Finance & Fury Podcast

Hi Guys and welcome to Finance and Fury the Furious Friday edition. This is part 7, the last episode of the miniseries about all things politics. Sorry it took a while to cover, I wanted to do this topic justice and explain all the steps and outcomes instead of jumping to conclusions. We have covered a lot, there are many bits of the puzzle. Who, what, how, why, and potential outcomes – We have been through the Fabians, the political spectrum and democracy, then how a population is organised (Rules For Radicals), the fair go, then political progress for equality, then how the west got to be in such a good position, and how we may lose it. If you made it all the way through, awesome work. Thanks for listening to me rant on this Final part: What should the government be involved in? What services should they be involved in? To start: Have a quick real-world example to look at US Government Shutdown: It's been almost a month, shutdown since 22/12/18. It's the longest in US history, everyone has called it a crisis Over border funding: $5.7bn for a wall, already compromised to make it steel rather than concrete As a comparison: US gave Israel $25bn to help build their wall Total Government spending (the Fed, States, Etc) is $7.56trn: this is $20.7bn spending a day The Wall is a 0.07% cost to the budget for the year Enter the blame game: Irony is Schumer and Pelosi were in favour of a wall: Until Trump came along. Showing it was mainly just talk More political infighting: First time I have seen Democrats oppose spending more of someone else's money Question: is the US still spinning? Is life going on? The longer that the shutdown occurs, the more people in the US are waking up to how little they need it But not for the Government workers and the IRS (their tax department) Workers aren't being paid, but they will be. They will get back pay, for the time of the shutdown whilst they were not working. Is that a good deal? But private citizens are stepping in, picking up trash in parks and helping where they can Truth is that the Government has little to do with lives directly, unless It is paying you, it is taxing/regulating you, or it is arresting you Indirectly though, unfortunately, it affects all of our lives Leads to the last part: What should the Government be involved with, or provide for a country? This differs for where you sit on the political spectrum. It's no secret which side I sit on, I value individual freedom and empowerment rather than the group thinking that everyone should have equal outcome For this episode, I will try and put my bias aside. The measurement for this episode is: has there been a net positive benefit or loss to a country based on Government Intervention? Progress from betterments to our lives, more freedoms, better health, etc or does it detract? Excluded "moral hazards", not saving money because of the knowledge that the State will provide an age pension and subsidised housing, and over-use of "free" health services in the absence of price signals to consumers. All of which isn't really free Won't have time to do this topic justice in 30 minutes. I will give the 1,000-foot view. If you are interested in a deeper dive, let me know If I don't explain something fully, or you disagree, let me know as well! What the Government is good at: Net positives Funding: Science and R&D. For the past 100 years, most advancement is in fields with the most money and manpower Technology and science: Government Funding has been great. Advancements over 100 years have been from this, like medicine, the internet etc Technological advancements in weaponry and nuclear science during the WWII. Government Funded Rocketry and telecommunications during the Space Race. This was all Government Funded Concentrating a large number of engineers and scientists to work together on the same project will, almost every time, produce more net advancement compared to if every member worked alone. DARPA (Defense Advanced Research Projects Agency) Funded things like the Internet, Google and Google maps, Windows, WWW, video conferencing, Siri, GPS, Facebook This is good: there is a measurable benefit, which the population adopted. Through being a demonstrable fact Most major developments come when the government diverts large budgets to achieve progress (rockets and planes). A vast difference in plane technology from WW1 to WW2. Major boost to development, with the failing of technology progress through history, boils down to individuals with no money or ability to share it Okay for measurable technology, like integrated circuits, they're very competitive. If your circuits are faster and cheaper it can boost profits for your company. Other forms of technological progress. Less quantifiable as potential improvements, the outcomes are unknown If they not seen as profitable less funding from the private sector is likely If research and development are financed by investors, they want to see as high returns as possible But thi

Welcome to Finance & Fury, the 'Say What Wednesday' edition. Today's question comes from Brad, "Any chance you could do a podcast on Australian foreign debt? Is it possible to pay it off? Will paying it off have a negative effect on our economy? Are most or all countries on the path to austerity?" Brad! Awesome questions as it will flow well into next Friday's Furious Friday episode. We'll tackle some of the debt issues here, which actually adds to the structural issues that our economy will face …which might cause some issues in the share market and property market. But to start off with…What is Foreign Debt? Foreign Debt is the total of government, financial institution, household and business debt that is borrowed overseas. Australia's Net Foreign Debt totalled just under $1 trillion last year. It's important to note that foreign debt does not equal national debt, which is the total government debt. It comprises government borrowings from overseas residents and government borrowings from Australian residents and thus excludes overseas borrowings by the private sector. It doesn't equal Household Debt (which is massive as well) Foreign debt is distinguished from other forms of foreign investment capital inflow such as foreign ownership as it carries with it the obligation to pay interest and repay the principal. Types of Debt Gross foreign debt is the sum of all non-equity liabilities by Australian residents, the major component of which is the total amount of borrowings from non-residents by residents of Australia. It includes securities issued such as bonds as well as loans, advances, deposits, debentures and overdrafts. In Australia the figure is close to $2tr which is a dramatic increase since 2005 when it was close to only $500bn Net foreign debt is equal to gross foreign debt minus lending by residents of Australia to non-residents and non-equity assets such as foreign reserves held by the Reserve Bank. Sitting at about $1tr at the moment Reserve assets held by the Reserve Bank comprises gold, foreign exchange, special drawing rights and Australia's reserve position in the International Monetary Fund. Where has this come from? It's all behind the scenes. Most of Australia's $1 trillion dollars in net foreign debt has been borrowed through the banking system and used to increase home lending. This has helped fuel property price increases. As at June 2017, the banking sector had borrowed some $850 billion from offshore, equating to 49% of Australia's GDP The Irony - Australia's government debt is relatively low when comparing us to other countries but due to the Federal Budget being hamstrung slightly by the banks and their offshore borrowing excesses. The Government has to limit its own borrowing that it would normally spend on things like infrastructure or other projects. There is a fear that Australia will lose its very safe AAA credit rating. Many of the ratings agency tell a similar story. This would downgrade the banks credit ratings and lead to the unravelling of the private debt bubble created by the banks. This also increases the costs of lending for everyone; the Government, the banks, you and me. With a lot of our net foreign debt tied up in the financial system (especially in home/property lending) there is going to be a bit of an issue if we lose our AAA rating and the cost of borrowing goes up. Essentially then it will be up to us to pay this debt off rather than the government, especially given the new Bail-In laws (whilst I touched on this slightly last week I will cover more thoroughly in another episode). I doubt the Government would need to do anything in regards to Austerity to pay back this debt as they can take over banking operations. What does all this mean? Not many nations have accumulated $1tr in Net Foreign Debt like we have. It's equivalent to about 56% of our GDP, and is up significantly from 8% in 1995 Australia's banks would never have experienced anywhere near the same degree of asset (loan) growth without the ability to borrow so much from offshore debt markets. The total value of Australian home loan debt would probably not have grown so strongly without this access. Australian house prices would be materially lower as a result – the more people can borrow the higher prices go! The fact that banks can borrow so much is a reflection on foreigners' confidence in the Australian economy and our ability to repay our debts (AAA rated is seen as safe) The key risk is that the banking system's ability to continue borrowing from offshore rests with foreigners' willingness to continue extending credit to them. This is a concern if we lose our higher rating. Few countries should be as worried about the prospect of sharply higher global interest rates as Australia… if rates overseas go up then our repayments will also go up. Too much foreign debt is a huge risk if a financial/economic crisis occurs and foreigners are spooked. For example, if there is a collapse in the price of Au

Hi guys and welcome to Finance and Fury. Today we will start off on the miniseries with the best place to invest money in 2019. Investments to Consider in 2019 Where should you invest your money? Question plagues both beginning investors and established pros. We are always looking for the best place to invest money for the here and now, and beyond No investment is guaranteed, I wanted to share my thoughts on different investment options for 2019 and beyond. Each one of these will suit someone's circumstances better than the other Maybe you have built up a respectable sum of money in a high-interest savings account, but you know that saving cash isn't enough, you want to do something with it. The propensity to hold more money in a high-interest savings account versus stepping into the realm of risk and buying into something that can go up, and can go down. But, over the long-term has a higher return than cash but in the short-term can definitely lose more than cash. What are the options: Break these down over 2 episodes, Today and next Monday. Today we will break down the share market. Should you be investing in shares. For the next Monday episodes we will look at investing in property, then yourself (education), starting a business (risk/return versus capital) and should you reduce debt? Should you invest in shares in 2019? Shares If you have been paying attention lately, you'd have noticed the market lost some value. Is this a correction or will it continue through 2019? ASX (Australian Stock Exchange) has suffered some heavy losses. From the start of September, it started declining, with a peak in August S&P 500 will have lost all its 2018 gains by the end of the year and then some, and many believe that's just the beginning of a spiral that might last years. First point: Breaking down the market, which is shares being bought and sold by millions of people CBA is down -12%, WBC also down -18%, ANZ is down -12%, and NAB is down -16%. This equals by weight of 22% of the market a total -3.26% loss on the market. But during the same time, CSL gained 38%. This goes to show the market is made up of many different shares. Why have the banks gone down? There has been a lot of bad press during the Royal Commissions with class action payouts, and the new bail in laws where banks lost their government backing Why has the market crashed? Comes back to a lot of uncertainty Covered some in previous episodes on shares, see resources at the bottom of the page. Is it anything new? Not really, it's more of the same thing happening Trade wars: the Tariffs between China and America Allies and enemies: Xi Jinping (China's leader) is meeting with a lot of African leaders to secure resources The risk to us isn't some short-term reduction in trade, but long-term as sides are picked. This will be further explored in a later episode Midterms are over: Republicans kept the senate The Democrats won the house. Which is good for Trump. He has achieved a lot in the first 2 years with tax cuts. When you look at the state of the American economy, the rising federal reserve rate has dampened market growth, which is a correction and saves it from reaching the growth bubble territory. Europe: Yellow Vest Protests or "gilets jaunes". This is still going on, as Europeans are waking up finally and protesting against policies provided by the EU France: 84,000 across the country in the 9th week straight Emmanuel Macron: National debate on 15 January in response to weeks of protests by the "gilets jaunes", so we will see how that goes This has spread across the rest of Europe and even reached Canada Concerns in France are that of Macron in response wants to reduce taxes on pensioners and increase the minimum wage. Which is just more of an increase to public spending Will do nothing but require the government to borrow more, pushing up France's debt Keep the EU Block's interest rate low to afford the repayments Cause pressure on EU Bond market. Especially with Italy as well, being one of the biggest bond providers in the EU Brexit: I will do a follow up episode on this one in the near future as well By plan or by blunder, the failed negotiations may accelerate the collapse of the EU I personally don't think it was some well thought out 4D chess move. But the no deal means no 40bn pound payment to the EU How happy will the France and Germany population be to have to cover this in additional taxes? What is the effect of these things? Most have little effect on the underlying health of companies here in Australia, beyond tariffs Cash flow on companies: The ones that dropped heavily are AMP, Banks, RFG, TLS These drops were specific to the company, not the economy. Not a good outlook though for some sectors What about the rest of the market? Profit taking caused a drop in some. The real question is will it continue? I like patterns and data. I spent a few hours going through all of the historical data since 1902 Markets don't behave like they used to

Welcome to Finance and Fury the Furious Friday edition. This is part 6 in the series, the second last episode of the series. So this is 2 more than expected in the series, which I guess is good for me. To do the last subject justice, I have broken it into 2 episodes otherwise it is just too much information all at once. When we started the series: How lucky we are lucky to live here and now. Today I want to start winding things up, break down what system got us here and why it works Core question behind why there are political fights. Different people's beliefs in what part of progress the government should have Also, people have different solutions to different problems Socialism: Government solves all problems. Whereas in Anarchy: No Government to solve problems I don't think either is good. Already gone through why on Socialism, I don't like people starving or having no freedom Government policy is meant to help, but ends up hurting: China in 1958, they killed all the sparrows to spare their consumption of grain so more people could eat. As a result, locus swarms emerged because there were no sparrows naturally keeping order, and 30m people starved between 1959 – 1961. This was as a result of 70% government policy. Regardless of if the policy was in place to improve, it did the exact opposite. Anarchy would end up devolving into a narco-capitalism or corporatocracy. E.g. Escobar or Jeff Bezos. Starts with freedom, but maybe too much. It develops to a point where they get drug kingpins or mega-wealthy people ruling. But they would be new, possibly those who own food, water, would become wealthy and paper money would mean nothing, and the resources become valuable Eventually go back to feudalism where we have lords of water and wheat Need to look for something in between these: What is the best option? What is a governmental system meant to do? Solve problems! Some simple problems are: Protection of the population: Military/States and borders to reduce predation Violence: Laws and people to enforce them What problems (or needs) do we have? Maslow's hierarchy of needs Physical needs met: food, water, warmth Safety needs: shelter, further warmth and rest, (public housing for $100 p.w) also protection: police and law enforcement I know that those who favour a 'social democracy' mean well. It can work, for a while until the money runs out. And it always does. Spending always has to increase and if an economic crash happens it becomes a very fragile system. But what about the rest of our needs beyond physical and safety? Can the government provide the rest? Removed need for community and belongingness (social). Living in apartments, you don't need anyone else if something goes wrong. However, with farmers in the outback, they may live kilometres away but they know each other in case something goes wrong. Little left to get esteem in for individual achievements, as asking for things and not earning them doesn't give much satisfaction Self-actualisation through development, creativity, and happiness. Further discussed in the next episode. Can never achieve self-actualisation when people are always looking down the pyramid at safety and physical needs. But just for more of it, better food, shelter, and security This process will be different for everyone because we have differences in what makes us happy We all have different solutions to every problem. So does outsourcing problems to the government work? Typical cycle: Problem identified (what is a problem for some, isn't for others) The problem is identified by some groups, sometimes these are government bodies who are funded to find problems This is the issue with group reform We all want the classical progressive dream: A good education, a safe environment and workplace, and healthcare needs met Who provides it is the thing that has changed: How did it use to work? Where did it work the best? Classical liberalism: Go through a few points that apply today which are more relevant Liberty as the primary political value, within reason. Freedom for the individual is the goal Rule of Law; non-aggression principle, but they still need to be enforced. But when using spying as an enforcement tool, it is a total loss of freedom of privacy Individualism is looking after the ultimate minority. It's these individuals that form groups. So you're able to improve groups from individualism Free Markets: Economic exchange should be left to voluntary activity between individuals. That is why private property is necessary, first and foremost. We need private property to be able to do that. History shows us that leaving things to free markets rather than government planning or organisation increases prosperity, reduces poverty, increases jobs, and provides goods that people want to buy Taxation, regulation, restrictions: Having superannuation contribution caps, and increasing the retirement age gives a boost to the government, at a cost to you What is at the core of this? Freedom

Welcome to finance and fury, The Say What Wednesday edition, today we have a question from Mila: Question We are expecting our first child very very soon, so what is the best way to invest money for your children, apart from the obvious solution of having a dedicated savings account. Where can we get a better return and keeping in mind the different tax implications for having it in my name, my husband's name, or the child's bank account? We are looking to give it to them when they are 21. Thank you, Mila Today we will explore those points: Funds for your Kids Gift: we will also do another episode on Education Funding itself. However, this episode is just looking at investing funds Something they can access at 21 to put towards buying a house, holding still, etc. The best solution would be heavily dependent on your situation What are your marginal tax rates, mortgage payments, etc What is the intended purpose of the funds will be at 21 (gifting, education, etc.)? Considerations: Are the funds being invested or not? If no, you have less to worry about Savings accounts, and mortgage offset accounts are usually for a shorter term Banks are happy to open accounts in kid's names, as they 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). If yes, which options help to grow the balance over the long term Index funds, shares, managed funds or other types of investments. 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 (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, and some companies expressly prohibit ownership by people under 18 for the same reason Three options: Investing by the parent 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% 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 parent 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 credits, you 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. The cons are 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 it, you have to pay CGT/transfer costs Can be caught out with Trustee as well Know the trustee personally, I bought first shares at 16, as I was under 18, my mum helped. I was the account designation, but mum was the owner on my behalf 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 back and watch it grow. Then, after you have owned the bond for 10 years, you can withdraw all or part of the proceeds free of tax. However, there is no obligation to withdraw your money and you can leave it in the low tax bond area for as long as you wish. The ability to access the investment at any time i

Hi everyone, and welcome to Finance and Fury. Today won't be a full episode, unfortunately, I am a little unwell. I am providing a bit of an overview of what the next few episodes will be about. When making investments, it's all about considering what will be the best thing for you now and into the future. So, I will spend a few Monday episodes breaking down what investments you should actually be looking at to make now, for this year. I'll be breaking down all the investments and options for 2019. We will be looking at shares, property, yourself (through education), starting your own business, and reducing debt. We will be looking at the 5 different options, and break them down in a lot of detail. We will start with shares and property, to see if they are a great investment, depending on your situation this year, what markets might do, what they are expected to do, what the long-term payoffs will be. Then, there'll be another episode to break down investing in yourself or other businesses. In a way, investing in yourself could be the best long-term investment return you ever get. Also, investing in your own little start-up business can be a great long-term return. And finally, covering an obvious one, reducing debt. So, guys, I apologise for the lack of a full episode today. I just wanted to release this to let you know there will be a full episode again from next Monday, and what it's going to cover. But in the meantime, if anyone has any investment topics they'd like me to cover as part of the series, please let me know over at financeandfury.com over on the contact page. Then, I can include it in the series as well. So until the next episode, enjoy the rest of your day.

