Finance & Fury Podcast

Welcome to Finance and Fury - This Episode – Look at Where to not invest in negative rates world – if it comes to that – other options First – what does the world in negative rates look like? – dive further into this to start – look at other countries, Japan, Denmark and how this affects an economy – Also - what sort of investments won't fare well - run through alternative assets Going to be 2 parts – go further into alternatives next week What asset classes may be at risk – financial sector Negative interest rates are terrible for banks - They destroy the business model for banks. Put further pressures on banks margin (profits) - make future bank collapses more likely because banks cannot build capital to absorb losses Commercial banks act as streams in the modern economy – Glacier (Central Bank) melts and the money flows through commercial banks and financial systems No ice – no flow – but no rivers – water nowhere to go – a dam that breaks and floods everything European banks are looking to be in poor shape – have negative yields but getting the exact opposite of what they need – Growth from stimulus spending and inflation Japan - same thing - used QE strategy to lower rates back before the term QE was muttered – originals – how well did it work long term? Japan has had near-zero or below zero interest rates for 20 years – stuck in liquidity trap How well has financial sector performed – 1980s - in Japan's bubble years TOPIX Banks Index – Peak 1989 at 1,500 – now it is about 130 – loss of 91% over 30 years If this spreads to the rest of the worlds financial sector – financial sector suffers - by extension – the economy suffers as low-risk decisions are required – lower business lending Banks make money from the difference between the interest rates they charge on loans and costs on deposits (liability as a reserve to lend out) – you get interest due to risk – also issue FI - Rates go negative = ability to make a profit gets thinner - but risks get larger on the assets loans collateralised against – i.e. property for mortgages Remember - pieces of the assets used as collateral have been inflated by these low-interest rates – Seen that play out with Japan back in the late 80s borrowers will make repayment as usual – but the amount still outstanding will be reduced each month by the negative interest but savers see nothing paid in interest on their deposits – and may also suffer as they go negative Denmark currently – 3rd largest bank offering 10-year mortgage rates at -0.5% - 20year fixed at 0% - Switzerland - UBS a few weeks ago sent a memo to HNW clients -introduce 0.6% p.a. charge on deposits more than €500,000 – Bank of England at 0.75%, ECB at 0%, Denmark (not ECB based) -0.4% cash rates Lower savings rates across Europe - Commercial banks need to take deposits and extend loans. That's their primary function. This credit intermediation, as it's called, is like a financial utility. One bank can be allowed to fail. But the banking system overall cannot be allowed to fail – why capital notes are being used as 'reserve capital' – replace lower deposits How banking meant to work - profit motive needs to make them aggressive on lending, and the fear of loss needs to make them prudent. Those two forces are supposed to balance each other out over time, with banks swinging too far in one direction and then too far in the other direction as part of the normal business cycle. Generally worked through history – when back with gold or other currencies - some hiccups, as long as banks can do this profitably – meaning they make enough money and set aside enough capital during good times to be able to eat the losses during bad times without collapsing. This sort of event created Central Banks – lender of last resort to provide liquidity – today – manage insolvency as fiat is debt-based Negative interest rates make banks start losing money on their assets – need to chase yield to make some kind of profit Have to do risky investments – sometimes will come with inadequate returns or compound systems risks ECB, the BoJ, and Swiss National Bank have admitted that negative interest rates weaken banks – not speculating here - The ECB has even been talking about a strategy to "mitigate" the destructive effects its policies have on the bank – cash bans The real economy - negative interest rates have an even more profoundly destructive impact: They distort or eliminate the single-most-important factor in economic decision making – the pricing of risk. Bit of a guess - Similarly, portfolio management tools like Capital Asset Pricing Model (CAPM), Modern Portfolio Theory (MPT), Value At Risk (VAR), Risk Parity are all ill-equipped to handle a world of lasting negative interest rates Risk is priced via the cost of capital. If capital is invested in a risky enterprise, investors demand a larger return to compensate them for the risk. And the cost of capital for the risky company is higher. If capital is invested in a low-risk acti

Welcome to Finance and Fury, The Furious Friday edition Continuing SDGs – today we are covering Economics or SDG 8 First, look at the economics of the UN itself – something never talked about Who pays for the UN – Member states - A complex formula - US pays most at 22%-28% of the UN's different budgets Aus - Regular budget for AUD - $86m (rough estimate) in 2016 - $58m USD – not too much But the official budget doesn't include other donations – Gov agency voluntary contributions (specified or unspecified) – all revenues from government donors – Total was $747m p.a. USD ($1.1bn) – across 21 UN organisations A lot of money being shipped to UN when we have a desperate need to more infrastructure and helping create more liveable areas outside of Cities – Up from $601m in 2014 – massively increased - UN revenues massively increased – What does the UN spend money on? 2016, the organisation's total expenditures was nearly $50 billion, with the US financing about $10 billion, or one fifth, of that. Even with costs surging fourfold in the last 20 years – expenditures have been compounding at 7.8% p.a. since 1976 UN plans - Economic growth and decent work – SDG 8 Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. World Pensions Council (WPC) development economists have argued that the twin considerations of long-term economic growth and infrastructure investment weren't prioritized enough – Plan is growth through full employment on infrastructure projections 2020 Target - to reduce youth unemployment and operationalise a global strategy for youth employment. Implementing the Global Jobs Pact of the International Labour Organization is also mentioned. 2030 target - to establish policies for sustainable tourism that will create jobs. Strengthening domestic financial institutions and increasing Aid for Trade support for developing countries is considered essential to economic development (not for us though, but other nations). Implementing an Enhanced Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries is their method for achieving sustainable economic development UN say that $5trn a year is needed – mobilise a lot more than currently being spent – essentially mass redistribution At this economic model's core - Global redistribution of GDP – push out lower-paying jobs to be outsourced by AI or by globalisation Built around David Ricardo's Comparative advantage theory from 1817 – Spent 4.5y doing Commerce – Finance also Economics – International Trade and Finance – Knew the right answers on the tests – That comparative advantage should benefit both parties if done right How the theory works – which argued that countries should specialise in the production of goods in which they have a relative advantage over other countries in production - promoting benefits of international trade Example – Back then a mutual trade benefit would be realised between China and the United Kingdom from China specialising in the production of porcelain and tea and the United Kingdom concentrating on machine parts. Makes sense right? In the 90s China for low wages in manufacturing/production and west for Service-based economy But what the theory doesn't account for – Not 1817 – Capital (money) is easy to transfer across borders – Technology as well – With Capital comes technology (FDI) – China as an example – FDI and increase in tech – outproduce across board – but slowly wages rise in china – so do costs – so production leapfrogs to another country with lower wages – so previous country stagnates in wages and growth – then new country goes through the same cycle - so on – race to the bottom – takes a while – Has been happening since 1975 – Lima Accord – set the framework for the movement of capital and technology to developing nations – which are the labour cost in comparative countries Modern Robin Hood – But you are the rich when compared to the third world UN has engineered the decline of the Comparative Advantage efficiency – simply a beggar thy neighbour policy now that creates downward pressures on wages globally – Name of Globalism The offshoring of jobs has reduced Australian (USA, UK, other 1st world nations) manufacturing and industrial capability and associated innovation, research, development, supply chains, consumer purchasing power, and tax base of state and local governments – technology comes from engineering and not science (especially climate science) Comparative advantage Creates a Focus of Multi-national companies on short-term profits at the expense of these long-term costs – Effect of moving our economies to the developing world Currency and taxes come into this – Today Media calling tariffs a trade war - There is no trade war – simply the US trying to protect their industries by placing tariff barriers on the import of cheaper products from foreign countries The irony is half of the imports from China are imports fro

Welcome to Finance and Fury, the Say What Wednesday edition Today's Question is from Gabriel With the latest news around trade wars, inverted yield curve and EU collapse, I would love to hear your thoughts on how to protect a portfolio, is it worth using hedging instruments or changing the assets mix? Do you use options? What do you think about using them as a hedge? Wealth Preservation – Concerns to account for – Most asset classes aren't looking good Share market collapse – many things that can trigger it - Hyper Synchronicity – Event occurs all at the same time without any apparent event - herd behaviour – governing dynamic which underlies the whole of human experience and history — social, emotional, psychological, and spiritual - probability transitions between emergent states of order and nonlocality –thought of long bull run makes people for different reasons sell off assets to profit and reinvest - If the EU breaks apart – I think is inevitable – when? No idea - Covered EU in 3 ep series Nov last year - Brexit over another few eps in April this year – go back to the eps then go into a lot of detail – ramifications – not the biggest concern by itself – but given the debt/financial systems interconnection – may cause a spark – in a sane world it wouldn't Trade wars – This is already weighing on markets in my opinion – Things could get worse if things that aren't expected occur – Bank failures – fragility of financial system – gets worse with lowering interest rates Fixed Interest – Inverted yield curve - which occurs when the coupon rates on short-term bonds are higher than the rates paid by long-term bonds – shows investors are so worried about the near-term future that they are piling into safer long-term investments – Switching out of 5 year into 10, or 15 Government Bonds – high price and low yields due to that – risks if rates rise – Corporate Credit – Catch provisions of bail-ins – for banks Seems to be a trend for most countries where 5 year bonds are lower yields than 2 years – except Germany and Japan – negatives Cash – Low interest returns – if any – plus if negative rates come Property as well – in most capital cities Aus is one of the most expensive fuelled by credit expansion and concentration of urbanisation Can't invest in shares, property, FI or cash – basically all asset classes But are alternative Options - Options (no pun) – used in Hedging – if you own shares – use it to reduce portfolio risk by lock in the right to sell the market at a certain price – shares you hold crash, then you can exercise the option and sell shares at the strike price. These securities are intended to move in a different direction than the rest of the portfolio. They tend to appreciate when other investments decline. A put option on a share or index is a classic hedging instrument – if your shares decline – your put can help cover losses – I don't – personally not a fan of them – something that is far too hands on and risky for me – Unless you are constantly monitoring – can lead to ruin – say market goes up a bit – and doesn't move much – paying premiums Relies a lot on timing – Everyone can see that a volcano is likely to erupt – but anyone's guess on the time and day when it will happen – Or avalanche – Talk about investment options a bit more in next Monday episode about negative rates and investing or holding cash First - Lessons from conservation – listening to book from James Rickards Talks about Conversations with family members and representatives - what it takes to preserve wealth over centuries and not just short-term cycles - frequent reply is "a third, a third, and a third." Stands for dividing one's wealth into one-third land, one-third gold, and one-third fine art Obviously some liquidity (cash) is needed for day-to-day expenses – along with allocations to speculative portfolios Not about gains with capital reserves – but that the investment will be around in 100 years – Looking at centuries timeframes for investments - land, gold, and art outperform riskier assets such as shares, bonds, and cash - sound weird but a viewed from the perspective of centuries and not just years or decades Objections/issues – Share and bonds can perform well for long periods – but they and also cash all involve some claim on a third party Contain credit risk in addition to the underlying market risk – volatility Credit risk is what ruins a lot of investments - investor is always at the mercy of the issuer Shares – Company go bankrupt and Bonds can default (no money to return for your loan) Paper currency in the history of the world has eventually proved worthless eventually – so why is it different this time? No income or yield - Warren Buffett disparages gold because it has no yield. The reason it has no yield is that it has no risk. Yield is what you earn when you take risk. Gold has no credit risk, no currency risk, no maturity risk, indeed no risk of any kind. It is just gold. In contrast, Buffett's Berkshire

Welcome to Finance and Fury Last Monday ep – Cash Restrictions Bill – Went through black economy and outline of regulations Today – Go further into implications of this – along with other considerations such as bail-ins and negative rates why bill needed – not for the black market Case for black market is a guesstimate – 3% of GDP — roughly $50 billion - recommendations given by KPMG, along with the guesstimate showing the 65% increase in black market economy over past 3 years This figure, it said, was a qualitative estimate (guess), based on a wide definition of what activities make up the black economy - activities including underpaying wages or paying for work cash-in-hand, under-reporting income, sham contracting, ABN and GST fraud, illicit tobacco, money laundering, unregulated gambling, criminal acts, counterfeit goods and illegal drugs - Proper modeling on the economic and social costs is work has not yet been done - Yet the Government is moving ahead with proposed laws that could make people criminals — with the threat of two years in jail — for spending more than $10,000 in cash. Opposition assistant treasury spokesman Stephen Jones has also indicated that he wants to see the ban apply to Bitcoin — a move that would send the Bitcoin industry into disarray given its repeated public campaigns to invest in the digital currency to avoid the proposed cash ban. Treasury is looking into giving the ATO even more powers to hunt down whomever it deems to be a 'black economy' criminal - changing the law to reverse the onus of proof for "serious black economy offences" – Rather than them proving crimes – you have to prove a negative (that no crime has been committed) – much harder What is the real long-term purpose of this? Reason Given – Black market – underpaying wages, illegal cigarettes, money laundering, illegal gambling, etc – How will banning cash payments above $10k stop these? One way is to arrest criminals – enforcing existing laws –banning cash completely would limit this – crypto may be used instead, why Govs likely next target Instead – legislation which can be updated by the minister ($10k becomes $1k, or transfers no longer excluded) other countries have already imposed limits — France above 1,000 euros; Spain above 2,500 euros; Italy above 3,000 euros Along with large denominations being banned – India, EU – with inflation, should increase, not be banned – issued in 1984 – inflation of 2.6% over 35 years – worth about $40 today in real terms Think the $100 AUD is safe for a few years – economists recommending for few years to ban to starve black market – Plus new powers for ATO – Guilty until proven innocent – power economically ruin lives – even if not guilty – cost/time spent on meeting claims/regulation What I think - to give authorities greater control over your choices and economy – Control of your choices and therefore behaviours during economic recessions or panics - Ties back into the Bail-ins, IMF, SDR and interest rate episodes I have been doing over the past few months In panics the Gov/Central banks take two likely actions to stop contagion of fear spreading – props up banks and provides stimulus spending and lower cost of cash – monetarist theory Issue - a financial crisis is mostly behavioural in response to one starting event The policy response aims to effect human behaviours – better to be seen to do something central banks reduced interest rates – for Severe recessions - required 3 to 6% points cut in policy rates – if a crisis happens – few countries have left in rate cuts – or low Gov Debts to GDP to run up a budget to get around this problem - recent IMF staff study looked at how it could bring in a system that would make deeply negative interest rates an options – Still drop rates by 4%, but down from 1% = -3% Likely not get that low -just example - The success of the system relies on confidence – the limitation on the ability to withdraw cash shores up bank balance sheets – no bank runs and no liquidity issues due to no reserves But if deposits will lose money – people don't want to hold cash at a loss – so would withdraw Create a form of a bank run – which is unacceptable in a complexly fragile economy – But people buy investments/spend the money instead – which is part of the aim to control behaviour and get economic growth going Past the point of return for this working – most of the money being lent through stimulus goes to Wall Street and not Main street (you and I) – But the same policy response is still repeated – low rates This started out as a short-term emergency experiment – but now this short-term emergency experiment is the normal = more and more then needs to be done for an effect Bail-In laws – talked about them about while back in the where to invest and not invest in a crash episode Under the provisions – cash deposits remaining in banks is essential To avoid bank runs of mass withdrawals = bank collapse – capital reserves now coming from capital notes –

Welcome to Finance and Fury, The Furious Friday edition Today we start discussing the SDGs in relation to The economy – few SDGs this relates to Go through each in detail in separate episodes – but this ep is an overview into how deep this goes. UN goals as part of Agenda 2030 – Quick list of these - SDG 8 – Decent Work and Economic Growth SDG 9 – Industry, Innovation and Infrastructure SDG 10 – Reducing Inequality SDG 12 – Responsible consumption and production SDG 17 – Partnerships for the Goals – Companies come into it Before we start breaking down each of these next episodes - Question: what do Smart Criminals do? Answer: never commit more than one major crime at a time Why? Chance of getting caught for both goes up exponentially – Similar for Gov Policy if change is made at once – if you saw the true end game of these policies – hint – another forced reindustrialisation like each of the programs done by Stalin and Mao – nobody would want this – But do it bit by bit, by bit, all through legislation that isn't reported on – One day you wake up and even if you are a stay at home parent, you now fall under labour laws as 'paid work' – actually, one of the recommendations run through in another ep – Forced to work for one of the big companies as no small businesses will be left to remain as they can't compete under the circular economic models designed by the likes of Google (who is also helping design the cities as part of SDG 11) – Implementation of these – all being done separately at different times over the next 10 years – along with last 20 (MDGs) All done to change behaviours – make cultures adapt through media and education (people first) Then politically and economically The questions that nobody asks – in a Democracy – where are the things people are asking for coming from? Does everyone wake up one day with no influences and vote for one thing? Or are our wants influenced by external forces? Listened to the last few FF eps, you know where I lean – likely on the side of influence – statistically – the probability of other is low – Historically true as well – when propaganda isn't present – hard to have population think same things in mass Modern democracy – places like the UN are influencing people on what they want – Who doesn't want free money? But they never then ask where does it come from? Or what is the cost? The question nobody is asking – why are we (Australia) responsible for reducing inequality in Indonesia? That is what SDG 10 wants – Global inequality Why is the UN with the IMF printing trillions per year, along with taxing Australians and using Industry super fund money in the hundreds of billions to give to counties for them to combat climate change – Foreign aid programs as well Now – under true democracy – those who don't want Australia to suffer lower wage growth, higher taxes and higher costs of livings (energy prices) may not want these policies to fight a boogy man – with no projected outcomes for the impact on climate change or the impacts of how this will help the economy If the Greens really want to fight climate change – set up a charity – take donations to do it – My guess is that it wouldn't get much in the way of funding needed – always wanting to use other people's money and not their own – the irony of socialist policies – needing the Government to control and enforce laws on people based around perceived moral hierarchy But the perception here is that money is unlimited – Aus has all the money in the world Only reason that people don't want to help is they are mean and want to hurt others – The way our country and most first-world nations has been run for a while now – not working out so well - due to the frivolous government spending and getting into more debts – they need to keep interest rates low as well – while we suffer for some Global Government's agenda – Nobody voted in the UN to fix our economy – as that has to be done locally Especially when their way of fixing our economy is by reducing inequality between countries – part of SDG 10 – 'Reduce income inequality within and among countries' Those saying it is unfair that AUS has higher standards of living than other developing countries will have their wish come true – they will too be living on a few dollars a day if the UN gets their wish Only way to reduce inequality is through cutting everyone's incomes down and through redistribution within borders but also across them now – Has to be done through behavioral controls and treating everyone like ants – all a cog in the wheel We aren't insects though - Humans are mammals – like all mammals, they work in a hierarchy – very complex one compared to other mammal groups – social-sexual hierarchy – alpha, delta, gamma, sigmas, omegas, etc. structures always going to be inequality – physically, mentally, financially – through choices within the hierarchy People think Alpha is coolest – well in tribal times – not a long-life span – died a lot protecting the group Al

Welcome to Finance and Fury, The Say What Wednesday Edition This week's question comes from Cameron "One small question we have been pondering. Our parents are gifting a small amount of money monthly to our 1yr old son (their grandchild). Rather than let in mature in a bank account we are interested in some sort of passive asx investment considering this could grow until he was at least 18. Any thoughts or commentary around this would be great to hear!" Today – Talk about family investing options – either for your kids or if grandparents are wanting to gift money to kids There are a number of different considerations needing to be taken (mainly whose name the investments should be made in, along with the end purpose of the investments) First - Funds for your Kids – What is the purpose? Something they can access at 21 to put towards buying house, holding still, etc. Considerations – Are the funds being invested or not? No – Less to worry about Banks are happy to open accounts in kids names – take money from anyone Setting up any savings or investment accounts in your child's name for taxation purposes wouldn't make a difference for quite some time. The ATO determine who needs to declare the income or gains by looking at who has 'control' over the account (i.e. if you are depositing/withdrawing money from the account, you would have to declare the income even if the account was in your child's name). Yes – Normally the best option that people look for – the long term for kids/grandkids - Which helps to grow the balance over the long term – Options – Either by grandparents or parents for kids Index funds, shares, managed funds or other types of investments. ASX listed funds or direct shares – brokerage costs on monthly transactions can eat up returns Managed funds/index funds have buy sells – provide more diversification and lower transactions costs education bonds (another ep), investment bonds, Considerations with investing funds for minors The aim is to try and minimise any CGT or transfer costs upon your child turning 21 any transfer of ownership of investments triggers a capital gains event (along with selling them), there are problems with setting any investments up in your child's name. You may also run into some issues with income tax rules For those under 18 years old if it is deemed that the child is making the investment decisions. After earning above $416 (the tax-free threshold for non-exempt minor income), income is taxed at 66% until reaching $1,307, with all remaining income being taxed at 45%. Whose name to invest in? Unlike bank accounts - most fund managers refuse to accept direct applications from minors Legal issues - share trust units fell in a market crash - the child could argue that he or she did not have the understanding to participate in this investment and ask for a refund. Stockbrokers are generally prepared to buy shares in the names of children – but most companies expressly prohibit ownership by people under 18 for the same reason Three options: General in nature – not taking into account your personal consideration Investing by the grandparents as trustee This is the most common strategy, but most people have no idea of the possible consequences of doing it. It does not get you around the punitive children's tax rates because the trustee will be assessed at 66 percent and there is a major difficulty in that the parent must at all times act as a bona fide trustee and not intermingle trust money with their own. Example - in a leading tax case a couple accumulated a substantial sum in a trustee bank account and then withdrew it to buy a unit for the use of their children while they were at university. The parents decided to put the unit in their own name and not the children's name – the Tax Office successfully claimed the money was, in fact, the parents' money and assessed them for five years' back interest. Investing directly by the grandparents or parents invest in the name of the lowest-earning parent – i.e. earns less than $37,000 a year, the maximum rate of tax is 21% and all income With franking – can get away with little to no tax It also reduces the possibility of the Tax Office disputing the ownership because parents are free to give money to their children whenever they wish. Cons - capital gains tax will apply if the parent transfers the asset to the child at a later date. Hard to set up investments with you as the owner if you intend to gift – have to pay CGT/transfer costs Can be caught out with Trustee as well Know personally – bought first shares at 16 – under 18 – mum but me as account designation – Mum owner on my behalf Issues – Grandparents passing away Or Grandparents on Centrelink – Gifting rules or investing in their names will be asset tested Investing in investment bonds Investment/insurance bonds are one of the simplest and most tax-effective investments Covered these in a previous episode All you have to do is make an investment into the bond and sit ba

