Finance & Fury Podcast

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question is from Phuong. “Hi Louis - With strikes happening at Sydney’s port recently and worker asking for pay rises, do you think that Robot will eventually replace human workers? And what are future job for younger generation, do you think?” Thanks for the question – brings up a great point – in todays episode – look at the rise of the robots – does it pose a danger to the employment sector and what the future of employment may look like   To start with – look at the rise of robotic workers – in automation study from Oxford Economics - Robots could take over 20 million manufacturing jobs around the world by 2030 – over the next decade – about 14 million of those were estimated to be in China alone Perspective – 7.8bn population – about 5.15bn aged from 15-65 – working age – 20m is about 0.4% of this working population – or about 0.04% of the population each year China has an economically active population – or in other words – emplo

Welcome to Finance and Fury. This episode – be looking at one of the simplest ways to potentially generate alpha and outperform the broader market It’s been a decade since financial markets have become increasingly centrally-planned by central banks and with this - disconnected from fundamentals Hence – traditional analysis of shares based around their fundamentals may not provide outperformance – however – I think it is still important to understand which are good companies to buy into Looking at fundamentals and understanding these and their implications in the broader sense can be hard – takes many years to learn But what if there is an even simpler strategy to beat the market and generate alpha? That is where there is one interesting strategy from some quants – released an article called "Can quants make money by tracking the Fed books?" Runs through trading alongside the Fed's balance sheet – as this seems to be the dominant price setter in markets Been talking about this emergence in a few episodes r

Welcome to Finance and Fury, the Furious Friday edition. This episode – be looking at the weird combination between socialism and billionaires that is emerging – especially focusing on why billionaires are increasingly becoming in favour of socialism? Or additional government controls over economic function Interesting development - Wouldn’t think that these two worlds would collide – the only time I could think of socialism being used in the same sentence is to take away the billionaires money – which is has been – but why would some billionaires be in favour of this? technically – if a country was truly socialist – they wouldn’t have any wealth – or would they? In this episode – try to puzzle this out further to make sense of it and to see why they might be in favour of it - To start with – look at the concept of Socialism for the rich and capitalism for the poor  This is a classical political-economic argument which states that in advanced capitalist societies – the more advanced the country the more th

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question continuing on the from Raj in last two weeks episodes – interesting topic on how factors affect the real economy – which is us – so this episode will to continue on a similar line –will focus on the remaining factors that can affect the real economy - fiscal deficits more and then the real inputs to the economy, like forex, oil prices and trade imbalances All previous factors – like interest rates can affect our lives and hence affects the real economy – influencing the decisions we make – similar – the yield curve – whilst not directly affecting our lives - can indirectly affect it by decisions that banks make – such as what interest rates to charge or pay on fixed rate loans or term deposits respectively   Before we go on – important to remember that the real economy is the combination of our economic interactions – so it is almost impossible to forecast the degree to which one factor is affected by the other – but you can g

Welcome to Finance and Fury. This episode we’ll take a deeper look into the RBA property market models and how different inputs affect prices. Potential models that give the ability forecast future growth of the market based around assumptions – from a study by the RBA - A Model of the Australian Housing Market Not set in stone – it is a best guess model – the accuracy is built around the assumptions – But the RBA built an empirical model of the Australian housing market that quantifies interrelationships between the factors that drive property price growth Looking back over the past 30 years - the Australian housing prices have increased on average by 7¼ per cent per year – since the inflation-targeting period since the mid-90s - by around 7 per cent per year - However, these averages mask three distinct phases: During the 1980s, annual housing price inflation was high, at nearly 10 per cent on average, but so too was general price inflation. In real terms, housing price inflation during the 1980s was rela

Welcome to Finance and Fury, the Furious Friday edition. This episode is a little different – it is some of my commentary about the political division that is starting to emerge – especially in America – but also how to avoid it in your own lives and also prosper through it Populations being divided It is a natural part of any cycle – and in a pretty natural occurrence in the world at large – there is nothing new to people thinking differently – but to what degree and the degree to which this gets played out in society in a physical manifestation does differ Covered cycles in the Fourth Turning episode as well as the K-wave theory episodes – and the political spectrum of society works in similar cycles – its almost like it is interwoven between the seems of each generational turning – going back to the 1920-30 – things were pretty crazy – then calmed down – before picking back up Started to see the emergence of everything in modern society being politicised - from race, sex, economics – even a virus Very

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question is continuing on the from Raj in last week’s episode. “I would love to have an overview of how certain economic factors are interlinked and impact economies” This episode look at Yield curves and bond prices and touch on fiscal deficits Last week – looked at the other factors – mainly CB policies including interest rates, inflation and the monetary supply – but can’t talk about these without the flow on effects that they have on what is known as the yield curve The yield curve for government bonds is an important indicator in financial markets - helps to determine how actual and expected changes in the policy interest rate (the cash rate), along with changes in other monetary policy tools, feed through to a broad range of interest rates in the economy – hence can have affects on the entities that comprise an economy The basics for bonds - A bond is a loan made by an investor to a borrower for a set period of time in return fo

