Finance & Fury Podcast

Welcome to Finance and Fury, The Say What Wednesdays Edition – Where each week we answer your questions Today's question comes from Cameron We are a couple, both aged 30 with approx 70k in each of our super accounts. We are interested in SMSFs with a view to purchasing property. How would one get started? What sort of costs are expected? Do couples pool their super? Buying Property in an SMSF   First, you need a SMSF – self-managed super fund An SMSF is a private superannuation fund, regulated by the Australian Taxation Office (ATO) that you manage yourself.  All other funds are managed by APRA - Australian Prudential Regulation Authority - the regulator of financial organisations (Banks and supers) SMSFs can have up to four members. All members must be trustees (or directors, if there is a corporate trustee) and are responsible for decisions made about the fund and compliance with relevant laws Two types of SMSF – Pooled and Segregated – Most are pooled for simplicity – where you can pool your funds to

Welcome to Finance and Fury Today – want to run through Coronavirus – Is it market noise or is it going to be an economic doomsday? First - It is too early to quantify the potential impact of the coronavirus on China. Much will depend on the attack and case fatality rates of the virus Coronavirus first emerged in the city of Wuhan, China - based on media reports - could affect growth in China and the rest of Asia-Pacific – spreading to the rest of the world – The severity of the impact of the coronavirus will depend upon the attack rate (the proportion of the population that falls ill) and the case fatality rate (the proportion of deaths) At this point, uncertainty about the nature of the virus is so high that it renders quantitative assessments pretty meaningless – but it may be helpful to think through how the virus could affect the economy – to do this – let’s have a look back on the impact of previous episodes of pandemics But the Impact of Past Pandemics Has Been Mixed - most commonly cited are the S

Welcome to Finance and Fury, The Furious Friday Edition Today – want to look at how much Corporate debt has been fuelling the top end of the share markets growth – signs that if liquidity is withdrawn, companies and markets collapse   Last FF ep – went through the flow-on consequences of low-interest-rate environment and QE policies - Free money Today - brings us full circle to the reality of the past decade: that any credit binge will always be popular because while the benefits of leverage come today, the costs of bad debt come tomorrow. Personally – Think about your personal situation for a minute – you could take a massive car loan for a new BMW, or go on a holiday on your CC = but the pain of repaying this comes later – the other option of saving over years to afford a new car or round the world trip doesn’t give you that lifestyle boost today Improving a business or learning a skill requires dedication and hard work - but Monetary “stimulus” – which is essentially credit - offers a siren-like, promise

Welcome to Finance and Fury, The Say What Wednesday Edition I've been looking at Soul Patt (ASX: SOL) recently as I've heard some commentators refer to them as the "Australian Berkshire Hathaway" but noticed they have underperformed the ASX200 index over the last 12 months. As they have overperformed over any other longer-term period, would you see this as an opportunity to buy in? And what do you think about this particular stock? Looking forward to hearing your thoughts. Thanks, Gab Disclaimer – not advice – general discussion in nature – seek personal advice Washington H. Soul Pattinson and Company Limited – call it SOL for short - is an Australian investment company - SOL invests in a portfolio of assets across a range of industries - main business activities include ownership of shares; coal mining; gold and copper mining and refining; property investment; and consulting. While the broader market gained around 25% in the last year - SOL lost 16% (even including dividends) Keep in mind that even the bes

Welcome to Finance and Fury Want to touch on passive investing versus higher conviction investing I watched the Big Short last weekend – many people asked me if I had seen it and were surprised when I hadn’t – don’t watch many finance movies or documentaries – find them to be liberal with the facts or only cover the rudimentary factors – so I watched it – good movie – did touch on some of the deeper points of the legislation and had some nods to the root causes – like when Michael Burry had the Fannie Mae/Freddie Mack prospectus on his desk – Those were the Government controlled lending institutions – that were mandated to give out at minimum 30% to lenders who couldn’t afford the loans - Most interesting character was Dr Michael Burry – Michael Burry – Christian Bale’s character – interested in the real-life man - Did some reading – Started his Hedge fund in 2000 – Quickly made large profits from shorting the overvalued shares in the DotCom bubble – Market fell buy about 12% while he made about 55% Also ca