Welcome to Finance and Fury In today's episode, I thought it was important to cover Currency Bill - Might have seen in the news – headlines about the $10k transaction – Currency (Restrictions on the Use of Cash) Bill 2019 – what we are talking about – had first round through Parliament Goes deeper - Talked about this topic last year in October – Cashless Society episode – link to episode Policy is trying to control behaviour – by making the undesirable activity illegal – regardless of validity or effect Gov wants all money accounted for – which is far easier when it is electronic rather than cash based – A lot to unpack in this – you might have seen this reported on in the news – give a quick recap on the bill – Then go through why these extreme measures are needed to help get out 'black market' economy under control – outrageously high when compared to 0% of GDP, at around 2%-3% of GDP - being satirical (later) Quick overview of the bill – Now - people could be jailed for two years and fined $25,200 – if you make a purchase or sale for more than $10,000 in cash in one transaction. Read most of the draft legislation - called the Currency (Restrictions on the Use of Cash) Bill 2019 if you are interested in reading the full thing Under the proposed law - all cash transactions between businesses and individuals would be limited to $10,000 Any amount over this would be considered criminal – the same proposed changes announced in the 2018-19 budget we quickly ran through in an episode briefly a while back now – but now we have more details – Penalties = jail time and fines would apply to both the individual and the business part of the transaction. There are a couple of exemptions to the cash ban. The $10,000 cash limit would not apply to individual-to-individual transactions, such as the private sale of a second-hand car. The limit also wouldn't apply when depositing or withdrawing money from a bank. The reason given for this bill is to crack down on the black market economy - The argument for doing so is based on the numbers provided by the 2017 Black Economy taskforce report, which say as much as 3% of Australia's GDP – some $50 billion – could be getting lost to the black economy But these numbers don't stand up to any serious scrutiny - the taskforce itself plainly says the 3% figure is just a guess - "We acknowledge that this conclusion is a qualitative one" and the figures "should be taken as indicative only" - no actual evidence on the size of Australia's black economy - $50bn is a guess – when Look at OECD countries – no 3rd word African countries – we are well below average of just above 5% to GDP – Aus is about 2-3% - but this figure is essentially a guess – if the Gov knows about it, it isn't black market – Where did the recommendations for this Cash Act come from? Came from the 2017 Black Economy Taskforce report – same KPMG report where the estimated size of the black market economy came from – which increased by 65% from 2012 (OECD report) to 2015 (KPMG report) this cash ban is a recommendation is part of this report – provided by one of the big four global accounting firms – KPMG – which also has conducted research to provide supporting evidence for their recommendations Interesting – company recommending the policy that will profit them, along within their industry – If this goes through, I'm sure that Mastercard and Visa, banks, etc will be very happy and might choose to choose KPMG to do more consulting or accounting work for them – I might be paranoid but that seems suspicious Irony of this report - KPMG and probably most major financial institutions (even our Big 4 banks in Aus) are the biggest perpetrators of facilitating tax evasion and money laundering - perpetrated by their clients in multinational banks, corporations – along with the billionaires who own/run each of the banks or companies There are a lot of cases in the past few years of illegal activity by banks, in most cases knowingly and just turning a blind eye – they pay the fines – say sorry – gov gets a bit more money to grow – shareholders suffer – CEO pays seem to not be affected – GFC – too much risk and straw breaking back – CEO bonus after bailouts using government funds – which can only be paid back through taxing the population Exposes the subtle expropriation the socialise loses, which privatising the profits The outcome of the recommendation is so that the individual to small business cash transfers are eliminated overtime to start implementing a cashless society – death by 1,000 cuts If this cash restriction is placed into law - it has been drafted so that the exemptions to the ban, such as for withdrawing cash from a bank, can be removed by the Minister at any time – therefore, at any point once this is in place the government can decide to ban cash transfers between individuals above $10k, or placing restrictions on the ability of Australians to access their own cash through withdrawals or transfers While our cap is

Welcome to Finance and Fury, The Furious Friday edition. This is part 4 of the series around the UN's Sustainable Development Goals. Going through the first SDG today – SDG4 – Education If you haven't listened to the first 3 – Maybe go back and check it out as today – finish the first part on people – So far gone through the UN, media, and trauma-based society Previous episodes: Part 1 UN Part 2 Media Part 3 Trauma-based society Today – Do a quick overview on SDG 4 - Education - Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all Run through the history of education – look at education model today – Look at current formal education as part of the SDG4 – how it is being implemented and by who within Australia Education for sustainable development (ESD) is explicitly recognized in the SDGs as part of Target 4.7 of the SDG on education UN hopes to educate children on the importance of the SDGs - "By 2030, ensure that all learners acquire the knowledge and skills needed to promote sustainable development, including, among others, through education for sustainable development and sustainable lifestyles, human rights, gender equality, promotion of a culture of peace and non-violence, global citizenship and appreciation of cultural diversity and of culture's contribution to sustainable development," – Long statement – lets break this down This job is given to UNESCO promotes the Global Citizenship Education (GCED) as a complementary approach They State that it is important to emphasize the importance for this in relation to the other 16 SDGs Why? Where does education fit in with climate change, how we live, sustainable economy, and the rest? UN says it enable individuals to contribute to sustainable development by promoting societal, economic and political change as well as by transforming their own behaviour Remember from the first episode in the series on Julian Huxley - Quote from founder about changing public minds – again it starts with the people – people need to willingly do this Global citizenship education(GCE) is a form of civic learning that involves students' active participation in projects that address global issues of a social, political, economic, or environmental nature Civic Learning - the study of the theoretical, political and practical aspects of citizenship, the study of government with attention to the role of citizens―as opposed to external factors―in the operation and oversight of government – political action through advocacy - The two main elements – 'global consciousness'; the moral or ethical aspect of global issues, 'global competencies', or skills meant to enable learners to participate in changing and developing the world Definitions mean a lot – words have different meanings to them – Whether and weather – sounds the same but spelt differently – but what skills are needed to change the world? Protest or advance engineering? – Both have a chance of changing the world – to what end? The UN admits they don't know – as progress is difficult to track: 75 percent of countries have no (or insufficient data) to track progress towards SDG4 Which are targets for learning outcomes (target 1), early childhood education (target 2), and effective learning environments. Data on learning outcomes and pre-primary school are particularly scarce; 70 percent and 40 percent of countries lack adequate data for these targets, respectively - This makes it hard to analyse and identify the children at greatest risk of being left behind. Left behind – No Child Left Behind Act (NCLB) brought test-based school accountability to scale across the United States Maths and Reading – 71% of schools spending more time on these neglecting other subjects – Doing more tests – focused repetitive leaving on reading and maths – not learning outside of repetition Whatever the government teaches kids can either be good for the kids or good for the Government – Kids - where they become independent strong capable people ready to conquer the world and form a network of friend's family and neighbours to provide support. But this heavily reduces the reliance of the individuals and by extensions communities on the Government, as if everyone was out following what they discovered how to do on their own to provide value, versus a system that at the core was no different to the slave/peasantry class in Rome, or factory workers in the 19th century provide an education system in a way where Stop and think about the education system – 12 years of schooling – choose a career or to go to uni - Go to uni – select one degree – Probably get a HECS debt – so by the time you come out – one career path then to follow – spending years to pay back debt at reduced income - or go back to uni – more debt Let's go back a little way to the late 1940s China – Mao – needed to create people with new loyalties, new motivations, and new concepts of individual and group life Education was recognized as playin

Welcome to Finance and Fury, the Say What Wednesday edition Today's question comes from Jessica. Jessica – Hey Louis, You mentioned something about a Yuan devaluation in the Tech Share episode. I'm just wondering what this is and why a country would do this? Thanks Jessica – Does sound weird – a country choosing Devaluation - an official lowering of the value of a country's currency within a fixed exchange-rate system China's monetary authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket (USD) – Beggar thy neighbour policy Exchange Rates – Fixed v Floating Floating exchange rates system — when exchange rates are determined by market forces and not by government or central bank policy actions – what we are used to in Aud, Usd, Eur – while note controlled influenced by MP The decrease in a currency's value relative to other major currency benchmarks is called depreciation increase in the currency's value it is called appreciation A fixed exchange rate - pegged exchange rate - is a type of exchange rate regime in which a currency's value is fixed or pegged by a monetary authority against the value of another currency, a basket of other currencies, or another measure of value, such as gold. Benefits - used to stabilize the value of a currency by directly fixing its value in a predetermined ratio to a different, more stable, or more internationally prevalent currency (or currencies) to which the value is pegged. Does not change based on market conditions, unlike in a floating (flexible) exchange regime. Makes trade and investments between the two currency areas easier and more predictable Useful for small economies that borrow primarily in foreign currency and in which external trade forms a large part of their GDP – Also gives confidence in stability – African countries that use USD rather than their own control the behaviour of a currency - limiting rates of inflation Risks - the pegged currency is then controlled by its reference value when the reference value rises or falls, it then follows that the value(s) of any currencies pegged to it will also rise and fall in relation to other currencies and commodities with which the pegged currency can be traded. dependent on its reference value to dictate how its current worth is defined at any given time. In addition, according to the Mundell–Fleming model, with perfect capitalmobility, a fixed exchange rate prevents a government from using domestic monetary policy to achieve macroeconomic stability. Downsides - Increasing the price of imports protects domestic industries, but they may become less efficient without the pressure of competition. Higher exports relative to imports can also increase aggregate demand, which can lead to higher gross domestic product and inflation. Inflation can occur because imports are more expensive than they were. Aggregate demand causes demand-pull inflation, and manufacturers may have less incentive to cut costs because exports are cheaper, increasing the cost of products and services over time. Reasons Behind Devaluation and effects One reason a country may devalue its currency is to combat a trade imbalance. reduces the cost of a country's exports, rendering them more competitive in the global market But increases the cost of imports, so domestic consumers are less likely to purchase them, further strengthening domestic businesses. Because exports increase and imports decrease, it favours a better balance of payments by shrinking trade deficits – GDP includes net exports – so boosts GDP by skewing the exports higher than imports country that devalues its currency can reduce its deficit because of the strong demand for cheaper exports. Devaluation usually takes place when a government notices regular capital outflows (or capital flight) from a country or if there is a significant trade deficit (where the total value of imports outweighs the total value of exports) Example Devaluation and Currency Wars 2010 - Brazil's Finance Minister, alerted the world to the potential of currency wars – Talked about this a few weeks ago - conflict between countries like China and the U.S. over the valuation of the yuan. US monetary policy has the same effect as a currency devaluation on China – QE – mass printing of money You are China – have an unofficial peg to USD – USD increases money base - to remain competitive in the global marketplace for trade, and also to encourage investment, drawing in foreign investors into (cheaper) assets like the stock market – China needed to devalue their currency - China has been accused of practicing a quiet currency devaluation, trying to make itself a more dominant force in the trade market. Was fixed up until 2005, slowly devalued to 2008 from 8.5 yuan to dollar to 6.8 – flat until 2010 when QE The process of devaluation itself is related with the increase of the amount of money circulating by just printing more if your currency

Welcome to Finance and Fury, Inflation and interest rate – real rates RBA update – Inflation and interest rates RBA - cash rate unchanged at 1% - following two consecutive rate cuts – past ep, talked about loans and property pieces Today – Look at the hidden wealth killer – inflation – loss of real values in relation to loans – Low rates with low inflation can be worse than higher rates with higher inflation saying it will take longer than earlier expected for inflation to return to the 2% target while economic growth has been lower than previously forecast The RBA is seen cutting interest rates later in the year as escalating US-China trade war tensions would pose a mounting risk to the economy – Make currency cheaper for exports Quick update - Excerpt from the statement by the governor Philip Lowe: Economic growth over the first half of this year has been lower than earlier expected household consumption weighed down by a protracted period of low-income growth and declining housing prices, higher levels of income needed to meet debt Looking forward, growth in Australia is expected to strengthen gradually from here- around 2½% over 2019 and 2¾% over 2020. The recent inflation data were broadly as expected and confirmed that inflation pressures remain subdued across much of the economy. Over the year to the June quarter, inflation was 1.6 percent in both headline and underlying terms. The central scenario remains for inflation to increase gradually, but it is likely to take longer than earlier expected for inflation to return to 2 percent. In both headline and underlying terms, inflation is expected to be a little under 2 percent over 2020 and a little above 2 percent over 2021. It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target But to what effect? Low interest rates with low inflation creates a mass misallocation of resources The outlook is being supported by the low level of interest rates, recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some housing markets and a brighter outlook for the resources sector. The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income and a stabilisation of the housing market are expected to support spending. Talk about the difference in property markets over time – different environments Higher average interest rates - with higher inflation – pre-90s Lower average interest rates – with lower inflation – post-90s Not going to do the generational debate – Boomer v Millennials - creates tribalism Why choose 1990 - monetary policy in Australia since the early 1990s changed - inflation target of 2-3% – Reason for change –1960s-70 – 5% - then USD 1971 – 1983 rates started going up 5-13% in 13 years – inflation on lots of currencies previously backed to USD, and by proxy gold – lead to higher cash rates which needed to curb With the floating dollar – rates in 1983 went up over the next 7 years to 17% - 1989 to 1990 – 2 to 3 years it was expensive By 1997 – 7% rates were back – 10% lower – so borrowings went up massively Inflation – 1976 – 14%, inflation dropped to 7% by 1990 Inflation today – 1.6%, been trending lower since the 1970s Early 1990s to 2019 - Interest rates in the late 1980s did not stay high for long home buyer back then got to enjoy the benefit of a massive drop in mortgage rates over subsequent years and a corresponding massive rise in house prices. Average income growth is expected to be the weakest in at least 60 years over the coming decade – paying off a larger mortgage much harder Drop in annual income from terms of trade – interest rates Labour utilisation down – working less - underemployment Average levels of mortgage size and initial repayments Mortgage Size - At 20% - $94k vs $520k Price values v wages – 5 to 10 Repayment as part of household income – Average wages $24k v $64k – compounding 5.6% p.a. Average prices $117k to $648k - compounding 10% p.a. Contribution to annual income growth Adjusted for inflation – This is important with Debt – If interest rates are 10% p.a., but inflation is 20%, the real value of mortgage drops a lot over time Also - real mortgage rates would be -10% Currently Above levels that existed prior to the 1980s Example – 6% vs 2% - $520k in 30 years $293k to $92k in real value assuming IO over that time Previous example - Average wages down to 3.5% and prices to 8% compounding in real terms Purchaser in the 70s 80s and 90s - fortunate position to have had their debts inflated away via high inflation Centrally indexed wage rises that outpaced the cost of credit. That versus today's mass immigration wage crushing future which means none of the loan principles will get inflated away. The important thing to remember – making additional repayments required to pay off the debt

Welcome to Finance and Fury, the Furious Friday Edition Today's episode is number 3 in this series – check out last 2 FF eps episode 1 episode 2 Last ep – talked about media and the realities that they create – but they are not consistent – and massive hypocrites Talked about conspiracies a bit in the past 2 eps – the media labels anyone who questions the official narrative as a conspiracy theorist But wait – didn't they have their own conspiracy theory on how Trump was a Russian agent? Putin and he had secret deals to overthrow the US? 3 years every day there were constant stories of reports of sources from an overheard conversation – blah blah – nothing – They not only were conspiracy theorists – but promoted that - and in a treasonous way – turning the people of the world against one person – US media lying about their leader to have him removed But when someone else questions what they say – conspiracy theorist!!!!! – If you question their conspiracy you are the crazy one It might take a little while to let that set in if you haven't thought about it before That is where this all has to start - Start with the people - and next week will be formal education system and implementation – want to explain how through using what is known about psychology and human behaviour is being used against you – How do you control what people do? Control what they see, what they read, what they see and what they learn. Behaviours are based around heuristics – If the news ran a story about the danger of one Suburb over and over – each day, a news story about crime in one Town – you may think that the place is incredibly dangerous – How the media has been instrumental in turning conspiracies on a global scale – Information is passed along at all levels – Affects what we see, read and hear through media/tv/etc, provides only certain bits of information as confirmation bias, repeated it over and over = very influential over time – a lie repeated enough becomes the truth Point of this series – don't get tricked – don't get distracted by all the rubbish about fear – build your own life That way you won't need to be afraid – a person with everything to be self-sufficient doesn't need the Gov Don't miss your time – go and do – to stop worrying about signs that don't matter Don't be unprepared – Don't look for the government to solve your problems – that is what the UN promises – solution to the global problems that they tell you are problems - Want to spend time to go through each of the policies – why they use fear to trick you, or how they convince you it is in your best interest to stop trying – avoid getting tricked into a Faustian Agreement How are people psychologically affected by the media and politicians – cognitive biases that hamper critical thinking - Availability bias – a mental shortcut that relies on immediate examples that come to a given person's mind when evaluating a specific topic, concept, method or decision - the more a message is repeated – the more we use that to make a decision Shark attacks, plane crashes, shootings, etc. Climate change – This end of the world prediction has been going on since the 60s, so almost 60 years now Lots of availability bias when people make decisions about this – as we hear the world is getting warmer – sea levels rising – but when physically measured – like in Syd harbour – no records of a rise Countries like Guatemala and other are seen as very violent with higher death – but Detroit ranks higher than most in shootings - Confirmation bias – search for, interpret, favour, and recall information in a way that affirms one's prior beliefs or hypotheses - systematic error of inductive reasoning something consistent - Conformity providing comfort – tune in and see that Trump is still a racist – fits into world beliefs set out by the media – I have tried very very hard – but cant find an actual racist thing – things interpreted by media as racist – e.g. "Baltimore, under the leadership of Elijah Cummings, has the worst Crime Statistics in the Nation. 25 years of all talk, no action! So tired of listening to the same old Bull...Next, Reverend Al will show up to complain & protest. Nothing will get done for the people in need. Sad!" Nothing racist about it – but the media said that because Elijah is black, he was being racist for calling out the squalid conditions – Bernie Sanders compared it to 3rd World nation, the Mayor took a tour (who is black) and said she could smell the dead rats – they aren't racist – but Trump is Long term Psychological effects – most damaging in IMO Gas lighting – making people think crazy – see one thing but told another – 1984 – John Hurt – how many fingers Oven example – take away agency – self ability - as no longer trust self Disassociate personality disorders – experiencing trauma – especially young Not developed to handle it = create a new personality as a coping mechanism to survive TV is war, violence, shows in Netflix promoting suicide – horror

Welcome to Finance and Fury, the Say What Wednesday edition. Today's question comes from Mike - "Hey Louis, Wondering if you think buying Tech shares are worthwhile" We have the FANG and the WAAAX – US – FANG - Facebook, Amazon, Netflix and Google Aus – WAAAX - Wisetech, Afterpay, Altium, Appen, and Xero (known collectively as the WAAAX stocks) Intro Find that the nature of investments is very binary – some are very for it, some against it – like BTC True with tech companies - some with no earnings profile - so polarised the local investment community Those buying into the company brand, then those buying based around values and trends Factors – Valuations and Fundamentals – Are they a bubble or good long term holds? forward price-to-earnings ratios – Growth shares normally about 25 to 30 in AUS, USA lower at about 15-25 – for tech different FANG share - average is a 50 PE WAAAX - over 100 times forecast earnings to almost 170 times earnings for the 2019 FY The valuation premium for growth is elevated today relative to history; software in particular now carries the highest multiples since the Tech Bubble – Back 2000 just before the bubble burst When valuations are this stretched it doesn't take much for the bubble to burst – shock to confidence investors are still licking their wounds after a Yuan-induced rout that dragged their financial universe from record highs – By product of trade war and currency war – had to devalue Yuan Interest rates - ultra-low interest rate environment. Investors are still coming to grips with a world where - more than a decade after the financial crisis - there is around $US12.5 trillion of global debt with negative yields. lenders are paying borrowers for the privilege of handing over their money - It has driven money out of the banks and into anything with a decent yield – shares are the dumping ground It has also had a major impact on the technical valuations of stocks in a world where interest rates are not going up for a long time to come. Appen, Afterpay and Altium which have been bid up significantly year to date as bond yields have collapsed. lower discount rate increases the PV of future cash flows, justifying higher valuations as interest rates fall, and fuelling multiple expansion driving gains to date = reason why the Pes on shares look sky high Example - rates drop from 10% to 5% = a 40% increase in the dollar value of earnings in five years' time, but a 420 per cent increase in the value of a dollar earned in 20 years' time. Leading to very high prices for profitless companies, because there is almost a religious belief that all of these companies will make lots of money in the future and therein lies the error Hype and market concentrations – comparisons to other companies and markets profitless companies are back in vogue and sometimes valued in the tens of billions of dollars 80 per cent of US initial public offerings in the first three quarters of last year had negative earnings. Wisetech, a logistics software company - worth as much as Qantas with a $8.5 billion market cap. Qantas reported revenue totalling $16.6 billion in 2018 and a net profit of $1.14 billion. Wisetech recorded revenue of $221 million and a net profit of $40.8 million. Altium is worth a billion dollars more than JB Hi-FI - a profit roughly one-seventh that of JB Hi-Fi's $234 million. Atlassian - revenue had finally exceeded $US1 billion for the financial year just ended at $US33 billion The major reason for the jump in value has been the astounding re-rating of the earnings which has meant the market is ascribing a much higher value to each dollar of earnings for this group than traditional stocks. He prefers Google and Facebook which, as the Australian consumer watchdog reported last month, have unprecedented market dominance when it comes to their monopoly on the personal data of billions of people. The two companies are also unrivalled exponents of the network effect: Where the value of a service increases with every additional user. Thematic and risks to these companies When you compare prices to values, they are so divorced from each other at the end stages where dumb money is willing to pay anything for a piece of this growth. WAAAX companies – have something over local companies – world wide consumer bases – reach huge potential for Afterpay, or the ability of these companies to scale so quickly. You need to make sure that the adoption curve is playing out, because if the acceleration slows then that's a real risk given a discounted cash flow valuation is based on a multi-year time period Who are the consumers of these companies – some of world's most valuable consumers - the Millennial and Gen-Z generations – spend a lot and don't have the money, but are aware of Credit cards This is a signal to me – growing spending, not saving, historically = occurs before the burst Competition - The news comes just days after the Commonwealth Bank announced it had invested $US100 million in Aft