Welcome everyone to Finance and Fury, the Furious Friday edition. Today's episode is part 5 of the miniseries. The last part looked at the 'fair go', what is fair for some, isn't for others. Nearing end of series, I want to put forward a case. The constant need to make things 'fair' i.e. have an equal distribution of goods = destroys equality of opportunity for a nation. It destroys what makes nations great (no opportunity from authoritarian governments, we covered this in episode 2), and starts to reduce the freedoms of the nation which is the equality of opportunity. Where does this 'fairness' mandate come from? Because it's a relatively new concept in society. The cause is our progressive nature. Progressivism is the support for the improvement of society by reform A philosophy based on the idea of progress, which asserts that advancements in science, technology, economic development, and social organisation are vital to the improvement of the human condition Progress is what separates us from other animals, which is why we are the 'king of the jungle' Our desire for never-ending improvement is great! Allows us to better our positions. We are hardwired to do it. However, there are not many inventions from those being coerced into creating verse those people who are passionate This is where reform comes into it, and I have an issue with it. The reform is a type of social movement that aims to bring a political system (in Democracy) closer to the community's ideal Reforms are mandated changes by the government. Reform in a democracy, politicians will pander to the crowd. This is seen across civilisations, like in Rome with Caesar and the mob rule At the core of progressive philosophy is the improvement of the human condition As the human condition is measured on the individual level, progress is great. But when you measure it in collectives (groups), that's where you can find issues Measure progress: All individuals doing relatively better, but some groups did better than others This is when progressivisms will make any country socialist if left unchecked/or goes unnoticed. This is the focus of today's episode. Swapping the focus of individual conditions to group conditions, in the nature of progress, seems to lead a nation to become socialist Progress itself: Humans always change, nature is always progressing. Progress is fantastic, only when it benefits everyone Technology throughout history, with fire, the wheel, and the printing press, the internet, and telephones During the age of enlightenment during the 18th + 19th century lead to an explosion in knowledge sharing and technology, and wealth (free market) First adopters got very wealthy through the new industries like banking, oil, and railroads. These are all relatively new technologies and they built empires for the individuals who managed to corner the market In society, up until about the 1600s most western countries were ruled under a monarchy, which people genuinely accepted. It was understood as the monarchy having the divine right to rule. But then, people were given the freedom to do what they want. The feudal system then shifted to more free markets. The wealth of monarchs never helped anyone, whereas, the wealth of robber barons helped millions of individuals Got wealth through providing cheaper oil, heating, steel, and general goods that people use These resources, now available at the turn of the age of enlightenment, helped many people, but also generated a lot of wealth for the owners What happens when equality is now a mandate of the government? Now progressivism is about equalising economic and social conditions The problem? Some people have more money than others. The solution under this mandate? Something is wrong with the system, and you just need to redistribute the wealth Do you want to help those at the bottom? What is help? Give a man a fish to eat, or teach him how to fish? Which is the better solution? Enter in new economic theories for new inequality and how to equalise the wealth distribution. Not let anyone own anything in the first place. 1900's progressives originally thought the problems society faced could best be addressed by providing good education, a safe environment, and an efficient workplace. This all sounds brilliant, but slowly changed the focus on solutions In the early 20th Century, theories were put into action with 'reform' like communist/socialist movements (economic/eugenic) Socialism upbringing across a lot of nations lead to the starvation, from reform, 110 million dead The reforms themselves come from the legislate for compliance in society. That's with the governmental power over the population. Increased when some of the population want it (Social organisation – One of four Core Components of Progressivism) This all comes back to activism: with groups campaigning for laws as votes equal change Question: Is it better to let people choose to adopt something for themselves, or is it better to force th

Happy New Year! Welcome to Finance & Fury's Say What Wednesday. It's been pretty quiet on the question front, I'm guessing with everyone away over the holidays… so today will be a quick episode covering the number 1 question I got all of 2018 but never answered – Sponsorship. I get one or two emails a week from companies looking to promote products/services and everyone I talk to asks me why I don't advertise? Do I make any money from sponsorship? The quick answer is no, and I never plan to. Preface – I don't have anything against advertising. Lots of people now make their living from Youtube, Podcasts, etc. I think it is great. It's the free market in action and allows people to make a living. Podcasting started as a little side project. I get bored pretty easily, so it was something to do nights/weekends. I enjoy doing this. Helping to educate people, talk about topics that don't get covered very much. I get to learn as well. Thankfully the personal finance topics don't need be researched (otherwise I wouldn't be good at my job), but the topics on politics, economy, history, psychology, I research because I want to make sure I know what I am talking about. As a bonus, I don't have to rant about this stuff to my friends/family – so I think they enjoy me doing it to. Reasons I don't want to do sponsorship. Never intended. I don't need the income. This might seem hypocritical as this whole podcast aims to teach ways of increasing your income. I don't intend to stop working – I'd have to start doing 3 podcasts a day to avoid going insane. Wouldn't it help to boost income? Yes, but ironically money doesn't factor into the motivation. Cost/Benefit – How much would I earn, versus all the other cons. The cons: Don't know the products/use them Get it with professional referrals – risk to give recommendations on things if they are bad, and I don't want the client to have bad experience It discredits me if product is bad. Most requests for sponsorship are for financial companies/investments/platforms. There are strong regulations around adviser kickbacks and I don't want to have any conflicts in advice What if the product tanks? This is also why you rarely hear me talk about specific investments; they might be good today, even tomorrow, but what about 1 year from now? People listen to these episodes at different times If I personally don't really believe in the product it's not right to promote something I myself don't use. Corporate interests – My content then has to be 'advertiser friendly' This used to be just naughty curse words, now it goes further and can restrict what you talk about I want carte blanche – I want to speak my mind. If you haven't noticed, do bash on some things sometimes. It's a slippery slope – it starts with small concessions, even self-censorship. Sponsors can control what you say. I don't want to do it to you guys Personally don't like sitting through other podcasts constantly plugging various products and companies. The whole point of this is to educate you guys and sponsorship wouldn't help with that. This is why I scratched the intro – I don't want to waste your time. If you have any questions from Monday's episode – what do you want to know to help achieve your goals? Or even how to get goals in place? Hit me up on the contact page 😊

Welcome to Finance and Fury Welcome to the new year, depending on when you listen it may be new year's eve or the new year Hope you are in for a good night, or not recovering from one. Starting off with a question; looking back on the year, are you in a better or worse financial position? If not, never fear because today's episode we will look at how to be in a better financial position (and what that really means) this time next year, and importantly how to implement some action plans to make sure you're always moving forward. Plus I will share with you my goals and the process on how I came to them Help to illustrate my strategy, to help you put yours together and implement them What are your financial goals for this year? Or new year resolutions? Maybe you haven't thought about them yet. By the end of this episode you should be able to think of at least 3 and something to put in place Financial goals are related to 'what you need money for'. Most will be related to other goals you have Short term goals, this could be saving for a deposit on a home, getting out of debt, or saving for a holiday Long term goals, these are mainly around financial independence, or things that take a long time to achieve like a passive income. My Goals for 2019: Revolve around my longer-term goals Equation: Achieve many short-term goals to achieve the larger long-term goals. Which is from the underlying purpose. If you need help, some of the archived episodes from the "self-made millennial" podcast are worth listening to. Like how to come up with purposes and goals in further detail. My Long-term goal: it's all around the concept of freedom, being able to do what I enjoy, and that's helping people to become financially independent My short-term goals do shift over time as I learn of new ways to achieve the long-term goals Putting together courses, doing podcasts, advising, it's all really what I enjoy doing What limits this? Resources, really there are 2 forms of resources time and money, and money can buy time Staff: You could pay someone to work full time while you do something else. E.g. $60k = 1,920 hours back to you Frees up more time for development: making webtools, calculators, etc which all cost a decent amount to get up A lot of my long term goals revolve around this one question: what can I do to improve other people's lives and also be financially independent. A by-product of this is reaching passive income needs. When 100% of your income is self-generated, you have the resources to achieve this goal, and detract from the first goal My financial goals went on pause for 18 months whilst setting up the business Starting from no income, so no staff, to a few staff, getting a premise, my own license. This all takes money. My process For me a financial goal isn't set unless it has a yes answer to the following: Will it put me in a better financial position? What does 'better' look like? It varies depending on the goals Simple measurements depending on your goal Will it move you closer to your individual goals? For my shorter term goals, will it help my team to expand to start achieving more. Will it help me get more done. Will it move you closer to your financial independence target? Target: Wealth to generate Income: E.g. $100k in passive income, you'll need $2m today. Which is $2.9m in 15 years' time. If you are new to all of this, have a listen to previous episodes on how to work this out. This can be found on the podcast show notes. Will it close the gap (every year)? There are categories which most goals fall into which are either: Building wealth: Investments and businesses Increasing income: Salary, investments, and business Break down further, like reducing taxes, reducing debts, etc. to increase income My financial goals for this year Personal: Be financially independent by 40 (same goal as when I was 20) – Smaller goals for the year Contributing to Super: around $10,000. I haven't been able to for a while, with starting the business up. As cashflow went into expanding company. Didn't want to go into debt so I funded the business from savings and business cashflow Hitting investment targets each month, which is similar reason to super I didn't draw much out of the company Increase monthly investments by $1,000. So a total of $1,500 pm, on top of the reinvestment of my existing investments Podcast/Course: Not so much of financial goals Have a second course done by the middle of the year Podcast: Keep pumping out 3 eps a week Get a few calculators I've built into webtools as a site resource These are a quick summary of my goals. What are your financial goals? Not many people stick to new year's goals. There can be too many, normally people think this is good to have a lot of goals, however: It's hard to go from 0 to 100 overnight, it's a lack of inertia. Something continues in its existing state (rest or in motion) unless it is changed by an external force Example: say you get 10 goals down now, and they are all

Welcome to Finance and Fury the Furious Friday edition. This is part 4 of the mini-series. Hope you all had a good Christmas. In the last episode, we talked about how the population is mobilised in a political spectrum. Today we talk about what the population is currently being mobilised for: Australian politicians/interest groups - the idea of the "fair go" Australia's last four prime ministers have all used the term at some point. (Hard to keep track of them now) Rudd used it on Howard's WorkChoices reforms. Gillard said it in "we are the people who hold onto mateship and the fair go" Turnbull used it when saying "We have a very unique culture in Australia and we have a very good mixture of capitalism and the free market, but we also have a culture of fair go, of looking after each other." What is this 'fair go'? Well it's impossible to associate the idea of the "fair go" with any precise meaning. It is essentially whatever the person using the term regards as fair or just from their frame of reference. Genius in this is it takes individual perception and weaponises it Plus the government assumes a lot of responsibility for looking after each other. It's an easy solution for us if someone else will solve the problems in society Do we have a problem with fairness? What is fair? The definition: "treating people equally without favouritism or discrimination" Does this mean the same rules for all? Or same position and outcome? It depends on the definition The definition in society is using the egalitarian flavour to look at fairness and justice (Fair go) Concepts at a basic level: egalitarians agree that all citizens have their basic needs met Infrastructure, healthcare, education, ending extreme poverty. These are good and have beneficial social consequences. Providing everyone with equal access to these resources. Equality of opportunity is also regarded as another important requirement of "Fair Go" This means that all citizens should have the same chance to develop their natural abilities, regardless of their backgrounds, this is great. It's shown in Western countries through the measurement of mobility of wealth In 2007, Andrew Leigh did a study on Australia. The conclusions were that Australia has a higher level of mobility than the US, which is extremely high. The study looked at inheriting wealth vs self-made wealth. "in the United States, the heritability of income is similar to the heritability of height. Australia, income is only about half as heritable as height" Housing as an issue. Housing for all, but how do you solve inequality when it comes to housing? Bill Gates has a very nice house, so to take away his equality of opportunity, gates no longer allowed in his nice house. This is the implementation of equality of outcome. Does this sound fair? Income distribution is another issue. If ending poverty is the goal, then we have already succeeded in that. But, is ending poverty the goal? Or equalising incomes? Some take the idea further and suggest it requires an equal distribution of resources (equality of outcome) Income inequality vs poverty, there will always be inequality in equal opportunity Australian relative poverty rate is over 26% of population (before taxes and transfers), Falls to under 13% after taxes and transfers. The relative poverty rate has been between 10% and 14% of the population since 2000 (where the poverty rate is set at 50% of median income) Poverty is measured by the middle-income amount halved. So for 1 – 5: the middle point (median) is 3 Halve it and get 1.5. If every quintile was the same income spit, then this would be the poverty measure If the median is the same as average? It shows equality in distribution. The average of 1-5 = 3, 15/5 What is the line here? The disposable income of less than $400 per week for a single adult (changes) or about $22,612 annually You can increase poverty under this measure by using disposable income first. The more equal things get, the more the baseline measurement for poverty gets. I had a look at the incomes and halved everyone's income in the bottom 80% and gave it to the top 20% This gave a median of $393 = $197 (or half) base. So as things get more equal, the relative poverty rate increases. This is ridiculous. Stats are easy to represent nothing of meaning, which is part of the reason disposable income is used. Under these statistical representations, the greater equality in Australia produces more poverty. This is due to a higher median being used. Absolute poverty: A Comparison from the Australian Welfare Report 2017. Those who can't afford to buy set basics in country This is currently 3.9% of households in Australia. Known as the "deep exclusion" zone Decreased massively! In 2001 it was 13%, which is a 70% drop since 2001 to 3.9% of the current population In 1973, the relative poverty mark was $62.7 p.w. That is a growth in the measurement of 4.5% p.a. but 'absolute poverty' has still decreased If it had grown with inflatio

Welcome to Finance and Fury. Today we have Jayden with us, and we will be talking about negotiating with banks and refinancing. Refinancing: Pros and Cons and how to negotiate Bank Valuations Interest rates might go up or might go down.so this is all about asking, is my bank giving me the best rate? The difference between 4.55 and 4.5 could mean 10's or 100's of thousands of dollars over the life of your loan. There are lots of reasons to refinance your home loan. If you have a home loan you are probably getting bombarded at the moment, from your next-door neighbour to the 7 o'clock news and they're all talking about refinancing. So is now a good time to refinance? There are a few different situations where refinancing could make sense for you, so let's go over a few of the main reasons to refinance your home loan in 2018. First up, what is refinancing? Refinancing is the process of taking out a new mortgage to repay an existing loan: often because there has been a change in your personal or financial situation, or simply because you want a better deal on your home loan. 1. I want to reduce my home loan repayments If interest rates have changed since you got your original home loan you could be able to refinance into a new loan with a lower rate. Let's say your current home loan interest rate is around 4.50%, you owe $500,000 on your mortgage and current repayment is $2,534 per month. You could look at refinancing your home loan to a cheaper lender who can offer an interest rate of 3.75%, your monthly repayments would reduce down to $2,315 per month, reducing your repayment by $218. How much are home loan repayments? Loan amount $ 350,000.00 $ 400,000.00 $ 450,000.00 $ 500,000.00 3.75% $1,620.90 $1,852.46 $2,084.02 $2,315.58 4.00% $1,670.95 $1,909.66 $2,148.37 $2,387.08 4.25% $1,721.79 $1,967.76 $2,213.73 $2,459.70 4.50% $1,773.40 $2,026.74 $2,280.08 $2,533.43 4.75% $1,825.77 $2,086.59 $2,347.41 $2,608.24 5.00% $1,878.88 $2,147.29 $2,415.70 $2,684.11 The craziest part is the power of compounding interest. Using the ASIC MoneySmart refinance calculator to do the numbers, if you were to switch to the new lender with an interest rate of 0.75% lower, on your mortgage of $500,000 you would not only save $218 per month but you would save $78,425 over the life of the loan! All by redirecting the extra repayment amount onto the principal. 2. My property has increased in value Broadly speaking, property prices in Australia have increased over the past 5-7 years. If your property's value has gotten a boost, you might be able to refinance and get a better rate. These days banks give better interest rates to borrowers with more equity. For example, if you bought your home for $500,000 and had a loan of $450,000 but the property's value has since increased to $600,000 you have increased your home equity from 10% to 25% and lenders will be more willing to give you larger discounts to get your business, reducing your interest costs and helping you pay off your loan faster! What if values come back lower than what you thought? Recent Case Study: Getting another valuation [from 2018] As you can see getting another bank valuation resulted in a $130,000 increase in the value of the property. This is the exact same property, at the same time – just by different valuers. Date Valuer Amount Difference September 2018 Bank Valuation 1 $640,000 – September 2018 Bank Valuation 2 $640,000 – September 2018 Bank Valuation 3 $770,000 $130,000 Challenging a Bank Valuation – Probability of Success It is estimated that only 3 percent of clients are able to successfully challenge a valuation. However, it does not rule out the fact that bank valuations are not always correct. Valuers can make mistakes and there are two main factors that affect the valuation of a property: The error made by valuers Their personal opinion Effect of Valuation on Refinancing Property valuation is crucial when it comes to refinancing. In case of a low valuation, loan to value ratio (LVR) becomes higher. High LVR requires lender's mortgage insurance which ultimately increases the overall cost related to your home loan and decreases the equity amount that you can get access to. Measures to Take If You Receive Low Valuation Find Out the Reason for Low Valuation - The primary reason for low valuation is the fact that valuers do not find any supporting evidence for comparable sales of similar properties, and are unable to find supporting evidence for the estimated value of that property. Look for Recent Sales of Similar Houses - You can also research yourself and find houses that have recently been sold and are similar to your house. Go for Independent Valuation - If a lender shows you a file that contains property valuation and you do not agree with the figures, it is better to get a private valuation. You can also go to another bank for the property valuation. In any case, banks always use the lower of the two valuations. 3. The fixed rate period on my loan is expir

Hi everybody and welcome to Finance and Fury the Furious Friday edition. Today's episode is the Stages of Socialism Part 3 – the series talking about politics. The first episode was about the Fabians and their strategies, then we addressed the political spectrum and how nations shift along it over time If you haven't listened to those episodes it may be worthwhile catching back up or if politics isn't your thing feel free to skip because I know it can be dry I Feel like the basics aren't talked about enough, especially when it comes to passing laws etc. so sorry if it is dry but I find it interesting and I hope you do too Recap: So in the last episode, we talked about democracy and the transition to socialism: Getting the power to change the rules in democracy comes from the side with the most votes, and the ability to form legislative actions. In today's episode, we will talk about how political change occurs in Australia, through legislative powers, and how to get power to legislate from numbers Also, run through How the population gets 'mobilised' as a voting block and increasing the numbers of people supporting Want to break down a few trends that are of increasing popularity in politics over the last few decades The Basics The government has powers of control over the populace through judicial processes (Laws and the ability to enforce them) How are they made? This is from the Legislative Branch of Government also known as Parliament House of Reps or Lower house – 150 members across electoral zones by equal weight of population Senate or Upper House – 76 members – Each state gets 12, NT and ACT get 2 each (both increase over time) They meet at Parliament house, Construction began in 1981 – Wanted ready 26 Jan 1988 – 200th Anniversary of Settlement It was expected to cost A$220 million and be ready in May, but it actually cost more than A$1.1 billion to build (5x) Laws: Bills introduced into House of Reps – 2 readings, house committee, changes, and amendments, voted on Senate, same process, the bill gets voted on and sent to the Governor-General to sign and put into law. Who is the Queen's representative in Australia PEO (Parliamentary education office): About 200 bills are introduced into Parliament each year and about 90 percent are passed into law Ranges from 264 (in 1992) to 12 (in 1907), and an average per year since 1901 is 108. The average has increased massively over the last 30 or so years 90% success rate is a pretty high success rate, there are a lot of laws If you want to make something a law you simply need enough votes. I.e. People voting for the Members of Parliament is how you get this done How to Mobilise the masses Rules for Radicals (RFR) is a 1971 book by community activist and writer Saul D. Alinsky. The Rules and Tactics explain a lot of the decline in the political environment over the last 40 years with personal attacks and never-ending division It is essentially how to successfully run a movement for change. A direct excerpt is "create a guide for future community organizers, to use in uniting low-income communities, or "Have-Nots", in order for them to gain power." The book is compiled with the lessons he had learned throughout his experiences of community organising from 1939 –1971 Divided into ten chapters, and provides 10 lessons on how a community organisers can accomplish the goal of successfully uniting people with the power to effect change on a variety of issues Targeted at community organisers, the issues range from ethics, education, communication, and symbol construction Use of symbol construction to strengthen the unity within an organisation, based on loyalty to a particular religious affiliation Reason being that, symbols by which communities could identify themselves created structured organizations that were easier to mobilise in implementing direct action. Find a common enemy for the community to be united against, the Us vs Them mentality. We see this a lot in politics, the tribal mentality Use of common enemy is a major theme of Rules for Radicals, purely as a uniting element in communities Before we start Let's go through what Alinsky wrote at the end of his personal acknowledgments in RFR: 'Lest we forget (at least an over-the-shoulder acknowledgment) to the very first radical: from all our legends, mythology, and history (and who is to know where mythology leaves off and history begins, or which is which), the first radical known to man who rebelled against the establishment and did it so effectively that he at least won his own kingdom – Lucifer.' – A.K.A Mr Satan and his kingdom was Hell This perfectly sums up his rules, as socialism creates a hell on earth, from history we see plenty of evidence Socialism has been implemented in dozens of countries and it has never worked, we encourage you to research for yourself Shows a certain narcissism in people that they think it will work when they try 13 rules in the book We will go through the main themes on th