Welcome to Finance and Fury, The Furious Friday edition I often wonder – Why the Fed/Central banks continue with polices that create a massive misallocation or resources and are hurting the economy more than helping – well – what If they cant stop or a collapse might follow Central bank policies cannot be unwound without creating a market collapse Central banks are focusing on inflation – but money printing has resulted in inflation of asset prices – not in consumer economy – no real business growth (despite markets going up) – limited wage growth and affordability issues – a bit of a mess Situation, where the policy response is to lower interest rates to try to boost CPI through increased ability to spend more and businesses, can increase how much they sell for – i.e. basket of goods goes up – but doesn’t work as the printed money never ends up in the equation, as velocity of spending is needed-  if the money is in the financial system through sinking money into investments – then velocity of that under curr

Welcome to Finance and Fury, The Say What Wednesday Edition Today's question comes from Chris What are your thoughts on TraCRs? I can’t recall if you’ve spoken about them before on your past episodes, if you have which one was that and I’ll go back and listen? How would you say TraCRs compare to using a platform like Stake? Do you think there are better ways of getting exposure to specific foreign stocks than TraCRs? Sorry if it’s an overload. Also thanks for doing the podcast I thoroughly enjoy your material and outlook   What is a TraCR? Transferable Custody Receipts Structure to provide beneficial ownership of the underlying shares of a listed overseas company For example, if you invest in a TraCR issued over a US-listed share, you are buying an Australian security that gives you a beneficial interest in, but not a legal title to, the US share. A single TraCR provides the holder with the beneficial ownership of a single underlying share. The value of the underlying share of a TraCR and the applicable for

Today – look at Why a Government benefit from high property prices, and why they might want high housing prices? To the point it moves away from being affordable – hurting population while benefiting Govs They all say they don’t – and that their policies will help reduce prices - but why this is either just promises, or a known a lie –   Governments could easily solve the property price issues – Incentivise spread Company and personal tax zones EPA laws – makes it easier Infrastructure taxes – should be the opposite – Gov chips in and then gets the price back on the sale Remove costs – Stamp Duty – one of the biggest ways people thing property prices can drop   Wealth effect – The wealth effect looks at the impact of the rising value of assets on consumer spending - A rise in house prices creates an increase in wealth for householders. As a consequence of this increase in house prices, householders will generally: Be more confident about spending and borrowing on credit cards. They can always sell th

Welcome to Finance and Fury, The Furious Friday Edition Today, the episode is delving a little deeper into superannuation I Work as a financial adviser – see a lot of changes to the legislation of superannuation since I joined the industry in 2011 – Today - Episode on my theory of superannuation from a viewpoint you might not see anywhere else History of Super – From 1970s - superannuation arrangements were in place were set up under industrial awards negotiated by the union movement – nothing like currently – they were union/company run 1983 - A change to superannuation arrangements came - through an agreement between the government and the trade unions Called “Prices and Incomes Accord” - the trade unions agreed that their members (workers) forgo a 3% pay increase to instead direct into the new superannuation system – important point of forgoing salary increase – come back to later This 3% was also matched by employers' contributions the employees' income – Though there is general widespread support for c

Welcome to Finance and Fury, The Say What Wednesday Edition.  Today's question is from Mario  Thanks so much for continuing to put together your insightful and informative podcasts. I have a question about investment strategies that last the test of time and can survive and continue into generations and generations to come. I have often heard about investment strategies that have survived through generations where the principle continues to be managed through conservative investment where capital preservation is key and the proceeds either continue to be reinvested or passed on to family. My question is what are your views about an ongoing investment allocation that can in fact last the test of time and How is such a structure set up and continually managed so that the investment isn’t destroyed when it passes to the next generation of family members or through turbulent times like war or global financial crisis? There are many questions that come to mind about appropriate asset allocation and who decides thi