Welcome to Finance and Fury, Past few Monday eps on Share concentration – and the holdings and influence that super funds have Today – talk about the legislation put into place and the plans going on now where you might end up renting an apartment from your super fund or bank The plan to help increase apartment supply – decline in prices = lower incentive for developers as a build to sell model – from slumping demand for apartment building New residential product: "build-to-rent" Won't help Australia's housing affordability stress, may make it worse, but it helps to achieve public policy objectives - widened housing diversity – for affordable housing close to city centres enhanced build standards – Avoid develop to sell disasters like Opal towers better-managed and secure form of rental housing – economies of scale from LCLs – which we will run through Look into other areas this has been implemented to see how well objectives met What is it? This refers to apartment blocks built specifically to be rented, at market rates or 'affordable rates', and held in single ownership as long-term income-generating assets Policy came to public attention when Labor reforms to taxation around build-to-rent leading up to the election Aim - to increase the supply of rental dwellings through developing a 'build to rent' and a large corporate landlord (LCL) sector - While these two sectors may share similarities, there is a subtle difference between them. Build to rent - developers and their financiers build multi-unit buildings and, instead of selling the units, retain them to rent to tenant households. Rents may be set at market rents or, for affordable housing, an appropriate discount to market rents could be offered with appropriate government support to make up the funding gap. 'Build to rent' is an established practice in both the UK and USA but it has not been taken up in Australia - Australia's tax settings, which were designed for a 'build to sell' model, as a major impediment, in particular land taxes and the inability to defer GST costs on construction materials makes retaining dwellings unprofitable. AHURI research identified a number of barriers for institutional investment in the Australian market, reducing the attractiveness of 'build to rent' for investment by the large banks, insurance companies and the superannuation funds. In a nutshell – large financial companies will become the driver of investment in inner city apartments QLD – We have a program open for bids in May within 10km of CBD. Goldman Sachs is a major investor in one of the biggest build to rent companies in USA. Large Corporate Landlords – Buy to rent model - financial institutions that acquire large numbers of dwellings and make them available to the rental market, or potentially at a discount to market rents for low-income tenants if appropriate government support is provided. LCLs don't necessarily build new housing stock, they can purchase properties in the market or through mergers and amalgamations with other LCLs. Indeed the largest LCL in the USA, Mid-America Apartments, (99,939 apartments in 2017) LCLs can merge with build to rent developers who can help manage rental dwellings Proponents claim LCLs and 'build to rent' schemes offer greater supply of rental housing, greater security of tenure for tenants, and better professionalism in tenancy management than small scale 'mum and dad' landlords. These models have also been criticised in other countries for maximising rent increases and for evicting tenants In one case, 60 families were threatened with eviction in Ireland in 2016 when the LCL that owned the residential complex had to sell over 200 houses to an internationally based financial institution in order to repay debts From an international flow of money – part of the profit shifting scheme which caused the Ireland property bubbe QLD - Deputy Premier and Treasurer Jackie Trad today invited industry to register their ideas on how to deliver a large-scale Build-to-Rent development within 10kms of the Brisbane CBD. "Delivering these affordable rentals will contribute to the Government's Queensland Housing Strategy 2017-2027 target of over 1000 affordable homes by 2022" – says homes but means high-density high-rises Why hasn't it taken off here yet? - the tax treatment and returns in Australia make build-to-rent less viable. cost-effective variations of the build-to-rent model are being trialled, including student accommodation, co-living arrangements, or build-to-rent accommodation where the tenant has an option to buy their unit after a few years of renting – talked about in another ep constant rental income from tenants is a particularly appealing investment for institutions that seek reliable income, like super funds What do the people implementing this want: under current conditions, even market-rate build-to-rent projects are barely viable – at least in Sydney. Australia's urban housing markets are expensive to purchase land. a

Welcome to Finance and Fury, The Furious Friday edition. Episode 2 in this larger series - The last episode – Talked about historical events – resulted from people acting out their conspiracy – act of making plans with a counterparty to commit an unlawful or harmful act – if it would be a crime to do, known as a criminal conspiracy – Conspiracy = Planning to commit a crime in most cases – but people who today are pointing out historical evidence surrounding events are now labelled a 'conspiracy theorist' based around what is outside of the consensus – Some might call that curious – doesn't mean that they are correct – but interested enough to gather their own information and see what is there – and does it stack up to what other sources have said? This is where the media is damaging – not only polarising but it creates two different realities for people People act based around what they believe to be true – from heuristics, learning, history, etc. Use CNN and Fox as examples, or Sky vs ABC in Aus – both have their readers/viewers – team blue and team red Have different information presented across channels – channels caught framing shots/faking stories – fake reality You create division between the masses – I think that the vast majority of people are good and want the best – but there are always some psycho mass murderers or UN co-founding members, like Stalin. Brings into the question of truth – don't want to create any mental breakdowns, crisis of consensus – but how do you know what you know to be true? Team blue v red – both play opposite stories – so people believe different things about same events I know that this is the case when it comes to the UN – a lot of people like what the UN is trying to achieve Have people who disagree on the methods, or that there is even a problem to solve in the first place How well can people work together when they don't trust other people, based around what other people believe is true – truth and trust Justice system – blind justice or Lady Justice – comes from the Greek mythology – Dike and Themis, then Lusitania from Romans – never got why someone whose job it was is to weigh up the scale of justice was blindfolded – did some digging – Romans weren't that dumb, only added first time in Switzerland in 1543 – used a mockery of the legal system where the rich got away – took off I guess – but we are all told she has a blindfold to be impartial – impossible to do if you are blind to everything going on – just don't be a bigot Here we enter labels and tribal nature of people – can be blinding – tribal nature of just doing what is implied by the tribe Those who like the UN – Call those that don't Conspiracy theorists, get called globalists or rubes back, others just walk away Labels and language can be very deceptive – Ended the last ep talking about UNESCO – United Nations Educational, Scientific and Cultural Organization – our education system, 'science' and cultures have been influenced by the UN for 4 generations now Each of these will be broken down into an individual episode – help explain how two realities are created – statement v outcome Education, Science – Climate Change – When did climate change become a thing? Culture – TV, music, language, beliefs – how people are affected by information – and influenced All the information from this series will be directly from UN, Subs, or affiliate groups, WEF, IMF, WB, etc. Keep this in mind whenever taking info in First – These SDGs are anything new when it comes to the UN – Central planning isn't great when it comes to achieving goals Millennium Development Goals (MDGs) - principle that no one should suffer extreme poverty – started in 2000 – target date of 2015 - poverty not eliminated – has been a decline – in 1990 (the reference year for measuring improvement), the number of people living in extreme poverty has fallen by 33 percent from 1.9 billion to 836 million worldwide, with most of that progress coming after the MDGs entered into effect. But from world bank from 1820 – 94% in poverty to 24% in 1990 – to 10% approx. in 2015 The world went through a massive shift in early 90s – Communism economics was failing – China and Russia The SDGs – started in 2015 - build on the MDGs' - adding a new dimension: sustainability. The sustainability dimension brings a universality across all areas of life that MDGs didn't have – From WEF Developed countries are no longer just enablers of progress, earmarking a percentage of their GDP to support the efforts of developing countries to reduce poverty, improve health and raise living standards. Pause – developing countries (Aus, US, NZ, etc.) earmarking a percentage of GDP to develop other countries – not good enough, moving on: Instead, they must be committed and active participants in the effort to achieve the agreed goals, in some cases even modifying their own domestic policies. In this sense, the SDGs more clearly reflect the conviction, upheld by the UN, that all of us are

Welcome to Finance and Fury, The say What Wednesday edition where we answer your questions, and sometimes questions from people from the gym – such as today Is this a scam – moneysmart have a page on this – which is good resource – give a quick summary of this – but trouble is that while you can read it and research the sort of things to look out for - so can the scammers. Scammers adapt to get around the warnings or rebrand to avoid public scrutiny. Imagine if you got a call from a Nigerian Price who just needs you CC number to buy a taxi ride home, but he will give you $100k in return. Works? Not today – we are all aware of this trick – but back in the 80s to 90s it was slightly more plausible – no smartphones to order uber, or mobile phones to call the people he needs, so you would be talking to him on your landline – assuming that he is at a payphone calling random numbers as he doesn't know right number to call and just spent his last 50c on this call – hence why this did actually work at one point of time – thankfully in a vast majority of cases people were wary – but today don't as many people would give CC details to someone who looks like Eddie Murphy in coming to America if they came up to you on the street. Today's ep will be focused on how to avoid a scam through not just a list of things to tick off – but logic and reasoning – The methods of scammers are always going to adapt as we do – but the method to working out if it is a scam doesn't change Process of knowing it is a scam before it lands on the ASIC or money smart list as a scam, and the tips list Normal list from MoneySmart – Investment scams and tips to recognise First warning bell - get a phone call, email or letter from a stranger asking if you would like to invest in a company Scammers often make the company look 'real' - there may be a website and documents that look official but are completely fake. Their tips on questions to ask to find out if it is real: What is your name and what company do you represent? Who owns your company? Does your company have an Australian Financial Services licence? What is your address? If they avoid these – probably a scam – hang up, ignore all calls and walk away – but who and what questions – very easily answered – What is a good place to start, asking who is better, but why and how are more important when it comes to fully reasoning out a scam, or anything The reward seems too good to be true - 'get rich quick' schemes might look good but in reality, only the scammer makes money You need to sign up right away - pressure you by saying you have to decide on the spot - Never agree to this. Tip - Always ask for documents and read them thoroughly before you make a decision. All good information and tips – what does a scammer do to avoid looking like a scammer? Probably still call – but they can use a legitimate companies details, or well-rehearsed story/pitch Long term profitable investment – so not massive instant returns, but higher than the overall market to be enticing – have a reasonable pitch No pressure to invest – just an introduction call – send you an email with an information pack with historical data, reports, and the companies website – has ABN, list of testimonials, investment information, past performance – slow burn strategy – At the start of the year – got a pretty irate call to the office from one or two people – some scammers were calling random numbers and saying they were from another company that has a similar name to mine, and that we were offering loan refinancing services and wanted to ask for details – people asked for company info and due to the difficulty in understanding what the person on the phone said – they googled the wrong thing and called our office – so got a few calls through wrong google searches, cant imagine how many the actual company got – Be aware of any random person calling from a legitimate company and asking for information, especially if you have never dealt with that company One Case – from friend at gym - Call from random company that appeared to have everything, website, performance history, being in the UK as well promise of trading algorithm that has performed at 12% per month on average – historical data proves it – this sort of return does seem too good to be true – but how do you know for sure - Hard when emotions take over - put in $2k now and get $34k in 2 years – Very tempting – FOMO versus TGTPT – fear of missing out can be bigger Number one rule in looking at a scam – Don't ask the salesman any questions, but ask yourself ones to reason this out Previous example - This compounding return doesn't really happen consistently when it comes to shares – How do we know this is true though? Might happen somewhere? Are there any trillionaires? Richest person from investments – warren buffet – at 12%pm ROR, $20k today would be $14.5trn in 15 years – then the next year would be $56trn – compounding is amazing – Question to ask – what are the chances tha

Welcome to Finance and Fury Today we are discussing the concentration risk Last week – how the modern banking system acts like dominos failing– Due to their liabilities and obligations to one another this week – look at the other side of the balance sheet – Which is the Equity Holders – Shareholders – who owns the shares of banks Also – the concentration risk that just a handful of companies have in the overall size/weight of the Aus Share Market. Plus – Look at two events that every bank just did as this is a real-world example Concentration in the index – Complex with lots of elements – break down major ones Remember – Big 4 banks – including Macquarie = 5 of the top 8 companies on ASX by market cap Australian bank shares – ownership and connectivity – beyond the derivative concentration representing 23% of ASX300 - IMF report in 2012: big four controlled 88% of residential mortgages and 80% of deposits. biggest six American banks held 30% of total deposits not just banking: the big four own 53% of life insurance premiums, 57.3% of retail investment funds through bank-owned platforms – Insurance and investment sides to banks also purchase shares on the ASX – of which they make up a large chunk This can just further increase the concentration risk of markets – if an investment manager owns 5% of a share and sells, that moves the prices down – a lot – average daily volume is about 0.15% - both buys and sells - Beyond banks owning their own shares directly – Subsidiaries – Investments, Banks – through super funds, investment managers, insurance companies – either buy them through own subsidiary or another bank – Super funds (investment managers) – Industry/index funds – hold shares on the ASX - Example – Aus Super – Balanced fund has $100bn in it – 22% allocation – range of 10-45% ASX market cap – $1.6-$2trn depending on the market cycle – $2trn now, but $1.8trn middle ground What can easily lead to a downturn in the share market? What if you have $2.8tn across all super funds – plus $100bn inflow p.a. – and super investment managers decide to dump the ASX? –strategic 'rebalancing' or 'profit-taking' If the target is 25% to AS – a drop in exposure by 10% down from 35% - selling shares/index – ASX $2trn – a sale of a super fund in Aus shares by 10%, sale of 14% of shares held on the ASX – that is a lot of power to move a market – top 20 super funds have around $1.3trn of the super investments also a lot of power in the property market - cover more in another episode Names on the list – Broken up between Public Sector, Industry or Retail (banks) – Pretty equally split in % of top 20 Of the retail funds – about $420bn in 8 – Bank Subs or non-bank financial services MLC Super (NAB), CFS Super (CBA), Retirement Wrap (BT), OnePath super – ANZ AMP super – 2 funds, IOOF super, and Mercer (owned by USA insurance company – Marsh & McLennan) Bank Major holdings – Blackrock entities – 3 of the top 10 for every bank but NAB – 'Advisors, Management, UK' Macquarie has about 7% of its shares But this is who the owners are – banks use custodial holding companies – HSBC, JPM, CitiGroup – 40-55% between 3 Beyond just being investors in one another and Concentration through connectivity and custodial power – Banks are Counterparty to each other – either a lender/borrower to one another – derivatives last week example of one side But big 4 banks are highly interconnected - each other's largest counterparties – nobody else is big enough the connection is far from direct ownership of shares – but banks borrowing from each other, rather than owning large parts of each other – Balance sheet has assets and liabilities – Under lending laws – lenders get paid back before investors If a bank borrows another money, and one bank goes out of business – banks get any money first – shareholders probably get $0 – when you look at the size of the loans to overall 'equity' Thankfully for them – the global markets and companies are just as easily reached as domestic ones – financial services can fall under free trade Not so good for us – as when a banking crisis happens in USA – we get hit just as bad Requiring each other – as there is so much money needed only one of the other big four can normally help Banks fund costs through short term debt securities – why hold cash – when you can use it to lend at 3.5% and borrow at 1.5% interest – like funding your lifestyle on CC and investing the rest of the money – then trying to repay the debt using your investment earnings – doesn't work unless you can consistently get over 22% p.a. returns on an investment to outpace the accumulation of debt – but if you got 22% investing, and card was 2% - who wouldn't do that? When there is a crash in the banking system – hard to fund expenses as nobody wants to lend to you – GFC – Called liquidity crisis – but in reality, was an insolvency crisis – two different things – as banks don't even have the assets to fund any 'bank runs' Further hastens the decline in sh

Welcome to Finance and Fury, The furious Friday edition Intro ep to a new FF series – probably going to be the biggest Today – episode to give the bird's eye view of the overall topic - massive topic - ranges from education, energy, transportation, medicine prices, along with 1,000 other things Spend a number of episodes on each of these elements - look at finer details – may seem unrelated – Everything in this series - form part of the 17 SDGs set out by the UN in Agenda 2030 This may be a bit long – lots to initially unpack - but very important ep – side to history most people don't know about – that still affects us to this day What is Agenda 2030? Most people haven't probably heard about this – that is okay – not discussed/addressed often – but it exists 193 countries signed on to this almost 4 years ago – we were one of them (Australia) If you are one of the few who have heard of this – probably had one of two reactions, First thought of the conspiracy theories that are brought up in relation to this topic or You were thinking about the plans for a one-world government – 'new world order' - conspiring to provide top-down legislation to all individual governments – Term Conspiracy theory – Conspire – make secret plans jointly to commit an unlawful or harmful act – People are charged for committing conspiracy in criminal law – if you agreed with your friends to sneak out of the house when you were a kid, you conspired with them against your parents' 'laws' Important to not be dismissive of the label of conspiracy theory – as some of the biggest atrocities in history were committed through conspiracy theory turned into action – conspiring is theorising with another party/making plans – then if you go through with the action – it turns into another crime – conspiracy to rob a bank versus armed robbery of a bank – only individuals are charged with conspiracy – Who is in charge of governments or unelected groups like the UN? Individuals – a lot of history showing lots of conspiracies Quick history of some conspiracies – on the Governmental/global level It was a Conspiracy that sparked USA entry into WW1 – prolonging the war for 2-3 years – millions more dead – and set up the treaty of Versailles – most historians attribute conditions of this to the aftermath in Germany and rise of the Third Reich – which lead to WW2 – This was the sinking of the Lusitania - WW1 breaks out – all know story - assassination of Archduke Francis Ferdinand of Austria-Hungary by a Serbian nationalist in 1914 - hardly sufficient reason to plunge the world war - claim over ten million lives and twenty million wounded – let alone the generation suffering from shell shock Well – if you listened to the Fiat rise – with the initial financing model of the 5 Rothschild brothers – this was around 100 years into use by now – and nations took advantage – finance trade, colonial territories, expansion An arms race had been in progress for many years; large, standing armies had been recruited and trained; military alliances had been hammered together; all in preparation for war – but once it broke out they needed more money – EU banks had no money left – to turn to USA selected the House of Morgan-acting as partners of the Rothschilds-to act as sales agent for their bonds - money began to flow in January of 1915 when the House of Morgan signed a contract with the British Army Council and the Admiralty - Also loaned to French and Russians By end of 1915 - Germany looked like they would win the war– France and Brittan on ropes – Germany offered peace in 1916 – basis of status quo – pre-war frontiers – but Franco Prussian wars of 1871 – turned down – the conspiracy was already in action – JP and other bankers would lose a lot of money if England and France lost and couldn't pay debts back – How to save their interests? US needs to enter Through the whole war – German Uboats (form of early sub) devastating military – but couldn't fire on civilian ships – so allies used civilian ships but outfitted them with weapons and used them to ship war supplies Lusitania was one – and Germans knew it – treaty that they can 'arrest' and search – but allies opened fire as soon as UBoat rose – so they started just sinking every ship civilian or military – most were the same thing Germany tried to warn the population not to get on the ship – send warnings to be printed to US newspapers - JPM – also had control over international shipping – German and England – largest lines – English competitor had the Lusitania as one of flagships - British passenger liner that sailed regularly between Liverpool and New York – But retrofitted with 12 guns on the decks – and carry munitions Left NY on May 1 1915 – sunk 6 days later – 1,195 dead – 195 Americans - event that turned US public into pro-war JP Morgan had 1000 journalists on payroll – and strong control over media through ownerships/investments Financial records show through 'New Haven Railroads' – Cost $400k p.a. in 19

Welcome to Finance and Fury, the Say What Wednesday edition Hi Louis, My wife and I a looking for ways to buy a home, given some credit history and income stability challenges. I was hoping to get your thoughts on Rent-to-own arrangements. I really enjoy your podcasts, thanks for doing it. Thanks Cameron! What you need to know about rent-to-own home schemes Rose out of current market conditions - A perfect storm of rising living costs, "low and slow" wage growth and increasing house prices – task of saving for a deposit for a $800k place takes longer than $200k place alternatives - rent-to-own schemes is becoming a choice for people looking to buy a place What is rent-to-own? Rent-to-own schemes - leasing agreements that afford renters the right to buy a home at the end of a pre-determined rental period, at a price agreed prior to signing the agreement Sets in stone the future sale price - means you may potentially buy a home for a cheaper price can also work against the buyer, if the market experiences a downturn during the rental period You don't own any part of the home until you made the final payment Then still need to apply for a home loan when the time comes to buy the property at the end of the rental agreement How do rent-to-own schemes work? Rent-to-own schemes have two components: a standard rental agreement and an option to buy. Option – if you wish to purchase the property - sign a contract with a vendor that affords the right to buy the property at the end of an agreed rental period - usually runs anywhere from two to five years. Still normally require a deposit – can be secured by applying for the First Home Owners Grant – or your own funds During the rental period - pay rent that is usually above the market average – plus ongoing fee for the 'option' to buy Some contracts also require the participant to cover additional outgoings (maintenance, stamp duty and insurance) The money paid as the premium for the option is deducted from final sale price The costs of rent-to-own schemes can vary wildly required to pay well above the market rent, as well as an additional 'option' to buy the property at the end of the tenancy agreement - exact amount of rent and the premium for the option vary from house to house Examples – 3 year rent to own – Contract price of $450,000 – pay a $28,000 deposit, $20,000 from FHOG $600 rent plus $100 a week for the option to buy the property at the end of the three-year agreement This would mean you would shell out a $109,200 over the initial three-year period $8k for deposit, but FHOG was $20k, including premiums total deposit = $43,600 if 'option' for reduced sale value in the house (which is not a given) = $406,400 home loan needed Home with a value of $450,000 would end up costing you $543,6000 ($450,000 plus $93,6000 rent But would likely be renting elsewhere – but for cheaper – say it is $100 above market = $15.6k total A lot can go wrong – not on the title - if you're unable to make a payment, you can lose whatever equity you have built up missing a single rental payment could result in termination of the contract, leaving you out of pocket and without a home Sounds pretty similar to one part of the Whitewater scandal May not be able to buy – what happens if you can't get a loan? Lose the money you have spent on premiums/as deposits you also might end up paying an inflated price for the property if the market drops – or lose the money you have already paid Any event where you can meet your repayments falls over lending laws – like vendor failing to meet their repayments – then you would lose rights to continue making repayments and property ownership Can I rent-to-own with bad credit? Yes – sellers have little risk of you defaulting on payments – can actually benefit them financially Sellers are far more likely to enter into a rent-to-own agreement with a prospective buyer who has bad credit than a bank is likely to offer them a mortgage based around servicing Watch out for this – if you still cant get the loan when the contract expires – bad outcome How the process works - Step one: Find a property – have to be a pack of a company stock already - may take longer than a traditional house hunt. Step two: Research the home – look to see if it is worthwhile – building and pest, builder, valuer – Step three: Research the seller - agreement ties your ability to own the property to the seller's financial circumstances ask for documents that prove their financial security Step four: Seek legal advice - help draft a contract, and make sure that they include a clause that clearly outlines details Step five: Keep up with your rental payments - budget and stick to it – or be left worse off than before Step six: Secure a home loan Step seven: Buy the home Thanks for the question If you want to get in contact, you can do so here.

