Finance & Fury Podcast

Welcome to Finance and Fury, the Furious Friday edition. This episode – will be looking at derivative disasters through in the history – looking at specific crashes of near financial disasters – that were contained Specifically – Look at a few examples in Australia –ones that most people wouldn’t have heard about – been studying derivatives and the legislative side to them over the past few weeks – came across cases that I had never heard of – wanted to share this and help to demonstrate how these instruments when misused can create a fragile financial system   To start with - Financial derivatives are powerful instruments Mainly because of their capacity to operate with a high degree of leverage -Therefore a small change in underlying prices of the assets that they are written on can lead to dramatic profits – but also losses Due to counter party risks – i.e. the other person that you enter these contracts into with – ones gains can be another loss – and when the loss comes due – the counter party can come

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question comes from Douglas: “Long time listener of your Podcast and it has great insights and thought-provoking ideas. Can you dive deeper in to who are the beneficiaries of the Future Fund from and what the unfunded superannuation liabilities means and list who besides politicians this fund does benefit?” Douglas brought up a good point – that the commonwealth unfunded liabilities don’t just go towards politicians which was the main focus of the episode two weeks ago – has requested deeper dive into who gets paid from the Future Fund - Commonwealth Super Liabilities Today’s episode – look at the Commonwealth unfunded liabilities – and the beneficiary funds Unfunded liabilities - Related to the gross debt that the Australian Government holds on behalf of unfunded superannuation liabilities – Essentially – how much money is owed but isn’t there ready to be made available for payment This comes form a special type of account called Defi

Welcome to Finance and Fury. Today’s episode – how to build a framework for decision making – for investments or wealth building strategies Not one set way to make a decision – everyone is different – everyone has different situations – people make decisions in different ways – Emotional decision making – some people just go with their gut – Logic/formula-based decision making – following a framework on what to do both have their pros and cons – the first one enables you to take actions quicker in some cases – very useful for decisions using heuristics - If we make too many decisions in a day – eventually get decision fatigue Which is the deteriorating quality of decisions made by an individual after a long session of decision making Not all decisions are made equal - what to have for dinner is different to decisions like which investment strategy to follow – or which investments are correct So when making smaller or non-important decisions – normally go with heuristics – not getting too bogged down in lo

Welcome to Finance and Fury. Quick announcement – only episode this week – have my FASEA exam coming up so need to spend spare time studying for that – back to normal next week – sorry for any delays getting back to any of you In this episode – I walk to talk about different forms of capital – What is the first thing that you think of when you hear capital – outside of finance, might be capital letters or a capital city – but capital as an economic definition - consists of assets that can enhance one's power to perform economically useful work – and this can range from many different forms beyond the financial Going off of pure financial topic today – I find these topics incredibly interesting – Came across this concept of additional forms of capitals that builds upon Bill Mollison’s original conception - Bill was an Australian researcher, author, scientist, teacher and biologist – passed away a few years ago but his works were massive in developing and promoting the theory and practice of permaculture – whi

Welcome to Finance and Fury, the Furious Friday edition. Last week we went through the Fed Theory and disconnect theories. Today I want to look at an overlapping theory to this on what is happening in society as well. I just finished an interesting book called the fourth turning and I wanted to share some insights into this. So much of what is happening in the world is built around politics – politics and the economy – but it is nothing new - the economy is us and our interactions with one another in commerce – and is a complex system – but at the moment there is a lot of conflict – and the tendency to try and control a complex system Politics – whilst most people vote – especially in Australia where it is compulsory – we have little to no say in the policies being implemented – But even less so when it comes to Central banks and the monetary system – none of us get a say in how Monetary policy is conducted – get some say as far as voting for people who promise some fiscal policy – but when they are in anyt

Welcome to Finance and Fury, the Say What Wednesday edition. This week the question comes from Justin. “Hi Louis  - I have been listening to your podcast for the last few months. I love all your work. I was just listening to Mondays episode of your review of the budget. And I had a question for you that maybe you could use on the podcast. The question is about the governments Future Fund and whether they could access this is a potential option as like a bail out for the current economic problems we are facing and into the future. Seeing as some of the fund is for medical research they now need it seems. For emergency help with fire, floods and a health pandemic. Also considering in the whole fund there is $212 billion in the fund. I would love to hear your thoughts on this." That’s from Justin – Brings up some great points – why wouldn’t the Government use the Future Fund to help boost the economy – one major reason for this – which we will run through today – Look at the future fund, what it is made up of,

Welcome to Finance and Fury. This episode – want to continue looking at theory versus reality – Focus on the theory of Value versus Growth investing in an inflationary world – and which one does better Looked at if inflation will return – but if it does - maybe Value shares start to outperform growth shares again Inflation is a major focus in the current economic world – especially since the 90s – Everyone pays attention to it - Investors, businesses and especially Central banks - continuously monitor and worry about the level of inflation Some just have to worry about it – whilst one tries to control it through interest rate policy Inflation—the rise in the price of goods and services—reduces the purchasing power each unit of currency can buy.  Rising inflation has an insidious effect: input prices are higher, consumers can purchase fewer goods, revenues, and profits decline, and the economy slows for a time until a measure of economic equilibrium is reached This occurs when there is inflation without t