Welcome to Finance and Fury, the Say What Wednesday Episode, where every we answer questions from you guys! This week's question comes from Nelson, "Hi mate, Love the podcast. Admittedly don't agree with some of your more conservative political opinions but that aside I think the financial education you are providing to many people including myself is amazing. I have a question for Say What Wednesdays, something probably quite close to your heart. Can you please elaborate on the role of a financial advisor/planner. What do they do? Do you have to pay them up front? And, as a 24-year-old would it be suitable to go see a financial planner from the beginning of my journey or are they more targeted towards older people?" Awesome questions! And thanks also for sticking with the podcast even though we may have different political points of view. It's really nice to see, because there seems to be a lot of people bail on others, just because there's one thing they don't agree with. For anyone else – if there's anything you disagree with please let me know! I really like to hear other points of view as I might be missing something or haven't thought about, so any feedback would be greatly appreciated. To the Questions: The term Financial Adviser/Planner can be fairly broad which is why there is a bit of confusion about our roles. Each firm does have different methods of providing advice, and different ways of charging fees which further complicates things. The Focus of Advice; What Advisers Should Do Advisers SHOULD focus on helping individuals achieve their individual financial goals How well this is done does vary - giving the industry a pretty well-deserved bad reputation. Reports of 'self-interested' advisers. This might be inappropriate advice for customer given just so the adviser can benefit. The main focus should always be on how to achieve each client's objectives The advice provided to younger individuals should focus on setting up some foundations for building wealth over time, and achieving lifestyle goals such as buying a house. For someone who is 60 and looking to retire, the advice should be around strategies for funding income passively after they finish work. Cookie cutter advice for everyone, regardless of their situation, has landed some advisers in trouble with ASIC as the advice is not always the most appropriate for the individual's situation. The Process The process and the type of advice varies between advisers Advisers' process can vary but it generally involves at least 2 meetings, where one is a "Fact find" meeting, and the second is a presentation and explanation of the financial plan (called a "Statement of Advice"). My initial process involves meeting with clients (either in person or online) to complete a fact find, where we work out what people want to achieve financially (short and long term), looking at what they have to work with now, and then ways of achieving this. Research and prepare strategies that will help to achieve these goals. These strategies are discussed with the client in a second meeting. The advice is then finalised and presented again with the chosen strategy in a third meeting. Advice is then implemented and reviewed regularly – I prefer to think of it as an ongoing relationship This is why it is important to get along with and trust the person, which is a difficult initial step to take. Costs In most cases, initial consultations are at no cost. Advisers will either charge a fixed dollar amount or a percentage of the funds invested / under management. Upfront initial advice costs, and then ongoing annual costs ("Upfront" and "Ongoing" Fees) Percentages – these advisers don't normally want to see younger/low balance individuals It isn't very profitable when there is a low or no balance to charge a percent against. This is how all of the industry used to charge, up until the past decade - plus product providers used to pay percentage commissions on the balance of funds invested to the adviser (up until 2014). This is also where the reputation came from that advisers only want to see older clients, as older clients tend to have the largest balance out of the demographics to target. Savvy tip: If an adviser is charging a percentage of funds invested as their upfront fee, invest a lower amount upfront and then contribute funds later - $1m to $50k, at 3% ($33k to $1,650) Flat Fees – Typically charge based on the level of services provided Strategy, product, meetings – this all depends on the specific firm as to what is charged Percentages are slowly dying off Fee Disclosure Statements (FDS) and Opt in regulations This is what sparked a lot of the Royal Commissions – Advice business provide letter with $ and clients have to opt in every 2 years People were getting a letter in the mail showing they had paid a few hundred (or thousands!) to someone you don't know was charging you. When to see an Adviser In my opinion, it is always better to start thinking about setting you

Welcome to Finance & Fury! Today we're talking about five property investing myths you have to stop believing. At the moment property has gone from being the most talked about, exciting thing… to the most talked about, negative thing. Since 1994 there has been considerably accelerated growth in the property market. Generations have seen this, leading everyone to believe that "property always goes up". Everyone knows someone who lost someone in the stock market especially around the time of the GFC but made money on property. Myth one: Negative gearing is a great investment strategy (especially for the tax benefits) Negative gearing relies on you making a loss on an investment property while speculating the capital values will increase enough over the longer term to make a profit. While it can be good for some investors, it isn't going to be perfect for everyone, so you should consider looking at positively geared properties or reducing your overall debt position. Chalk this myth up to property spruikers and investment marketers who have a vested financial interest in getting you to overpay for property. People have made money from negative gearing in Australia, but there are better investment strategies out there than relying on negative gearings' tax benefits. What's a quick example of negative gearing? Simon buys an investment property, and the expenses for this property are more than the rental income he earns, resulting in a $15,000 annual loss. In other words, Simon has to contribute $1,250 each month from his cashflow to hold the property. As a result, Simon can use this $15,000 annual loss to reduce his taxable income from $110,000 to $95,000 resulting in a $5,850 tax subsidy to Simon. The property still costs Simon $9,150 per year. Negative gearing is a bad investment strategy for a number of reasons. It robs your cash flow. In Simon's case, he needs to pay $1,250 of his income every month to hold the property. You can only make money by selling the property. But remember, each year Simon holds the property it costs him $9,150 after tax. It generally relies on you being heavily indebted and can limit the number of investments you can hold. It costs Simon $1,250 every month to hold the property which limits his borrowing capacity. Depreciation tax benefits reduce over time. It is reliant on a tax strategy that could be removed after the next federal election. Although it should be grandfathered, meaning no retrospective tax changes, so Simon may not be affected. Myth two: The Australian property market is going to drop 40% The media had been suggesting properties in Sydney and Melbourne were set to fall by 40%. This is VERY wrong. Need convincing? In the same 60 Minutes episode that Martin North made this statement, 60 Minutes' reporter Tom Steinfort incorrectly reported Australian property prices have only ever gone up. Australia's property market moves in cycles, and Australia's largest housing market Sydney has seen values fall 5.6% since their peak in July 2017. But this is nothing new. In the GFC we saw Sydney dwelling values fall 7% over 12 months, After the Sydney Olympics (downturn in 2003-2006) we saw a reduction in values of 7.1% So, what about that 40% fall in property prices? The forecaster Martin North suggested the 40% drop in house prices was not his central scenario. Australia's unemployment rates would have to hit 9.5%, mortgage stress levels would need to increase above 40% and bank losses would need to increase fourfold. It's important not to think of Australia as one single property market. Each individual state and city is in its own stage, within the property cycle. You are buying a property, you are doing just that: buying the individual property and not the market. So individual property research is key. The positive factors underpinning our property market include: Strong population growth and net migration up 27.3% year-on-year; Urbanisation in limited supply areas Low unemployment and good employment growth, with ABS reporting "trend employment increased by 303,100 persons (or 2.5 per cent), which was above the average annual growth rate over the past 20 years of 2.0 per cent"; and Inflation is under control, at the lower end of the RBA's target band of 2-3%. Myth three: Rent money is dead money You should buy where you live, get a massive mortgage, and spend the rest of your life paying it off right? Rentvesting allows you to live where you want, and invest where you can afford. With Sydney and Melbourne median house prices nudging towards $1 million, saving a deposit seems to be getting harder for most home buyers. So rather than buy on the outskirts, why not rent where you want to live and invest where you can afford? Pros: For the lifestyle. You can live close to your work or in the city, and live the lifestyle you want to live. Get into the market quicker. In Sydney, the average place will set you back $1 million. You can choose where you want to invest. With rentvesti

Welcome to Finance and fury, the Furious Friday edition. Today's episode is Stages to Socialism Part 2, so if you haven't listened to last Friday's episode it might be worthwhile doing so. To start I want to talk about oranges. They're a delicious fruit, they grow on trees, and then mature. Then you can eat them. They have nutrients, that helps you survive. Have you ever left an orange on the bench too long? It starts getting a small soft soggy area, that slowly expands Then that mould starts to grow, this starts eating the orange and eventually consumes the whole thing I always thought of the Government as mould and the orange as the economy/free market/individuals The free market matures and Individuals get wealthy. Then government starts growing, we ignore the orange, and it rots Can't blame them, just like companies, or bacteria, every organism has one purpose to multiply and survive. This is the best tactic to last. Unfortunately, it is an organism which doesn't create, it only redistributes. Spending has to come from somewhere, like the population and companies and paying tax Don't get me wrong, governments are needed. But the question people disagree on is needed for what? Political Spectrum, it isn't just left/right, there isn't a simple way to look at this Think of this political spectrum as an X shaped chart. There are two axis Authoritarian to Libertarian – How much freedom do you have as an individual Government intervention levels/the size of government Rules and regulations that you must follow. On one end you have dictatorships, and the other is anarchy Economic Left (Communism/Socialism) and Economic Right (Capitalism) Control of markets and owning the means of production Property rights for individuals and are there many regulations to follow. Communism is on one end and the free market is on the other Government interventions – Authoritarian to Libertarian Power corrupts and absolute power corrupts absolutely Once a government gets 100% control, the system of government doesn't reverse that quickly Roll the dice every few years/decades, get a new leader. They may be worse and more corruptible than the last guy Leads to a slow decline in civilisations, for example, Rome with emperors, Medieval Kingdoms with monarchies Chop the head off the snake and the thing crumbles Inefficient – Become so heavy that it crushes itself, and doesn't operate efficiently. Barriers to entry (Regulations) and How much tax you have to pay (Redistribution) Economic Control and private property Creates four broad spectrums Economic Freedom to legislated equality Personal Freedom to legislate morality Examples NAZIs were authoritarian, with traces of economic left but more socialist Fascists like Mussolini who was very authoritarian. Decent amount of capitalism (But corruption and often nepotism that fails it) Stalin and Lenin were communist, with authoritarian regimes. On the economic left with no private property ownership Our system Does Democracy Work? A government of the masses. Authority derived through mass expression, What most people want Attitude toward law is that the will of the majority shall regulate Based on deliberation by passion, prejudice, and impulse, without restraint to consequences. We are a free market, democratic country, with socialist policies Military, Police, Health, Public Education, Roads. These are all publicly funded. Doesn't make us a socialist country, we are a free market This is good – Government is essential in many basic needs. It provides a platform for society to exist How well they do those things is a core component for the success of each country Protection of population Enforcing laws with the judicial system Infrastructure through Planning and contracting How much involvement is where people start disagreeing. Either more or less Government? How much time does anyone have to know what politicians are doing, let alone understanding each individual issue? George Washington once said "It is one of the evils of democratic governments, that the people, not always seeing and frequently misled, must often feel before they can act right; but then evil of this nature seldom fail to work their own cure." It isn't feasible to expect every citizen to be sufficiently informed and to vote on every law Problems they are trying to solve are complicated and takes time to fully comprehend People are busy with their own lives Democracy can go to Monarchy/Dictator quickly The people tire of their involvement in the mundane processes of legislation and legal administration. Over time they fail to remain properly educated as issues mount and become more complex. The people neglect governmental affairs when times are comfortable and erupt in a firestorm of uncontrolled emotions when times are uncomfortable If you rely on the government and that starts failing you, what do you do? This creates unrest In one of any significant size, dissatisfaction and disorder erupt and the people demand leade

Welcome to Say What Wednesday! Today's question is from Mark; "Hi guys, lovin' the show – I'm looking to buy my first place in Brisbane and I was just wondering if you have any tips on how to negotiate with the real estate agents and work out what price I should be offering first go" Negotiation Fundamentals As former FBI Hostage Negotiator Chris Voss (author of "Never Split the Difference") says, our life is a series of negotiation. Negotiate every day in our lives; with our kids to go to sleep early, a better salary, to buy a house. Negotiation is about finding a meeting point between what the sellers want for their property and what you want to spend as the buyer. When you are buying a house, everything is negotiable… What are the best Negotiation Techniques? I find I use mirroring when dealing with real estate agents…This is just repeating what the Real Estate agent said to you, helping you get more information from them. The more you know about them, and the less info you give about your situation, the better the position you're going to be in. House Price Research To start with: what a property is worth? When buying a house there is no hard and fast way of determining the value of a property. The price is what the market is willing to pay. all properties that are being sold on the market do not have a hard and fast set price Negotiating a house price is recognising that the advertised price is NOT the final sale price (vendor discounting) So just realise that the price your future home is being advertised for isn't necessarily the price you will need to pay! Action: Work out your maximum price Before you even submit your offer and start negotiating, you need to know what your upper spending limit is. research will help you determine what the property is worth, but you should also speak with your mortgage brokerto determine your borrowing limit… This is the maximum a lender will be willing to lend Know the Sellers Motivations Knowledge is power when you negotiate. Ask open-ended "What?" And "How?" questions Chris Voss recommends using calibrated questionswhen negotiating… These are approachable and non-threatening questions leading with "What" and "How". An advanced technique is to ask the same question three different ways What are the sellers doing after they move out What are the vendors plans once they sell? How soon are the vendors looking to sell? Action: Questions To ask the Real Estate Agent What are the vendors reasons for selling the property? How long has the property been for sale? What was the original asking price? How negotiable are the sellers on price? What do you think the lower price they are willing to accept? Consider the Real Estate Agents Motivations They want to be able to sell the property at the best price They want to be able to sell the property in the shortest timeframe possible. Ideally even before the property hits the market, that way they don't even need to do an open inspection! Get your ducks lined up Question is: How reliable is your pre-approval? What is a pre-approval? - A pre-approval is an indication from a bank that they are willing to consider approving your home loan once you find a property you want to buy. Have confidence with your finances When you start to negotiate the house price, you want to have complete confidence in your home loan and finances. You want to know the maximum amount you can afford. Action: Get a pre-approval today with our expert Mortgage Brokers Amazing Contract Terms Don't sleep on property contract terms. The most important information you need is: Purchasing Entity: I.e. your full legal name, including middle names. Price Deposit (remember the deposit is split into 2 parts) Finance and building and pest terms Settlement Dates Lawyer details What are the best terms to make my contract competitive? Really it is going to depend on the seller's situation as to what makes the contract more competitive. Most first home buyers will put 21 days for finance, 21 days for building & pest and 45 days for settlement. If you want to make your offer stick out, consider putting 7, or 14 days for finance and 30 days for settlement. Provided your mortgage broker has arranged pre-approval these terms will be very achievable. Signed a Contract of Sale on a Home? In some cases, the Real Estate agent will ask you to sign the contract of sale to show the sellers you are serious about your offer. This doesn't mean they have accepted the offer but is usually the second step in the negotiation after you've made your initial offer by email. Prepare your counter offer This is the point where lots of first home buyers get disheartened… The Real Estate agent will call you, say that the seller has reviewed the offer and not accepted it – but given you a counter! Negotiating house price after building inspection As I have mentioned before, Building & Pest reports are the single most important thing you can do when buying a house. And when you are buying an older p

Welcome to Finance and Fury Shares are at almost the same price as 2 years ago in Australia – What is happening? Mid Dec 2016 – 5,580, Last week (3rd) – 5,667 Today – is it a great time to buy some shares or a warning sign of things to come? Break down the health of the market, some reasons for the decline, and what the future may have in store To start – clarify some things When talking about Shares – Monolith of the market – ASX 300, but there are: Financials make up a large chunk (35% approx.) - These have been declining XXJ and XFJ = -11% over that time period = -3.6% decline in ASX Telecommunications (TLS) – Much smaller percentage of the market XTJ = -37% over that time period Volatility – Shows the average movements in price from their average over a period of time Higher levels of volatility can show that markets will rebound Volatility is higher when markets have declined – Markets go down faster than they go up Good time to buy? Looking back through history – graphs to help communicate this Since 1900 – Average return of 13.21% p.a. – Very long term average – Includes Divs – Accumulation index 22 (19%) negative years – 12 years (-10-0%), 6 years (-20-10%), 3 years (-30-20%), 1 year (-40%) - GFC 96 (81%) positive years – 19 years (0-10%), 48 years (10-20%), 17 years (20-30%), 3 years (30-40%), 7 years (40-50%), 1 year (50-60%), 2 years (60+) Past 12 months - -5.1% - Pretty small decline, so is the market likely to have another negative year? Back to back negative returns – happened 5 times throughout the last 118 years 1915-1916 - -1.9%, -1.7% (-3.6% cumulative) – Gain of 427% before (13 positive years) 1929-1930 – -3.6%, -28.1% (-30.7% cumulative) – Gain of 517% before (12 positive years) 1951-1952 - -3.3%, -11.8% (-14.7% cumulative) – Gain of 285% before (9 positive years) 1973-1974 - -23.3%, -26.9% (-44% cumulative) – Gain of 441% before (10 positive, 2 negative years) 1981-1982 - -12.9%, -13.9% (-25% cumulative) – Gain of 584% before (6 positive years) From 2009 to 2017 – 246% gain, including this year back to 234% From 2012 to 2017 – 193% gain, (-11.4% in 2011) – Historically speaking we shouldn't get a negative return 2 years in a row based around the trigger in gains What is the health of the market? Fundamentals - GDP GDP growth is low – 2.8% this last measurement 100% to GDP – Back to 2008 levels Our economy isn't going so well comparatively High Corp tax rates and low productivity – a sign of poor performance P/E - Market price today – 5720 – Leaves a PE of 15.04 = long-term average Indicates that the markets are fairly priced PE drops around – 2 metrics P & E Market crashes – Prices go down Earnings reductions – haven't had on a massive scale – Bit below LT average Dividend yields – currently sitting at 4.8% - fairly stable Back below longer-term averages – 4.4% Technically cheap – based on income yields Why is it declining then? Worries and lack of confidence Political uncertainty – Election coming soon Media stories – constant news cycles The issues will be – Confidence! World economy – We follow America in shocks Sadly not on the way up over the past 2 years. We haven't had the increase – so will we see a decrease? Trump – Give the market confidence – Lower taxes, cutting regulations and making it easier for business Riots (more protests) – Yellow vests – All through France, Brussels, Netherlands Where it might be heading Prices – While fundamentals look okay, the market isn't rational Emotions and fear – Can be rational (running from the guy with the knife), but loss aversion leads to irrational behaviour Currently - 9 periods EMA is below the 21 periods EMA then you likely see the market go down further Shares not quite oversold either The market looks to be bottoming out soon – But doesn't seem to be there just yet However – Still a good time to buy for the long term (10+ years) – Break it up Self-fulfilling prophecy – not the only one who can look at a chart to see this Massive market crash predicted – Mathematicians claim unprecedented global disaster Using analysis More likely to happen that they are saying this But the timeframes are 10+ years so who knows Summary Nobody can time the market or know when a crash will occur Financials have dropped in prices a lot – off royal commission and payouts Seem to be undervalued but updates may prove they will lose a lot of future profits Earnings have been declining Get active funds that work outside of top 20 – These show better long term returns Mid cap funds have average annualised returns of about 13-17% over 10 years, ASX (inc div) – 8% References: Australia Stock Market Valuations and Expected Future Returns https://www.gurufocus.com/global-market-valuation.php?country=AUS Mathematicians claim 'unprecedented' global disaster is just years away https://www.news.com.au/finance/markets/world-markets/mathematicians-claim-unprecedented-global-disaster-is-just-years-away/news-story/5351f779ce0cce6a48776e86fc15f7f0 Australian Sharemarket