Welcome to Finance and Fury snuck this episode in ahead of time – only reading about news yesterday – need to do some further digging – but is it Time to sell shares in anticipation of a crash? Today – run through some news that you might not have seen – financial troubles of DB, but also China's bank runs First - A lot of elements to it – financial crashes are never due to just one event – chain of events – think of it as an avalanche – snow builds up – eventually, there is too much – large vibration (sound, contact) = slow rumble at first, but as it takes off and wipes out most of what is in its path – Share market crash is similar is there is often a run-up in value – if it has come from debt, derivatives, expansion of money supply, further driving irrational exuberance – Then there is an event that requires a contraction in the money supply – i.e. how much is invested versus how much debt is owed on it How connected they are is also a factor - Banks Largest shareholders are other banks or financial institutions, investment managers – probably cover next week But the current concentration risk to the market comes from counterparties to financial obligations – i.e. derivatives - and what happens if banks default – and What would trigger a GFC domino effect – What share are the most at risk – Banks and financials – Not saying to run and sell bank shares – no idea if a crash is coming soon – but pay attention to events – individual isolated events – a massive increase in counterparty obligations since GFC, low-profit environments with banks due to low rates, further driving 'innovated' profit-making within banks (leveraging and speculating) now banks laying people off, China bank run (seized by CCP for bailout) – run through these step by step – these alone won't be enough to trigger the avalanche – one bank becomes insolvent and goes into resolution proceeding – through bail-in and out strategy – may work to minimise the crash – but only if 1 or 2 banks need help what happens to the banks that have lent them money, or have created derivatives on that same loan = expansion of money stops due to derivative bubble popping – chain of events I'm worried about The system is chaotic though – chaos theory butterfly effect describes how a small change in one state of a deterministic nonlinear system can result in large differences in a later state Markets and legislation work in this way – 1 policy is very deterministic – sets out with one set of patterns with its intended goals – but change a different law – also deterministic – this has an impact on the first due to complexity and connectivity If you understand how this relates to the risk in the system – understand why markets are so volatile More complex and more connected, greater the chaotic potential becomes – exponential Quick backstory on recent events – and what the financial risk/connectivity look like Rise of Derivatives – talked about this in some past eps – but what are they? Tell the truth – took me a long time to understand these – Uni - Derivatives and Risk Management (FINM3405) – I am a very literal thinker – don't get sarcasm well - took me months to fully understand how derivatives were used – understood the theory, but didn't understand how it could actually work one party could agree with another to write a contract where they promise to exchange one thing for the other in the future, at a certain price, rates – when you don't own that thing even though the contract derives it value from it - Used as Tool for banks – either to hedge risks or make profits through leverage and speculations Won't go too deep into it – but as an example – BHP and Chinese company – BHP things coal price will decline, so wants to lock in the price now on their coal exports – but they will be delivered in 2 years from – write a derivative – based on the market of coal – if you have to sell at a lower price, you can cash in your option as you bet again the price for a small premium or just counterparty contract – still derivative Banks usually derivatives because they can be highly leveraged – normally borrowing funds for the purchase of assets In derivatives – you can control a large number of shares for little upfront cost – Contract for shares worth $20 may cost you a $0.3 outlay but now have contractual ownership on assets that you technically don't own Now – rather than having to outlay $2m it is $30k – profit potentials are huge through betting on the market -but so are the risks Also more efficient versions of trading the underlying instruments from which they are "derived." – no reporting Example - a bank thinks the market will crash – may want to go short – but buy back in 12months – doesn't have to sell shares then if you use derivatives – just flip from long to short – get into a new contract and reverse position Needed something to make some good profits on – plus – heavily deregulated in the early 2000s - Commodity Futures Modernization Act of 2000 – allo

Welcome to Finance and Fury, The Furious Friday edition. In money system – need a reserve – gold, currency – gives a floor value which gives confidence Doesn't provide much stability – Most central bankers use the same terms when talking about current international financial system – Incoherent – You have the AUD to USD drop, gold moves one direction, - completely disjointed – based around the models of international finance – not what they predict will happen – but still trying to manage Floating currencies are not stable - financial war easier – There has been a currency war going on since 2010 Remember QE – US dollars and treasury issues – what happens if your currency is pegged to USD? China – had to massively increase their money supply as well to keep currency exchange low – US growth from consumption, while China growth from exports – Yuan goes up, exports down But printing a lot of Yuan created inflation in china, along with the rest of the world – food, oil, commodities, USD is a form of global currency that assets are priced in If domestically you are experiencing inflation (or real devaluation of your currency) – price of food goes up Think about any financial asset – shares, property, bonds, gold, cash Each behaves differently in crash – shares go down, bonds gold go up, etc – but they are all priced in AUD If you crash AUD – our international buying power and wealth goes down – global system very fragile Very controlled - One country can devalue its currency to make it more competitive – has to be done slowly over time Think that is what the RBA is trying as well – based on theory – interest rates drop = carry trade = exchange rates change and drop due to interest levels here – but over time – demand for goods (now cheaper) go back up bringing currency with it Theory doesn't work out so well – due to incoherent natures of currencies – Confidence – and that currencies of other countries are used as reserves What solution does the IMF see for its Reserves and stability of financial system problems? Gold? – but the price of gold would need to be pegged to USD$10k per ounce to form a currency reserve Hard to get enough – been trying – mining ramped up, China and Russia massively buying up gold Has every bar melted into new bullion to avoid fakes – fake gold going around But IMF have SDRs – China needed to hold a lot of gold to be accepted into the currency basket of Special Drawing Rights (SDRs) Special drawing rights are supplementary foreign-exchange reserve assets – IMF wants it as an international reserve asset SDR is the unit of account for the IMF – "The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members." – what does that even mean? SDRs represent a claim to currency held by IMF member countries for which they may be exchanged – but only within the Financial System – There is no secondary market – unlike other forms of reserves/assets – bond etc SDRs originally a part of the monetary system - Bretton Woods arrangement post WW2. USA had almost all of the gold reserves of the world at that time – other countries left with little SDRs were intended as a supra-national currency that could be used instead of gold, thereby reducing dependence on gold (essentially the USA) – IMF first issued in 1969 to supplement its member countries' official reserves (i.e. gold) Today - SDR 204.2 billion (equivalent to about US$291 billion) have been allocated to members, including 2009 - SDR 182.6 billion allocated in the wake of the global financial crisis - to "provide liquidity to the global economic system and supplement member countries' official reserves". The SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods system, the SDR was redefined as a basket of currencies – floating currencies in the end China and Russia are storing Gold and urging the IMF to replace USD as the global currency reserve with SDRs Don't like the reliance on USD as China and Russia have been on the raw end of the US Fed and Treasury Price based on a combination (weighted average) of multiple currencies – The IMF has its own reserve which has multiple currencies basket is reviewed every five years - reflect the relative importance of currencies in the world's trading and financial systems - currency weights remain fixed over the five-year SDR valuation – but values with cross-exchange movements daily United States Dollar – 41.73%, Euro – 30.93%, Japanese Yen – 8.33%, Pound Sterling – 8.09%, China – 10.92% Interest rates - weighted average of all the currencies Why are Special Drawing Rights (SDR's) Required? to move away from the United States dollar-based system – which has already way too much debt – $22trn debt If the USD collapses (as it isn't money but built on $22trn of debt and agreements) – world suffers Large consumer but wouldn't

Welcome to Finance and Fury, the 'Say What Wednesday' Edition. We recently had an awesome email from Zoe about a potential market solution following the 'Solution for pollution' episode last week; "We sort our cans from our mixed recycling in our Sydney CBD office building to donate the 10c return to charity. We collect 50 cans per week on our floor which is on level 22 of a 23-level building. Staff are incentivised to sort their waste through the small charitable 10c donation. However, it is difficult to return cans in the city as there is no spare space to hold sorted recycling. This could be fixed if we could hold sorted recycling in our office buildings. Rather than sending mixed and often contaminated waste to large holding areas outside of the CBD, we could send clean product directly to appropriate recycling facilities. There are hundreds of office building across the country holding contaminated recycling then paying waste companies to remove their rubbish. With a small 10c donation to charity for each recyclable product we have a great incentive for our office buildings in the country to hold sorted recycling in their basements which can be sent directly to the correct recycling avenue. I'm a long-time listener, first time writer. Thank you for such an interesting podcast." That sounds like a great program that you are all participating in! Really awesome to hear and is definitely a great effort to help the pollution problem. How can this become a more popular thing? not just with cans – with bottles, paper, food, plastics. In today's episode we will go deeper into this topic Talk about policy decision making – how to expand this sort of program and also, why policy makers are likely to stuff it up We have to operate this way due to the influencing factors such as share values, costs, Government intervention, etc. All incentives based – you can lead a horse to water but you can't make it drink. Policy may end up drowning it. Then also we'll run through why simply regulating that companies have to be a part of the supply chain would result in a pretty bad outcome, not only for companies but also us as the consumer. First, I want to explain a few concepts behind policy decision making and issues I see with the current regulatory environment Common practice - Things defined by 'hoped-for' results, rather than the actual mechanics of decision making 'Profit making' businesses often fail to make a profit and become extinct – economist Thomas Sowell calls them 'residual claimants to the company's income' – they get what is left. There's no more reason to expect a drug prevention program to reduce drug use, or public interest law firms to serve public interest, than there is to expect a company make a profit. You have to look at what they do – not what they intend to do. This is the trouble with regulation and legislation – set out with what you intend to do, but regulations aren't a dynamic system and the information feedback loop is almost non-existent Government makes a blunder with regulations and it takes a while for them to concede (if ever) Do you ever hear them turn around and say 'we got it wrong' – instead they say, 'this policy will work, if we have more money' Doubling down. It's politicians' jobs to stay in power – saying you are wrong doesn't give voters confidence and you may not get re-elected – could be career suicide if they try to correct something that they have done wrong It takes years to have the studies conducted on the effects anyway – there's time to ride it out and still retire Let's compare this to a company – Can a company afford to double down if it is wrong? If it does, it is no longer a company. This is part of an instant (quick) feedback of information about your decisions. Not making a profit shows that you're doing something wrong (sales, costs, consumer wants) – need to find out ASAP and correct the model. That is where the incentives lie – how effective they are is based around the level of consequences – pros and cons But still need the information feedback loop as part of the system – allows to adjust course midstream – rather than just wait and crash – incentives aren't worth anything if you have no information on what is working, and what isn't Policy has to have two key components – correct incentives – quality information feedback loop Issues – how do you collect all of the information needed to enforce regulations? – use Recycling as example Gov – how does it know best how to collect rubbish – or transport, store, process, recycle, price, get it to the companies – this is the main issue of any centrally planned system – information is limited and inability to adjust decisions to the individual level, rather than collective – farms under economic authoritarians like Stalin, Mao – weather and crop differences couldn't be managed – people forced into collective farming – people starved, even though you had a massive increase in number of workers in one project, if

Welcome to Finance and Fury The ASX is sitting around a high mark. But there is a lot of talk about recessions, analysis talking about share corrections, not a lot of optimism – Has there ever been? Don't really see many articles with positive outlook on the economy Important to remember – Don't trust journalists to make investment calls Bad track record- European debt crisis, Brexit, Trump getting elected, trade wars, actual wars – GFC? Paying attention to the media yields some of the worst investment returns – emotions and fall into crowd Today ep – want to look at share market corrections, what signs are pointing towards, then how to not get stung If you have been listening – eps at the moment might come across as doom and gloom as well Apologise if it comes off that way – only intention is to inform but also provide ways out Not prophesising - Point of those episode is to let you know what can happen – not when or the magnitude Are we going to crash? Might surprise you after what I just said – but we will 100% have another share market crash – but Who knows when it will occur! Investing in shares – you are 100% guaranteed to see a downturn in the portfolio value But from high point – not original capital invested – what goes up, comes down – Important point is to try and avoid losing the value of what you originally invest major stock market correction is possible Levels – looking back – 10-25% range potential - for whatever reason – that would be a significant decline Can be scary Riding out the decline – Buying companies – shares = ownership in a business – either domestically or OS Make sure the companies you buy are good – doesn't matter what short term valuations say then own quality investments and ride out the correction – confidence – will the company go out of business Not – will my share price go to zero – that is hard to comprehend – but will the company go out of business – that is the important part Where is our share market in relations to economy - Australian shares are near record highs while interest rates are near record lows RBA - Lowe admitted - did not understand why bond market priced in for a recession while the sharemarket was screaming boom times ahead disconnect between the two usually means that one market will be "spectacularly wrong" Bond market – due to rates dropping, yields are also dropping – especially future yield spreads What does this mean – Bonds have a maturity date – buying debt – has a date when you get the money back If something has a 2 year timeframe with a 1% yield versus 10 years with 1.5% = .5% spread Shows that the interest rates will be increasing over the next 10 years What has happened – Compare now, 1 month ago, 6 months ago Short term – 2y and 4y – same now and 1m – 1% - but 6m 1.8% Medium term – 10y – 1.4%, 1.3% and 2.3% Long term – 30y – 2%, 2%, 2.8% Share market Australian share market not heavily overvalued – PE Ratios Our share market is doing well in growth But share markets normally improve with the economy, but it is rising as the RBA is lowering interest rates to help the economy along (opposite signal) 12 month forward PE Either Bonds, shares, or nobody is correct no-one can predict with certainty what will happen to the sharemarket next. If business growth continues to slow, share markets will be the incorrect ones – and the market will take a downturn market analysts look at charts of the ups and downs of share price movements to gauge trends Relative Strength Index (RSI) rises above a critical line - trading above the RSI looks like it has some room to run – but after a peak there is a decline – sometimes 3%, sometimes 10-20% - recently went through 10% PEs aren't outside of range of normal – little above May be the case People are buying based around future expected growth – get in before it is gone Few scenarios – hypothetical - We see no growth in a few months to years – event RBA has no room to drop rates – share market panics as the predictions weren't true and tries to be the first to sell Fed – holding off raising rates now – but need a 4% buffer We see an uptick in growth – RBA does except this in the next 6 to 12 months – Share market doesn't charge ahead, but keeps growing steadily Collapse of derivative debt bubble – would be worst case – no signs – counter party obligations are huge though So if I'm saying we can't predict market crashes, what can you do? Buy quality shares or funds – what is quality What do they do? Something people will still use, or something that is almost impossible to shake people's confidence on Diverse models for income – products, services – Amazon vs corner store Have low expenses – or if high, most is capex Are they consistently able to provide growth and dividend returns? Dividends are important part of a share – makes up a large chunk of return – Growth plus Income = Return Why? Companies with good divs has to come from profits and not too much of those as a percentage This is where comparing the

Welcome to Finance and Fury, the Furious Friday edition Been talking about monetary system – today dive into Crypto currency Crypto currency – means nothing - has to do with individual coins/tokens/whatever – Preface – Don't have as deep an understanding on the overall crypto market as I do on the fiat money system, and especially blockchain I do know enough about BTC to know one thing – I wouldn't buy BTC personally – You may love it – good If I get something technical incorrect – let me know – But ill be talking from fundamental POV – helps to explain where I come from – We all know the story – In 2008 - Bitcoin was proposed by unknown author/s - pseudonym of Satoshi Nakamoto At the heart of blockchain is the distributed ledger. In its simplest terms, a distributed network is a shared database. Rather than one central entity holding the information, it's spread through a network of millions of sites or nodes. This decentralization offers many benefits over traditional, centralized systems: increased security and transparency, for starters. use of a trustless, fungible and tamper resistant distributed ledger called a blockchain Ironic it is called a decentralised currency, when you need power and the internet to access Since Bitcoin's inception, thousands of other cryptocurrencies have been introduced – no limit or requirement to join cryptography allowed the currency to have: Reading summary here - Trustless system allows you to trust in the system without needing to trust in the parties with which you're transacting. Computers verify each transaction with sophisticated algorithms to confirm the transfer of value and create a historical ledger of all activity. The computers that form the network that are processing the transactions are located throughout the world and importantly are not owned or controlled by any single entity. The process is real-time, and much more secure than relying on a central authority to verify a transaction. In a shared ledger system, every transaction is recorded and verified in a transparent manner, and the system creates the trust by default – doesn't show who is behind the ledger though Trustless technology — meaning you don't have to know, like, or trust the person or entity you're doing business with — Trust in the system versus not needing to trust – but this only refers to trust in transactions going through Fungibility fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of its parts is indistinguishable from another part – same as AUD tamper resistant – tamper how? Unregulated – does this mean tamper with prices? Or just tamper with transactions? Been hacking cases - hackers steak API keys and get into wallets Or just destruction of blocks or theft – simplification - done on mining through forcing incorrect verification codes – change a c for a d in the chain – block is lost – range of 17%-23% lost for good of BTC Going deeper is bitcoin an option? what do you value BTC in? Is it AUD? Or USD? Think about that – is it really a new form of money if it is still valued in current currency – not in relation to good themselves Fractal version of fiat currency – you need fiat money to start with to purchase under current economy Currencies need reserves to lower chance of going to zero – without something backing it (other currencies, gold, etc.) – no perceived floor in panic How do we value currencies? Subjective theory of value – what is the value? What we will pay –confidence Reserves and Gov decree - provide lots of subjective value in Fiat – lots of confidence – until there isn't Seen currencies suffer massively under this – even with safety measures Subjective value – when btc goes 11k, is seen as subjective value – speculation in further prices Has a form of floor value mechanism – cost of mining versus price – if price goes to $2k, nobody mine – supply stop Confidence - When it is lost – depending on how bad - impossible to regain –requires confidence – or short memory The fact that BTC doesn't have an Intrinsic value doesn't matter as much as how resilient it is to confidence shocks– BTC never been through a financial collapse – created around 2009 – We know how other asset classes will perform – never seen BTC performance in panic – who knows? Unregulated leads to fraud and manipulation – or regulation being introduced Future regulations are a worry – for the most part left alone – easy to regulate – Requires internet – Aus providers easily block IPs – what if access through internet is blocked – can't verify without internet connection May have a base value purely due to the areas it is most useful for – tax evasion, laundering, terrorism, illegal stuff – North Korea blocked in cash transfers, but could trade in crypto - utility token until use taken the supply of it also being snapped up by Governments – China, seized all of the citizens BTC, while on the surface against it, they likely have the larg

Welcome to Finance & Fury, the 'Say What Wednesday' edition. I recently received a great email from Nick, on a fantastic topic. So, I'll read most of the email as background to today's discussion; "Hey Louis, I've recently be thinking about an issue that I think should be at the forefront of people's minds a lot more than climate change, and that's waste pollution. The issue of waste pollution in both the ocean and land seems to get a lot less coverage than the issue of climate change, even though the issue has a far greater capability to affect us in a dire manner, as pollution can undeniably kill life. Now, what does this have to do with finance? I recently attended Groove in the Moo, and they had this system where they overcharged all cans by $1, but gave you a $1 cash refund for every can you brought back to the purchasing station. Me and my friend being thrifty got to work and collected over 200 cans that we saw just lying on the floor to make some money over the day. This concept got me thinking though. What if the government began a program similar to this, whereby if they overcharge particular items and offer cash refunds for their return to a recycling centre? Having a system like this would act as a disincentive for people wanting to buy single use plastics (as it would then cost more) but could also effectively stimulate the GIG economy, where a government doesn't have to pay for as many workers to clean up streets and so forth, and also allow people who are short on cash to earn extra money for recycling and doing the right thing by the environment (This is of course if people actually took to the idea of cleaning up rubbish they saw on the street). I do understand that you get something like $0.05 for every aluminium can take to a recycling centre, but the incentive isn't promoted in any way by the government. Do you think a system like this could actively help reduce the amount of waste produced, rather than legislating bans on particular goods (similar to the ban of single use plastics)? Thanks again for all your content, and hope to talk soon. Nick" Awesome Question – and a great way to make some money, nice work! To start, I think it would be a great thing. I am a big fan of incentives to recycle and reuse. This program, and different forms of it, have been in use for a long time. From what I have seen of this first hand, it does work well when implemented well; I lived in Austria/Germany and while they have few bins, there isn't much rubbish around. That is due to them having rebates on bottles/other goods that can be reused. We used to take a carton of bottles back to the supermarket to get a discount on the next slab Even out in parks or concerts, people would walk around and collect a bottle as soon as it was put down anywhere and come up to you to ask to take your rubbish away. This was mostly thrifty people, like Nick, but I noticed it also outside of music events randomly on the streets – it was the homeless that would go around and collect bottles – and earn income for themselves. As mentioned in Nick's email, some states do have a few cents reward per can/bottle. It's not that popular though. The issue is a very limited distribution chain – except in reverse. For example; imagine Amazon, what happens if they didn't have drones or employed delivery drivers, but relied on delivery people who come and go at random. Who have to find their own transport, go grab the item from the storage house and then drop it off to the person? Good luck getting next day delivery! The same problem is in reverse – getting the millions of recycling items back to the place they are best suited is an issue especially with the collection method. Think about your recycling habits; You may be the best – tear off labels, rinse out products, remove lids, etc. put it in the bin, then it gets collected and thrown in with everyone else's rubbish, bottles smash, combined with actual rubbish put into the wrong bin… and it becomes the sum of averages and what basically becomes rubbish anyway as it can't be processed or sorted. Doing it manually isn't practical; there's labour costs – shipped to Asia – which uses a lot of CO2 in transport Due to low environmental regulations overseas, the rubbish was mostly being burnt or dumped upon arrival anyway. The countries that suffer; Indonesia, Vietnam and, in particular, Malaysia, which received more than 71,000 tonnes of our plastic in the last year alone – so all that rubbish you see in pictures of beaches in Bali and Thailand – chance it has come from our recycling. Normally I'd have a bit of a chuckle at government incompetency and them somehow getting the exact opposite result than intended – but this situation is really and massively impacts lives – policy allowed to continue, with opposite to intended effect – wouldn't they stop? If it was a company – like Amazon and their delivery model, if the packages are burnt instead how long would they stay in business? What can