Welcome to Finance and Fury, the Furious Friday edition. Today – want to look at market theory versus reality – because a lot of market theory doesn’t hold up – so are the markets truly changing? Is this just a short term divergence prior to markets going back to match traditional investment theory? Or are markets transitioning to an entirely new systemic paradigm – If so - Metrics of the past will not be able to predict how markets behave according to expectations In this episode – have a look at some theories of market changing – later in probably another episode - want to focus on something else I haven’t covered – Want to look at an alternative view – such as looking at social dynamics shifting in society – Summary Strauss–Howe generational theory – similar to the K Wave theory – but apply this to markets next episode To start – let’s look at Theories versus reality – essentially, what should happen versus what is happening Most existing theories of economics and the financial system cannot match su

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question is from Scott: “Hi Louis, I am currently in my 30s and have recently bought my first home. I would like to get your view if I should take advantage of low interest rates and start to put additional funds into my mortgage or if I should be thinking long term and investing instead. My mortgage is around $580,000 and I would like try to get this paid off as soon as possible but at the same time, know that investing could put me in a better position. Would love to get your thoughts on this.” Great question - Invest or pay off debts – This episode is general in nature - This isn’t personal advice – look at the pros and cons of paying off debt versus investing – look at the opportunity cost of each situation What is the right thing to do? Depends on your goals and financial position – one strategy isn’t right for everyone Someone in their 20s – may be better to invest – have long timeframe for funds to grow - Someone in their 50s –

Welcome to Finance and Fury Budget came out last week – this episode – go through the fiscal overview and the policy measures in it   Fiscal overview – provided updates on the government budget position and economic updates Government – added $289 billion in fiscal spending and balance sheet measures - equivalent to around 14.6 per cent of 2019‑20 GDP At the same time - estimated large declines in taxation receipts has seen a major deterioration in the budget position, with estimated deficits of $85.8 billion in 2019‑20 and $184.5 billion in 2020‑21 – so the annual position is a loss Gross debt was $684.3 billion (34.4 per cent of GDP) at 30 June 2020 and is expected to be $851.9 billion (45.0 per cent of GDP) at 30 June 2021. Net debt is expected to be $488.2 billion (24.6 per cent of GDP) at 30 June 2020 and increase to $677.1 billion (35.7 per cent of GDP) at 30 June 2021 – gross going up by 24% and net debt going up by 39% Real GDP is forecast to have experienced its sharpest fall on record in the Jun

Welcome to Finance and Fury, the Furious Friday edition. Episode today about a trend over the past decade and moving forward – is water the new petroleum? A few episodes ago – went through what is more valuable – a TV or water – depends on your perception and what is in demand versus supply – but if you think about it – what is the most valuable thing to us as humans – I would argue - Air – Water – food – our survival is predicated on these three things – rule of 3 here – 3 minutes, 3 days and 3 weeks – but due to supply – they are seen as having low values – if viewed in monetary terms – we don’t even really think about it most of the time – why would we? Air is in abundant supply – water seems to be everywhere – turn on a tap – even food – especially fast food – if you can call it food is very cheap – this is not so much a concern for most people in western nations Hard to monetize air – food has already been monetized – but what about water? It has – but is seen as a public good – quite low cost - A

Welcome to Finance and Fury, the Say What Wednesday edition. This week the question comes from Mina. “I would love to get your view on Structured products like the ones being offered by sequoia. Is the risk worth the return?” Great question – thanks Mina - this episode is not investment advice – general nature - Structured products – A structured product – can also be referred to as a market-linked investment – they are a pre-packaged structured finance investment strategy based on an underlying asset This can be built around a range of assets – from a single security, a basket of securities, options, indices, commodities, debt issuance or foreign currencies – complex structure They are an investment product that is put together by a financial institution - usually by a bank or investment firm – pre-packaged exposure to one or more underlying assets typically contain an embedded over-the-counter derivative contract, such as an option or swap, and they are often blended with a bank deposit or government b

Welcome to Finance and Fury. A lot of people may be feeling regret right now - regret for not holding technology shares like Afterpay – it is up around 850% from the low in March Was not buying tech shares a bad decision? And is there potential from here? Look at this in this episode – Most people want to make the correct decision for investments – hard to know what is the correct decision - When looking at some sectors of the share markets - technology stocks in particular – might be having some regret for not investing But looking at these companies – the price may indicate that these are great companies Is it sensible or a bad idea to buy a company with a negative earning per share? Or a massive PE? There are plenty of shares in this basket - Afterpay – APT on a PE of minus 450x this year – technically doesn’t have a PE – but looking at the losses per share of $0.15 to $0.20 – looking at future projected earnings – in 2 years company would have a PE of 230x Xero - XRO on a PE of more than 1,000 times - 1