Welcome to Finance and Fury. In this episode be looking at one piece of information in the share market – insider trading There is a lot of information in the markets that can be looked at – can look at the fundamentals of an individual company – can also look at systematic information – economic indicators In this episode – look at one specific bit of information which markets provide and that is the behaviours of insiders of the share markets – specifically directors or people working in management in companies (what are considered insiders) buying and selling shares and if this is a good indicator of the share price performance When talking about insider trading in this episode – won’t be talking about the insider trader that most people might know – what you might see in a TV show or in media headlines about one trader being arrested - insider trading is actually a legal practice that despite the common misconception – does exist and is perfectly legal as it is in a governed way – such as say Elon Musk,

Welcome to Finance and Fury, the Furious Friday edition. Today – discuss the topic of banking policy changes and how this opened the gates for the potential of never-ending money supply in the modern banking system To start with – look at How does money get lent out in Australia? Well – by a bank of course – you go to a bank to borrow money but what are they allowed to lend around? Well in basic economics – banks are treated as a financial intermediary – their role in a traditional sense is to connect savers to borrowers – they act as the middleman So a saver with surplus cash will put it into the bank – the bank will then use this as a reserve and lend out based around this Under this situation – a banks ability to lend is limited by how much they have of their customers savings – which act as the deposits Because in order to lend more money – they need more depositors – no depositors – no loans However – this theory is based around what is known as fractional reserve banking – where a commercial bank has

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question is from Raj. “I would love to have an overview of how certain economic factors are interlinked and impact economies: Inflation, Forex rates, Oil prices, Trade imbalances, Fiscal deficit, Money supply, Repo rates, Yield curves and bond prices, Lending rates and Central Bank monetary policy” Big topic – every one of these factors is related in one way or another – both to the economy and to one another The economy is complex – incredibly interconnected and unfortunately for any economist or policy maker – incredibly hard to accurately predict – or accurately theorise about You can have theories about if one factors moves in one direction – it will affect others in another matter But a lot of this is theoretical – purely to it making logical sense based around models that were conducted in an isolated environment – The world and economy isn’t an isolated environment – change one input and down the road it is anyone’s guess what

Welcome to Finance and Fury. This episode is about the story of Dave Portnoy and a warning to any new traders of overleveraging – or even using leverage if you are relatively inexperienced There are Millions of new investors are getting into the market- which is great – but being a new investor will come with growing pains I had plenty of growing pains for the first 5-10 years of investing – from 16 to 26 – learn a lot from mistakes But thankfully – all of those mistakes were isolated losses that were contained Investing is important – but what is more important is to still be an investor in a decade and not end up losing all your investable assets or alternatively, being scarred for life when it comes to investing – and never re-entering the market There are a lot of Online trading brokers that allow leverage – for any new investor that joins there platforms It depends on the market and the trading platform – but the amount of leverage a retail (which is what is considered amateur trader) can obtain is

Welcome to Finance and Fury, the Furious Friday editon. Last week – looked at laissez-faire economic system What laissez-faire should provide – a system of let it be – at the core – a system of relative freedom for the individual – doesn’t mean freedom for everything There are still laws in place in society which a government needs to enforce – those of negative rights – where someone doesn’t have the right to infringe on you – unless what you are going is against the law – for instance murdering someone Talked in past episodes about the need for governments to have some role – that is to enforce freedom for the individual When talking about the free market – the role of governments would be to not let companies subvert the individual’s freedom – or for the financial system to take this over – once a system is taken over – it removes individual inclusion – So in todays episode – we will be looking at what works elements work with a let it be system – that is economic inclusion versus exclusion – What

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question comes from Cameron. “Do you think that negative interest rates will come to Australia?” Today – look at what would trigger a negative interest rate policy (NIRP) – exchange rates, economic conditions like employment or inflation, then debt levels – at the household level The cash rate was cut to a record-low 0.25% in March and has remained there since. The Reserve Bank board insists it will not increase the cash rate until progress is being made towards full employment and it is confident that inflation will be sustainably within the two per cent to three per cent target band. Negative interest rates are a pretty dramatic financial measure to take – But lots of drastic measures have been taken recently – those by governments and central banks to help boost the Australian economy In a quarterly statement on monetary policy the RBA says negative interest rates would be an “extraordinary unlikely” course of action At this stage -