Hey guys and welcome to Finance and Fury! Today we're joined again by Jayden to talk about whether property prices will keep declining due to higher mortgage arrears. The RBA's cookie cutter approach to rates will continue to try and help reduce chances of mortgage default and ease burden on household cashflow. Why is it that an increasing share of housing borrowers are behind in their mortgage repayments? Points to a rising risk to the financial system as housing loans are 40% of banks assets directly This is in addition to trillions sitting in derivative style instruments which use these mortgages as their underlying assets When the property backing the loan exceeds the value of the loan then arrears aren't a big deal for banks. They take the deed of your home and take back their loan (plus unpaid interest/costs). With falling housing prices however, the potential for banks to experience losses increases. Where are arrears at While it is increasing, the rate of arrears in Australia is still relatively low compared to internationally. In Australia is should be noted that over 99 per cent of housing loans are on time, or ahead of schedule. Making loans involves risk - banks are used to managing this risk. But when arrears rates are persistently very low, that would suggest that lenders were being too cautious in lending Part of the problem with our economy is that loans aren't going to businesses (real growth drivers like wages) they go into houses. Our loans are fully recourse, unlike the U.S. for example. Why borrowers fall into arrears; there's no single one cause, but often a combination. A fall in income or a rise in expenses, or both. Personal misfortune, such as unemployment, ill health or a relationship breakdown, which is unrelated to economic conditions or the quality of their loan Clear pattern of more loans going into arrears in locations where the unemployment rate is higher Increases in interest rates Weak economic conditions Borrowers can struggle to make their payments if their income falls. Weak conditions in housing markets make it hard for borrowers to get out of arrears by selling their property. Rate of income growth Nominal income is rising strongly, over time, mortgage payments take up a declining share of a borrower's income. Nominal income growth has been around half its longer-run average Banks' lending standards also play a role in arrears. Poorer quality loans might continue to perform well in good economic conditions, and only fall into arrears with an economic downturn. Assessment and size of lending adds risks Drives prices up as well - if rates go up, it's a worse scenario Summary Housing arrears have risen but by no means to a level that poses a risk to financial stability Weak income growth, housing price falls and rising unemployment in some areas have all contributed. Australians amassed one of the world's highest levels of household debt in a five-year property boom amid a combination of low interest rates, lax lending standards and supply shortage. Prices have since tumbled, with Sydney's down about 15% from the 2017 peak – People just aren't selling their property as nobody is buying – so people who are in arreras wont want to sell at a loss – nor would the banks How to "Arrears-Proof" yourself Accumulated buffers of prepayments of their mortgage, and some others have other assets outside of property. Households with financial buffers can withstand some period of unemployment, but if that extends too long and depletes their savings, they risk falling into arrears Budget and know your numbers – stress test whether you can afford a 2% rise in rates, or if you lost your job for 2 months Get insurances in case you are injured and can't work Links https://www.bloomberg.com/news/articles/2019-06-17/australia-mortgage-arrears-rise-to-2010-highs-rba-s-kearns-says https://www.macrobusiness.com.au/2019/06/sp-mortgage-arrears-keep-climbing/ https://www.macrobusiness.com.au/2019/06/lunatic-rba-surging-mortgage-arrears-no-risk/

Welcome to Finance and Fury, the Furious Friday edition! I've been thinking a lot about what we are taught in economics, the basic '101'. Specifically, if you print a lot of money you get hyper-inflation. There are plenty of stories to back this up Germany Weimar republic, and Venezuela right now – there are plenty of countries with hyperinflation Central banks around the world (and at home) are trying for more inflation, and have increased their money supply over time. But we're ending up with lowering inflation. This is puzzling on the surface, though it has a pretty simple answer. Inflation and CPI – What we're told they are - quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. Rise in the level of prices – why a $1 today is worth more than $1 in 1 year, let alone 100 years CPI is what is used to measure the basket of goods RBA monetary policy – Try to keep between 2-3% inflation through influence on money supply. The issue with percentage targets is Compounding Compounding is a very powerful tool, it can be your friend or your foe, it really depends what is compounding – Returns (growth), interest, or inflation Returns – for an Investor who owns assets or cash, it's good. Interest – if you owe money it's bad Inflation – for an Investor or individuals/consumers it's bad, but if you owe money it's actually very good Inflation is bad for us – especially when it's compounding and is controlled. We want things to be cheaper. But unless our wages keep up (which is determined by the economy) we suffer pricing squeezes. Plus, unless you have massive amounts of debt your savings and investments give lower real returns. This is why inflation is great for Governments! If you have no real assets but are cash rich from income each year from tax payers – You need to either budget well or borrow for funding shortfalls – Every nation in the G20 is in debt – to who? Debt goes one level further in relationship to currency/fiat monetary system – When you get shut off (ex-communicated) – nobody will buy the debt off you to print money – currency collapse – creates additional inflation due to the relative cost of imported goods Can cripple a country that has their debt valued in another currency – impossible to pay back Example - Germany with war reparations - Gold or other peoples' currencies Crippled them – First - Currency is backed to your supply of gold back then – so lost supply of what backed currency If you have to pay reparations in someone else's currency, or give up your gold supply that is backing your currency, what will happen to the price? Today – IMF is the bail out bank for nations – But bail them out in debt based on USD International debt (government or private bonds) dates back a way – The 5 Rothschild brothers (Salomon – Austria, Nathan – England, Calmann – Italy, Jacob – France, Amschel – Germany) opened their banks up to international markets – increasing connectivity through lending capacity across boarders – Governments of the day welcomed it Quote – Revolutions are generally triggered of by deficiency of money. By preventing such deficiencies, the Rothchild system may serve to preserve peace in Europe. This system or rather Nathan Rothschild its inventor is still providing for such peace. It does not inhibit one state from making war on another exactly as before, but it does make it difficult for people to overthrow the established authority." - Heinrich Heine – German Journalist wrote in 1830– he goes on for a while, gets deep about how religion can be replaced by money. Unfortunately, though – as this system grew, the magnitude of war exponentially increased – whoever has the most money in war wins – most kingdoms of the past eventually ran out when fighting prolonged wars But still faced a problem. These bonds were valued in Sterling which in turn was backed by gold, while there was an increase in money supply from fractal banking reserve – still limited to the finite level of gold/sterling to back it. There was almost no inflation under the gold standard – debts had to be paid – no inflating them away But the biggest debtors were the Governments of the day (mostly monarchy's) Napoleonic war 1815 – almost £10 million pounds lent out Rebuild - 1818 £5 million loan to the Prussiangovernment and the issuing of bonds for government loans- collateral Continued on like that until Governments got their own way of producing funding Had central banks already – but still limited by gold. Not anymore, they print as much as they want Theory of money supply Increase money, you get inflation. It makes sense – the more of something you have the less valuable it is Inflation – devalue of the dollar in real terms - $100 stays $100 – but can't buy as much (hidden tax) Why don't we see this today? Money supply has increased massively since we went to the Fiat system – to achieve the target of 2.5% p.a. M0: inclu

Welcome to Finance and Fury, the 'Say What Wednesday' edition. Today I'm here with Jayden! Today's question comes from Gavin, "Is there anything to be considered when looking at refinancing mortgages with smaller lenders that run their business online like reducehomeloans.com.au with rates of 3.19%, versus the larger lenders?" Great Question! Types of Lenders Large lenders – 'Big 4' banks; ANZ, Commonwealth Bank, NAB, and Westpac Small lenders – almost any financial institution other than the Big 4 banks Credit unions, building societies Non-bank lenders – what most online lenders fall under What are non-bank mortgage lenders? A non-bank mortgage lender is a financial institution that offers home loans but is not a bank Is a mortgage with a small lender better due to being cheaper? It can be, depending on what you're looking for in a home loan. As with anything else, smaller lenders have their pros (possibly lower interest rates, possibly better customer service, etc.) and their cons (possibly fewer resources, possibly more limited loan options, etc.). We've discussed some of these pros and cons in more detail below. Some smaller lenders are able to provide more competitive interest rates or fees, while still offering all the same features as loans from the big banks, such as an offset account or redraw facility, the ability to make extra repayments, and more. How it Works The company presented as the lender aren't the ones who own the mortgages, instead the provider of the deposit funds would have the ownership of the mortgage. In the event the lender was in a defaulting position, the recall of their assets (the mortgages people have borrowed) in a liquidation process is unlikely as the ownership of the loan would be transferred to another entity. Smaller lenders may be online only, so therefore they have fewer overheads than the traditional "bricks and mortar" bank branches. Watch out for these red flags Non-bank lenders that are online only. If the website is all you have to work with make sure all the information you need is available The major things to watch out for with online lenders like Reduce Home Loans is that they are not a Bank. Therefore, they don't actually accept deposits for savings accounts which is what a Bank would normally use as it's source of funding for their mortgage lending objectives. They do instead source funding from other means (sometimes from the banks themselves) however, it does add an additional layer of risk Can be confusing – so see what Laws apply to small lenders to see where they fit ASIC – Australian Credit Licence - National Consumer Protection Act 2009 (Cth) (NCCP) – This is at least a minimum provide a certain standard of information to every potential borrower assess whether a potential borrower can realistically service the loan Same criteria as all other lenders – ASIC regulated APRA - an additional set of criteria for lending risk for the banks – but non-bank lenders are not deposit-taking institutions, so they are not regulated by APRA Some smaller lenders are regulated by APRA, but those who are not carry additional risks Dispute resolution schemes - whether a big or small or non-bank you have an ombudsman who can help resolve issues. AFCA Are small lenders likely to fail or collapse? Government guarantee for deposits up to $250,000 doesn't apply if non-deposit taking lenders If your lender is failing, there are several likely scenarios that protect you as a borrower: The smaller lender is bought (acquired) by a larger lender. A larger institution buys your mortgage from the smaller lender. The government provides assistance via the deposit guarantee. Nothing really changes for you as a borrower, except that you may get a new lender Always compare your options for switching your home loan to another lender. Smaller lenders may in general be more vulnerable to economic conditions Risk comes from their source of funding - larger lenders or other large companies/investors But there are pros and cons to this as well, as this funding means they are able to offer flexibility that the big banks may not be able to offer. Summary Borrowers should look for a lender that is regulated by APRA as well as the usual credit laws, is not connected with recent bank failures, and doesn't raise any red flags when you're researching their loan options. Make sure they have an Australian Credit Licence, External Dispute Resolution Scheme (AFCA) and are reputable.

Welcome to Finance and Fury. Today's we'll be talking about what assets will survive a financial correction. The assets that that people still have confidence in. Confidence is key! In any asset, confidence is what is required. Why is confidence important? If a lack of confidence/panic is what causes prices on assets to drop heavily then the solution is in assets that, while their prices may be impacted (short term volatility) they will not go to zero. Human behaviours/emotions pay a significant role Bubbles (and FOMO) – you see the price going up, you jump in because you fear missing out. This can create overpricing. Works in both directions – Crash – when people fear a share crash, they sell their shares in a panic, and the crowd follows dropping the price quickly The fundamentals/intrinsic values of things don't matter in a financial collapse. People aren't looking at Fair Value when all they can focus on is 40% losses – they only see the losses Subjective values – do people value it regardless of intrinsic values Never sell after the fact Hubris to think you can sell out before the market crashes – 'timing the market' You have to own assets that will survive or become more valuable Asset goes down in value – so what? Depends on type of asset and what you do, and what those investments are to you I think of TLS, bank shares are volatile term deposits – not expecting great growth off them, the valuations are almost like a Utility company – but decent dividends When shares do go down in value If you sell, you crystallise or realise the loss They keep going to zero The Solution Avoid selling early and crystallising losses or losing 100% of the investments that you have Step 1 - Buy good companies, diverse business models, diverse markets and lot of different companies, across asset classes (Diversification) Step 2 - Don't panic sell Buy alternative asset classes Gold/Silver/Palladium/Platinum Not on futures contracts or derivatives, but one that holds the underlying asset Not enough gold/silver etc. in world to cover size of ETFs/funds with positions in gold Water I'm looking into this one, I just find it interesting 1lr of petrol is cheaper than buying a bottle of water from the gas station Don't collect too much – The Government might tax you The Worst Case – you are in a position that you have to sell Most common cause is leverage /debt – this applies across asset classes Two-fold The lender wants their money back – they may have someone else to pay, or have lost confidence themselves in getting money back Cashflows – The cost of the debt is too great compared to what you can cover Types of assets to watch out for Shares with Margin Loans LVR levels Run up of leverage causes a lot of bubbles, then corrections Property that is highly leveraged Not PPR – not forced to sell that hopefully But if people are losing jobs, rents may come down or be non-existent Mortgages – MBS, Managed funds marketed as 'Income Funds' Other 'debt instruments' Corporate notes/hybrid securities Credit – short term 90-day bank bills – used for short term funding Derivative exposure Warrants (do play some part) Summary – There are assets that, while not retaining the value like you might want (drop in price), if you hold them you can survive Have a range of investments (not just bank shares) Some physical assets – Gold Shares in companies that people will still use – not fad companies or ones built on people's discretionary spending Property – ensure that you can hold this long term and not need to sell Make sure they are quality assets Don't sell It sounds easy – though it's not easy seeing the value of your assets drop – but it is better than selling out and missing the rebounds due to emotions

Hi everyone and welcome to Finance and Fury! Today we're going to look at our current monetary system; what is considered money, and also the future of our monetary system. Today's episode will be a fairly quick episode, and will be an introduction to a series of Furious Friday episodes that we'll be doing over the coming weeks. Our current monetary system is actually debt-based fiat currency. This means that every dollar that you have is a debt obligation by a central bank to eventually repay. This is pretty important to look at, because unfortunately this won't last forever. It's only been around for 40 years, and we can already see the signs of this system struggling to keep up with the never-ending ability to create 'money' out of thin air. Money is created with 1s and 0s – for every $1 there is a debt obligation to the central bank to repay this. Every dollar that you have is backed by some form of debt, whether it be debt created from a commercial bank (fractal banking reserve) or when it is issued and bonds are created and traded in exchange. The three functions of money Store of value – can I hold on to the money and spend it at a later date knowing that it will hold its value until tomorrow, next week, or even next year? Unit of account – You can think of money as a yardstick; the device we use to measure value in economic transactions. Medium of exchange – Is widely accepted as a method of payment Major characteristics of money These vary between options and are why some forms of currency are adopted preferably over others. Durability – Will it last? Can it be stored easily? Technically cash durability isn't as good as gold – Pablo Escobar and his money eating rats Portability – can you carry it around easily? Gold bars are pretty heavy. Divisibility – Similar to unit of account where you can break the units down into smaller levels Uniformity – is every unit the same? Can it be debased/devalued? Coins are not immune Limited Supply – Counterfeiting Who is creating it? Gold is better than fiat currency from this perspective Acceptability – Barter is hard Fiat became easier and became a legal tender by decree The combination of all of these characteristics + how we value it = what we adopt as money. This comes back to a thing called 'subjective value'. Do we think we will be able to use it in the future? (Money riots of the past) Money may take a physical form, as in coins and notes, or may exist as a written or electronic account. It may have intrinsic value (commodity money), be legally exchangeable for something with intrinsic value (representative money), or only have nominal value (fiat money). The Mesopotamian civilization developed a large-scale economy based on commodity money. The shekel was the unit of weight and currency, first recorded c. 3000 BC, referring to a specific weight of barley, and equivalent amounts of silver, bronze, copper etc. The Babylonians and their neighbouring city states later developed the earliest system of economics as we think of it today, in terms of rules on debt, legal contracts and law codes relating to business practices and private property. Money was not only an emergence; it was a necessity. Money can be a number of things Cows, sheep, grain – used in barter economy Shells – Ancient China, Africa, and India Golden coins – Goldsmith bankers Paper with gold/silk backing it Debt based Fiat Some of the things we'll be looking at in the upcoming episodes; The way we currently do it (debt-based fiat) and inflationary targets Bitcoin, and also crypto currency in general Gold – the old school way What will happen once the debt bubble breaks, and the rise of SDRs (Special Drawing Rights) which I believe will be a form of global reserve currency in the future. They have been around since 1969, and are used as a global currency reserve, but you can't own them – only the IMF can! This is going to be a VERY interesting topic so stay tuned!

Hi Guys and welcome to Finance and Fury's 'Say What Wednesday' Episode. Today we're joined again by Nick. Our question today comes from Justin who asks, "Our building company recently went through issues with its cashflow, so as directors we halved our wages to help…I was wondering if you could talk about the importance of, and the correct way to complete a cash flow forecast. Up until recently we had never completed a budget or cashflow forecast yet we have a turnover of 5 million. Yet, it was the lack of cash flow forecast that nearly brought us down." Good question! Today's episode we'll run through; What are cashflow forecasts The different ways of achieving these How to plan to build your cashflow Major issues you may run in to Business cashflow As a business owner the company revenues are yours after all costs are paid for Costs of business - What is typically the biggest expense for a business? What is the average profit margin? How does it differ between types of companies? Profits - Used to pay director salaries, dividends, etc How volatile do you see these being? Do most Directors' incomes vary year to year? How can a business plan for cashflow forecasts over a 12 month to 3-year period? What are the steps to look at in preparing a forecast? How to know what your costs are? How to work out an estimated revenue? Types of cashflow forecasts – depending on stage of business: Starting up – what is important? What are your upfront starting costs? How do you forecast something that you haven't event started yet? Working out prices on goods/service sold Multiply by the number of people you expect to buy your offering – this can be hard Calculating upfront and ongoing start up costs What are some costs people forget about? Bond, insurances, GST/BAS? Do people tend to overestimate their initial forecasts? Is it important to review these upon the first few months of business? Growing – What are the important things to focus on once you are out of the weeds? What are some ways to continue growing the revenues – but not rely on it in forecasts? Mature – What would you consider to be a mature business for cashflow purposes? Is cost reduction important here? Increasing profit margins? Is continuing growth important instead? What are some major issues that you see with some company cashflows at each stage? Do they underestimate costs? Overestimate revenues? How do you plan to go through volatile times? Downwards trend in the business cycle? Types of business cashflow planning – What are the different methods used across industry sectors? Professional Services based Manufacturing/Trades/Construction/etc. Retail/Hospitality Avoiding issues in cashflow planning: What are some key rules to follow in cashflow forecasting? How often should you review them and adjust the forecasts? How do you plan provide buffer margins for any inconsistencies between action and estimated?