Welcome to Finance and Fury, the Furious Friday edition. In the last two Furious Friday episodes, I’ve talked about the regulation and de-regulations on the monetary and fiscal sides. Covered the Banking Act of 1933 and the Glass-Stegall section of this – then the financial de-regulations that occurred in 1986 and 1999 – some interesting events have played out since then What I didn’t cover is that there was a step taken back after GFC – to help undo some of the de-regulation a rule in the US that was designed to prevent banks that receive federal and taxpayer backing in the form of deposit insurance and other support from engaging in risky trading activities – called the Volcker rule but recently got watered down 3 weeks ago – might have something to do with loan products that banks are now offering due to business shut downs – interesting timing and connections which we will run through today   The Volcker Rule is a federal regulation that aimed to prohibit banks from conducting certain investment act

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question comes from Mario. “Loving the podcast on the central banks. I have a question about purchasing gold as part of my investment strategy. My core investment strategy is to invest in high quality stocks that pay a consistent and growing dividend however recently I feel that gold and silver as a hard asset are important. I know Warren Buffet advocates against the purchase of gold given its an unproductive asset and doesn't generate income. I like the idea of having a hard asset that is tangible and acts in direct contrast to my equity portfolio however I know this may come at the opportunity costs of income and growth generated from equities. Do you think holding physical gold or gold in an ETF is a good idea? Why or Why not? Would love to hear your views. “   Today – how gold works in a portfolio for capital preservation – methods of buying it and look at performances in portfolios Allocation as a hedge for a financial meltdown - s

Welcome to Finance and Fury.  The future landscape of superannuation – the rise of megafunds through compelled mergers Numerous bodies, including regulators and government, have been keen for superannuation funds to merge The merging of several larger superannuation funds are currently underway creating so-called mega funds. On the flipside, there are smaller superannuation funds, particularly niche funds who focus on areas such as ethical investments, that are holding out against the pressure to merge. This episode – we will focus on the issue of mergers in superannuation, where it can bring benefits and where it cannot – implications for the future of superannuation   The consolidation of superannuation funds is primarily being driven by APRA and superannuation trustees - believe such moves can improve the super system and lead to better outcomes   This belief is supported by findings from the Productivity Commission (2018) review of the efficiency and competitiveness of the Australian superannuation sys

Welcome to Finance and Fury, the Furious Friday edition. Last Furious Friday episode – started on a thought experiment – looking at the reversal of the trends in Monetary policy - who knows if these would work and make for a better economy – these were: Separate commercial and investment banking Remove reliance on a debt fuelled economy – reforming central banks to remove inflation targeting as a monetary policy All of these are at the monetary Level – solution isn’t the monetary policy solely – whilst I think that most monetary solutions are a major part of the problem - This week – we will be going through the fiscal side – or governmental or regulatory side – Focus will be on Supply Side Policies help encourage investment and spending at the business level because interest rate cuts are ineffective in boosting spending and investment alone – especially if firms are too reluctant to invest or consumers are stuck paying back higher levels of mortgages – instead they have been taking on more debt which ha

Welcome to Finance and Fury, the Say What Wednesday edition. This week’s question is from Shaf – “I would like to get your opinion/analysis on Australia’s ageing population, and investment opportunities that are linked to this segment of the market. For example, companies like CGF or publicly listed aged care providers.” Great question – This style of investing is along the lines of Thematic investing Thematic investing involves creating a portfolio or investing in companies involved in certain areas that you think will generate above-market returns over the long term All based on Themes – which can be based on a concept such as ageing populations or a sub-sector such as leisure Thematic can be any theme – green energy, AI or technology Aging population has been a big one for a while – first saw it come into mainstream in late 2010 Because of Australian and western nations aging populations - many developed nations are facing an ageing population - While the issue might pose some economic challenges- it

Welcome to Finance and Fury What is important when it comes to investing? Or which is the more important – what you know or what you do? Sometimes the more you know – the harder it is to invest – information overload – can be a curse of knowledge – if you knew nothing but over the past 20 years just bought index funds – better off than if you knew everything (which nobody does) but never invested a single dollar – In this episode – talk about Investing actions – over knowledge Obviously, knowledge helps – helps you plan and know which actions to take – but the actions that you take can make the difference between Financial Independence or Financial dependence Taking action versus theory – why? Well even sometimes fundamentals aren’t important – the knowledge of fundamentals Even at the moment - The current market gains – even against a backdrop of deteriorating economics and fundamental news and data – this is certainly a worry – but it does make sense with Central Banks furiously flooding the system with l

Welcome to Finance and Fury, the Furious Friday edition. Does the Government need to solve economic problems? Do central banks solve economic problems? If so – how? These are honest question that do need to be thought about - there seems to be this growing thought through western societies that the answers to both are yes. That individuals are no longer capable of making their own decisions or choices in the economy – and it is up to a higher power But yet- if we are left to our own devices, would we solve the problems of the economy over time through our voluntary choices? Going to the extreme examples - If more money redistribution to the people from Governments, or increased government controls over the economy worked so well – then socialist states should rock People would be clamouring to get into these nations – not get out and go to nations with a freer market – which simply means greater freedom of choice when it comes to economic activity – The flight from socialist countries and the better qual