Welcome to Finance & Fury, the Furious Friday edition. To start this episode, I want to say just how incredibly lucky we are to be born in Australia during this time, even compared to 100 years ago. Free societies are amazing – so why is there a massive shift lately in wanting to change it? What if you think that what we have is actually broken? What happens then? If you take for granted what you have? The loss of historical context, and perspective relative to how others live globally, there is a loss of ability to see how good we have it. This is our demise as it is used by those in power or those seeking power. We create a non-existent problem to solve and mobilise the masses, for the benefit of those in power, or those seeking power. This will be the first in a 5-episode series which will aim to break down the real risks of socialism in detail, and just how it infiltrates a society like ours. Breaking down socialism and they methods that are used including the conditions needed to be created first. Breaking down the stages of socialism Has to start with Capitalism (create wealth) Socialism Communism Next, breaking down the strategies used and the methods that people use to mobilise/manipulate the masses. Looking back through the history of Australia and where we may be heading Finish up by looking at the political spectrum overall, and ways to avoid a dystopian hellhole The road to socialism is paved by those with good intentions, unfortunately just results in awful outcomes every time. I might sound crazy but this is one of the most important eps (IMO) that I will do. We are blinded due to our incredibly narrow view, and we forget what life is really like for the majority of people living around the world, or for tens of thousands of years through society. Things can always be better right? There are many people with a desire to install a system in Australia which has been proven in the past to fail every time, and this is worrying. Doing the same thing over and over again, and expecting the different results. I know politics is not everyone's cup of tea, but it forms the rules and regulations that you have to exist under. You can ignore politics, but it won't ignore you. Every personal finance tip I give on Finance & Fury goes out the window if a system is installed that removes your ability to do it. We are seeing this increasingly over time, like the removal of negative gearing on existing properties being proposed, the increase in progressive tax…slowly chipping away at what freedoms individuals have. From what I see in the media, it's all a one-sided argument… so I want to present the other side for a change. Please do me a massive favour PLEASE share this episode if you don't want to live in a country that goes down like Venezuela. I want to create a series to provide insight into the warning signs that the country is going to hell, like warning signs for a heart attack. What are "Socialist Ideas" True socialists advocate a completely classless society - government controls all means of production and distribution of goods He final stage is communism where everyone owns everything and there's no government Socialists believe this control is necessary to eliminate competition among the people and put everyone on a level playing field. Socialism is also characterized by the absence of private property. The idea is that if everyone works, everyone will reap the same benefits and prosper equally. Therefore, everyone receives equal earnings, medical care, housing and other necessities. This sounds nice, but let's look at an example; say you have 2 people: you get 25% of $100, or 50% of $20? Socialism shrinks the pie, removes incentives and focuses on equality of outcome. Democratic Socialists believe that they can achieve this through the democratic process. But once they have it, the 'democratic' part ceases to exist – Once Governments get so much power, they no longer need the population to gain power, what happens then? Socialism can work in tribes of 100 people – Everyone carries their weight, otherwise you get an axe in the back of the head. Today it is the opposite: Under socialism those carrying the most weight get the axe in the back of the head first – as they create the inequality (through owning the private property) and need to go to achieve the goal. There are two ways of installing socialism Marxists: in a hurry to come to power through direct confrontation with established governments – revolution. We have talked about this in previous episodes about Russia, and China, and I will look to do further episodes on other countries as well, exploring the patterns that play out with Marxism. Fabians: This is something happening a little closer to home. They take their time to come to power without direct confrontation, working quietly and patiently from inside the target governments – it's death by 1,000 cuts Fabian Strategy: advances the principles of socialismvia gradualist and reformist eff

Welcome to Say What Wednesday. Today's question is from our listener, Sam. "Hi Louis, love the podcast! I'm wondering if you could do an episode on Adani. I've seen lots of protests over this and am just wondering what your thoughts are? Why are people so opposed to it? Seen the school kids striking or the media saying it will be the end of the world?" A wide range of groups are opposed to the project for different reasons – So let us go through each one in detail – not platitudes Let's get into it! What is it? - Adani Group is an Indian multinational conglomerate – diverse businesses include energy, resources, logistics, agribusiness, real estate, financial services, and defence and aerospace. Carmichael Mine in QLD - Adani has said that over a 60-year lifetime, the company expects to extract 2.3bn tonnes of coal, which would make it equivalent to the biggest mine in the US. Six open-cut pits as well as five underground mines - area more than 30km long. first mine in the giant untapped Galilee coal basin - production rate of 25m tonnes a year (originally 60m) Opposition to the mine present climate and environmental claims Climate: "Average emissions from burning the coal extracted will amount to about 77m tonnes of CO2 each year." That is the CO2 from burning it – Not the extraction – This coal will mostly be exported to India But why are CO2 emissions such a big deal? - The worry is that CO2 emissions are leading to climate change and global warming – "keep less than 2C – 90% of coal reserves need to stay in the ground" Question: Are CO2 emissions bad? If they are, how are they bad? To remove all carbon – Everything dies! Forgotten fact - inhaled air/atmosphere is 78.08% nitrogen, 20.95% oxygen, But we exhaled 5% by volume of CO2 = 100-fold increase - We breath out about 1kg of CO2 a day Aus Population breathing = 9.5m tonnes of CO2 p.a. – Almost everything we do increases CO2 Plants need it! Randall Donohue - CSIRO: Plants build their tissues by using photosynthesis to take carbon from the air around them. More CO2 = more vigorous plant growth - carbon dioxide fertilization effect = 11 percent increase in global foliage since 1982 (discounting rainfall and other influences). Negative feedback - increasing levels of CO2 = extra plant growth. Global greening trend observed by satellites, and the growing global land carbon sink which removes about one-third of all CO₂ emissions generated by human activities Great news for biodiversity, and good news for food security: plants are the primary producers that feed all animals - tree deep roots tap groundwater and at the same time stabilize the soils. Looking through history – Millions of years ago much higher CO2 – why everything (dinosaurs, plants) bigger Volcanoes release around 650m tonnes of CO2 p.a. passively As more plants grow - less CO2 as it is reabsorbed Rules of thermodynamics being ignored in modelling – Why no model has ever been correct Did basic thermodynamics at Uni (shout out to ENGG1500 UQ) – Negative feedback entropy Went from Global Cooling (globe was cooling until the by 0.2C until the 1980s), global warming, now climate change Assume the worst - the planet is warming and seas are rising (getting a larger surface area) - the natural result is MORE precipitation = the replenishment of the ice caps, glaciers plus deserts turning to tropical forests as the Sahara once was Points to consider How to solve: Carbon Capture and storage Technology - Modern day coal power plants pollute less than older designs due to new "scrubber" technologies that filter the exhaust air in smoke stacks (John Ondov, 1979) Client – Works in Paris on this technology – reduces emissions significantly This is such a complicated topic with multivariant – I will come back to it – But for now put a pin in it to get on with others I will do a whole other episode on the history of climate change movement – agencies mandates are only allowed to explore the 'risk of human induced climate change' – That is why everything points to us as the problem Massive risk – If it isn't us, then we may be going through all of this in vain Global Warming could have many causes – The Sun for instance! And how close we are to it changes over time I'm not denying the climate is changing, as it has always changed and always will Data from 400k years – Higher CO2 and Temp 325k, 240k, 125k, back there now Only focusing on one explanation is very irresponsible – plus only using a short timeframe – when trading a share you look at historical influences and data, and not current market data Why was everything bigger millions of years ago? More CO2 and higher temps I'll break down every other explanation in another episode – LOD, Solar Flares, Natural Cycles, UV waves, etc. Talk about the economic incentives of the policies as well – no better way to get a global tax on people Agencies doing the research (IPCC) – Mandated to assess the risk of human-induced climate change Remember - world to gets col

Welcome to Finance & Fury. Today we're talking about 9 reasons you may have your home loan application declined. We have Jayden Vecchio this episode running through the 9 reasons. As a result of the recent Royal Commission into banking, the lending criteria has become more strict to slow down the market there has been a limit set on lending. Small Deposit These days you will need 8-10% of the property value as a deposit to get a home loan…BUT, there are situations where you can use a guarantor to help you borrow up to 100% of the property plus additional costs. Best of all, you avoid paying lenders mortgage insurance which is usually payable if you have less than a 20% deposit. Being over 45 years old Although there are laws (check out the Discrimination Act) to make sure banks don't discriminate because of your age, these days it is common for the lenders to ask for an exit strategy in paying off your home loan if you are over 45 years old. This is because a 30 year loan term structure means the loan will end when you're 75, and the bank wants to know how you'll be paying the loan at that age. In effect, these restrictions can limit your mortgage options because of your age. While different banks have different policies, some common exit strategies for anyone aged over 45 years old are: Moving to a smaller house and downsizing once you reach retirement age Selling other investment properties, or shares. Releasing funds from your superannuation to pay down the loan. Recurring income received from your superannuation fund. Being too young Don't worry the young people get grief too from the banks! You can't apply for a home loan if you are aged under 18 years old, but did you realise that being aged under 25 can negatively affect your credit score? Being young you may have a very limited (or no credit history) at all to show you are a good borrower. Defaulting on phone bills could be the reason you get rejected. Spending habits When you apply for a home loan nearly all banks will want to see your last 3 months (Suncorp Bank want to see 4 months) day to day transaction account statements. If you spend a little too much at Zara, or at Dan Murphy's on the weekend this could affect your home loan application. The banks will look into your monthly living expenses to determine if you can afford to make your home loan repayments. Under 12 months in a job Lots of banks will want you to be in your current job for at least 6-12 months to be able to borrow with less than a 20% deposit. In other words, if you are borrowing more than 80% of the property value (with lenders mortgage insurance) you will get your loan declined… Unless you work with a mortgage broker that knows which banks will lend to you if you have been in your job for less than 12 months. We work with some lenders that will lend to you even if you have just started a new job. If you have been in the same industry for a while now and your previous roles weren't permanent positions, this can be overcome. Being self-employed In a lot of cases, the banks will decline your loan if you have been self-employed for under 2 years. We are self-employed loan experts and work with several lenders that will consider home loan applications with people who have been self-employed for only 12 months. Same again as before, if you've been in the same industry for a number of years, this can help. There are lots of Mortgage Brokers (and banks) who are generalists and just find self-employed applications too hard. We have a team of credit experts and will help find a lender that will work with you. Being Self-Employed for under 2 years can mean instant home loan decline with some banks and lenders. Buying a 'difficult' property It used to be the case that buying a unique property with a helipad caused issues… Unfortunately, the banks are being even more particular with what type of properties they will lend on. Some banks have restrictions to lending on units, others will restrict you based on bushfires, or flooding restrictions. In other cases, some banks will be ok with lending on apartments but have restrictions based on: The suburb or postcode where the unit is located, sometimes with restrictions based on high density or inner-city locations. How many floors the block of apartments has, sometimes with restrictions when it is higher than 4 stories. The total floor area inside the apartment, with restrictions if it is less than 40 square metres. If the bank already has too much lending in the building you are wanting to buy in. Regardless of these limitations, you can still get your loan approved by going with the bank that is happy with that type of property. Read More: How reliable is your pre-approval? The Flood Awareness Map lets you know what the history of flooding is at your property. Bad Credit History A bad credit history in the eyes of the banks involves small defaults, bankruptcies, and judgments on your credit file. Defaults on your credit file as small as $10

Welcome to Finance & Fury, the Furious Friday edition. For the past few weeks we've been talking about the EU and this week we'll finish up by looking at the flow on effects of the EU breaking up. There's no way to be 100% sure of what will occur but having a look on a country by country basis will help to break down what the flow on effects might be. The EU is simply a collection of countries so looking at the individual countries and consequences of them leaving is a good place to start. Also, we will have a look at the collective overall and how it redistributes wealth within its budget nature, and how this will help or hurt nations if they leave. If you haven't already listened to the previous two Friday episodes, it might be worthwhile having a look at them here and here, as we covered a lot of the history of this topic in those episodes. If you aren't interested, that's fine too it won't really hurt. First, we'll take a look at Britain and "Brexit" which has been a mess from the start Designed to fail from day one, Brexit has been nothing but poor negotiations – making nobody happy. The hurdle - Negotiating the treaties which would replace the existing Single Market and Customs Union. The Single Market The Single Market seeks to guarantee the free movement of goods, capital, services, and labour – the "four freedoms" Goods & Services: Tariffs and the Customs Union All goods and services attract the same rules regardless of where they were produced. No customs checks during trade between members of the union and no customs duties are paid on goods moving between EU Member States (all apply a common external customs tariff for goods imported from outside the EU). Some argue however, that the Customs Union increases costs and undermines economic growth as some nations can't afford to maintain the regulatory standards it imposes. This prices these nations out of the export game. At the same time a WTO study posited that the costs of conforming to the rules of origin are negligible. Free Trade Agreements are a viable option – NAFTA and other free trade deals work better than the Single Market. The issue is that Britain will need to negotiate new individual agreements with each of the nations within the EU. This is difficult, especially with the likes of Spain who are resistant. Capital: Single currency and Monetary policy Doesn't have to worry about this as much as they have their own currency Services: Applies to people who provide services "for remuneration" Labour: The free movement of people between member states for work. Labour and services aren't as much of a concern as the single markets and custom union Payments to the EU Estimated at 50bn pounds to leave – why? It was part of their agreement. Member countries have to make payments to the EU. EU Budget – 158 billion Euros in 2017 paid in by the member nations. This is then spent on EU policies and the EU's 5 areas of spending. The EU's 5 Areas of Spending Preservation and management of natural resources – 37% of the budget. Includes the common agricultural policy, common fisheries policy, rural development and environmental measures. The objectives of this: To increase productivity, by promoting technical progress and ensuring the optimum use of the factors of production, in particular labour; to stabilise markets; to secure availability of supplies; to provide food at reasonable prices. Common Agriculture Policy (CAP) – (Where most of the budget is spent) Works by maintaining commodity price levels within the EU and by subsidising production. The mechanisms are: Production and Import quotas: Sets the amount of goods required to be produced, restricts goods imported to the EU and exported from the EU. Market Controlled: CAP mandated demand for some produce is at a higher level than free market Import levies for goods imported to the EU - set at a level to raise the world market price up to the EU target price, and this renders nations outside of the EU uncompetitive. Prices are set at the maximum 'desirable prices' Trump/US and EU trade negotiations to reduce some of the tariffs Internal intervention prices: If the market prices fall, EU buys up goods to raise the price. Spent 3 bn Euros in 2017 buying oversupplied food and on selling to other nations. Incentivises producers to overproduce (they still get paid) but it floods international markets and drops international prices. In a free market when producers overproduce, prices drop and/or production reduces over time. At one point 70% of the EU budget was buying over produced food supplies, which they then dumped onto the world market. Reduced prices hurt 3rd world producers whose costs of production are higher. For example, in 2007 3.5m hectolitres of under demanded wine (which the EU bought). In 2009 2.3m hectolitres of wine (hectolitre = 100 litres). Subsidies to farmers – based around the area of land growing crops. Naturally the largest subsidies go to the biggest players (20 of 100 are bil

Welcome to Finance & Fury, the Say What Wednesday Edition, where every week we answer questions from you guys, the listeners! This week's question comes from Gabriel; "Hi Louis, I listened to an episode on NPR on the Chinese Social Credit System and thought I'd like to hear your thoughts on it. Is it a dystopian future? or an unavoidable path that started with the loss of privacy on the internet?" That's a great question, so today we'll run through the potential downfall of China, what this is social credit system, why they are doing it, and looking at what the future holds in store as well. The Social Credit System is a national reputation system being developed by the Chinese government. Announced in 2014 with limited implementation occurring this year The plan is to have this up and running fully by 2020 with the intention to standardise the assessment of citizens' and businesses' "credit". Credit is a combination of economic and social reputation We have 'credit' scores based around lending, but this is different. It's unclear whether the system will be an 'ecosystem' of various scores and blacklists run by both government agencies and private companies, or if it will be one unified system. It's also unclear whether there will be a single system-wide social credit score for each citizen and business. The system is a form of mass surveillance which uses big data analysis technology and AI There are 200 million CCT cameras watching people day to day. My suspicion is also that every device in China is doing this as well (webcam, phone, TVs, etc.) Equipped with facial recognition, body scanning and geo-tracking to cast a constant gaze over every citizen. Smartphone apps will also be used to collect data and monitor online behaviour on a day-to-day basis. Then, big data from more traditional sources like government records, including educational and medical, state security assessments and financial records, will be fed into individual scores. Mine data that users exchange with websites and derive a full social profile, including location, friends, health records, insurance, private messages, financial position, gaming duration, smart home statistics, preferred newspapers, shopping history, and dating behaviour. The outline focuses on four areas: "Honesty in government affairs" "Commercial integrity" "Societal integrity" "Judicial credibility" How you will be scored What you do: What you buy, internet browsing, littering, not obeying rules, even things like jaywalking Financial behaviour will be an important measure for the national social credit score (defaulting on debt) Excessive online gaming even reduces one's score. What you say: If you say something negative. For example, a reporter got charged with speech crime. What others do: Friends and family affect your score. The outcomes depending on your score: For Individuals - "Citizen scores" A Good Score will give you access to VIP treatment at hotels and airports, cheap loans and a fast track to the best universities and jobs. A Bad Score will get you locked out of society - banned from travel and visas, banned from renting or buying a home, or barred from getting loans, bank account/credit cards, freeze assets or bar employment. Currently 22m people are already on the 'blacklist' 9m people are already banned from domestic flights and train transport For Businesses – This is meant to serve as a market regulation mechanism – a self-enforcing regulatory regime Companies will comply with government policies and regulations Scores can be lowered by disgruntled employees, customers or clients Good credit scores will see companies enjoy benefits such as good credit conditions, lower tax rates, and more investment opportunities Bad credit scores will potentially face unfavourable conditions for new loans, higher tax rates, investment restrictions, and lower chances to participate in publicly-funded projects. Being a socialist state where almost everything is 'publicly funded' and state owned, if you get a low score, you'll be barred from basically all funding What is the whole point of this? President Xi said, "we will be rich and democratic, cultural, harmonious and beautiful" It is presented as a means to perfect the "socialist market economy" as well as strengthening and innovating societal governance – sounds beautiful, yes? John McCarthy (Founder of AI) who was raised as a Communist said, "The difference between a contemporary liberal and a socialist is that to a liberal the most beautiful word in the English Language is 'forbidden', whereas to a socialist the most beautiful word is 'compulsory' This indicates that the Chinese government views it both as a means to remove freedoms and to: Regulate the economy at a business level As a tool of governance to steer the behaviour of citizens This constitute a new way of controlling both the behaviour of individuals and of businesses – compulsory compliance. If you don't toe the line your life can change complete

In today's episode, Jayden interviews Michael Matusik, an independent housing market analyst. Michael aims to be a voice of reason amongst the distortion and in this episode, breaks down the Australian Property market explaining the property clock. He explores each capital city in Australia, discussing at which point in the cycle prices are sitting and where they head from here.