Hi everyone and welcome to Finance and Fury. If you missed last Monday's episode on bank bail in laws, you might want to go back and catch up as this week's episode follows on from that one. Today we'll look at what to avoid holding as investment in the future, based around the updates to these laws. Knowing what investments can be taken by banks in the next financial collapse, to allow them to bail themselves out is a great place to start, as these are going to be pretty risky going forward. According to an IMF paper titled "From Bail-out to Bail-in: Mandatory Debt Restructuring of Systemic Financial Institutions": Bail ins - a statutory power of a resolution to restructure the liabilities of a distressed financial institution by writing down its unsecured debt and/or converting it to equity The language is a bit obscure, but here are some points to note: What was formerly called a "bankruptcy" is now a "resolution proceeding." Bank's insolvency is "resolved" by turning its liabilities into capital. Insolvent 'too-big-to-fail' banks are to be "promptly recapitalized" with their "unsecured debt" so that they can go on with business as usual. "Unsecured debt" includes deposits, the largest class of unsecured debt of any bank. The insolvent bank is to be made solvent by turning our money into their equity – bank stock that could become worthless on the market or be tied up for years in resolution proceedings. This power is statutory. Cyprus-style confiscations are to become the law. Some countries can already take funds from depositors – Australia is a bit of a grey zone Rather than closing their doors - "zombie" banks are to be kept alive and open for business at all costs, and the costs are to be to borne by us at some point – even if you don't hold bank shares, the market would go down A lot of the recommendations have come from the Financial Stability Board (FSB) – Reformed in 2009 Mario Draghi – ex Goldman Sachs Current ECB president - member of the 'Group of Thirty'founded by the Rockefeller Foundation (the Group of Thirty is a private group of lobbyists in the finance sector) His son - Giacomo worked as an interest-rate derivativetrader at investment bank Morgan Stanley until 2017, a time overlapping with Draghi's presidency of the ECB Current Chair is a former partner of Carlyle Group, the last chair had 30 years' experience at Goldman Sachs FSB – recommended that banks raise a "buffer" of securities to be sacrificed before deposits in a bankruptcy 'Too-big-to-fail' banks are required to keep a buffer equal to 16-20% of their risk-weighted assets in the form of equity or bonds convertible to equity in the event of insolvency - Called "contingent capital bonds", or "bail-in bonds", or "corporate notes". The fine print that the bondholders agree contractually (rather than being forced statutorily) that if certain conditions occur (notably the bank's insolvency), the lender's money will be turned into bank capital. Just know that most banks alone aren't able to do that much damage – but when the people working for banks get the authority and executive powers of Governments to socialise the losses and privatise the gains there is a bad outcome for us This system is a socialist policy – not free market economics – technically closest to fascist system of Government and business merging/restricted, but without the central planning Either way the result are recommendations for policy which incentivises risk taking, then privatises profits but socialises losses Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 ("the Act") creates a power of bail-in by Australia's banks of customers' deposits. The Act empowers APRA to bail in anything that is on the banks' balance sheet that can be written off or converted Liability limited by a scheme, approved under Professional Standards Legislation Hybrid Securities – special high-interest bonds evidenced by instruments which by their terms can be written off or converted into potentially worthless shares in a crisis Interesting – there was a massive push from APRA to have banks provide funding for capital requirements from Corporate notes – CBA, WBC, NAB, etc. Hybrid Securities issued by banks; "a generic term used to describe a security that combines elements of debt securities and equity securities." - securities issued by banks which permit the amounts secured by the security to be converted into shares or written off at the option of the bank in certain circumstances Under the Basel Accord, a bank's capital consists of Tier 1 capital and Tier 2 capital which includes Hybrid Securities - they'll be bailed in. The big issue with these securities is the risk of being wiped out – there's no default; just through the stroke of a pen they can be written off. For retail investors in the tier 1 securities – they're principally retail investors, some investing as little as $50,000 – these are very worrying. The comments of Graeme Tho

Welcome to Finance and Fury, the Furious Friday edition Going to run through the last part of the Lucky country – and that is how we can best turn our luck around Through – innovation, freedom of choice, and ignoring narratives based on assumptions Going to skip through Innovation and freedom of choice –to not repeat the same thing over and over – check out the other eps on this – links on the website – Quick summary of how they fit into todays topic though Growth through Innovation – these two-go hand in hand – Creating new businesses and technologies, products and services which drives innovation – profit incentive – Innovation efficiency is a market force Innovation is a chain – single inventor, drive to improve, idea used to make product, then others improve Without companies we never get tech improvements – Chain between Gov tech and population What accelerates this - Freedom of choice and equality of opportunity – After researching this for years – assume it to be correct – but others have different views based around their assumptions I also believe that freedom of choice extends to what we allow as a population – due to the decisions we make based on assumptions Taxation policy is based around assumptions – but regardless of low or high rates – collect average tax to GDP% But when the very assumptions that we are basing a decision off is incorrect – it isn't surprising we don't get the outcome expected What Today's episode will cover - What we assume is good for us, or will work – may have the opposite effect Also – how to know what we are told to assume is actually good for us Assumptions and models – Our lives are built on assumptions – heuristics – this is good, saves mental capacity for mundane tasks in decision making – System 1 and 2 – but something repeated enough moves from us thinking about it – to an automatic action I see this with investing all the time – If it is something I already own or understand well – investing becomes an automatic action – but if it is a fund I haven't seen before, i wouldn't just assume it is the same as all of the ones I currently hold If you are told something over and over again – you just assume it is true – repetition is a powerful tool Good and bad habits also form this way – if you hear the same thing over and over from different sources – must be true? Example – Who do you assume is smarter/provided greater benefit to our lives? Einstein or Tesla? Person – not company Based around assumptions – I'm assuming most of you have to stop and think about it for a second or have Einstein as a default answer – he is more commonly discussed/known – But I might be wrong – I am just assuming that based on personal experience, few people truly know the benefit to our lives Tesla provided Einstein was once asked how being the smartest man alive was – 'I don't know, you'll have to ask Nikola Tesla' What did Tesla invent? Beyond the power in your home – 300 patents – a lot of them helped develop most tech we have First Electro-Magnetic motor patent in 1888 – Why Musk named the company after him Radio – Marconi credited – when asked 'Marconi is a good fellow, let him continue, he is using 17 of my patents' Wireless, remote control, Radar, Xrays, Hydroelectricity, the resonant frequency of earth – earthquake machine, speedometers or electricity frequency or flow meter The list goes on– but didn't care about money or credit, gave what patents away worth billions back then we assume that he had nothing to do with it anything outside of electricity – was an obscure fellow who had some beef with Edison – Instead – developed free wireless electricity for public use – His backers weren't happy – JP Morgan and Oilmen The only man that was willing to fund him was John Astor, who died on the Titanic, a boat the JP Morgan owned He ran out of funding – and was smeared by the press of the time to destroy his reputation so nobody would take him seriously – Story of him wanting to marry a Pidgeon – actually not true – I assumed it was as I read it online It was a dream he had - he became fascinated by them - can sense the resonant frequency of earth better than almost any animal – then he had a dream about one and was talking about that – fake news is nothing new – just thanks to the internet and phone cameras, it is hard to completely cover up the truth What did Einstein leave us? theories of relativity with little application outside of the metaphysical/purely theoretical Tesla quote – 'Einstein's relativity work is a magnificent mathematical garb which fascinates, dazzles and makes people blind to the underlying errors. The theory is like a beggar clothed in purple whom ignorant people take for a king….its exponents are brilliant men but they are metaphysicists rather than scientists'. Moral of this story - Be aware of things that dazzle to blind – things that cannot be explained to you – too good to be true Don't trust something that sounds too good to be true – promises and assump

Welcome to Finance and Fury, the Say What Wednesday edition John's Question: I thought a useful topic could be about pros and cons off starting a business and starting your own business vs buying a franchise system etc. and using a business to achieve financial freedom. Personally, I have been looking into options to start a business both online and franchises. I have found that starting an online business can have a very low startup and ongoing costs, which is attractive but finding something that can be worthwhile is difficult. So far I have been leaning towards buying a franchise due to the systems already in place and there service or product already being tried and tested. But obviously, this incurs a higher startup cost and ongoing franchise fees etc. But I am not a skilled tradesman or professional such as a website developer or marketing expert etc. with a unique selling proposition, so therefore a franchise system is most likely a better option for me to pursue. Starting an online business or franchise First – Check out the Episode towards the start of the year about figuring out what type of business to get into – Won't cover that part – but say that you have an idea in mind about the type of company: How do you start a business? What you need: idea, clients, cashflow, capital What types of business have high upfront capital requirements? I.e. higher barriers to entry First key steps – what do you need to have planned out? What are the most important things to have ready before starting? What are the most important things to focus on in the first 6 months? Problems will happen along the way – what are some major ones that you have seen, and how could these be avoided? What if you don't know what type of business to get into, or don't have a selling proposition? – Purchase a Franchise How does the purchase of a franchise work? What are the costs, and how much support is provided? Can you get financing to buy a franchise? If so, what LVRs? Have you seen any types of franchises which are the most profitable? What are the best ways to structure each? Best way to structure a franchise (Trust, company, sole-trader etc.). By yourself Partnership Best way to structure a business (Trust, company, sole-trader etc.). By yourself Partnership Which has better cashflow potentials? Any type of franchises that have more consistent earnings than others? How do the valuations work on a franchise compared to a company? Which industry/types receive the best valuations? How easy is it to find someone to buy your company/franchise if you are looking to step back? Summary of pros and cons of starting a business vs buying a franchise system Pros of a Business – When would you want to start a business? Does it give more control over service offering? Pros of Franchise – When would you want to buy a franchise? Are they more successful than starting your own? Cons of Business – When would you not want to start a business? Any horror stories you have Cons of Franchise – When would you not want to buy a franchise? Any horror stories you have Thanks for listening, If you want to get in contact, you can do so here.

Welcome to Finance and Fury Today – Want to start looking at what would likely survive another financial correction or worse, collapse Been thinking a lot recently about the structure of the modern economy – This episode is probably more like a FF ep, but this topic will have a massive impact on each of our lives at some point – where to have your money in preparation for the next crash Heavy topic - so a few things need to be explained before diving into what to look for in what will occur in the next collapse. If you listen regularly, you might have noticed a lot of topics have revolved around monetary policy lately – rate cuts, effects, etc. – Been looking for an answer to what the best investment would be in the event of a financial collapse As the current financial system of uncollateralised debt will be the cause This doesn't mean that the Next Financial collapse is imminent and that you should rush and sell everything – but it is important to still pay attention to certain signals – Are people buying more or less luxury items, are they going on more or fewer holidays, what products are being marketed, how much are companies reinvesting profits, or paying it out as a dividend, and how much people are saving? These paint a thematic trend of the 'mood' of the economy – the economy collapsing is a financial collapse An economy can exist without money – i.e. barter – but two issues in modern economy without money Limited in wealth – people don't have much in the way of physical goods – chickens, sheep, etc Very ineffective – imagine your own life – income from job in the form of food, you pay rent in tvs, which you get from trading away cookies you make The economy is a number of things, all bundled into one concept though – The invention of currency did revolutionise though – But at the core, the economy is between two players You have consumers – which are a major driver of growth – Demand Nobody to sell to – no companies If people can't afford what you sell – no companies If people don't want what you have – no companies You have producers – Those that provide the supply Nobody to buy from – you starve or have a low quality of life The cycle of the economy There is a flow between consumers and producers – exchange of money for good or service All agree that the more that is being exchanged and if the growth of how much is being produced, consumed is going up, the economy would also grow Most people think of companies are producers – but they are also consumers Consumers can also be producers – I consume, but also produce at the company end – I am a bad consumer personally, but the company makes up a massive difference, and flow on effects of what people you receive an income from the company go on to consume. In the extreme example – this would be a 'free market' - system in which the prices for goods and services are determined by the open market and by consumers Producers are free to make what they want, sell at what they want and at the quality that they want – but what they want is what the consumer wants – the customer is always right – remember – company goes out of business if you have nobody buying your goods because someone else does it better. Individuals would be free to then dictate to the producers what they want with their wallet. Currency/money and the modern financial system allowed the economy to boom – connected billions of suppliers/consumers What gets in the way? Laws, taxes and regulations –to protect us, or provide growth in the government (expand capacity or revenues) I used to think that if we got rid of taxes, regulations, etc, we would have a free market Forgot the fact that the very cost of money is controlled (interest rates) – along with the supply of money At the higher level – this probably has more impact on the economy running inefficiently – a massive build-up of debt of nations and slowing growth There is no true free market - That was a quick overview of the nature of an economy and concept of the free market – Why is it important to know this? Looking at How to prepare crash revolves around looking at the interaction between these elements Goes beyond just human behaviours now with Government and regulators – as the outcome is based around what is allowed and what can be done – There is no way to be able to exactly call when where how on a crash – almost like predicting the weather – condition changes Start – most crashes are behaviour triggered, but system created Allows people to do what the system allows So behaviours create it in the system of the economy A much better idea about what would happen after based around looking at the system – Government – what can they do? Crashes of the past – panic selling - Most of crashes is behaviours – Governments step in to try to stop panics – showing action – Why govs banned short selling in GFC – otherwise it becomes a race to the bottom Also why the 'bailouts' occurred – action by gov to stop panic of banks/insurers goin

Welcome to Finance and Fury, The Furious Friday Edition In this ep, we continue looking at the lucky country look at a downward spiral in growth – low growth traps – and how it is created by what is meant to help growth? Low growth trap – The big problem comes from just looking at the numbers – and basing policy around models Major part of the modern economy – looking at the numbers – I do it as well Numbers can be inaccurate, or misinterpreted – sometimes the models being used for numbers don't get the answers that were expected Such as the RBA and rates – lowering them to boost the economy Nothing new as to why the RBA wants to drop rates – major banks think it will go down to 0.75% - Looking to take action to help stimulate Australian economic growth, employment, wage growth, etc. The question really is if this will work as the equilibrium models suggest – based around neo-Keynesian We should be seeing a pick up in inflation (CPI) rates – which is the trick – focus on a percentage which is ever compounding under the current system – another episode At least – why aren't we seeing GDP growth, improvement in productivity or wages and employment? Big puzzle which almost every first world nation is trying to solve at the moment – and economists First – look at Productivity – this measures the quantity of the economy's (or just a particular business's) output of goods and services relative to its inputs of raw materials, labour and capital equipment – this is theory Productivity improves when a given quantity of inputs to the production process is able to produce a greater quantity of goods and services than before. It's most commonly measured by reference to just one of the inputs, labour. So, it's output per unit of labour, usually per hour worked. Main way to make workers more productive is to give them more or better machines and structures to work with. That is, to invest in more physical capital. Increasing workers' education and training – "human capital" – also makes them more productive: better able to work with more sophisticated machines, to think of ways to make machines do better tricks, and think of more efficient ways to organise the work that's done in a mine, farm, factory, office or shop. The main way to make workers more productive is to give them more or better machines and structures to work with – this is what theory says anyway – having something to measure In the present information and communication technology revolution isn't transforming the economy to the extent that earlier general-purpose technologies – such as electricity, the internal combustion engine, the automated production line, and even running water and indoor toilets – did Why doesn't the modern-day economy show the same levels of productivity or growth as in the past? partial explanation - that much of the benefits coming from the digital revolution are going unrecognised by a system of national accounts (gross domestic product) designed to measure the industrial economy Also - low population replacement rates – birth rates not keeping up with the aging population If it keeps up - future of weaker growth in consumer spending = lower incentive for firms to invest The increased complexity of a system requires a greater input to receive the same result Example – some of the smartest people finding new ways to get around laws/taxes – not picked up in GDP growth but for the most part – due to Modern economy – focus on economies of scale for cost reduction – not massive R&D projects (synergy between companies – merge) – creates very large companies over time Apple – Jobs was an innovator – but just took existing technology and made it much better for us to use – First smartphone was by IBM more than 15 years before Apple released the iPhone Can see this in the share buybacks occurring – UBS and Macquarie predicted Australian companies to do more share buybacks in 2019 – if Labor won the federal election – Franking credits, higher taxes – Dividends not valuable Not only doesn't investor get that money to spend/invest – it just inflates the share price of the company US businesses have been using their profits not to reinvest but to pay big dividends and to buy back their shares on the stock market, hoping to boost their price What gets us out of this – Innovation – continue to increase our ability to create and we will be fine – new ideas, more people creating things that work to provide value to others lives - This is where some policies have had dramatic effects on our lives – the policy decision is working from an equilibrium model that is long past it's used by date I think for the worse- house prices as an example – thanks to the compounding positive inflation rate target – very short-sighted policy Theory: key to productivity improvement is investment – particularly investment by businesses But to spur business investment – you need economic growth and the expectation it will continue But it can't include a thing like i

Welcome to FF – SWW- answer questions from each of you – this week from Sebastian Hey Louis. I've been thinking about the pro's and con's of Managed Funds vs LICs/LITs. It occurs to me that one of the main disadvantages of managed funds is their open-ended nature. In a crash, A manager of a fund is disadvantaged in this situation because they are having to redeem fund units as panicked investors sell out at a time they should be deploying cash into the market. Closed-ended LICs and LITs don't have this problem. What do you think about this - and should it impact our choice of investment vehicles? Thanks, loving the podcast as always! Great question! WARNING: No advice, just providing general examples of when things work, when they don't – on with it Few things to clear up – have to run through open/close ended funds, what are MFs/LICs/LITs, the risks/benefits of each and which one experiences the worst outcome in a 'bank run' on an investment – people wanting their money back all at once First – Quickly run through Managed Funds, LICs, LITs These are the structures that hold the underlying assets Managed Funds – Trust structure – therefore, open ended structure Buy – Buy units with the manager – they then create these, pool your money in line with other investors money – Sell – tell manager, they sell your allocation to shares, you get the cash, units are no more This is called open ended – as many units that are needed are created, or sold Income – Distributions – Trust structure, so they pay no tax and pass on all income, or gains to you =Dividends, Franking Credits, Realised capital gains (that isn't reinvested) Listed investment companies - LICs are incorporated as companies - closed-ended funds Like any share – you need to cap supply - issue a fixed number of shares on initial public offering (IPO) Buy – Have to buy off someone who holds shares and wants to sell – This means they do not regularly issue new shares or cancel shares as investors join and leave the fund. Instead, they , and investors must buy and sell those shares on ASX. This closed-ended structure allows the fund manager to concentrate on selecting investments without having to factor in money coming into or leaving the fund. This stability can be of assistance to managers who take a long-term approach to investing. As companies, LICs have the ability to pay franked dividends. Listed investment trusts - LITs are incorporated as trusts, rather than as companies - also closed-ended vehicles investors buy and sell existing units on ASX – hybrid between the two – buying managed funds from someone else – not manager Listed investment companies (LICs) and listed investment trusts (LITs) make up the majority of the listed managed funds on ASX Focus on Managed Funds and LICs/LITs – open versus closed Pricing of each investment option – Unit price versus share price – differs in how they are priced and what is the value Managed funds and ETFs are priced at (or near for ETFs) the net asset value (NAV) NAV - total market value of the fund's investments, cash and cash equivalents, receivables and accrued income. The market value of the fund is computed once per day based on the closing prices of the securities held in the fund's portfolio Unit Value = net value/number of units in fund Example – MFA currently holds 10 shares (nothing else – just one company) – each share = $10 = $100, then If there are 10 units – Unit price would be $10 Someone buys 10 more units – does the price go up? No – Use your money to buy 10 more shares – Now the NAV is $200, but unit price is still $10 If the shares MFA holds go up in value – to say $20 – NAV = $400, Price = $20 Close ended funds – trade at a discount or premium to their NAVs based on the demand from investors premiums - result of a greater number of buyers than sellers in the market discount - results from more sellers than buyers – supply and demand for the share What we get here is where like any share – people will pay more for it if they think it will go up Some of the best LIC managers have traded at 20% above NAV – due to good past performance But then long term investors take their profits and the price drops – not the NAV LICs and LITs are closed-ended funds that normally trade at a discount or premium to their net tangible asset (NTA) backing market determines the price around the supply and demand of the share itself – Open ended prices are set by the value of the underlying assets – which is a much broader supply and demand – between all of the assets they hold, rather than the demand for their units A lot of this comes from Fund Transparency Difference and supply/demand of investments The greatest difference between ETFs and CEFs is how transparent each fund is to the investor. ETFs are highly transparent because ETF fund managerssimply purchase securities that are listed on a specific index. Stocks, bonds and commodities held in an ETF can be quickly and easily identified by reviewing the index

Welcome to FF – RBA cash Rates are lower now – talk about flow on effects Today – Will you get mortgage cuts, how your savings will be affected, effects on the job market and wages. Mortgage cuts Don't expect the banks to pass on the Reserve Bank's rate cuts in full don't assume your mortgage won't become more expensive outside any official rate movements. That's the lesson to be learned from a "fascinating" graph that compares how the big four banks have manipulated variable rates against the official interest rate over the last three years. ANZ and Westpac refused demands from both sides of politics to pass on the full 0.25 per cent cut announced by RBA governor Philip Lowe last week. NAB and Commonwealth Bank customers will get the full reduction in their mortgage interest payments but the comparison shouldn't expect further savings if another expected cut comes later this year. when the Reserve Bank moves down so do the banks but not always by the full amount – the gap is getting wider each announced they would lower interest rates on mortgages by 0.18 and 0.20 per cent respectively when 0.25% reduction Bank subsidiaries and second tier banks - St George, Bank of Melbourne, Bank SA and RAMS will pass on a 0.20 per cent cut to their owner-occupier customers. They are, however, cutting investor interest-only rates above and beyond the RBA by 0.35 per cent. Suncorp Bank has also announced it will cut all variable home loan interest rates by 0.20 per cent, effective June 21. Band of Queensland is only passing on 0.15 per cent, and Virgin Money is passing on 0.22 per cent. ING, Australia's fifth largest home loan lender, chose to pass the full 0.25 per cent cut on to their variable rate customers, effective June 25, 2019. Why? The cash rate reducing cycle went all the way back from November 2011 to August 2016 the banks to find themselves under a lot of margin pressure when there have been multiple changes in cash rate "When the next rate cut comes, it's going to be harder again for the banks to pass on the full amount, in particular for the banks that passed on the full amount this time around." Also – have multiple sources of funding – it doesn't all come from Aus – so if money from USA – and their rates go up Doesn't mean banks can reduce rates Potential savings 4.32% to 4.07% 25% rate cute – $400k mortgage – 58 savings per month - $21k saved over 30 years $500k mortgage – 78 savings per month - $26k saved over 30 years How to get – have to shop around – new rates and introductory offers best things about being on a variable rate is that you're well within your rights to take your business elsewhere competition – compare what others are offering because ultimately the effective rates of existing loans may not go down much Reduce Home Loans is offering 3.19 per cent, Homestar 3.24 per cent, Mortgage House 3.29 per cent and Athena 3.34 per cent. Do another episode on these online lenders – some are not banks and what to watch out for Cheeky banks – even ones making a full cut like CBA and NAB – wait 3 weeks to get Make $108.8 million by delaying the effective date of the cut Deposit rates – other side of the story - Commonwealth Bank and NAB have penalised savers a week after passing on the RBA's full interest rate cut to borrowers. Both banks have reduced the base rate on their online savings accounts by 0.20 percentage points, leaving them at 0.30 per cent. This leaves savings rates at rock bottom levels, and will put the banks under intense pressure of funding This is due to lower savings if lower rates around being paid Human incentive to want higher returns Also - potential to squeeze profit margins of the banks will be keeping bank executives awake at night – how to meet shareholder demands the prospect of negative interest rates - as seen in other countries is starting to look more likely Where you have to pay the bank to put money into the account See it in either booming black market economies (so much cash not on books, like Miami in 80s) Or in deflationary economies – ones like Japan Unfortunately for savers and in particular self-funded retirees – increased longevity risk – thanks to lower returns on cash Need people to plan out retirements more in advance now Economy and employment Share market - The wider financial sector was trading 1.0 per cent lower – thanks to the banks Westpac led the losses with a 1.24 per cent share price decline to $27.78. Does this mean the overall market is going to go down? One of two scenarios Money see monkey do – banks lead the market down – so people sell in fear – but unlikely to last long Signs of a struggling economy – lower consumer spending so lower business profits After all, the Reserve Bank was just forced to cut interest rates to record lows do that because the economy is going poorly, not because it is going well. Economic growth has been pitiful recently — under 2 per cent for the past year. Wages growth is just 2.4 per cent and if inflation wasn't so