Welcome to Finance and Fury On the last episode – looked at signs property prices will be high Today – continue and look at based on these factors - Will property prices keep going up? First – recap of the Tell-tale characteristic to be able to tell if property prices are high – 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 Access to credit – it is the Borrowed funds by the population – household debt to GDP in Australia has grown massively until 2017 – stabilised/dropped slightly since – and property prices with it – One of the most privately indebted countries in the world - behind Switzerland In conjunction with the urbanised population – higher the amount people can borrow or put towards property – higher the prices will be Regulations – that have aims to increases the incentive for hi

Welcome to Finance and Fury, the Furious Friday Edition Welcome to FF FF – Hasn’t been a FF in a while – but last was running through Crypto markets in relation to the BIS and powers that be Today – Want to cover the potential of what central banks using crypto and by extension, all of us looks like This is a potential scenario for us – when – who knows? Maybe 2 years – 5 years – 15 or never happen – but Recent examples in the news - The Bank of England-authored Green New Deal (in 2008) and Synthetic Hegemonic Currency (takeover of Central Banking Crypto)  In this, they outline what the Bank of England’s Crypto might look like Another example - in BVI - Blockchain startup LifeLabs announced that it is developing a digital currency dubbed BVI~LIFE in partnership with the British Virgin Islands (BVI). The coin will be a stablecoin pegged 1:1 to the U.S. dollar — which the BVI have used since 1959 – pegging their fiat currency against the USD — and its use is expected to reduce transactional fees, increase tr

Welcome to Finance and Fury, the Say What Wednesday Edition, Where we answer your questions, today's question is from Sol Tau Thanks for the Podcast and all the great info it provides. Could you explain what leads to hyperinflation and if there is any possibility of seeing that sort of scenario in Australia? This is a great question – and one topic I was going to tackle in a few weeks in relation to the monetary reset to crypto – so I'll jump the gun and cover potential hyperinflation First – What is hyperinflation? In economic terms - hyperinflation is very high or highly accelerating inflation rates 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 – hyperinflation quickly erodes the real value of a currency – due to

Welcome to Finance and Fury,  Back from Holidays – spent some time in the USA - Got me thinking about differences in property and their pricing – seeing property prices vary differently state to state – city to city – want to do a Series on property and its prices – Today - How can you tell that property prices will be high in a city? What are the measurements/characteristics on a country/city can be used to determine if property prices in cities are going to be high? This topic will take a few episodes to tackle properly – but in a quick summary Tell tale characteristic to be able to tell if property prices are high – Urbanisation levels versus available credit (cash people have access to from savings or lending/mortgages of the population) – Concentration of people (higher demand with population levels) and the limited supply available when people are concentrated in living space In Aus – we will go state by state – state pop, compared to largest city – we are fairly urbanised But more importantly – it i

Welcome to Finance and Fury Looking around in Australia - increasing disparity in wealth, and social fragmentation That social fragmentation means Australians are become "more self-interested, more materialistic, more competitive". Our largest challenge as a society is the challenge of preserving social cohesion – where we are all working towards the same goals as a society – It is an Us Verse them – some want the 1% to pay for their homes, uni education, others want everyone to live in the dark by removing all CO2 use There’s no perfect society - We have the inevitable consequence of living in bigger, faster cities and working in more competitive workplaces. Our bodies respond to stressful events with a surge of adrenaline, which increases our reaction speed and helps ensure our survival - Trouble is, our bodies aren’t designed to cope with repeated stressful events and adrenaline rushes. If more "jobs and growth" and the higher incomes they bring are intended to make us happier, maybe governments would