Welcome to Finance & Fury's Furious Fridays… This week we continue looking at the EU. If you didn't catch last week's episode, you might want to check it out here. It explains what the EU is, and what their role in Europe actually looks like. This week we dive a little deeper and look at the two issues faced by the countries who are considering leaving the EU - Loss of sovereignty & Immigration. Loss of sovereignty A lot of nations (Hungary, Czech Republic, Slovakia, Poland) lived under brutal authoritarian governments – for most of the 20th They swapped Nazi rule, for Soviet rule and now the EU rule The Internet Censorship Bill is a great example of loss of sovereignty Article 13 – the new Copyright Directive involves the creation of a crowdsourced database of "copyrighted works". Platforms such as FB, Youtube etc must take this into account and block "copyrighted works" from being posted on their sites. Billions of people around the world will be able to submit anythingto the blacklists There is no onus to prove you actually hold the copyright, and no punishment for false submissions Article 11 simply gives publishers the right to ask for paid licenses when their news stories are shared on online platforms. This would destroy FB and Youtube. Good or not – this is where a lot of people get their information, updates about current events and news. It's all shared content. The thing that was the turning point for most was realising how little Sovereignty they have when considering the current immigration crisis There are two complicated issues – The Schengen Agreement and The Dublin Regulations These will probably cause the downfall of the EU Schengen Agreement- border checks on internal borders (i.e. between member states) are abolished Restricted border checks to external borders only – Meaning free travel for anyone inside the EU Some nations aren't a part of it – UK still has customs, even on the train between France and the UK Almost the same as moving from QLD to NSW to Vic The Dublin Regulation- the EU member country that an immigrant first reaches MUST process the asylum application Prevents asylum applicants in the EU from "asylum shopping" – moving to the country of their choice, typically the country that will provide better welfare. This wasn't well enforced until 2016, but now it's placing too much responsibility on the member states on the EU's external borders – Italy, Greece and Hungary – who receive the most immigrants on their doorsteps. Italy – boats from Africa, Hungary and Greece – Turkey Spain – from Morocco The new proposal would introduce a "centralized automated system" to record the number of asylum applications across the EU and presents a "reference key" based on a Member State's GDP and population size. The country is essentially given a quota of how many migrants they have to accept. The populations of the country have no say on immigration policies If a Member State chooses not to accept the asylum seekers – it will have to contribute $250,000 per application as a "solidarity contribution". This got me thinking – that is a LOT of money per person – especially given the narrative that there is massive "economic benefit" in migration So, what are the economic effects of migration? There are two sides to the coin, and it all depends on who is moving where. Immigration – the words is now used as a collective term for both legal and illegal migrants entering a country, including refugees. The "Sending" countries experience both good and bad effects off emigration. "Brain Drain" - the loss of trained and educated individuals to emigration – This is generally through legal immigration. Currently more African scientists and engineers working in the U.S. than there are in all of Africa, according to the International Organization for Migration (IOM). Africa only retains 1.3% of the world's health care practitioners – UN Population Fund 2006 With almost 17% of the world's population and 64% of the population with HIV/AIDs Remittances - funds that emigrants earn abroad and send back to their home countries Estimates at $530bn in 2012 Money leaving the shores of a country reducing the multiplier effect in the nation the money is being sent from because it's not money that will be spent in that nation. Might have small currency pressures, and also props up the sending country with higher spending The "Receiving" countries Population growth is heightened – More people buying things, and paying taxes (that is, for the portion of immigrants who are working) This helps to address skills shortages but may also decrease domestic wages This can also add to public burden (though this is negligible for skilled migration) There are a lot of hidden costs of immigration; Welfare, Education, Healthcare, Infrastructure, Housing Increases unrest and economic inequality CIS study concluded that, "immigration has dramatically increased the size of the nation's low-income population" Disparities between immi

Welcome to Finance & Fury, the Say What Wednesday edition, where we answer your personal finance questions each week. Today's question comes from Tara; "Hi Finance & Fury, love the show! I was wondering whether you would be able to provide advice on the best way to invest $1,000 - $2,000? Would love to hear your suggestions?" – Tara Awesome question and thanks for getting in touch! Not technically allowed to provide 'advice' – but I can give a general outline on what to look for when starting to invest. Starting to invest is hard - especially when you don't have 10s or 100s of thousands of dollars. Hard to get diversification Hard to get low cost Hard to get in based on minimums Where to start What are your goals? How long is it for? – Investments should be made for the long term. If you're at a timeframe under 3 years, I probably wouldn't suggest investing at all Will you need to access it at any point? – If yes, how long? If you need to access the funds in the short term (3-5 years) something more defensive would be better If you're looking at longer (7-10 years), it's safer to invest in growth assets If you're looking at an even longer time frame, or you don't need the funds until you're 60, you could consider a different environment all together, like super. How much risk do you want to take on? Determines the allocation between growth to defensive Will you be making further investments? Determines what type of investment Buy sell vs brokerage – fixed dollar transaction costs can really add up when compared to costs that are based on a percentage of the investment amount. Keeping costs low Transaction costs Brokerage can start eating away into your capital Buy Sell spreads Platform costs/Brokerage accounts Accounts charge Getting diversification at low costs With $1,000 your investment options are limited to get many different underlying funds Need a range of shares across different countries. You need a range of asset classes as well. Some scenarios Let's look at 4 different options for investing $1,000 Shares Purchase one share for $20 brokerage (2% transaction cost). This is not great. Direct shares – One share offers no diversification and is open to high volatility LIC – Has diversification, but in one asset class with about 20-50 holdings on average Managed funds Buying directly from the manager isn't an option as they have minimum initial purchase amounts ranging from $10,000 to $500k Platform Purchase managed funds on a platform to get around the minimum buy-ins Platform – Probably looking at $200 in admin costs per year = 20% of the value in this case. ETF Single ETF – you can get an index fund, which provides a fair amount of diversification within an asset class Multi-managed ETF – Single purchase for $20 brokerage, you could pick up 7 or more other indexes Superannuation Contributing to invest inside superannuation – WARNING: won't have access until you're 60 years old – so this is for the very long term Non-Concessional (Personal) Contribution (NCC) Works well for those with a low taxable income (less than $36k including Salary Sacrifice or Fringe Benefit Tax) Post tax contribution No contribution tax paid going into the account (Low Income Superannuation Tax Offset). This is capped at a maximum offset of $500. Effectively turns $1,000 into $1,500 invested – in addition this sits in a lower tax environment Example – buy the same investment in super as a NCC vs buying an investment personally (outside of super) Assuming 8% p.a. for 30 years Personal - $1,000 at a 21% tax rate = $7,960 Super - $1500 at 15% tax rate = $12,770 (60% more over a 30-year period) Concessional (pre-tax) Contribution (CC) Better for those with a higher taxable income, but look out for the concessional contributions cap Contribute $1,000 and reduce your taxable income by that amount by claiming a tax deduction on it. E.g. Earning $100k = $390 of tax back personally. Effectively turns $1k contributed into $850 invested, once super contribution tax has been taken out In Summary Look at the diversification! Compare the upfront and ongoing costs Make sure it lines up with your goals and investment time frames As always, if you have a question you want answered on Finance and Fury, get in touch with us on the Finance & Fury website contact page.

Welcome to Finance & Fury. Today we're back talking again about property…and more specifically, buying property overseas. Some Australians have given up on the dream of buying property in Australia due to Australia's high property prices. An increasing number of Australians, including Millennials, are investing abroad with the United States as the most popular destination. They're priced out of the market here, and are looking to other areas and other countries for options. Property prices are still 32.4% higher compared to five years ago. There has been a 29% increase in Australian residents purchasing properties abroad. Pros Cheaper house prices, which makes it easier to get into property based around the deposit requirements Better yields on property overseas Australia ranges from 2% - 5% Philippines from 6.13% A.E. from 5.19% Costa Rica from 7.48% Indonesia from 8.61% Provides diversification outside of the Australian market Risks Finding the right property, knowing the area that the property is located, knowing the market and where that market is going. What Country? Where in the country? What type of property? It is typically best to see the property you are going to be buying Political and government risk Currency movements Buy a property for $300k overseas – if the Australian dollar appreciates by 5% compared to the US, you lose $15,000 in value Reduced or additional returns depending on whether the AUD appreciates or depreciates against the property's domestic currency (i.e. The USD if the property is purchased in the US) Differences in tax In the US there are tax incentives to purchase the property that you live in, compared to Australia Double Taxation Agreement (DTA) – Most western countries have DTAs so that your income is not taxed by the two countries. This avoids the potential scenario of double taxation on your rental income if you were to rent the property out. Legislation changes – Overseas government or domestic making changes For example, QLD put an absentee tax on land if it is over $350k Banking legislation and interest rate changes Difficulty in Management The biggest challenges faced when purchasing a property overseas is not only finding a suitable property manager to protect your interests, but also understanding and monitoring the market. Distance and language barriers Example – If someone stops paying rent, the laws may be different and it may be hard to get action on it As always thanks for listening! If you liked the episode let us know, if you didn't, let us know that too. And, if you have a question or topic that you'd like us to discuss on the podcast, hit me up at financeandfury.com on the contact page Here are some links to articles; Business Insider, "The 25 best countries to buy rental property and make money on the side" News.com.au, "The United States is the most appealing location for overseas investment, but an expert warns to do your research before entering overseas markets"

Welcome to Furious Friday where we look at misconceptions in the media about the economy There is a lot of talk about fears that the European Union (EU) will fall apart – That this will cause a financial crisis Will it? A lot of people are saying that the financial markets will collapse if the EU were to break apart I wanted to break a few things down What is the EU and what does it do? Why are the member nations considering leaving? What will be the effect on financial markets and the global economy? What is the EU? The EU is a geo-political entity covering a large portion of the European continent. It is founded upon numerous treaties and has changed quite a bit over the years In 1957, six core states founded the EU's predecessor, the European Economic Community (EEC) (Belgium, France, Italy, Luxembourg, the Netherlands and West Germany). Trying to create a common market – European Coal and Steel Community 1999 – Monetary union was established – 2002 was in full effect 19 members at the time Today – 28 members - undergone expansions that have taken it from 6 member states to 28, a majority of the states in Europe are a part of the EU. What is the EU's role? 7 EU bodies - EU parliament & Council, EU Commission, and European Central Bank (ECB), etc. Set laws and rules on almost everything for member states ECB - They do things like sent lending rates for banks, and combat any inflation problems that may arise Has its benefits Tax free trading among members – Tariff free for goods sold between countries Mobility of labour – Members can travel and live in any of the member states This is why many of the nations are wanting to leave – Come back to this Common currency – Makes doing business, traveling or moving easy for all members Motto: United in diversity – Everyone getting along NEW: They want to form their own army though – Worried a lot of people Can be used to keep other nations in line – German soldiers could go to Hungry to put down riots If the EU is so good, why are people looking to leave? Effects – Practicality it has downsides for the good – 3 big ones Removes monetary policy for countries – Puts it in the hands of the European Central Bank The central bank for the euro and administers monetary policy of the Euro area, which consists of 19 EU member states ECB's role - maintain price stability within the Eurozone are to set and implement the monetary policy for the Eurozone – Inflation targets conduct foreign exchange operations, to take care of the foreign reserves of the European System of Central Banks operation of the financial market infrastructure under the TARGET2 payments system Jointly owned by the member National Central Banks (NCB) The capital of the ECB comes from NCBs – Requirement to issue capital is based around the size of a country's economy in GDP €10,825,007,069.61 currently Currency – Being on the same currency might not be the best thing for some nations Works well for Germany – Can export a lot and not experience currency appreciation pressures – Makes them more competitive Estimated that the Euro is undervalued at 20% compared what a local German currency should be - adding to their trade surplus Other countries in the EU might not able to sell goods at a profit on the Euro if their economy is struggling Printing money - the exclusive right to authorise the issuance of Euro banknotes. Member states can issue Euro coins, but the amount must be authorised by the ECB beforehand Takes power from Member Governments – One stop shop on policy There are 751 members of parliament in the EU parliament – That is a lot of politicians – We have 150 in the house of reps in Australia Aus – 1 per 100k, EU – 1 per 700k people Hard to get representation and is very bloated What do they decide on? Immigration policies and quotas – This is the big issue for most member states Mobility of migration around the EU Dublin Regulation The first member state where asylum claim is lodged is responsible for a person's asylum claim – Hasn't been enforced well Countries in the EU have been given quotas to fill – This is one of the biggest objections Giant body choosing – Not the population Similar to the UN's Global Compact for Migration Lots of EU nations feel they are losing their culture and national identity Your first reaction might be to think that they are backward racists, I'll share some stats with you next Friday that will probably shock as to the state of things e. Natives are now the minority in many cities, like in Frankfurt and London Plus – Only 1 in 5 is from a 'war zone' – goes against what you hear in the media Regulation control – Single market regulation Goods and services – The EU gets to dictate regulations on food, manufacturing, services, etc. Makes some countries less competitive Environmental – Quotas and caps on trade Example – Common fisheries policy (CFP) – 77% of the UK fleet given rights to 3% Other 97% goes to just 6 companies One Dutch-owned super trawler has the right to

How can you pay off a mortgage with debt? Velocity banking and Offset accounts This question comes from Tom a podcast listener. He asks "Just wondering if you have ever used Velocity banking at all to pay down debt quicker?" In this article, we will explore what velocity banking is as well as some alternatives to paying off debt with other debt available in Australia. So what is it? And why haven't we heard about it? It's a Strategy of Using a Line of Credit (LOC) to pay down principal on a loan. Typically used in the US. How does velocity banking or 'chunking' work? The LOC becomes your income and expenses account. You put your pay into it and pay all your expenses from it, including your mortgage repayments. You use the LOC to pay down your loan through "chunking". What this means is if your income is greater than your expenses, the LOC should build up by the difference every month. If your household income is $8k p.m. and your expenses (inc mortgage) are $6k, the LOC should build back up by $2k p.m. Once the LOC builds up to the maximum amount, use the total chunk to pay down the home loan again. Keep repeating this process until the home loan is completely paid off. You spend the majority amount of your time repaying interest on a home loan during the life of the loan than you do paying the principal. Paying down a loan with more debt can be beneficial but it depends on if there is anything that works better available for you. You wouldn't want to take action for faster repayments unless it was the best option for you to take. Everyone's situation is different to it is important to consider alternatives, especially in Australia where we have other ways. Does it work? It depends on the strategy and the loan requirements. An individual can save a ton on interest repayments, but they can do so in other ways too. An example of an alternative strategy that is similar to velocity banking but possesses more advantages is using an offset account. What is an offset account? These are accounts that work similar to the LOC account, but you raise the funds through equity not borrowing. This is more common in Australia. What does that mean and how does this work? You skip borrowing the funds for the first chunk and just use the offset account as your income account. Use a credit card to pay expenses and then pay off the credit card each month from the offset account. The difference between income and expenses will reduce the total interest repayments on the loan as the sum in your offset account gets larger. Keeping as much money in the offset account as possible helps reduce the interest repayments on the home loan, as interest is calculated daily. Hence we pay off the CC at the end of the month, optimizing the time our savings spent in the offset account. Let's do a comparison between traditional mortgage repayments, velocity banking and using an offset account. The situation is as follows: a couple have a $480,000 loan at 6% for 30 years. The repayments will be made monthly. The individuals with the home loan have the following financial situation: The normal interest repayments come to $2,878 monthly Normal interest repayments would mean paying the monthly repayment for the life of the loan ($2,878 pm) Chunking or velocity banking would be taking a LOC and treating it as a transaction account. Putting income in and taking expenses out. In this example, the LOC will be $20,000. The LOC will be paid back in 10 months to $20,000 at which point in time the chunk will be used to pay down the home loan. Using an offset account will be treating the offset account as a transaction account. Putting your income in and taking expenses out. Building up the offset account over time until the loan is paid off. Which one is better? Normal repayments appear to be the worst, you are paying $555,477 in interest over the entire life of the loan. In addition, the loan lasts a full 30 years, 19 years more than using an offset account with the case study. With an LOC and chunking your payments, you pay $191,227 in interest on the mortgage. Plus an additional $10,339 for LOC at 8% p.a. A total of $201,566, saving the individuals $355,000 on their home loan. With an offset account, however, you pay $175,928 in interest which is a reduction of $379,540 in interest over the life of the loan. The table demonstrates that an offset account is best. You pay the loan off in the least amount of time and as a result, you pay less in interest overall. So what are the advantages? You can pay off the home loan faster by making additional payments sooner. This significantly improves the time it takes to completely pay off a mortgage. Pay less in total interest repayments over the life of the loan. These savings allow you to do more with your money after the home loan is paid off. What are the disadvantages? It requires free cash flow, as you need to have more income than expenses. All the strategies for paying off your home loan faster require the

Welcome to Finance and Fury…today we have Jayden Vecchio from Hunter Galloway on the show, talking to us about 5 game changing tips for buying property especially for those who are looking to build a a decent property portfolio. 5 Tips for Building a Property Portfolio 1. Have a plan Many property investors think buying real estate as nothing more than sticking some money into an asset that is guaranteed to go up. 'Just get a foot in the door and you'll make money from property', they say. So, what about those investors that got their foot slammed after investing in mining towns? Or bought off the plan purely for tax benefits? Successful property investors have an investment plan in place. Like a business plan, they take time to research the market, educate themselves and deeply understand the numbers. Do you have a goal of building an investment portfolio? As the saying goes, a goal without a plan is just a wish. 2. Don't Follow the Crowd – Contrarian Investment Over the past year, it has felt like one day we are being told property is booming only to be told the next day we should start preparing for doomsday falls of up to 40%. During the depths of the GFC, Warren Buffett said: "Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance." The bottom line is following the crowd, or market commentators into the latest property hotspot based on what everyone else is doing is a bad strategy, and one that generally leads to property investors losing money over the longer term. As Buffett says, insulate yourself from popular opinion. Do your own research, form your own opinion and build from there. 3. Alternative Strategies – Rentvesting Why can't you live where you want, and invest where you can afford? Example – Rent in Sydney $720 p.w. = $37,440 p.a. Or buy for $986,497 - 80% loan-to-value ratio over a 30-year term at 4.50% P&I, repayments are $1,022 each week, or $53,144 each year Interest $35,514 of this Plus, insurance, body corporate, rates, etc. In a rentvesting scenario, you could invest this difference Into another property, or, Look at diversification in the stock market, ETFs or fractal property investments like BrickX. Understanding the numbers Australia's richest property investor, billionaire Harry Triguboff (worth $12.77 billion), still takes time to review every sale and expense line of his property business. Numbers to understand Cashflow in and out Banking lending/serviceability 4. Change with the times Property values work in cycles Harry Triguboff, who has been investing for almost 60 years. He had said: "If times are bad you buy land and by the time you have finished building times are good again." The same is true with the lending market. Sometimes it's easy to get investment loans, sometimes it's hard. At the moment the reality is the royal commission is causing the banks to take a more conservative line on lending. Smart investors are adapting to this by understanding the following three points Live credit scoring is now out. Positive credit reporting is being used by the banks, and they can now see your repayment history from the past two years. A missed repayment 14 months ago could affect your ability to borrow. Get your credit file to know where you stand. Reduce your monthly expenditure. Banks are looking at what you spend each month, and will reduce your borrowing capacity based on these figures. Talk with your mortgage broker about your monthly living expenses and consider working on a budget to keep them in check. A bank valuation is an opinion. When leveraging equity, three different valuations from three different banks helps smart investors get ahead. It's not uncommon to see up to a 20% difference between valuations, and a good mortgage broker will help you navigate this. 5. Look at the long-term picture Warren Buffett: "Nobody buys a farm based on whether they think it's going to rain next year, they buy it because they think it's a good investment over 10 or 20 years." Buffett decides something is worth investing in because it will last, not because it's doing well right now. So many property investors are just thinking two or three years into the future or buy at the top of the market when FOMO is at its peak. This comes back to having an investment plan in place. If you have a goal of building an investment portfolio or creating passive income of $100,000 in 10 years, put together your plan and start working on it today. Talk with your mortgage broker or financial adviser about your investment plan, understand how different investment properties can affect your borrowing capacity and ultimately hold back your goals of building an investment portfolio.