Welcome to FInance and Fury, the Furious Friday Edition. Following the series of the Lucky Country – You don't need to have listened to the last few FF eps for this one – rare event – but will be talking about a few related factors, like GDP growth, Interest Rates, Housing – all in relation to the share market – Today – episode will be looking at how the share market is related to all of these factors Help focus on how to create a rising share market – as it has become more volatile over time, and growth has slowed What factors affect the share market? – Millions Due to the nature of a market -built up of millions of people – so millions of factors, between 10s of thousands of companies, between millions of people – why markets are almost impossible to predict day to day - First – let's start with What is the ASX – Australian Securities Exchange 2,319 listed companies, $2.21trn market cap, the average company is worth $1bn (just shy) What factors affect the market? Interest rate - What are the flow on effects – from the announcements and policy decisions Movements in the cash rate are quickly passed through to other capital market interest rates such as money market rates and bond yields - influenced by the risk tolerance of investors and preferences for holding funds in a form that are readily redeemable then feed through to the whole structure of deposit and lending rates. Share valuation – use risk-free assets – Gov 10y bond yields – but as they drop – the risk premium in relations to shares goes down – so the cost of equity declines, so does a company's weighted average cost of capital – so the returns for the share market don't have to be as large to compete with investors' money – then – the companies themselves don't need to compete that much either – things become easier – as the returns they need to provide decline – so innovation goes out the window – just solidify market share and sink into GDP like returns over the long term – going to break down the top 20 companies over the past few years – This got me thinking Why did a fall in share prices lead to a collapse of GDP back in 1929 but not 2008? Confidence – people who are invested in markets (those with larger consumption capacity) stop spending Housing – peoples wealth is in housing as well – most Australian wealth is in housing on average 2018 Australia became the country with the largest median wealth per adult – thanks to housing This build confidence – when we feel rich, people act rich – investing or spending more – boost to economy Looking back in history Share Markets and GDP are very very related A countries GDP was close to their share market capitalisation Today – Globalisation = Global GDP to Global share market capitalisation (valuations) Free movement of capital + companies are able to list anywhere in the world (as long as meet requirements) A lot of companies chose to leave based around listing restrictions/confidence- reason Alibaba (bigger than amazon technically, thanks to dominating China market) listed in USA, not many people trust Shanghai exchange Growth of GDP with Market cap The differences in them – does it provide a sign? What Is the Stock Market Capitalization-to-GDP Ratio? - The stock market capitalization-to-GDP ratio is a ratio used to determine whether an overall market is undervalued or overvalued compared to a historical average. The ratio can be used to focus on specific markets, such as the U.S. market, or it can be applied to the global market, depending on what values are used in the calculation. It is calculated simply as stock market cap divided by gross domestic product. Typically, a result that is greater than 100% is said to show that the market is overvalued, while a value of around 50%, which is near the historical average for the U.S. market, is said to show undervaluation. If the valuation ratio falls between 50 and 75%, the market can be said to be modestly undervalued. Also, the market may be fair valued if the ratio falls between 75 and 90%, and modestly overvalued if it falls within the range of 90 and 115%. In recent years, however, determining what percentage level is accurate in showing undervaluation and overvaluation has been hotly debated, given that the ratio has been trending higher over a long period of time. The market cap to global GDP ratio can also be calculated instead of the ratio for a specific market. The World Bank releases data annually on the Stock Market Capitalization to GDP for World which was 55.2% at the end of 2015. This market cap to GDP ratio is impacted by trends in initial public offerings (IPOs) and the percentage of companies that are publicly traded compared to those that are private. All else being equal, if there was a large increase in the percentage of companies that are public vs. private, the market cap to GDP ratio would go up, even though nothing has changed from a valuation perspective. Where is Aus At – 115% Where is US at – 141% - one of most innovate

Welcome to Finance and Fury, the Say What Wednesday Edition This week's question comes from Adam Hey Louis, learning lots from your podcast its been good value. My question is now the coalition are remaining in power i want to take advantage of the proposed first home deposit scheme. Can you explain more about this and if its good or bad and what to watch out for, and how we can be good candidates. Cheers Today: Talk about coalition proposals First home deposit scheme How can you use it? What to look out for? What is it? First Home Loan Deposit Scheme The Coalition -FHLD Scheme - support up to 10,000 first home buyer loans each year 5% deposit with a government guarantee for 15% of the loan – not having to pay lenders mortgage insurance as there is 20% of loan guaranteed – your equity and Gov proposal was modelled after a similar scheme in New Zealand called Welcome Home Loan - established in 2003 Eligibility will be available to eligible first home buyers who have been able to save for a deposit of at least 5% up to 20% only be available to first home buyers below a certain capped income level which is $125,000, or $200,000 combined income for a couple who are both first home buyers. The income test would be based on the previous year's taxable income to provide certainty The value of homes that can be purchased under the Scheme will be determined on a regional basis, reflecting the different property markets across Australia. allowing them to access a loan offered under the Scheme by a participating financial institution Lending institution – they will give you a 95% loan The lender would still undertake the full normal credit check process on the borrower (meeting all their legal obligations) to ensure that the borrower is in a position to be able to afford the repayments. But estimates show – reduce the time taken to save for a deposit by more than five years for people living in Sydney, four years in Melbourne and three years in Brisbane The National Housing Finance and Investment Corporation will partner with private lenders to deliver the First Home Loan Deposit Scheme, prioritising smaller lenders to boost competition The Scheme will commence on 1 January 2020 and will be operated by NHFIC – what is this? Also Establishing the National Housing Finance and Investment Corporation (NHFIC) – team to meddle with housing policy First Home Loan Deposit Scheme will offer even more support with up to $500 million in the form of equity through the National Housing Finance and Investment Corporation If the borrower refinances or the loan comes to an end the Commonwealth support will terminate. Still have access to FHSSS and state stamp duty/FHO grants - superannuation to save for a deposit - Just 2,800 people so far have used that scheme – hasn't been that effective – as it is a complicated way to save for a deposit What is the point of it? To help Australian get into the property market – the limited capacity for first homeowners to fund deposits for high prices 110,000 Australians bought their first home in 2018 - the highest level in nine years – but were coming out of GFC and drop in Syd/Melb property in 2018 roughly one-in-10 of the 110,000 Australians each year will get the Gov guarantee They don't want to undermine the investment or residential property markets – through changes in taxation policy Taking away things from people is bad optics in politics – that is probably a major reason for Labor's loss Smart by the Gov for optics - doesn't cost very much (unless there are unexpected losses) But is it good for us? First home buyers, or not? Look at potential Effects First - notice something with most policies to help affordability? They are almost all demand side driven – looking at helping increase demand – for small pockets of people They have other policy to look at supply issues - Looking to increase housing supply – releasing suitable commonwealth land (mostly defence land) for housing development – but high residential Investing $1bn in infrastructure – National Housing Infrastructure Facility – these are good But land can be held by developers – land is released – developers buy it up – hold it and only develop when prices are up to maximise profits – so doesn't help as much as would hope to Also – types of developments – high profits with high residential Risks to the Government – which are passed onto tax payer lenders "will still do all the normal checks on the borrowers to make sure they can meet their repayments". But - in the event of a default the bank would need to get its money before the government – That is the way guaranteed deposits work – otherwise Gov would be a creditor of lender to you Opens up to quite a lot of risk, especially in a falling market – Gov bail outs of property prices now Risks to the buyers - Long term – cost more interest – as we will run through soon Also – chance of having negative equity in a property increases – risks of default Will it work? Looking at first

Welcome to Finance & Fury, today we're going to be looking at what stops people from investing. The common reasons I see; Fear and misconceptions Not knowing what to invest in Not knowing how to invest Not knowing the benefit Not having enough to invest The last one is a self-determinant from the previous 4 reasons. A form of financial procrastination creeps in; If you fear, don't know, what, how or why, then you won't allocate any resources (money) to it If you don't know what to do, or how to do it, then you aren't likely to bother If you don't know the benefit – of realising that at some point – you will need to give up working Or – if you think something is a long time period off, or too large a value, you may procrastinate as well Why invest for retirement in 30 years? What is the point of trying to save a $110k deposit for a home? Most things that become larger (time periods, or their size in monetary terms) also become harder for us to achieve - $110k seems like a lot but $70 per day for 4 years Procrastinating is a part of being human, and creeps into our lives without really consciously thinking about it. One of the worst parts about procrastinating is that we justify this behaviour, using some very clever tricks: Avoidance and distractions – Looking for other tasks to do instead of taking action on what we need to. Blaming – We blame external events for why we delayed doing a task. Denial – We can tell ourselves that what we are doing now is more important than what we need to do tomorrow. Comparisons – Other people haven't gotten around to do this, so why should we? Sadly, while these may make us feel better in the short term, all that they do is delay the inevitable pain we will feel We end up beating ourselves up mentally because we didn't get to where we wanted We retire with very limited options regarding income, wealth and essentially our financial independence What is investment procrastination? Same as any normal procrastination and it has been around for as long as humans have been alive, and can be in relation to everything we have ever needed to do; Socrates and Aristotle wrote about this in Ancient Greece, describing it as a state of acting against your better judgement. Put a little simpler, it is delaying doing important tasks for less important ones. It is much easier for us to still feel productive by getting through easy non-urgent tasks in preference of doing demanding ones. Also, it is much easier to do something fun compared to something hard. Therefore, if we are given a choice, we will often choose the fun thing over the hard thing, even if the hard thing will benefit us. With long term investments we don't see any immediate benefit - your future self (once retired, or in a few years) is not you today so it's hard to stay motivated and benefit your future self Why do we procrastinate? Behavioural psychologists have a term called 'time inconsistency' which helps to explain why we procrastinate. This refers to us as individuals valuing short term rewards more highly than future rewards, even if these may be greater in the future. All goals and plans are for your future self. So, based on this, you sabotage your future self by seeking rewards for your present self, even if it is not really that great a reward. This internal battle between your future self and present self can be said to be the key cause for procrastinating. The fact that your present self is the one that needs to take action and it can be hard to make your present 'self' take action. As you cannot rely on long term rewards or consequences to provide motivation, you need to implement strategies to either provide some immediate reward or consequence for procrastinating. Achieving any tasks comes in two phases as well. The first is procrastinating and the second is taking action. Acting first saves pain – this is why an action plan is important. Create an action plan today (go to the Members' Area on the Finance & Fury website, we have a lot of free resources, workbooks, calculators that will help) The longer we delay, the greater the pain we feel from procrastinating. However, the longer the time is away until we absolutely must take action, the less pain we feel delaying. It is funny however, as generally as soon as you go over the break even point you will see that taking action isn't that painful at all. Have you ever had a small task to complete, delayed it for a few weeks and then, when you actually got around to doing it, it only took you 10 minutes? The act of delaying causes more mental pain in most cases than just taking action. How to get over any hurdle for investing? Fear and misconceptions. Are you afraid of making a bad investment, like it's a 'double or nothing' investment? That's gambling, not investing. If you have been listening to this podcast long enough, or been doing your own research this hopefully isn't an issue. You know the real difference between what is an investment and what is not, an

Welcome to Finance and Fury, the Furious Friday edition. Today we have a pretty good episode! (I find this interesting at least, so I hope you do too) – We're talking about the Australia Property market, specifically the property bubble. How monetary policy has affected house prices over the last decades Most people my age born in the 80s to 90s, even 2000s have only seen property go up This makes it seem like a safe bet – so I want to look at this and the reasons for the meteoric rise, then look deep into whether or not we're in a bubble. Just quickly before I get started, speaking about property (or lack thereof) I'm participating in the upcoming Vinnies CEO Sleepout to raise funds for the homelessness problem in Australia. If you have been enjoying the content and finding it valuable, I'd really appreciate if you could help me out by giving back. We're raising funds for rehabilitation and counselling to help homeless people, crisis centres for victims of domestic violence. Go to Finance and Fury and click on the banner on the home page to help A Recap Over the last couple of episodes we have covered a lot about property and monetary policy – because a lot has been happening! Just in the past 12 months ASIC end of 2018 updated consumer credit rules and set the requirement for banks to look at people's actual expenses when assessing lending APRA with removal of 7% benchmark for assessing serviceability on home loans – lowering to 6% or so, and potentially lower as rates drop RBA – we saw RBA drop rates to historical lows this week – 1.25% Foreign buyers' restrictions as well All had either positive or negative effects on demand, but nothing about supply. And this is the major issue in our property bubble problems. Market forces Prices are set from two points of supply and demand Supply is available purchases – people selling their house, or new houses on the market. Demand is much more complicated as it comes back to a number of factors Incomes/demographics – working age population, immigration, concentration around employment/ where people want to live. Availability and cost of credit – if you can borrow a lot, and at low cost it increases demand We have had a lot of demand but little supply increase to meet the growing demand Where we have come from: Property market history If you've been listening for a while you will have heard me touch on a few of these points Reasons for property prices increases – Demand side – rates and availability of credit Below 6% until 1971 – the Brenton woods system was abandoned and our interest rate rose to 13.75% in 1983 AUD floated in 1983 and rates kept rising. Up to 17% by 1991. Then, there was a drop to 9%, before going up a bit to 10% in 1993 By 1997 rates had dropped to hit 6.7%, which is more than a 10% drop in less than 6 years We can see how the market responded to this (price reaction) by looking at the property price history from 1997 on wards (sky high!) To break it down, in 1973, median house prices across Australia's capital cities looked something like this: But, back in 1973, the average weekly wage was $111.80 (accounting for both full and part-time workers) Today, a full-time worker makes on average $1,453.90 weekly (before tax) Our wage growth and median income growth has helped to fuel the demand for property Side note on income growth; Taken as an average, not individual. If we measure the individual it's much more than 2% p.a. (changing jobs, or don't ever receive a promotion etc) Inflation matters! So, we need to compare real values, in today's dollars and normalise for inflation. In 1971 the median house price was $190k in today's dollars, by 1991 the median price was $260k – that's real growth of 1.6% p.a. approx. over 20 years. In 1997 the median price was about $300k, by 2017 the median price was $700k – in real terms 4.3%p.a. Every step of the way there has been an interest rate reduction in the price boom Level of affordability can vary cyclically. House-price to income data suggest a structural affordability problem in Australia over the past 20 years. Average wages going up since 1997 There's also been growing concern about the low levels of first-home buyers entering the market in recent years. Also, the demand for bigger buildings also went up which creates a problem – cheap money incentivises people to spend more than they would otherwise – for renovations etc But most of the price of residential property in Australia reflects the value of land, rather than the cost of construction or the value of buildings. 3% p.a. increased from improvements since 1990 6% p.a. increase from land value since 1990 This is another problem - Australia has an abundance of land, there is a limited supply of well-located land, particularly close to the centre of our major cities Lots of apartments went up into the city to stimulate supply of housing without releasing land – but Australians overwhelmingly want to eventually live in a house with a backyard (80% e

Welcome to Finance and Fury, the Say What Wednesday Edition Today we have a question from Luke. Hi Louis, I listen to you often. Very informative and interesting episodes. My question is regarding super/pensions. I lived and worked in the U.K. for about 10 years - and still have a pension there. I also have Super here in Australia. I heard I could bring my U.K. pension back to Australia, then I heard they stopped it, and then I heard I still could. I was hoping you could clarify this for me. Great question! This was a big change to expats retirement planning a couple of years ago that seemed to go pretty unnoticed, so thanks for bringing the topic up. Created issues The issue with the UK Pension transfers to Australia occurred with changes to UK legislation back in 2015. This was due to the UK pensions prohibiting people from transferring their pension funds before they have reached the minimum UK pension age of 55, due to changes in accessibility laws between the two countries (i.e. the UK didn't want people transferring their Pension accounts to Australia and being able to access the funds at an earlier date). Anyone who has worked in the UK will normally have built up some form of UK pension benefits. It is now compulsory by law for all employers in the UK to enroll their employees into a workplace pension scheme. This means when people leave the UK, they will need to decide what to do with the pension fund they have built up. You can transfer your UK pension to an Australian Superannuation as long as the Superannuation has QROPS status. A qualifying recognised overseas pension scheme or QROPS for short, is an overseas pension scheme that the UK recognises as eligible to receive transfers from registered pension schemes in the UK. To qualify as a QROPS the scheme must meet the requirements set by UK tax law. To check if a pension is a QROPS you can check the list of schemes that have told HM Revenue and Customs (HMRC) that they meet the conditions to be a recognised overseas pension scheme (ROPS). From 2015 only people who are over 55 and either have an SMSF, or have a complying APRA super fund (i.e. regular super funds like an industry or for profit fund) are eligible. Anyone who meets these requirements is eligible to transfers their UK pension funds through following the non-concessional contribution rules. These are separate rules to UK pension transfers - These are as follows: The transfer amount has to be within the non-concessional contribution cap of $100,000 per annum. A bring forward rule applies to members under age 65, allowing an amount of $300,000 in one lump sum through using the contribution limit over a three-year period. However, for anyone aged over 65 but under 75, they need to meet a work test too contribute funds to super, along with being limited to $100,000 p.a. as the bring forward rule is no longer available after 65. Upon turning 75, no further contributions can be made. A lifetime contribution limit of $1.6 million will also apply. If your total super balance is over $1.6 million, you won't be able to make any further non-concessional contributions. Introduced with a different round of super reforms Part of balance transfer caps - $1.6m in Pension environment – cap amount in super Was going to be a lifetime cap of $500k retrospectively. The Non-Concessional If the transfer is made within 6 months of moving to Australia, then the whole transfer is treated as a non-concessional contribution and therefore subject to the NCC limits and rules. If the transfer is made after 6 months of moving to Australia, then the rules are slightly different. The value of your UK pension on the date you arrived in Australia is treated as a non-concessional contribution. The growth in the value of your fund between the date you arrived in Australia and the date your transfer is treated as fund earnings and therefore subject to tax in Australia. This part of the transfer is neither treated as a concessional contribution or NCC. There is only one retail superannuation with QROPS status, the Australian Expatriate Superannuation Fund, the rest are all self-managed superannuation funds (SMSF). Once you transfer your pension to a QROPS in Australia then it becomes subject to normal Superannuation rules, as well as being subject to UK rules for 10 years after the transfer. Few practical examples of how this works and explain the process of transfer further You are 45 – No go You are 55 and super of $1.7m – no go You are 60, super of $900k and UK pension work $280k – Okay to transfer (if super fund complies) You are 67, not working – No go, cant transfer into super here Side note – lots of other pension funds (like RSA) can be transferred into super in Aus, but they do have their own laws and tax treatments with withdrawn early – just make you aware Thanks for listening, if you want to get in contact you can do so here.

The ability to get more achieved - learn how to control your time, not just manage it. This is what this episode will focus on, or put bluntly, it's about Getting Shit Done! What is time? Time is the indefinite continued progress of existence and events that occur in apparently irreversible succession from the past, through the present, to the future. The reason this is important is that time is limited – it eventually runs out for all of us. While our total years alive may differ – each day we are all limited to the same amount of time. Whether you are a CEO or retired, we each have 24 hours a day. So how do some people seem to get so much done working with the same time constraints? They do this by creating and controlling time. When I first heard this it took me a while to fully comprehend. How do you create time? Easily, you can either free up tasks or get through them quicker, however focus is the key. I believe that the 9-5 work day has killed productivity. Most people - if they really wanted - could get what might take a full eight-hour day in far less time – some look busy for 5 hours, then get what needs to be done before 5:30pm. This has led to habits in the workforce that have flown through in to lives. Reduces urgency as there is always more time - Even if you are at work and there are tasks to get done which someone else is providing to you, you control how you do these. The more you control time, the more you will get done - This then leads to a greater output and greater chance of pay raises and promotions. Success – is achieving something – more you achieve = more 'success' Plus, you will have more free time! The two ways to get more done – manage time and 100% focus – means stopping procrastination Heard 'work smarter, not harder' - It is about what you get done, not how long you spend doing it – Think it isn't a great saying – as working smart is hard – it requires self control, good habits, time management – which aren't easy to do put in the effort – where the working hard comes in – as initially it is hard – Discipline Discipline is interesting If you have discipline – you have self-control When you discipline someone else – it is punishing someone to teach them (current definition) The Latin disciplinameant "teaching, learning." The Old English version referred to a branch of knowledge or field of study (so if you're really good at word origins, you might want to make etymology your discipline). Developing discipline as a form of training is a military concept that's more than 500 years old. Then we started using the Old French 'descepline' – means to punish Self-control is important – either way you will be disciplined through You don't get what you need to do done – someone else may discipline you, or you will do it yourself with negative self talk – or a modern-day equivalent of self-flagellation to punish ourselves for not getting something done Think most people would agree – like to have the first kind of discipline in our lives To get through more – need to be disciplined and give 100% focus to what you are doing. So how do you get started? Implement the 'time management loop'! Start your day with a clear focus. This starts the night before with a review of your tasks the next day. I used to waste so much time figuring out what the plan for the day was when I would arrive at the office. I used to get in to the office, spend the first 20 minutes organising tasks and reading emails, then go get coffee. To do this, organise your time by chunking up your day into blocks. This helps to set limits on how long you have to finish something, helping to reduce the overall time spent on the task. A book called Deep Work explores flow and productivity that recommends exactly this. Having chunks of time set for one task and one task only leads to much more being produced. But focusing on the important tasks should be your priority. There is no point in chunking your time to spend on tasks that make you feel busy but achieve little. Focus on high-value activities. What is a high-value activity? It is simply something that will move you towards your goals more so than any other activity. To determine what is of the highest value, you need to align these tasks with your goals and priorities. It helps to focus on outcomes more so than the individual tasks. So, ask yourself 'what must be done now to get to my end goal?'. Becoming goal orientated when deciding on what to spend your time on will give you the clear focus you need to become as productive as possible. But what happens to other tasks that you don't get around to? There is a concept called comparative advantage. This works in economic terms where if one country can produce something at a lower cost (or better) than another, it should do this task and then trade for the other goods it foregoes producing. We can do this as individuals through outsourcing by getting someone else to do what you aren't great at or don't enjoy doing. To help