Why? – nobody else will help to confer information and thus Teach them about value of money – Kids don’t understand value of not just money as a medium of exchange – but that their time has valued attached to it – I don’t think some adults know that either At the very basis level – Doesn’t matter on which child psychology you read (Piaget, Freud, Erikson) – all have the understanding that children are egocentric – the world revolves around them – dues to brain development and availability heuristics What about me? Constant question from kids – or variation – when are we going to be there, or the why game Isn’t a bad thing – shows curiosity that can be lost if no nurtured But when it comes to money and value of items, monetary system – Prime directive (StarTrack) shouldn’t be to worship money – but to understand value of what it can be exchanged for This doesn’t just apply to kids – value is very important – not the price Value is the very basis of every investment as well – would you pay $100 for somethi

Welcome to Finance and Fury Traditional asset class allocation Diversification getting harder Diversification in a world where most asset classes are becoming correlated Diversification: what it is and isn’t Diversification across asset classes is one of the most fundamental principles of investment portfolio construction Reason - different types of assets perform differently at different stages of the economic cycle When done properly - diversification across asset classes results in stable returns at less risk - An appropriately allocated portfolio helps smooth out the ups and downs of the markets so investors can enjoy the positive compounding of returns over time About downside risks – whole portfolio shouldn’t fall as much in the face of a market correction – allows a portfolio to retain its value A loss of 10% = 11% to reverse the loss A loss of 25% = 33% to reverse the loss A loss of 50% = 100% to reverse the loss – 90% loss = 900% gain Asset allocation and Diversification - asset allocation is

Welcome to Finance and Fury,  Are we in a property bubble? There is no question that the Australian property market has become significantly overpriced – but is it a bubble and due for a significant downturn? – For this – only talking about capital cities – most of the land isn’t in a bubble First - A property bubble is a form of “economic bubble normally characterised by a rapid increase in market prices of real property until they reach unsustainable levels relative to incomes and rents” – then like most bubbles – prices at some point decline History - Australian house prices rose in correlation relative to average wage-earning – up until 1996 June 2014 - IMF reported that house prices in several developed countries are "well above the historical averages" and that Australia had the third-highest house price-to-income ratio in the world.  2016 – OECD - reported that Australia's housing boom could end in 'dramatic and destabilising' real estate hard landing In past 12 months - Sydney and Melbourne have exp

Welcome to Finance and Fury, The Furious Friday Edition Monday ep this week went through BTC – Went through a monetary reset towards a crypto-fiat system – Today – talk more The BIS and central banks versus BTC and the crypto markets – how are they planning to get there. There are two side to crypo - especially Bitcoin – BTC is a divisive topic – garners strong passions in the population One side are the proponents - hail it as the future currency - is immune to the manipulation of politicians and central banks – Suggestions of Bitcoin being the basis for restoring world currencies to a new monetary standard or Bitcoin standard. On the other side - Bitcoin is seen as an electronic version of snake oil, tulipmania and Ponzi schemes While admitting to the underlying blockchain technology being useful and a great idea - not in the context of a currency If you remove BTC and just said crypto currency - I think both sides are right mostly Fiat system – is a bubble in its size – far surpasses tulipmania - i

Welcome to Finance and Fury, The Say What Wednesday Edition Question from Mark part 2: Can you explain the repo markets that are going on at the moment? Apparently the banks are loaning money from the Feds at 10% so they have enough liquidity to survive the night/Bank run? Announcement – Last SWW ep for the year – Taking a break – Monday eps still going but no Wednesday or Friday episodes Repo market – Or repurchase market – What is it? And why are they done? What this says about the state of the economy A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities Agreement where one party sells Gov Bond they own for cash to another party – and promise to buy it back at a higher price in the near future – the inflated value is the repo rate Active participants in the domestic repo markets are those who deal in Gov Securities – include commercial banks, Central Banks, securities dealers Securities dealers - typically large domestic and international banks/investment