Welcome Finance and Fury's Furious Friday episode. Today we're answering the question we asked on Wednesday about Labor's polices and their promises to lower housing prices/increase affordability. If you haven't checkout out the episode, it's probably worth while just to go back and have a listen as it gives a bit of a background on the history of the Australian property market, why the price increases have been happening over the last 20 years, and some alternative ways to create a solution. Labor's plans for housing affordability Increase financial stability, reduce homelessness and boosting jobs (this is mainly straight from their website). Both parties are running on similar issues here. They've done their demographic research, but they have different ways of doing things. What Labor have proposed (8 policies in total) A big ones - Reform on negative gearing and capital gains tax concessions Limit future negative gearing concessions to new housing – you will only be allowed to negatively gear on a new build. Reduce the capital gains tax discount from 50 per cent to 25 per cent (existing may possibly be grandfathered) I'll break these down in detail after I quickly run through the other policies first, as these two seem to be the ones that everyone is paying attention to. The following is copied from Labor's own website explaining the reasoning behind these policy changes. Im going to run through this with you line by line… 'Higher income Australians are able to use these tax subsidies to reduce the income tax they pay, primarily through negatively gearing property and the capital gains discount.' This is true – So far so good. They DID forget to mention however that anyone can access these strategies – it just takes time to build some wealth first. 'These subsides are concentrated in the highest income deciles, as low- and middle-income Australians are more likely to spend their income on consumption, whereas higher income Australians are able to accumulate capital and use tax benefits to reduce the amount of tax they pay on their income.' Again, very true – But this is a choice, there are many higher income earners don't accumulate capital and they spend it on consumption, and they are likely to be paying more than double the tax of a low-income earner, even after deductions. 'Ultimately, a dollar of tax avoided by high income Australians is an extra dollar of tax paid by all other Australians'. This is where it started getting loopy – It is starting to make it seem the economy is run on a collective quota system, which isn't true. Communists tried that. Australia's tax system is progressive i.e. the more you earn the more you pay. About 80% of the income tax collected in this country comes from the top 30% of income earners. 'Labor, believes that the tax system should be designed to boost jobs and grow the economy. The tax system acts a form of traffic lights in the economy, directing investment within the economy'. This Central planning. The more you extract from the productive sector, the less productive they're going to be. 'In setting tax policy, therefore, we should be designing a system that green lights investments on activities that boost economic activity, and underpin the efficient allocation of resources. Existing policy arrangements that direct resources to unproductive investments and speculative markets should be re-considered.' They are saying here that they want to design policies that reduce the incentive to invest for yourself and give the government more money through taxation so that they can "invest" it for you. Since they know better than you how you need to be looked after, right? Moving onto the policies - Will any of these actually help? Who knows? There are two ways of looking at the world; Demand side – Looks at affecting consumers Making people not want to buy property to drop prices Supply side – Looking at affecting supply Number of properties increases What are the policies: Limit direct borrowing by self-managed superannuation funds (SMSF) This might help, but may only be a drop in the ocean SMSFs can borrow to invest in assets on a limited recourse basis Loans in SMSF increase from about $2.5 billion in 2012 to more than $24 billion today. Worried that the growth will cause volatility in super and increase home prices Here's some perspective - $21.4bn is borrowed each month just by owner occupied individuals SCORE: this will have little effect Facilitate a Council of Australian Governments (COAG) process to introduce a uniform vacant property tax across all major cities This is taxing a property or land being held in Australia by people that don't live here Exists in QLD currently and is also being trialled in Victoria – 1% of value each year SCORE: Meant to punish people who are holding onto vacant property – Not sure, think this might hurt us a bit. Establish a bond aggregator to increase investment in affordable housing A Shorten Labor Government will establish a bo

Welcome to Say What Wednesday! Today's question is about Labor's plans to help with housing affordability. To answer that properly, I will spend today going through some underlying factors impacting Australia's property market, and what affects housing affordability and how it works in the long term. I will actually answer the question about Labor's proposed policy on Friday. At the end I'll run through what is probably one of the only ways to lower property prices sustainably in the future – IMO anyway. The History of Australia's Property Market Yes, a dry topic but stick with me, it's worthwhile understanding what's been going with property over the last 20 years or so. The Big Three Population size and growth 1901 at Federation, we had a population of about 4 million - High growth from the gold rushes up until then Population now – 25,122,747 Growth of 6 ¼ times over 100 years America – from 77 m in about 1900, to 326 m now which is growth of around 4 times Why has our population grown by so much? Great place to live – High levels of immigration We no longer discriminate – Immigration Restriction Act 1901 Dictation test – In a European language or English (Most, of course, were white and so it was referred to as the White Australia Policy) Governments progressively dismantled such policies between 1949 and 1973 Since 1973, after the dismantling of the White Australia policy and broadening of Australia's immigration policies, new groups of migrants have been arriving from all parts of the world Immigration now makes up over 60% of our population growth One of the Highest growth rates in the world, behind Saudi and NZ We are living longer Decline in death rates at all ages – Improved living conditions, sanitation, food, medical improvements 100 years ago, the median age was 22 years and 4% of the population was aged 65 or over. Nowadays, the median age is 37 years, and 14% of the population are aged 65 and over Timing of this is important – something interesting happened in 1994 – which we will come back to at the end of this Population distribution Today, 85%-90% of Australians live in urban areas, 70+% in the cities 100 years ago, less than 40% of Australia's population lived in our capital cities Melbourne was our largest city, with just over 500,000 people 1945 – Sydney hit 1.5m to overtake it (growth of 800k in 30 years). Between 1911 and 1945, Sydney's population grew by over 800,000 people, to almost 1.5 million, basically doubling. Interest rates Major increase in property price comes back to lending capacity 50s to 70s – 5% or so, very consistent during the gold standard, Brenton woods era 70s to 80s – went to 7, 8, 9, 10% 80s to 90s – 10 -17% 90s to within 2 years dropped back to 10% - going to about 7% 2000s – 7 to 9% (dropped to 5% in 2009) – then back to 7% Last 8 years been dropping - Now rates are below 5% So why has this caused property price increases? Supply and demand! Supply Urbanisation – The nature of Australian property supply is very centralised Sydney 4.6m, Melb 4.2m, Bris 2.2m, Perth 1.9m, Adelaide 1.2m Gold Coast - 600k, Canberra - 367k, Newcastle - 308k 65% of population live in 5 cities America – big 5 – NY, LA, Chicago, Houston, Phoenix – combined 19.3m – 6% of total population Size of houses are also bigger – demand for bigger houses In fact, the average new house built in 2016/17 was 233.3 square metres, the biggest in four years and more than 11 per cent bigger than 20 years ago. The average house built today is over 30% bigger than 30 years ago (the 1986/87 financial year). Second Behind America in terms of largest homes in the world Demand Immigration Urbanisation – People go where the jobs are Natural increase and net overseas migration contributed 34% and 66% respectively to this total population growth. In the past 10 years - Brisbane's population increased by 27%, making it the fastest growing of all Australia's capital cities in the 21stcentury (A lot of interstate migration) Demographics Baby boomers (1946 – 64) – Largest demographic from post WW2 boom In 1994 the last of the boomers turned 30 – The average property prices was fairly flat to upward sloped from 60s to 1994/1995. From that point and over the last 35 years, average prices have doubled - $140k to $280k (inflation adjusted) 1998 to 2018, the average prices went from $310k to $810k – that's more than 2.5 times in 20 years, and double the growth rate of the previous period. If the growth rate had kept at the previous rate the average price would be $664k rather than being over $800K Low interest rates More loans and low interest rates – mid 90s interest rates were 10% lower than the past few years previously and 3% lower than the long-term average of 10% This fuelled borrowings for investments as well and we saw a rise of investment properties being purchased If people can access more debt, they will The Outcome – 1994 to 2018 Brisbane – Median house price $126k to $524k. Borrowed $101k at 9%, today $419k

Welcome to Finance & Fury. Today we'll be running through some alternative assets – precious metals, like Gold and Silver. We'll talk about How they work How they fit into an investment portfolio Gold Price Silver Price Whilst they are very separate assets to each other, they work in a similar way. There has been increased volatility with shares in recent months, and this has led to an increase in gold and silver prices. They are considered an alternative growth investment; when other asset classes like shares, property and even bonds are doing badly, gold and silver are considered a "safer" way to invest. History In between the periods of barter and modern-day credit cards and paper money, gold and silver (plus other rare commodities) were used as a medium of exchange, or currency. This however, was inefficient. In the past your wealth, and the government's wealth was measured in gold, by weight. Gold rushes – in 1851 people flocked to the Victorian town of Ballarat If they found gold, they could exchange that for money Also used to back 'paper money' as the measure of intrinsic value Converted away from this in 1971 Now it's rare for people to have stacks of gold bars lying around Today, people buy gold ETFs, or Bullion through a few companies With gold, if demand increases, eventually price increases – this can work well when people are flocking to gold, away from other assets as they look for safety. History of Price Rise of internet saw ability for average Joe to buy gold as well. Prior to this, access to gold was quite limited. The price has been more volatile since early 2000's Why is gold and silver good? Limited supply – Paper money today has potentially unlimited supply – at the Central Banks discretion Government has debt in the trillions, Australia, the UK and most of Asia (other than China) are all up to their eyeballs in debt Came from getting the money printed by issuing a debt instrument (bond) for the cash – but they also have to pay the interest back as well Over printing creates pressure on the currency, increasing volatility. Demand – If people buy gold, the price goes up Supply is limited – you have to actually go and find the metals, and get them out of the ground, there are not many new sites being found. This is why they are considered 'inflation proof', retaining real value compared to fiat currency Diversification – Typically acts in an uncorrelated, or negatively correlated fashion to shares and property As people get worried about property or shares, they may buy more gold This pushes the price up Number of uses – not just investment which creates a more stable demand Not just used as a speculative investment Used in electronics, jewellery, medical Gold has special properties and is very versatile Disadvantage of Gold and silver No income return – Return solely based on demand Income returns can pick up total returns on shares or property if the growth is low or negative. Only Growth returns…which is hard to predict If it's in ETF form, good luck getting your gold! It's all electronic through derivatives. Buying it You can buy gold through an ETF, or some companies will store it for you. Where it fits into a portfolio Growth allocation – Mainly as a capital hedge Constructing a portfolio, it might be suitable to allocate 5% or so into gold, but that doesn't mean it's right for everyone In summary It's good as a long-term inflation hedge, and to diversify a portfolio out further, but can be volatile or non-performing (due to no income)

Welcome to Furious Friday! I recently saw a news article about Australians being "promised new laws to slash up to $832 from their annual electricity bills" This article outlines; This is a "federal government move to toughen rules for big energy companies and demonstrate action on household costs". Outline new laws "to set a default offer price for millions of consumers…response to calls from regulators …to put pressure on suppliers". The Government "promises the default offer will ensure customers are not being "exploited" because they stay on the standing offer from their suppliers rather than shopping around for a better deal". "Opposition Leader Bill Shorten revealed plans in August for simpler bills with "capped" prices under a Labor government, at the same time former prime minister Malcolm Turnbull outlined similar measures". "Returning to the table to negotiate with Labor a bipartisan energy policy that will support the growth of renewable energy, bring down carbon pollution and bring down electricity prices for Australian households and businesses is in the national interest," Mr Butler said. "The "standing offers" used by companies such as AGL, Energy Australia and Origin have been criticised for years because loyal customers miss out on discounts and are punished for not shifting to different suppliers". How will this work? ACCC's "reference bill" says that, in each region, it makes it easier for customers to compare offers from different suppliers, which is great because this increases competition Where it gets bad – Default pricing or capped pricing forces sellers/suppliers to limit their prices. When you break this down, whilst it SEEMS like a good idea, it isn't actually that great. Let's look at the stats, and the claims that there will be price savings on electricity Government says the price premium to be saved could be $652 in Victoria, $411 in NSW, $369 in Queensland and $273 in the ACT ACCC's estimate of annual savings from the default tariff measure is much lower, at $105-$165. Either way, both the Government and the ACCC have said that it will lower prices. What price capping actually does, comes back to my favourite thing - The Supply vs Demand equation When capping the price at which goods and services are supplied, it reduces supply, and this lowers infrastructure in the long term. Especially when renewable energy is being forced upon suppliers as well, pressuring them to cut their emissions etc These things increase costs to suppliers… so how will they pay for it? Demand – With lower prices, demand goes up, people use more when something is cheaper. This is a bad situation – Reduced supply along with increased demand = Not enough power Lack of power - Rolling blackouts A rolling blackout - an intentionally engineered electrical power shutdown Electricity delivery is stopped for non-overlapping periods of time over different parts of the distribution region. Rolling blackouts are a last-resort measure used by an electric utility company to avoid a total blackout of the power system. They generally result from two causes: insufficient generation capacity or inadequate transmission infrastructure to deliver sufficient power to the area where it is needed. Rolling blackouts - common or even a normal daily event in many developing countries where electricity generation capacity is underfunded or infrastructure is poorly managed. Long term effects of price ceilings When companies have price-ceilings enforced by regulation and are what they can charge for a service is limited, this effects profits. Their incentive to invest in the infrastructure and the grid goes down because level of investment can only come from profits If profits are going down because prices are capped, as publicly listed companies they're still obligate to maintain profits – otherwise investors dump their shares and the company can go out of business. A lot of individuals lose their jobs in the end. This results in a decrease in overall supply to the market. Pakistan In Pakistan there are shortages day in and day out. This highlights the chronic underinvestment into infrastructure, long-term planning sacrificed to short-term expediency, lack of leadership, cronyism and corruption. Capped prices meant the companies had no funds to build infrastructure The dual effect of the government setting low electricity prices PLUS the customers failing to pay for it meant state utilities lost money, and couldn't pay private power generating companies, which in turn could not pay the oil and gas suppliers… who cut off the supply. Infrastructure investment comes from revenues – if revenues drop, there is less money to maintain the power grid. Rolling blackouts in developed countries sometimes occur due to economic forces at the expense of system reliability (such as in the California electricity crisis of 2000-2001). Okay, lets look to a developed nation, and specifically, California in 2000-200. California had a shortage of ele

Today, we're talking about the Trump economy, and the state of the US market. Love him or hate him, America is doing better than ever – Trump just can't stop winning when it comes to a lot of political and economic factors. In his first 2 years in office President Donald J. Trump has achieved results domestically and internationally for the American people – he is the first President in my lifetime that seems to be putting his own countries interest first rather than signing a bunch of international pacts that look after other countries more so than his own. The American economy is stronger, American workers are experiencing more opportunities, confidence is soaring, and business is booming. Why is this going on? What we hear in the media is that America is going through so much trouble President Trump has put the American people first and made government more accountable – he is one of the most transparent Presidents in America's history. I will focus on the economics in this episode, but with that said, Trump has turned ISIS into an afterthought, and de-escalated tension with North Korea The share market may have corrected but it is still massively up. The play by play: America Economy is Stronger - American workers are better off thanks to President Trump's 'pro-growth' agenda Evidence – Share Market – Still Up 33% since Oct 2016 and the ASX only up 7.5% since then GDP Growth – 4.2% - which has beaten all expectations Nearly 3 million jobs have been created – 304k manufacturing, and 337k construction (Highest levels since 2008) Unemployment rate has dropped to 3.7, the lowest rate in over 50 years. Job openings have reached 7 million, the highest level recorded. Gallup Polls – 67% of Americans believe now is a good time to find a quality job Only under President Trump have more than 50% of Americans believed it is a good time to find a quality job since Gallup began asking the question 17 years ago. Restored confidence in the American economy, with confidence among both consumers and businesses reaching historic highs. Consumer confidence has reached a 17-year high Manufacturers and small business confidence/optimism hit record highs Energy production – Net energy exporter Trump travelled the world to promote the sale and use of U.S. energy How? Work Force changes and taxation – Leading to confidence Job training and workforce development to empower workers to seize more opportunities, signing an Executive order to expand apprenticeship opportunities. This is great for an economy – Everyone keeps saying that replacement of humans by technology is going to replace us – hearing that for hundreds of years – but, we adapt! Do you think that a medieval serf, where 80+% of the population were farming based populations – think that a computer engineer, or pilot would be an occupation? We are adaptable – why we are the #1 species Each American now gets more money in their account each week – Most Americans are now earning more due to the income tax cuts The top corporate tax rate was lowered from 35 percent to 21 percent so American businesses could be more competitive. This has caused companies to bring back money into America. President Trump signed historic tax cuts and Jobs Act into law, cutting taxes for American families and making American business more competitive. President Trump has rolled back unnecessary job-killing regulations beyond expectations. When you make it easier for business to operate – they do wonders for the economy The free market can choose very efficiently – Someone gets sick from eating at a restaurant for example. In the modern age, someone has invented an app letting people know that it may not be the best restaurant to go to. Businesses are incentivised to give the best service – or lose customers in the long run once loyalty runs out In 2017, President Trump far exceeded his promise to eliminate regulations at a two-to-one ratio, issuing 22 deregulatory actions for every new regulatory action, saving $8.1 billion. Fair Trade – lower regulations Since taking office, President Trump has advanced free, fair, and reciprocal trade deals that protect American workers, ending decades of destructive trade policies. Torn on this – Free trade is good, but not everyone wins Days after taking office, the President withdrew the United States from the Trans-Pacific Partnership negotiations and agreement. Made good on his campaign promise to withdraw from the Trans-Pacific Partnership. Opened up the North American Free Trade Agreement for talks to better the deal for the U.S. Worked to bring companies back to the U.S., and companies like Toyota, Mazda, Broadcom Limited, and Foxconn announced plans to open U.S. plants. Trump wasn't entirely wrong. Companies from developed countries that signed up to the deal, such as Japan and the United States, would have outsourced to developing countries that have low-cost labour and fewer labour laws, such as Vietnam. In which case, unemployment in developed