Welcome to Furious Friday – Today – Continue with the Lucky Country Australia – Today – want to run through how a lot of our luck – especially if you have owned property, comes from the design of Australia's monetary system since the early 90s. But diminishing marginal returns are a real thing – especially when it comes to money. In this episode we break this down to set the stage for the next two episodes – on Australian property and share markets and their potential returns for next few years. The heart of every monetary system - money can only be created by a central authority – for guarantee of value – most of human history: Genghis Khan - established paper money in Yuan Dynasty- currency fully backed by silk and precious metals behead those found guilty of counterfeiting – in Before in Song Dynasty just tattoo their faces But this is when the paper money was fully backed by valuable goods When it comes to fiat currency (our current monetary system) – need to have one central Authority to make sure that the intrinsic value placed on it sticks – in the form of a Government guarantee Imagine if we all viewed monopoly money was worth the value of the note – if we all believe it and accept the backing of the value – we will use it – but why is monopoly money worthless? Because it can be made by almost anyone at will with a colour printer A central authority is needed – to not only produce the currency (that cant be faked easily), but be protected by law as the country having one single currency – capping the supply to be controlled by one entity but it can't be the Government – having Gov over supply of money is bad – they can enforce law – ATO, or laundering/counterfeiting Policy - Separate Central Banks – this central authority then grants the right to create money through fractional reserve banking to commercial banks - the right to further create money through lending banks do not have to keep all of its deposits in the bank – they create money by lending out a certain proportion of its deposits to others - who of course had to deposit the loan into a commercial bank to use it – as it has Authority granted by the regulators Deposit $1,000 – Bank lends out $800 – someone uses it, give it to someone for service = $1,800 = creating more money. And this also means that commercial banks are generally profitable as the money supply grows – 1993 - $81.5k mortgage, 8% rates, $6,500 p.a. – 2018 - $388k national average, 3.9% rates, $15,136 p.a. except of course when they stretch too far - like in 2008–9 = which thanks to the Government having authority over the money – they got a bailout of freshly printed money First made them make risky loans, secondly guaranteeing the loans/deposits – incentive to gamble, thirdly printing more money to buy back defaulted debt so the banks losses will be covered by future debt obligations in tax over 30-50 years The system has evolved with Central Banks no longer having currency backed by anything - Floating of the Dollar in western world – USA 1971, AUS early 80s –That is really what fiat means – authority by decree but the key principle of the system in creating money is the monopoly of the central bank – but Now the supply simply doesn't need a backing asset to provide a reference point But the issue with this is that the traditional way of wealth creation has been hijacked – being artificially controlled Two ways - The supply of money is now based on a whim rather than market forces – control of bread prices in USSR And natural incentives are being artificially manipulated – Like putting quotas in production based on weight Again – like USSR – nails would be produced too big to be usable – to reach quotas with less work You are incentivised to deposit funds into the bank when interest rates are high – bank can then lends money out = more money is created – but limited to the overall wealth of the population – 1) what they can afford in interest payments, and 2) rates depends on the level of deposits which relies on more people having more money in the bank Look over Aus savings rates – 1950s – fairly constant band – had lows of 10%, high of 20%, but mostly 15% - 1983 – 1998 – 15 years – slow decline from 15% to 0% or negative – stayed there until about 2008 – then spiked Went back to 10% for a bit - Economic collapses can scare people to save more – but declined to 2.5% since When we reflect on this, I don't think it is too much to say whoever controls the creation of money controls the world … Of course, being able to create money is a wonderful – we all need to be able to create our own wealth –but when we the incentive to save, and the incentive to borrow are controlled by a central authority- It creates a system of uncertainty and often not an optimal outcome – as there is no instant feedback loops – like in every other financial market – apply this principle to anything You have a company that sets the price of power – it has a complete monopoly on Australian power –

Welcome to Finance and Fury, the Say What Wednesday edition Today's question is from Robbie, Hi, and thanks so much for the podcast. Both Mum and Dad are retired however Mum is eligible for the pension before my Father reaches 65 (approx 5 years) however Their combined assets puts them over the threshold to claim the pension. Is it possible for them to transfer money/assets to a trust, or gift money to a sibling to reduce their combined assets below the Centerlink threshold. Relating this to a non-specific question - is it possible to transfer assets/money that a retiree owns, so as to be under the threshold to be eligible for the Centerlink Pension, and if so, is there a time this would have to be done by (does Centerlink look at the last 5 years or so of assets?) Today: Run through maximizing pension incomes Little can be done to reduce assessable/deemable assets Asset limit tests, gifting rules and transfer costs Assets and Income tests: Assessable assets over $387,500 for a couple starts to reduce fortnightly pension Full reduction occurs when the total is $853,000 Non-assessable assets are superannuation accounts while below pension age and their own home Investments are included net the loans Income test is either what you get directly or deem you to be paid Deemed is assumed percentage on investments If investments get assessed, why not give it to someone else? Gifting rules: Treat transferring assets as a gift Gift $10,000 a year before it is treated like an asset There is a 30,000 cap over 5 years So if someone is 5 years or so out, gifting a sum more than $30k, then in years 5 years out, or during AP – less than $10k p.a. Other structures? Can you set up assets ahead of time and build wealth there? No Trusts don't get around this Centrelink would have a look to who has access to the trust As long as anyone is connected to a trust, it is counted as theirs The costs: Transferring assets means you might incur costs Depending on the level of growth – might have CGT If you leave the direct shares in your estate, can transfer to children without CGT These shares would still carry their original cost base Payout super, but run into the gifting rules Depending on the level you need to reduce your assets by to get the age pension, you can end up being in a worse position Examples – General illustration purposes superannuation of $1.2M, 2x investment properties ($600k) and principle place of residence, cash $30k, cars and contents - $70k Total Assets - $2.5m in assets – Well off the $853k max limit Transfer property? CGT on the sale, whatever the gain is, halved, added to income + stamp duty (likely) Maximum age pension is $37k for a couple on the pension – Between the two properties and 5% incomes from super, talking about $90k p.a. Couple – One 65 and other 55, have cash of $50k, home contents and car - $50k, two supers, 65yo $550,000 and 55yo $200k – Assets of $650k now, 55yo super non assessed - $394Fn reduction - $10k p.a. – left with $7900p.a. Withdraw $300k from super, put it into 55yos – 3 year bring forward for NCC – after tax into super - $100k over three years Note – tax may be payable if you withdraw this early though – so won't want to have to access before 60 Now assets $350k, so under test – Full AP. Almost same net income – Except now most of it isn't coming from your own account - $35,414 from AP and Income from $550k, or $35,651 p.a. from $350k and full AP – both over AP age, pensions gone, but at least $300k could sit away and grow over that time period Tips on what to do to boost income in retirement Fully franked shares – boost retirement income Transferring superannuation into income stream phase Good way to get 42% more income from every dollar of franked dividend Be wary of death taxes, we have it on super but not personal assets Why do other countries have it? Summary: Age pension – if you aren't eligible due to assets, you've probably paid a decent amount of tax along the way Best not to rely on it if you have time to accumulate wealth Some ways are in preparation, gift assets Thanks for listening everyone, if you want to get in contact you can do so here.

Welcome to Finance and Fury Looks like borrowing for property purchase is going to be easier. APRA is looking to make some changes to lending criteria enforced onto the banks. Today: Run through what these changes are Why they are occurring What the lending environment looks like over the next few years What is happening with the RBA and borrowing restrictions from APRA? Interest rates are strongly related to the interbank cash rate Made it clear that they are cutting rates in 2 weeks' time from 1.5% to 1.25% Banks lend at a margin slightly above the cash rate that covers their expenses, makes a profit and pays the deposit levy The cash rate of 1.5% and variable lending rates of around 3.75% leaves a 2.25% buffer But banks assess your borrowing capacity at an interest rate of 7% This is set by APRA, and they are going to remove the serviceability assessment at 7% Government plans: APRA has removed its quantitative guidance on the level of the serviceability floor rate at 7% Authorised Deposit-taking Institutions or banks use to assess home loan applications December 2014 is when the assessment of serviceability floor was imposed as 2% on top of variable loan product rate At the time variable rates were around 5% A single person on $80,000 would be able to borrow nearly $100,000 more under proposed changes Lower cash rates = lower interest rates on loans Lower hurdle rate of assessment in what you can afford = you can borrow and afford a larger loan Why are these changes being proposed? Property prices are outside of peoples' borrowing capacity Banks were forced to start looking at borrowers' actual expense, forced by ASIC Introduced changes to the national consumer credit protection Act RG 209 Responsible lending conduct was introduced and reasonable inquiries into all other expenses The old approach was the HEM Benchmark which wasn't very accurate It looked at where you lived and some other statistics, form here it estimated your expenses Since last year, household lending has decreased by 30% due to these new requirements Because the banks are lending less, the regulatory body's solution is lower the interest assessment criteria What does this mean for you? Access a larger loan Access a cheaper loan Help property prices, as people can get access to funds These are good if you own property, are looking to refinance or are looking to buy But what about the long term? This isn't the only side to lending Credit regulations – assessment by banks onto customers Requirements set by APRA and ASIC Prudential regulations – assessment on the allocation of lending for risk control Prudential regulation requires controlling the risk by lending to low risk, high collateral borrowers The banks need to hold adequate capital as defined by capital requirements This is why housing is so popular as it is safe and sound One side of lending is easier, the other side of risk control is increasing Business and self-employed lending – previous episode link Household debt to GDP in Australia is at an all-time high, going into non-value adding activities While it is easier for salaried individuals to get loans, it is harder for self-employed people This policy will increase what is dragging our economy backward Household disposable incomes have increased by about 2.5% p.a. The previous decade was about 6% p.a. The misallocation of spending is going towards a company but not adding new economic activity People are not spending on services, goods, and other non-financial businesses People are too busy paying down their massive loans Business revenues then can decline, as nicer things in life get cut Any company impacted by reduced revenue, it is harder for them to get funding Those companies are forced to close and people lose jobs The misallocation of lending Increased residential cost = excessive lending to the residential housing sector This is at the expense of businesses Regulations and risk control incentivise lending to one borrower over another Banking system to allocate lending away from the most productive areas of the economy The logic of cutting rates it to make it easier for businesses to borrow and invest and households having a higher disposable income to increase consumption This has not worked to date Summary: High household debt leaves the economy vulnerable to economic shocks Australia has slowed down in economic growth and rates have only decreased since 2012 If you are looking to borrow to buy Can you afford higher rates? What are the cash flow requirements now and in the long term? Don't get in a position where you are forced to sell, have some buffer prepared There are limitations to monetary policy from the RBA The government can provide additional fiscal support We will cover more monetary policy in Friday's episode How one person can send a market up or tank Also please consider making a donation to my fundraising efforts for CEO sleepout If you want to get in contact you can do so here.

Welcome to Finance and Fury, the Furious Friday edition Last week: Being grateful for what we have, where Australia started and where we have come Today: Luck truly running out How it can be manipulated What is luck? Success or failure apparently brought by chance rather than through one's own actions' The saying that 'we make our own luck' What are the outcomes of being lucky? The difference between success and failure If you were born in a Western Country, you were born lucky We have a great upwards mobility of wealth The real luck is being given the ability of choice Have a look at the freedom indexes, they show higher levels of quality of life Where does freedom come from? There is a very strong correlation between free nations (economically and legally) and prosperity/quality of life What exactly makes a nation free, and gives the population every opportunity to build their own success instead of luck? I have been getting into the key figures in the Founding Fathers Not often do you get to see the people stand up to a governing system and establish their own Happened in Rome in 509BC 13 colonies voted to join forces against King George In 1787 they formed the 'constitutional Federal Republic' not a democracy Dictatorial powers, what are they? Freedom from tyranny – sunlight is the best disinfectant Should we ban people from speaking because some people find it offensive? You can have pure garbage or allow expressing legitimate issues for people The second amendment – a well-regulated Militia and the right of people to bear arms Jurisprudence is the context along with the amendment or law Australia the Federal Parliamentary Constitutional monarchy Not a true democracy either There are 2 types: the direct democracy and the representative democracy We are a constitutional monarchy The governor general answers to the Queen Australia ranks high on the freedom index – but retaining this is up to us The US started free however it has dropped massively The supply of money has a big influence over our life and we don't vote for the members of the RBA From an ABC article Link to the article here People were surprised where they sat for income or wealth compared to the average Issues from the control of information from the government or media When censorship is legislated from the government it leads to corruption Australia has 180 bits of legislation passed every year, can you name one? Stalin quote "Education is a weapon whose effects depend on who controls it and at whom it is aimed" Misdirection leads people to vote away their liberties Comes from both ends: It is nice to think that politicians are to blame It is also up to us, who we vote for and what we allow? Notice that by the time you hear about a law, it is already too late To what extent do new driving laws relate to impairment of driving and not straight forward punishment? Another thing barely reported on Have you heard about the government in Darwin and their social credit score system? We did an episode a while back on the social credit score – link is here How is this possible? Branded as the "smart city" What type of activity will sound an alarm? How should we react to this new level of control? How the Chinese Communist party rolls out infrastructure and software abroad Any Australian governing body implementing totalitarian social control is a major concern Moral of the story, regardless of how it is positioned, don't give up freedoms or the luck of being born into a society with a lot of potential But what if the news doesn't want to inform us? Monetary side messing with the economy and the lack of information around this from the media. The need to sensationalise everything for revenue instead of informing people of current affairs Next episode: How a few individuals around the world control all of the economies at the top level due to the supply of money Thanks for listening, if you want to get in contact you can do so here.

Welcome to Finance and Fury, The Say What Wednesday edition. Where every week we answer your questions. Question from Anton - In your recent podcast you mention countries that have more millionaires and billionaires have more gdp and a higher quality of life. I am interested if you have research that shows the relationship of quality of life for the lower quartile of the population (by net total worth) against the number of millionaires in a Country. Today: Research on quality of life More millionaires per capita helps For the lower quartile also St Vinnies CEO Sleepout on the 20th of June – Donation Link Recap of what I said in that ep "countries with the highest number of millionaires/billionaires per capita, have higher levels of GDP per capital and higher quality of life scores, even for the poor" Per capita is important – shows output Concentration of millionaires per capita There really isn't a lot published about quality of life and number of wealthy people Little research showing benefits in anything Took some time to compile the research Resources will be shared to subscribers Where would you prefer to be in the lowest quartile? Where would you get a better pension income, social support, infrastructure/transport, healthcare? What about an OECD country instead – Live in India, or China? Where does government support come from? Taxpayers. Who pays the most in taxes? Millionaires and high-income earners. The more millionaires there are per capita – the more money the Gov can collect Millionaire's money is more volatile due to deriving income from companies From 2007 and 2011, the income of the bottom 10% increased by 2% while incomes at the top declined by 1% Who has the most millionaires per capita? Switzerland (8.5%), Taiwan, US, Aus, Belgium, UK, Canada, France, Norway What about in regards to relative poverty lines? What about other countries with millionaires? But not per capita China, India, how do they compare? How do their qualities of life compare? How do you measure quality of life? Standard of living? No universally objective measurement Rising global incomes? Rising disposable income? What about India's costs of living? Main source of income of lower income earnings is government support I haven't gone over other indexes, but all point towards more millionaires per capita being a good thing These statistics change all the time Look at my example for perspective Equality of opportunity is a good measurement of quality of life Freedom index is a great indicator They show the mobility of income potential I will be compiling the research and sending it out to subscribers If you want to get in touch, you can do so here. Graphic representations:

Welcome to Finance and Fury A plan for structural reforms to help increase Australians' ability for upward mobility. The coalition will likely have enough seats to squeeze through a lot of reforms. Today: Income axes going up aren't much of a concern What about the taxes you don't see directly? The effect of these taxes on the economy growth or decline How to reduce your taxable incomes? Taxes – Government revenue source Number of taxes – do you know how may taxes you pay each year? The average Australians pay at least 125 different taxes each year, 99 to Federal, 25 to State and 1 to Local Total tax collected is approximately $528.5 Bn Most tax comes from incomes of individuals and businesses – 59% or $312 Bn Consumption tax like GST makes up 26.8% was supposed to replace state's stamp duty Business payroll tax makes up 4.7% or $24.7 Bn charged to companies if they have above a threshold employees/wages Excises on specific goods – normally ones on top of GST at Government discretion Sin taxes – consumption tax on goods which are harmful to society Alcohol – the social cost from loss of labour, healthcare, accidents and crime costs Tobacco – the effects of smoking are estimated to cost $320 million but the revenue raised is $12 Bn Does the additional money go back in to addiction treatment programs to help? Or the general spending budget? Consumption vs Income Taxes Both can't be kept high If consumption tax increases the cost of living, income tax should be lower Consuming becomes more costly with consumption tax, putting a strain on upwards wealth mobility Statistics on Taxpayers Individuals and income tax reduction plan for 2022 and 2024 Helping reduce the burden GST placed onto families from 2001 onwards Original plan to protect works from bracket creeps With wage growth and inflation going up, if the marginal tax brackets don't increase too you get bracket creeps Abolishing the entire tax bracket 90k – 180k incentivises hard work Despite these changes you will still see the top 5% of workers paying a 3rd of all income tax collected Someone earning $200,000 pays 10 times more tax than someone earning $45,000 per year How to reduce certain types of tax? GST? Stop spending so much. Further excises on your spending only reduce with less spending Income tax? Deductions or salary sacrifice Salary sacrifice puts money into super up to $25,000 cap taxed at 15% rather than marginal tax rate Deductions give back the costs of investments or work related expenses and donations to reduce your assessable income Give to charity – Donate to my CEO Sleepout https://www.ceosleepout.org.au/fundraisers/louisstrange/brisbane Negative gearing when you spend more on investments than you earn Borrow to invest – home equity Get your marginal tax rate back and for a lot of people the amount back will decline from 2024 Lower marginal tax rates for those earning between $40k-$200k Franking credits – Shares Tax offsets on dividend income Buy fully franked dividend yielding shares, but gets added to gross income Own 1,000 CBA shares. They pay $4.30 per share in dividend so you get $4,300 of income. Plus the franking credit, of $1,843 so total income is $6,143 Earning a salary of 100k, assessed at 39% the tax would be $2,396 minus the franking credit of $1,843 so net tax is now $523. Therefore, the marginal tax rate is now 13% instead of 39% But, you will simply pay no tax on dividends if your assessable income is all the way up to 200k, as franking credits offset tax on franked income with a 30% tax rate Family trusts – No changes to distribution rules Still allows flexibility and asset protection Own assets and distribute income to the lower marginal tax rate individual Capital Gains/Losses Gains still get the discount for assets owned longer than 12 months Losses, claim against future gains If you enjoyed this episode leave a rating, if you want to get in contact you can do so here. Resources: Individuals taxation statistics - https://data.gov.au/data/dataset/taxation-statistics-2016-17/resource/4161d1b8-f9e3-4f36-b21d-d5d06b43ed2e Australian taxes - http://taxreview.treasury.gov.au/content/paper.aspx?doc=html/publications/papers/report/section_2-03.htm

Welcome to Finance and Fury, the Furious Friday edition A reminder of how lucky we are and why we are called the lucky country. Also, what we have to lose if we neglect to remember this Some perspective: You don't know what you have until you have lost it Taking things for granted like our power, because blackouts suck What about the billions of people who don't have power or deal with rolling blackouts daily? Who would value having power more? The hatred of the rich shows the lack of gratitude by those who do it Countries with the highest number of millionaires/billionaires per capita have the highest GDP per capita and quality of life They are wealthy (some exceptions) because they provide more value to our lives We are lucky to have "rich people But why are we called the lucky country? First used in 1964 by Donald Horne – The Lucky Country The origin of the phrase was negative in the context of the book "Australia is a lucky country run by second rate people who share its luck" Where did we come from? Few places on earth better suited for middle-class prosperity than Australia British convicts and free settlers – first government in 1788 were autocratically governed by a British Governor (mini-dictatorship) Considerable unhappiness with the way some colonies were run The monopoly of Rum used as currency and Australia has a history of a beer economy English common law was introduced, the rights of Magna Carta and the Bill of Rights 1689 were introduced. The number of settlers increased and they were given resources and land from the government. Convicts were used as Laborers Land assigned back then as "Liberty Plains" is now Homebush and Strathfield in Sydney Then had the gold rush and entrepreneurs came flocking in Given the freedom and vast resource-rich country Australia is, it provides an ideal environment for upward mobility From the pioneering ranches of the nineteenth century to the middle-class suburbs of the late twentieth Has our luck actually changed? Or did we change our luck? Became a socially divided society like most first world countries The political influence will either make it or break it Bob Hawke – Legendary figure for Labour, 1983 – 1991. Did you know the Hawke Government implemented financial deregulation and reform? Australian dollar float, dismantled the tariff system, privatized state sector industries, ended the subsidisation of loss-making industries and introduced full dividend imputation. Did also have some popular ALP policies, with tax system reforms and introduction of Fringe benefits tax as well as capital gains tax He would be considered moderate these days, if not closer to the LNP A political party for the working class is now dominated by those operating outside the tangible economy Some people are focused on achieving one thing and will do whatever it takes to do it Pushing for climate change mitigation programs will further deindustrialise Australia What about all of the people who will lose their jobs? Or those in other countries that rely on our Coal for energy? What has changed our economy? Gradual deindistrialisation stems directly from policies imposed by local governments in NSW, VIC, and QLD Sydney's manufacturing employment is down 50% in the last 2 decades Politics was slowly transformed into an instrument of the bureaucracy and "progressive" gentry Why are the yellow vests protesting? We are sabotaging our economy, dependent on resources sales to China Our commitment to renewable energy dwarfs EU, US, and China. Per capita, we have 5 times the number of renewables Our energy costs are now among the highest in the world ALP want to boost renewables from 20% to 50% in 2030 and the Greens want 100% Ironically just as Australia is to replace Qatar as the world's largest producer of natural gas, industrial enterprises in Australia are under pressure from high energy prices Imports are replacing the closing Australian producers With more taxes, energy prices, fuel, and super payments, there is less disposable income to you OECD households were considered middle class, but this has dropped 1% per decade since the 1980s and now ranks below the OECD average How policy affects our market? How our luck may have run out? Decline in Australia's middle class resulting in the regulation of land and expenditure to promote urban density 1981 to 2016 - property-ownership rates fell from 60% to 45% for 25 - 34-year-olds UK has only 6% of the land urbanised US has 3% and Canada has 2.1% urbanised 3% of Australia is urbanised Major cities in the first world have a "smart growth" model Helping turn once affordable cities into some of the world's costliest According to the RBA, planning regulations are a major addition to this cost Inner core of Brisbane, Sydney, and Melbourne represents 11%, 7% and 13% of the greater metro population (31%) More than four-fifths of families living in single-family homes in suburban areas Market manipulation can leave limited choices Not enough