Welcome to Finance and Fury. Today’s episode – look at the potential kinds of money what are the best kinds of money are the best for the population In the modern economy - The unprecedented expansion of money supply – created some economic and political consequences is only possible with certain kinds of money   Different forms of money – One world currency – digital backed, Fiat currency, Different gold standards Then rate these - Look at their stability, degree of central control and how open they are to abuse -   Types of currency – One world digital currency – still technically hypothetical in its implementation Nothing new here – the concept has been around for a while - John Maynard Keynes proposed this – back in 1944 at the Bretton Woods conference – this single world currency was named the “Bancor” At the same time this conference created the International Monetary Fund (IMF) The IMF already has a super-national currency called “Special Drawing Rights” (SDR) made up of a composite of fiat curren

Welcome to Finance and Fury, the Furious Friday edition. Today, we are going to go through the concept of Planning versus chaos within an economic system Before we get into it - Which one would you prefer – purely based around the description – an economic system that is fully planned or one that is based around chaos – albeit self-organising chaos? That is where Fully planned does sound better – in theory – you should have lower uncertainty – through have some entity creating all the rules of commerce, from the amounts of goods to produce and at what price, how many people should be employed and at what wage – creates the perception of safety - but in reality – is this what actually occurs? On the other hand – when looking at Chaos - could this actually lead to a better result for you and I? Well – based around what has been observable throughout history – it is – as chaos when left to its own devises becomes self-organised It does sound weird – letting an economic system fall into complete chaos But chaos

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question is from Martin. Paraphrasing the question – but the crux of it is - What is happening in the property market and will property prices decline from here or were the original bank forecasts overestimated? Great question – Today What is going on in the property market – Did an episode a few months back covering the economic forecasts – went through worst and best cases – said that it wouldn’t be the worst – probably some where in the middle – so where does the market currently stand To start with – looking back on the Aus house price index – was growing strongly since the late 90s – had ups and downs along the way – but on average – the prices have mostly moved sideways over the past 3 years - rising or falling by around 10% per year across major cities like Syd and Melb Back in 2018 when prices started to fall – not much to be concerned about - affordability remained strong, unemployment was low and interest rates had room to fal

Welcome to Finance and Fury. Last Monday – talked about exchange rate basics Summary - There are a number of factors that go into analysis of the fundamental health of economies and the implications for currency movements – and in turn these can affect the exchange rates – Went through indicators that show the flows and trends of supply and demand - like the balance of payments (capital and current accounts) and the level of foreign reserves a country has – including economic indicators like inflation, interest rates, GPD – all go towards affecting the exchange rate movements – but these are only at a cross currency level when looking at say the AUD to USD Today – Look at some of the reasons behind movements of AUD to USD Major things to look at: Central bank policy – interest rates, inflation expectations – influence trading behaviours Trading positions – what professionals are betting on The trade markets – current account and capital accounts – historical data No way to accurately predict the movements

Welcome to Finance and Fury, the Furious Friday edition, where we will continue to look at some derivative disasters. Last week – went through some of the basics – and a few Australian specific examples - In todays episode – want to look at the Long Term Capital Management crash in the late 1990s Similar to some of the cases last week – wouldn’t be surprised if you haven’t heard of this – but it had the potential to spark a larger crisis – The story is very similar to the GFC- almost like a mini-or pre GFC – and an event that likely created the moral hazard that lead to the GFC - so what happened Long Term Capital Management (LTCM) – they were a major US hedge fund – used absolute return trading strategies Now - hedge funds are normally defined as absolute returns funds – as the name sort of indicates – they aim to get absolute (or positive) returns over a rolling period regardless of market conditions – So a traditional asset managers or long only fund tried to outperform a benchmark or index year on year

Welcome to Finance and Fury, the Say What Wednesday edition. This episode is a bit of a special episode –looking at some legislation in Australia that is currently underway – Has to do with the Government stepping in for the Monetisation of the news – which could ultimately mean the consolidation and control by legacy media of the information that you receive Might have, or may not have heard about this new bill that is going through parliament - likely to pass in Australia in the next week – called the News Media Bargaining Code On the 20 April 2020 - the Australian Government announced that it had directed the ACCC to develop a mandatory code of conduct to address bargaining power imbalances between Australian news media businesses and digital platforms – like Google (youtube) and Facebook What the ACCC says – “the production and dissemination of news provides broad benefits to society beyond those individuals who consume it. The proposed bargaining code is intended to address bargaining power imbalances b

Welcome to Finance and Fury. I’ve seen news about the AUD being at a 15-month high Today – wanted to do an episode on exchange rates and look at some of the fundamental driving factors in the price movements – next week put this together and look at the current trend and factors behind it In the modern financial world – most exchanges are floating exchange rates (excluding some nations – like china that have a semi pegged currency to the USD – or others that just use it outright) What are floating exchange rates - A floating exchange rate refers to a currency where the price is determined by supply and demand factors relative to other currencies These are traded on foreign exchange markets – or called forex for short - allow for 24/7 trading in currency pairs – actually the world's largest and most liquid asset market But it is the largest traded market in the world – only a relatively small number of currency pairs are responsible for the majority of volume and activity – essentially 20 – As of 2019 number