avoid the debt traps. We’ll also look at how to use this as a chance to get spending habits back in line. First – situations to avoid getting further into debt High interest loans are being offered to people via text messages - offering short-term loans to get them through whilst they are unable to work Known as pay day lending – but also offering short-term high-interest loans Obvious issue with this is that these loans trap vulnerable people in a debt cycle that is difficult to escape No doubt – a lot of the population is going to suffer financial stress – The National Debt Helpline says almost 10,000 people have called for help during the past month, but demand is so high that some calls are not getting through. "A lot of people who are calling us are incredibly stressed and really worr

Welcome to Finance and Fury, the Furious Friday edition. In today’s episode we look at what the future of the economy looks like?   First – I want to say a massive thank you to everyone who has given great feedback and your support – many of you have reached out – great to hear you are enjoying the content – so thank you – really great to hear that many of you are enjoying it     Before we get into the content – quick recap on the previous two episodes - First episode two weeks ago - went through how we are the economy – Last week – went through numbers being used as justification for these lock downs – These numbers sound very scary – Recapping on some numbers- but this time from the Covid shut downs - What other numbers sound scary – In Aus - Three million people have lost working hours and 390,000 have lost their jobs due to the shutdowns – 26% of the working population have been directly affected to date from the shut downs – 1 in 4 - Australia’s working population – 13m – 62% Full time – 38% casual – U

Welcome to Finance and Fury, the Say What Wednesday edition. This weeks question comes from Scott in Texas. “Thank you for your steady course on the social and resultant economic collapse from Govt reaction to the covid 19 virus. I am just as dismayed as you that we, in a democracy, are letting our lives be dictated to by a small majority of politicians using fear to control the masses. The math of who gets the virus and death rates just do not justify the controlling measures happening all around us. I keep asking myself, who is profiting and how are they pulling the puppet strings of control???”   This is an amazing question – and one personally I have been looking into for the past few months So many levels to this – As the saying goes- never let a crisis go to waste – and is very applicable now – many different organisations and groups that are gaining some benefit from this – either additional profits, additional influence or legislative control – you can disagree about the motives all that you want – b

Welcome to Finance and Fury. Today is a share market update. Don’t get tricked by the rebound in prices. We will be looking a bit into the pattern recognitions in relation to markets The market is low compared to 3 months ago – if looking at 10 years in the future – would be a bargain – but does this mean it is at the low point Look at major declines of the past – how they have compared – but also the repeating patterns they have Taken a massive battering initially – price declined by historic rates – almost came out of nowhere – Went through previous pandemics in the past – never been a decline like this – the markets always continued to grow – what is different – governments shutting the economy down – Going through a dead cat bounce – or seems to be – How the market works – The worst was priced in initially – markets are liquid – and they freak out Hits a low point – people enter the market But this all occurred As announcements of shut downs start – But then recovers – it seems counter intuitive – bef

Welcome to Finance and Fury, the Furious Friday edition. This is episode two in the coronavirus series, so if you missed last Friday’s episode, it might be worthwhile going back and having a listen to it.  It covered the concept of the economy and how we make it up, but today well jump in to it. The whole point of this series is to look at the question “Is the cure worse than the disease”. In this episode we’ll start to look at this. First we need to go through the numbers that have been represented to us and we’ll start from the disease side of the equation. This episode is all about the numbers, and when it comes to numbers, this is one of my personal strengths as I’ve spent my life looking at numbers. I will spend some of the time in this episode looking at the validity of the numbers being presented to us. In addition to numbers, another personal strength is pattern recognition, which makes me good at what I do. On the flipside, I know that can make me fairly abrasive and to the point which is a downside

Welcome to Finance and Fury, the Say What Wednesday edition. This week, the question comes from Andrew: "Last episode you mentioned super and a product that lets you invest in third party platforms. Would like to hear more about that." What is super? Most people think of superannuation as just something your employer pay in to so that when you turn 60 you can access it. Even though your employer pays into super, that is your money! 9.5% on average don’t care and why would you right? out of sight, out of mind and decades away from becoming relevant. If you could log into your bank account and click a few buttons to save a few hundred dollars a year, would you? The real cost of super is opportunity cost – doing nothing now will hurt Any problem ignored long enough will grow – until it is too late Pay attention and make it work – don’t regret the future One thing I hear clients say all the time is ‘I should have looked at this years ago’ – regret is worse than effort   What are your options: Super is a