Welcome to SWW …on a Monday … because we have been receiving a LOT of questions about what's happening with this so-called "market crash", why has the share market dropped so much, should we sell to cash to avoid massive losses? Here's the back story The Australian share market has wiped out all its gains from the last 12 months Some say we have entered a technical "correction", plus Following a massive sell-off on Wall Street overnight It has fallen by more than 10% since its peak in late-August until October There were days last week when it was dropping 2+% in a day Why are markets tumbling? What America does, we follow, and so does the rest of the world The local market's substantial decline comes after the Dow Jones index fell more than 600 points – this wiped out all its gains since January - 10 months' worth New York's benchmark S&P 500 index - down 3%, Nasdaq (tech heavy) - down 4.5% Australia is still faring better than some others when it comes to one-day losses; Tokyo's Nikkei (-3.4%), Seoul's Kospi (-2.5%) and Shanghai's composite index (2.6%) Why is this occurring? There's a number of reasons, but a lot possibly comes back to investors taking profits ahead of upcoming uncertainty US Share market in 2 years rose 40% until the declines over the past few weeks Uncertainty is a major factor on share markets; People get worried, they sell their investments… so the market goes down If you aren't certain about what tomorrow holds, how can your plan and act today for it? Certainty and confidence in the share market are the key drivers of consistent growth Markets with too much confidence turn into bubbles This will always exist in the share market; Consistence in confidence leads to overconfidence, overconfidence then leads to bubbles … but then profit taking sets in Profit taking = Selling Factors affecting sentiment and uncertainty; there are actually many things, but let's focus on the major 4 US Midterms – Elections – Anyone heard of the blue wave coming? It is where the house and senate is voted on Among the 33 Class 1 Senate seats upfor regular election in 2018 are 23 currently held by Democrats, two by independents who caucus with the Senate Democrats, and eight by Republicans Republicans – 51 currently – All polls show Wyoming, Utah, Texas, Tennessee, North Dekota, Nebraska, Mississippi are all safe Republican – 8 seats up for re-election 6 are up for tossups – In independent states Democrats - 47 19 seats are safe There is an assumption – Republicans remain 51- Dems at 49 – but they're still not in power. Media is saying the "blue wave" everywhere… but I don't see it Economic advisor Larry Kudlow this week blamed the spectre of Democrat wins for falling market prices. Even if this is true, if it was the only reason for the market price fall, it is a great time to buy! Raising rates – The Fed are very quickly raising rates President Trump slammed Fed boss Jerome Powell, saying he threatened growth and appeared to "enjoy" hiking interest rates. - "Every time we do something great, he raises the interest rates," How does raising interest rates affect markets? Shares; Free cashflows of shares is used and in the equation the risk free is the denominator Analysts use the risk-free rate when they determine the intrinsic value of a stock. And the rates on Treasury securities are used as the risk-free rate. A lower risk-free rate typically translates into a higher intrinsic value. Bonds and Bond pricing; Rates rise, bond prices fall, and it's worse the longer the duration Rate rises can hurt the valuations of both asset classes Decline of Tech - disappointing quarterly earnings from some major American companies Tech stock declines drove much of the repricing 6 of the top 10 are tech stocks Geo-political Tariffs and trade wars Geopolitical tensions with oil producer Saudi Arabia for the killing of journalist Jamal Khashoggi EU – Low growth and Italy's conflict with the European Union regarding budget spending This could be a big one, not enough time here but will do an episode on the EU and economic breakup in a future ep We have been talking about America – Why cover it, we are in Australia? This does matter for us, not for fundamentals but 'monkey see, monkey do' Crowd behaviour – Share markets around the world are highly correlated. Similar factors and similar human behaviour What will cause Australia stocks to be volatile? Similar things - overarching factors mentioned before, specifically to us though: Political uncertainty is a big one; almost one Prime Minister every year for the last 7 years It's hard to invest if you aren't sure what is going on. As policies are likely to change so too does individual behaviour Example; You learn that the cost of bananas is likely to triple in price in two weeks' time…most people rush out and buy bananas. When an outcome is likely from a political change, people change their behaviours prior to it even occurring What will cause Australia to have slow growth in

Going to say it: Might be controversial – 'But is it okay to be white'? If you have seen - Pauline Hanson proposed an "It's OK to be white" motion in the Australian "Deplorable rise of anti-white racism and attacks on Western civilization". It was defeated 31-28 by opponents who called it a racist slogan from the white supremacist movement. Today I want to go through this in detail and look at the longer-term economic impacts – and it will have to do less with race than you think. Where does the story of neo-Nazis being behind this come from? Media claims it is from David Lane – American Neo-Nazi – Said to come from his "14 words" statement 'We must secure the existence of our people and a future for white children.' I did a fair amount of reading on his other work and couldn't find anywhere 'it's okay to be white' The "14 words" statement is clearly not the same thing So, where does it come from? It's OK to be white (IOTBW) is a slogan from 4chan in 2017 – self-proclaimed 'shit posters' They did it as a "proof of concept" that a "harmless message" would cause a "massive media shit storm" Did they succeed? I'd say they did succeed as it is not a statement oppressing any group of people. It proves racism in the media Why is it not okay to say it? A narrative has formed. It is easy to label someone as something – they can defend that they're not. You can't prove a negative – If someone says you are racist, sexist, or a homophobe it's impossible. For example – if someone calls me a homophobe how would I prove I'm not? Two of my best friends are dudes who are married to each other. When you're on the defensive though, it can just dig a further hole Social System is made up of Socio-Cultural, Economic, and Governmental systems, each interacting with one another. Socio-cultural A sociocultural system is a "human population viewed in its ecological context and as one of the many subsystems of a larger ecological system". The term "sociocultural system" embraces three concepts: society, culture, and system. Media, Hollywood and narrative, "Evil, white men" For example, I have seen many Arnold, Stallone, etc action movies ... the terrorists in them are always white. Not wanting to offend leads to "political correctness" (PC) PC can lead to society breaking down In response to this an opinion piece satirising how hard it is to be a white man – by a white man Richard Glover - SMH It's not only Senator Hanson. The whole Parliament has long realised there's a role for positive discrimination: rules designed to give "a hand up" to those who are doing it tough. In our case: the negative gearing laws, the capital gains discount, the franking credit system, the family trust laws and the salary-sacrifice provisions within Australian superannuation. Some say, "where's the fairness in a program that can only be accessed by one segment of society", but that's to ignore the special problems faced by people who are right here, living among you. Frankly, if you didn't grow up white and rich, it's hard to understand. You may have to check your lack of privilege. What he is doing, is associating white with wealth – Why? Well, we will come back to this I have a theory on why this might be occurring – well not mine, but Robert Johnson who analysed Jung Conscious - the ego represents the conscious mind as it comprises the thoughts, memories, and emotions a person is aware of. The ego is largely responsible for feelings of identity and continuity. Subconscious Personal unconsciousis essentially the same as Freud's version of the unconscious. The personal unconscious contains temporality forgotten information and well as repressed memories Collective (or transpersonal) unconscious. According to Jung, the human mind has innate characteristics "imprinted" on it as a result of evolution. Examples - Fear of the dark, or of snakes and spiders might be examples, and it is interesting that this idea has recently been revived in the theory of prepared conditioning. Why we resonate to a good story – "The Hero's Journey" where we start off on a journey, overcome the dark, etc. All parts of the personality, as we all have the capacity for evil. When you suppress the collective unconscious, this creates an "Ego Split" When an ego split occurs, you project everything about it on others Rich vs poor – Projection of "having money is bad" Economic Each society needs some system Ancients – Barter system – mostly peasants – couldn't accumulate much due to moving around Medieval – Coin/markets – settled – this created a nobility and large lower class Today it's much more complex – No class structure and easier to accumulate resources than ever. Plus, there is a lot more people. This leads to a greater variant of inequality, plus, they actually measure it now for the first time Governmental Government needs legitimacy to operate - Democracy through voting in – So cater to the socio-cultural and you can win Power base – tools of extraction From who do they e

Welcome to Say What Wednesday! Today's question comes from Katherine. "I heard a story on Hack the other day about Sweden becoming a cashless society – Can you explain this further? Is it a good thing and should we be looking at doing the same thing in Australia?" Sweden going cashless: This is not a government regulated change – it's based on the behaviours of the population. Individuals are choosing "cashless" over cash transactions Already considered to be the most cashless society in the world. More Swedes have access to a payment card than to cash, according to data from the country's central bank, Sveriges Riksbank, or simply Riksbanken. And the overwhelming majority of the nation - 85% - have access to online banking. How does it stack up? Circulation of notes and coins as a percentage of gross domestic product (GDP) Sweden: Just 2% of the total value of transactions in Sweden consist of cash Australia: About 4.2% of GDP Cash transactions in stores Sweden: 20% of payments in shops are made in cash Australia: Was 70% in 2007 but has declined to about 35% now UK: 42% of all retail transactions The Central Bank is worried: The situation has gotten to a stage where the Central Bank has had to warn the public about the rapid rate at which physical cash is being phased out of Swedes' lives. Reliance on only a handful of third-party payment systems: Riksbank Governor Stefan Ingves, "a completely cashless society would mean a small number of commercial players being responsible for all payments in Sweden, posing a threat to the infrastructure for payments" A cashless Sweden could be unprepared if faced with a crisis, he added. Demand for cash would likely increase in a crisis situation Some people don't have the ability to go cashless Elderly people and refugees are among those that would need access to physical cash Sweden could eventually "reach a situation where legal tender is no longer an efficient medium of exchange" This means you would eventually lose the ability to exchange your cash for goods and services, and therefore the currency loses its value. Already some businesses are no longer accepting cash There are other reasons – It's not actually safe to carry cash around (crime), plus there are issues around counterfeit money. It helps safeguard the stores from robbery. A cross-party parliamentary committee in Stockholm is currently reviewing central bank legislation to examine whether banks should be forced to provide cash services for their customers. Increasingly bank branches are refusing to offer over the counter cash services, due to weakening demand. Why is this occurring? Sweden is a unique economy when it comes to payments. It's home to a popular instant payment app called Swish, set up in 2012 by seven of the largest banks in the country. More than half of Swedish consumers are signed up to the app. Government and Central banks The public sector is required to facilitate people's access to cash, and to help enable people to living within society. It all depends on the likelihood of the country's legislative tightening of the central banks and legislation creating protection for cash An option being tabled by the central bank is a government-backed virtual currency called the e-krona. The project is currently in its second year of a two-year pre-study. The central bank is not keen on the idea of cryptocurrencies. A very poor version of money - not a stable store of value or an efficient means of exchange There is also the idea that government-controlled banks could issue electronic cash May open the floodgates – personally I don't think it's a good idea to do this. It has been done before and ends in hyperinflation, for two reasons; Loss of confidence in economy – expropriation of resources – increases political risk (demand) No control on limiting money supply (supply) What are the effects of not having cash in society? Black market economy gone In Australia – there is a lot of cash held in $100 bills Increased tax revenues – GST, Company and income taxes Absolute control over transaction – the Government can block you from spending money It's a way to be able to control the monetary flows baring transactions Tracking – Can be tracked in spending Thanks for the question Katherine! If you have a question or want to know more about any of the topics we discuss, get in touch via our contact page

Welcome to Finance & Fury! Today's we'll be looking at how to start, once you've set your financial goals. This is the starting point for anyone looking to get a plan in place. We have talked about goals in past episodes, but we haven't really gone into much depth. Goals and Reality – Setting goals and then making it a reality So, where do you start? If you have your financial goals in place that's a great start. It is about having a strong foundation for the plan and covering the basics. What are the basics to start a plan? We will look in depth at each one of these and what to do with them Budget Debt Management Personal Balance sheet The Foundation Building Blocks Budget: Cashflow is King Cashflow Components - Income, Taxes, Net Cashflow Gross income - What you get from employment or investments Taxes (what is taken out) - Based on marginal tax rates which progresses in brackets Tax Free Threshold - the first $18,200 at 0%, then the next tax bracket is 19%, etc Then, you need to add on the Medicare levy which is currently 2% Net Income/Cash flow – which is gross income minus taxes Net cash flow uses Daily living expenses (essentials) – Housing, food, utilities, etc Discretionary spending – Everything else on top Savings/Investment (what you have left to put towards your goals) Previous episode - Pay Yourself First; "Why work your whole life, just to have nothing left over?" Debt Management Bad debts - Personal Debts or non-investment assets that have debt attached to them. Avoid at all cost – it's selling yourself down the river Uses cash flow – To repay loan Works like a negative investment – Costs you interest, up to 21% Don't get into too much bad debt – for example: Credit cards and personal loans $10,000 of a personal loan If you have personal debts make a priority to get rid of it Good debt – Plan and manage Negative gearing – Can be good for high growth investments Goes against the budget metrics – Only as good as getting your marginal tax rates back Balance Sheet Starting point – Types of assets Lifestyle – Ones used for personal use – Personal Home, Cars, etc The ones that Bad Debts are attached to Investment – Assets for investments: Shares, Property, managed funds, etc. Good debts are attached to investment assets This should be a main focus Targets for investment advice Fill in the gap – The Rule of 20 allows you to determine roughly what you'd need in the future This is where you can keep track of your goals Here is an excel sheet for you to use This is the starting point Now you need to make a plan, and then implement it Get a budget in place – Increase what you're putting towards your goals Stay out of personal debt – pay off debts based on level of interest. The higher the interest costs the more important it is to pay this off quickly. Use a balance sheet in order to keep track of your progress towards your goals.

In today's Furious Friday episode, we're going to talk about one of the most dangerous things threatening our financial freedom – the notion that we are simply just groups of people. It comes back to a lot of economic theory and the use of models based on aggregates. This crosses over with the politics of grouping – 'The Poor', 'The Rich', for example. Tribalism and group preferences are dangerous – It's a tool of distraction. The narrative that things aren't going well because you are oppressed, or unlucky. It breeds hate, encourages divisive tactics in politics. It breeds helplessness – if someone tells you over and over again that you're a part of a disenfranchised group it becomes a self-fulfilling prophecy The danger comes in the solution which focuses on equal outcomes, and how to optimise society rather than people improving their own situation that make up that society. Not based on equal opportunity. Where you start has little to do with where you end up Individuals forms groups – SO my optimising individuals' performance for individual benefit actually helps optimise society even better, rather than just taking from one group and giving it to the other. Removes critical thinking and thinking for yourself For example, how does a policy affect you rather than 'groups' as a whole? What is the counter to this? Is there a theory that is based around individuality? The Austrian School of Economics a fairly unknown school of economic thought, which is a shame – This school of thought is the bed rock of modern-day economics and has been absorbed into mainstream economics. Theories like; Marginal utility – The theory of gaining satisfaction from additional units of consumption Opportunity cost – The cost of foregone opportunities / the cost of the next best option This is cornerstone to the economic problem of trying to solve unlimited wants with limited resources Theories on time preference, that is to say, we prefer the same size reward sooner rather than later Austrian Economics – The choices of individuals causes all economic phenomena. Unlike Keynesian economics which focuses on group preferences plus governments having a large input into the economic prosperity of the individual Core components of Austrian Economics Individualism: To explain economic phenomena - we have to look at the actions (or inaction) of individuals Argues that groups or "collectives" cannot act except through the actions of individual members. Groups don't think; people think. Groups are formed by individuals! Democracy (especially with compulsory voting) is built to cater to group preferences Partisan politics works well with a two-party system – Us vs Them Libertarian (where the state plays a minimal role) is obviously not popular with the Government itself – after all, once something has power it doesn't want to give it up. Subjectivism: economic phenomena goes back to judgments and choices made by individuals on the basis of whatever knowledge they have (or believe to have) and whatever expectations they have about external developments (events) and the perceived consequences of their own actions. Subjectivism is the theory that perception (or consciousness) is reality, and that there is no underlying, true reality that exists independent of perception. Example: Someone living in a private gated community has a different view on how the world is compared to people in poor parts of India! The same thing occurs within our own country. Example: Imagine that you have worked really hard your whole life, not wasted your money, put it away and invested well. By the time you go to retire you have a few million dollars and give to charity, spend time on causes – but… society tells you that you are evil. While you are a good person, people who aren't in your position think the only way you are rich is that you stole it from others – that is their reality. Tastes and preferences: subjective valuation of goods and services determines the demand for them so that their prices are influenced by (actual and potential) consumers. This is the opposite to socialism where the State provides the value of goods to the population Or, price fixing through governmental policies Example: Beer – I like German dark beer – I would be willing to pay more for it than others Tariffs and Taxes – leads to reduction in optimal utility Example: Climate change taxes and carbon emission taxes – Penalties collected by the Government that effects the optimal choice of the individuals. This leads to economic waste and societal loss overall. Opportunity costs: Reflects the alternative opportunities that must be foregone. It is one of the principles of main economic theory; What is sacrificed in order to do what you are doing Monetary or 'utility' – time spent listening to this could be spend doing something else – Thanks! Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative foregone (that is not chosen). It is the

Welcome to Finance & Fury's 'Say What Wednesday'! Today's question is from John; What are the tax implications of investing in shares, owning, holding, selling, dividends etc, does this vary to ETF, LIC etc? Is tax payable on the change in value year on year, or only when a profit or loss is realised? And does this change if they are held in a company or trust? We'll take a look at: Types of taxes Structures - Managed Funds, Shares, LICs and ETF Two types of taxes Income Tax – and Franking Credits depending on the investment Franking Credits (FC) – helps avoid a double taxation. Tax is paid at company level and then calculated alongside your personal tax to ensure tax isn't being paid twice and that you're paying tax on that income at your marginal tax rate rather than the company tax rate. Capital Gains tax Income Tax Companies - Shares/LICS – Same thing really Shares/LICs pay dividends – the board sets the FC levels Shares – vary regarding dividends and franking credits LICs – Typically set a dividend and have FC attached ETFs – work a little differently to Shares/LICs Australia – Franking credits are attached in most cases but are a flow through from the underlying shares Not going to be 100% Fully Franked International - International shares which get withholding tax taken out overseas 30% for US ETFs – can claim back 15% withholding tax from overseas income Capital Gains – ETFs as a trust – They don't pay any tax – it flows through If they sell a share for a profit you pay the CGT – you do get the 50% discount though Managed Funds Income from managed funds are called distributions – made up of: Dividends – As normal – Underlying companies pay dividend then this passed on Franking Credits – offsets the income and comes from underlying shares Small cap managers might not have any FC if underlying companies don't Capital gains realised – Either non-discounted (12 months) A highly active manager or geared fund can pay out large chunks of capital gains in a year if realised I've had a geared fund make 70% in a year in realised gains – and got a big tax bill ☹ What is best for tax efficiency? Typically Shares – Fully franked dividends Then the next most efficient are ETFs – Low portfolio turnover or passive/index and not as much capital gains tax paid out. Can have lower FF dividends compared to blue chip shares Lastly, managed funds – Typically higher tax payable due to distributions of capital gains Reinvestment plans of Dividends Even if you don't get the income it is still treated as taxable income Reinvest $1,000 of Dividends – you still have to pay the tax on it as if you received it Capital Gains (The difference between the price bought and the price sold) ETFs/Managed funds – At a listed unit price – Net asset value – Sum of all shares Shares Shares/LICs are at a price per share sold vs bought ETFs – AS it is priced – same in gains Managed Funds – CGT is still possible when you choose to sell it but typically lower CGT – They pay CGT out to you along the way and you bear the pain along the way Tax environment – Depends on how they are held Personally – Marginal Tax rates Trust – Distributed Company – Best to not – you don't get a CGT discount We went through a lot of information today – if you have any questions or want me to clarify things further please do get in touch. Head to https://financeandfury.com.au/contact/