Welcome to Finance and Fury – Today – will be looking at the potential outcomes for property market from here – How the effects of the Government responses to Corona may affect the property market – there are many things in play – prices in the property market complex system – so many unknowns – but based around some possible outcomes – we can look at the flow on effects – but no way to be sure to the levels these may materialise To start with – have to look at the Basics of property – where we were at prior to the government imposed economic decline In Australia – the characteristic of our property market prices being high come down to urbanisation, interest rates and regulations Urbanisation levels versus available credit (cash people have access to from savings or lending/mortgages of population) Concentration of people (higher demand with population levels) and the limited supply available when people are concentrated in living space But more importantly – it is the Borrowed funds by the population –

Hi Everyone – Welcome to Finance and Fury, the Furious Friday edition. The whole point of this episode is to remind people of the original purpose of the Furious Friday episodes of this podcast – that is to think for yourselves – For those of you newer to the podcast – there are three episodes a week – Monday is personal finance – Wednesday is answering questions – Friday is more of a commentary on what is going on – a deeper dive observing the political, socioeconomic, and many other topics – as this all related to economics     Recently received many comments or reviews saying to stick to my lane and to not cover corona as millions would die - instead do economics or investment topics – I was – and still am – Government measures globally to combat this invisible enemy (as politicians refer to it as) are affecting the economy – so in an effort to understand if these actions are justified, I was looking into what is going on – If something is crashing the economy – then that is exactly what I am going to co

Welcome to Finance and Fury, the Say What Wednesday edition. This weeks question comes from David.   David says: We have seen some ASX fixed income Listed Investment Trust (LIT) have fallen 10-30% from their NTA. Are you able to do a series to cover those to see if it is now a good investment opportunity? My thinking is that the massive drop is a function of retail investor fear (they don’t know what they are invested in) rather than the decline in the actual value of the investment.   Great question and we will look at some of the ones David sent through - NBI, PGG or KKC   important to note – not all fixed income is made equally What is fixed income/interest? A Fixed Interest is a debt instrument - a form of lending. Financial Product designed to raise money for the entity that issues the bond I liken it to an interest only loan – You need money? You borrow morning with the mortgage as the product and pay interest back When a company or Government needs money – Someone (you) purchase that bond – Essential

Welcome to Finance and Fury – Today we'll be looking at some of the pitfalls of the recent financial measures to combat the economic fallout that is going on Two major ones when it comes to the personal side of this- Money out of super – Easing the rules of requirements to the access of superannuation funds under the ‘financial hardship requirements’ Mortgage payments – The repayment ‘holidays’ on mortgages   Before we get to it – with either of these options - If you are in extreme financial hardship and need to do this – do it – but if not and just want to take money out of super or go on holiday for a mortgage – don’t - work off a strategy of survive now but pay later   Mortgages - Banks‌ ‌also‌ ‌come‌ ‌to‌ ‌the‌ ‌party‌ ‌to‌ ‌provide‌ ‌repayment‌ ‌‘holidays’‌ ‌to‌ ‌ease‌ ‌short-term‌ ‌cash‌ ‌flow‌ burden‌ ‌to keep‌ home loan repayments if people have been impacted by the government measures Under these new rules - borrowers‌ ‌can‌ ‌defer‌ ‌their‌ ‌loan‌ ‌repayments‌ ‌for‌ ‌up‌ ‌to‌ ‌6‌ ‌months – Natio

Welcome to Finance and Fury, the Furious Friday edition. Today – want to run through what is happening within the industry superannuation environment – not looking good With the market crash – cracks in the financial system are starting to appear – with almost no asset class but cash being safe – a lot of super funds have gone down in value – but this isn’t the only issue when it comes to industry funds The issue is the type of investments held – which have been placed in illiquid – i.e. hard to redeem investments – such as private equity, infrastructure or direct property – lots of funds have 25%-30% of their investment balances in illiquid investments – cant easily be sold down to meet redemptions So as people request switches out of their one size fits all allocations of ‘growth’ or ‘balanced’ to cash or other asset allocations like conservative, they are having a hard time to do this When it comes to markets – the saying goes that ‘A rising tide lifts all boats’ – but a low tide can leave boats stran

Welcome to Finance and Fury, the Say What Wednesday edition. Question from John: “I have a question on how to capitalise on the depressed global market ie what investment strategies might be worth considering if any. I know it’s very much early days, but I’d be curious to hear your thoughts, if you have any, on timing, likely post -CV19 effects of the financial measures that are being put in place (ie what might the recovery look like)”   Great question – Very deep topic - the situation is changing every day – so doing this podcast on an ever-moving situation creates a dilemma – what I say today at time of recording – may not be accurate by the time you listen – evolving But what we can do is look at the causes of the loss of the economic confidence and the markets crashing – Then look at to the triggers of potential market recoveries along with asset classes Start and look at what happened in the ASX – Shares have been hammered – lost 32% in a matter of a month - Record Drop in such a short time – why?