Welcome to Finance and Fury. Before I start I want to say a massive 'Thank you' to our listeners. We cracked 150k downloads in the first 6 months which is phenomenal. Also, thank you to everyone who has taken up the course – I want to extend the promotion to another 50 people as a Thank You for everyone's ongoing support. Just enter the code 'faf01' for 50% off at the checkout. Here's a link to the course: https://financeandfury.com.au/learn-finance/ Today we're talking about the AUD plummeting to a two-and-a-half year low - 70.79 US cents (approx. at the time I'm recording this episode) The Aussie dollar could be heading to the "mid to high 60s" by next year, experts say. The dollar is now about 13 per cent below January's three-year high of 81.36 US cents. Is it USD rising or AUD crashing? It all depends on what the domestic country is doing in relation to the foreign country of comparison In comparing the AUD to the USD it is the rising USD more so than anything The AUD is going well in relation to the GBP, for example. The Australian market There is a lack of competition between AU and the US Potentially soft retail sales data due for release could be "another possible nail in the coffin" There is a decreased demand for AUD "The principal reason it's falling is because the yield spread, basically the difference between interest rates in the US and Australia, has turned very negative," MacroBusiness Fund chief strategist David Llewellyn-Smith said. The US Federal Reserve last month raised rates - third time this year – now at 2.25 per cent. The Fed has flagged another hike in December, three more next year and one in 2020. RBA cash rate 1.5% since Aug 2016 – No rise since Nov 2010. With the fears of property prices declining – not likely to get a rate rise for a while Factors affecting currency trade Carry Trade Global markets work through borrowing in low interest rate areas and invest in high interest rate areas. It's called the carry trade. It is said that the yield spread on 10-year US and Australian government bonds is now "at the most negative it's been since 1983". A lot of people want to sell the Australian dollar at the moment Terms of Trade The ratio of import to export prices, which in Australia's case is basically all about coal and iron ore exports We sell so much of both coal and iron ore. There is normally a very strong relationship — high commodity prices means a high Aussie dollar. That's not the case at the moment. Iron ore and coal prices, while nowhere near their levels during the peak of the China boom, are reasonably high. The AUD would be up around 85 cents based on the terms of trade Economic & Tariff wars The growing economic war between the US and China. "As we speak, Beijing is employing a whole-of-government approach, using political, economic, and military tools, as well as propaganda, to advance its influence and benefit its interests in the United States," Mr Pence said. Chinese spies hacked America's technology supply chain by sneaking compromised chips into companies including Amazon, Apple and big Government agencies It's about power and strategic ascendancy and hegemony. All that is bad news for Australia — and in this case, the Australian dollar. The worse it gets, the more sentiment sours about the Australian dollar. We're a little country caught in between two behemoths. What the current situation is good for Cheap to buy Australian goods if you're overseas What it is bad for Australians buying things internationally The RBA, for its part, is completely boxed in - are totally unable to raise rates Forecasting currency is a mug's game. There are an impossible number of variables. But those are the primary drivers. Protecting yourself from currency fluctuations – Investments Hedged vs Unhedged Buying international shares – Hedged at not much risk of currency risks, unhedged is good when AUD is falling Unhedged has been good over the last few years as the AUD has dropped Within an investment portfolio diversify and get both

Welcome to Finance & Fury, the Furious Friday edition. Today's episode is all about the drive to equality. A recent proposal by the Labour Government is to force equality through gender, and forcing companies to publicly disclose pay gaps between men and women. Reporting differences in pay between genders Personally, I don't like it as it further drives division between people I think it will actually hurt women more than help them The Proposal Companies with more than 1,000 employees will be forced to publicly disclose how much they pay woman compared to men. Companies that fail to comply will be excluded from competing for government work - this seems like blackmail for compliance! Companies already disclose pay gaps to the Workplace Gender Equality Agency as it is already illegal to discriminate and pay people less based on gender Why is this happening? The Wage Gap currently sits at about 15% or so, but this depends on how you interpret the numbers Stats – What is an average? In 2016 the average female wage was 89% of the average male wage The median (middle number of average) female wage was 92% of the median male wage. This gap has remained relatively steady over the past decade (see Table 2.1). The practicality of it Will the analysis be multi-variant? Age and experience? – this will impact annual earnings Hours worked and time in the office What position and role in the company? The government doesn't care about free market forces – it comes back to votes and control Outcomes Prime Minister Scott Morrison is concerned workplace conflict would be sparked if pay details were disclosed. Cost of regulations – New government agency will need funding – from tax payers' money More staff required for big companies which means higher salary expenses without increasing output – this destroys the free market What if a company has a wage gap? SJW boycotts will cause trouble for companies, decrease of demand for their products, they may have to lay off workers to survive, and therefore go out of business Everyone loses their job – women and men alike. No winners. Will it actually change anything? Will it help close the wage gap? The most critical thing governments can do to boost women's pay is to ensure the economy remains strong, and not divisive. The only thing any government can do is to create the right economic circumstances to be able to grow jobs Why does the gap exist? Let's look at Industry Sectors and earnings Breakdown - Occupation and industry have different averages Mining is one of the highest for men Western Australia has highest pay gap – 22.4% (Thanks to mining) This is due to dangerous work – 90-95% of deaths in workforce are men Get paid 'risk premium' – do women REALLY want to equalise that? Social work is one of the lowest for men Lower incomes compared to Mining If it was only based on gender wouldn't companies then only hire woman? Companies are meant to be greedy – if this is true why don't companies only hire woman? This is an example of playing politics rather than being about actioning meaningful change. The issue with politics today – politicians go for the easy vote – it's a game Why are politicians playing this divisive game? This is dangerous – Telling 50% of the population that there is no chance for them is bad If you constantly hear that you are doomed to earn less, would you try as hard? Be wary of Government Agency claims – They need the gender pay gap to exist Again, it's a race to the bottom and unfortunately this is more likely to reduce everyone's wage Sweden is one of the most 'equal' countries and you see more woman going into non-tech related fields because it comes back to individual choices. I encourage you, especially if you're a female, don't focus on the so-called "Gender Pay Gap", "there's no hope" etc. etc. …and instead focus on trying to improve yourself, increase your demand and try to get the best for yourself without buying into social engineering. We all have equal opportunity (there's actually more women than men at university now) Regardless of your gender – make sure you tune in to Monday's episode 😊

Welcome to Finance and Fury's 'Say What Wednesday'. Today's question is from John. John asks, "What is the relationship (if any) between shares and property in Australia? Should we expect the broader share market to react to falling property prices?" Great question! Correlation - a mutual relationship or connection between two or more things That is, what are the price movements doing in relationship with one another? Does property price rise and fall with shares? Or the other way around? Are they consistently moving in the same direction or in opposite directions? Correlation doesn't mean causation!! Just because things are related it doesn't mean that they are caused by one another, for example Lisa Simpson's rock that repels tigers. Correlation between asset classes The correlation between the asset classes and that factors that play into this. Study showed that shifts in stock and property markets can lead to the emergence of an unstable linear relationship between these markets. This supports that there is some causality between equity and property markets however it showed that the equity market had an influence on the property market, but not the other way around. "The results also indicate that non‐linear causality tests show a strong unidirectional relationship from the stock market to the real estate market." Ranges between 0.2 to 0.8 – changes over time depending on market factors Property companies – highly correlated Wider market – not as correlated However, the Big 4 banks make up 20-25% of the ASX and their major revenue comes from lending market – less loans = less money Is it Causal? Globally not so much But in Australia, yes - if property goes down, ASX may drop as well if the banks drop If banks lose 30% of their value = ASX drops 7.5% = Cause a panic sale in the market Do people see property as an alternative? Yes and no – people see more risk in shares All comes back to confidence – Share market returns look more homogenous (moving as one) Confidence in the economy - Good for one, and good for the other When people see shares go up = Gives confidence that things are good in the economy This can lead to increased in house prices as people then go out and buy more property Also – when companies do well, people are employed and earn more When incomes and individual wealth increases through employment people can afford loans Conclusion There is no clear correlation but having both property as well as shares can help get a full diversified portfolio.

Welcome to Finance & Fury! On today's episode we take look at the best ways to secure your financial future I'm going to share the rules I follow – And how to not be a victim It isn't hard – it's actually really simple… but simple can be boring and repetitive What you can do and how you can implement these things Preface - Don't be a victim In today's culture it seems that outrage and victim-hood are held above taking personal responsibility. Most of you won't be like this as you are obviously doing something to help yourselves through learning - but being the victim seems to be better than succeeding for some people. Outrage at CEO pay, outrage at wage gaps, outrage at anything The solution is always to make "them" less wealthy, not to improve your own position – because that is hard What if the answer was to teach everyone else how to get there? And not through redistribution What if all of this energy was used to improve your own position rather than rage at things you can't control? When it comes to finance – You can be a victim or not If you think of yourself as a victim you are the one victimising yourself If you take control, then you are setting yourself up to succeed If you can't beat them – join then – Don't hate the wealthy, but become one of them as they are people too Simple Rules to live by Always remember that you are investing in your future You can negotiate with your future self, and your future wealth Be furious about it – if you want it, you can get it Start now and never stop… because the future catches up on you at some point Earlier you start the more you will have – the more your future-self will thank you I have been investing for the past 15 years, and my current self is happy I can see the funds, I couldn't see the money I spent though My past self-felt a little stingy – but compared to others it has paid off Think long term and big picture Think about what your future looks like What you want to do, and how much you need to do it? Rule of 20 – Plan to get a 5% income off investments. For example: $100,000 = $2,000,000 asset base If you aren't sure what this looks like, work it out! You need to have a plan in place as it is hard to work towards something that you're not sure of Don't try to go for big wins quickly. Doing this is the only way I have ever lost money – investing out of hope Invest well and don't lose money. Quality - Don't invest in hope of large instant gains In Wednesday's episode – it took years to get good gains, didn't happen overnight Losing funds will destroy your future Diversify At least 15 – 30 companies (or a few ETFs/LICs) Get more than the top 10 (large cap) REMEMBER: Invest in line with the big picture Passive income of 5% Having 20 properties is no good if they are negatively geared – costing more than you earn Ignore your emotions Avoid selling low and buying high Rationality is your friend Be patient – don't rush in based on fundamentals like PE or Yield RFG example – Wanted to buy a little while ago, thought that $1 was good – but saw it going down more - $0.48 now Has a Yield of 62% at the moment – but will be 0% once they update their earnings Track your progress to get to your ideal future Be honest with yourself – somebody has to (or have your partner keep each other accountable) Putting it in place Figure out what you want to do This is the hardest part for some people to answer Look at your expenses – What does your ideal lifestyle cost? Also, when do you want it by? Time matters thanks to inflation - $1 today is not $1 in 10 years Apply the rule of 20 What asset base will you need? Apply inflation – 2.5% by the time Reverse engineer your targets Play around with online calculators with how much you need to save each money to get there Just do it – Action is more important than planning You can know what to do – but if you don't do anything then it will never happen Conclusion Don't be a victim – don't blame others! Take control as nobody else will do it for you

Welcome to Furious Friday! Did you hear?! The property market is going to drop by 45%!! Oh no! Today, we're looking at a recent 60 Minutes segment 'Bricks and Slaughter', which aired on Sunday and sensationalised Australia's property market. The segment made several inaccurate statements, including; Our property market has only ever increased (and implied that from here it can only decrease), That we were on a path towards a 45% housing collapse. Since the episode Several of the experts that appeared on the show have come out and expressed their disappointment and unhappiness as the majority of their comments were either manipulated or never made the final cut. SQM's Market Analyst Louis Christopher says he was interviewed for over 45 minutes of which approximately one minute was featured in the segment. Media did their job – which is to sell headlines based on fear! So, where is the property market headed? Property moves in cycles, and doesn't always go up. Property prices have gone down in the past, even in recent times in 2008 and again in 2012 as attached. Majority of media is reporting on Sydney, no mention of Brisbane - In Aug 2018 values rose over the month in Brisbane, Darwin and Canberra, were unchanged in Hobart and they fell elsewhere. Australia's largest housing market, Sydney, has seen values fall by 5.6% since peaking in July last year; a trajectory that is straight down the middle of previous downturns. During the GFC, Sydney dwelling values fell by 7.0% in the space of twelve months, and the downturn before that (2003-2006) saw values fall 7.1% over the same number of months. Australia's second largest city, Melbourne, has seen values falling since November last year. Since that time the market is down a cumulative 3.5% and the descent has generally been milder relative to previous downturns. 45 percent housing price collapse Martin North says 60 Minutes took the absolute worst of the four scenarios he presented, and used it as the basis of the alarming segment which went to air on Channel 9. "It is not my central scenario, rated only a 20 percent probability, as I made clear when interviewed," he said noting this caveat did not make it to the final cut. North suggested a fall of 45 percent in home prices would be over three years or so, and require the US financial markets to react to rising US Fed rates. Even in markets where values have been falling consistently for more than four years on the back of a material weakening in economic and demographic conditions, we haven't seen values fall by anywhere near 40%. Perth dwelling values peaked in 2014 and have fallen by 12.6% and in Darwin where conditions have been even tougher, dwelling values are down 21.8%. Sydney median house price is still up 220% since 2008 The median house price was $141,000 in 1988, $257,000 in 1998 $505,000 in 200, median house price was $1.120m in June 2018. Australia is completely different to USA Finance market is very different to USA in 2008, they introductory rates which reset at the same time and went from 2% to 5% so repayments rocketed up. Also, the USA had non-recourse lending meaning you could walk away from a loan if you didn't want to pay it back - When borrowers owed more than the asset was worth, they took full advantage of the non-recourse feature and handed the keys to their home back to the bank. The term "jingle mail" was coined to describe envelopes full of house keys arriving at lenders. Banks took the losses. APRA regulation The Takeaways The property market moves in cycles, it goes up and down. If property prices had kept going up we would be in more trouble – e.g. Sydney median house price will hit $2m by 2028 unless market changes If people make crazy claims, look into them. Understand the context within which the statistics are presented. Know the full story. Our market is fundamentally different from the American market. We have lending standards. Remember, the language used in the media is used to SELL. The words "market correction" are far less sexy than, "Armageddon" or "market collapse". Here's a few links Louis Christopher, SQM Research https://www.news.com.au/finance/real-estate/sydney-nsw/sqm-researchs-louis-christopher-disappointed-with-60-minutes-appearance/news-story/3a749833c55f9456cb71560252d7f764 Bricks and Slaughter https://www.9now.com.au/60-minutes/2018/extras/latest/september/bricks-and-slaughter Martin North https://www.propertyobserver.com.au/forward-planning/investment-strategy/property-news-and-insights/89508-45-percent-hosuing-price-collapse-was-least-likely-scenario-martin-north-on-the-60-minutes-washup.html?utm_source=Property%20Observer%20List&utm_campaign=84f40de3d2-EMAIL_CAMPAIGN_2017_09_28_COPY_01&utm_medium=email&utm_term=0_a523fbfccb-84f40de3d2-245607477

Today's Say What Wednesday question is from Paul; "Hey fellas! I think you guys are doing a great a job. Always a fun listen. Question; I was wondering your thoughts on the world of FI (financial independence) which is getting more momentum, to the likes of Mr Money Mustache and other FIRE? Have you taken a similar approach to these people with your own personal finance, having savings rates as high as or higher than 50% of total take home income?" For those who don't know: Financial Independence Retire Early (FIRE) i.e. Save and invest most of your income now I really like the idea of Financial Independence and employ it myself to avoid the hedonic treadmill creep. I set a base living standard and then invest everything I earn on top of this figure. Whilst I was PAYG a little while ago I was saving between 50-60% of my income and investing it, with a decent chunk being salary sacrificed. I've been in the process of setting up a new business in the past 18 months which put a dint in the ability to save, but hope to get back to that level shortly. I always reinvest income from investments – starts to make up a larger component of your income. Keeping things simple – It is hard to get to that point – But with one simple trick you can start working in the right direction. It starts with, 'How to not care about what I have, or how I relate to others' Where it comes from – Spending habits – Shopping, cars, etc. Dopamine – Reward system – Buying something is the easiest way to get this Serotonin – Status symbols – feeling higher up in the social picking order Money provides both of these thing – But only in what others can see Dopamine is easier to do. Focus on savings every month and get your hit of dopamine when you achieve the target Serotonin is harder to do. It does require a bit more self-confidence (self-esteem) to be happy not chasing the way out through buying things. If you're constantly looking at what other people have you'll always be unhappy – there is always someone else with more. Why you can never really tell who has real wealth just by looking at them (or if it is funded through debt and cashflow) Met a guy who owns a helicopter, every time I saw him he was in old sneakers, old t-shirt. What you can do Play a game - You can think of it as tricking people – turn the game around and as long as you know are making yourself wealthy, and not others buying their stuff it can work. Endowment effect – Put more value to what you already own Turn it into thinking about Keeping your money – put a premium on your spending habits Essentials – 0% Non-essentials – Gross the price up by a factor: Example - New TV is $3,000 – Life of TV is 10 years Earn 7% on that over the same time - is the TV worth $6,000? Thinking in terms of future value and opportunity cost To part with it, the item better be worth it Conclusion You don't have to live like a pauper – enjoy your life with great experiences. But, just next time you're looking at a big splurge on something, gross up the value and see if it is still worth it!

Today's episode of Finance & Fury we're talking about Artificial Intelligence taking over the ETF and investment market. The discussion was actually started by one of our listeners, Gabriel who recently wrote in, so thanks Gabriel for sending this through. Introduction; there are a few types of AI ETFs Funds that specifically invest in companies involved in the development of products and services in AI And alternatively, the one that we'll talk about today: AI is running the ship - funds that use AI methods to select individual investments to buy within the fund We will talk about: The introduction of AI powered ETFs What this could mean for the market Options on what to do AI ETF - AIEQ Been around for about almost a year (Oct 2017) Run by IBMs Watson AI - cognitive computing platform capable of answering natural language questions by connecting large amounts of data, both structured (e.g., spreadsheets) and unstructured (e.g., news articles), then, learns from each analysis it conducts to produce a more accurate answer with each subsequent question. Computing called cognitive computing, where systems understand the world the way humans do. That is, learning how humans would think about the world: through senses, learning, and experiences. Watson continuously learns, gaining in value and knowledge over time, from previous interactions. Example – Saw AI beat the world's best players in complex online strategy and role-playing games At first the characters would stand still, then run around in circles, then run into enemies and die, then after enough deaths they figure out they have to fight back, then figure out the best strategy and style These are complex games and the players can make 300-600APM (almost 10 actions a second) AI is programmed with parameters, that is to say, we tell it what to. Investor demand - Equbot positions investment solutions based on in-depth analysis of investor demands. 'strive to create products that deliver positive long-term results on a risk-adjusted basis through optimizing proprietary investment research and trading models' How will it do it? - drives an enhanced view of the global investment landscape. The ability to process continually growing volumes of data and thread machine learning throughout our operations enables a truly unique investment process. continually process, grow, and learn, just like our evolving investment technology "We are processing more news information, more data around different countries," "We also added different capabilities like global macros and country risks, and integrated all the different modules to our platform." Chida Khatua How's it doing so far? Pretty well – 6 months – outperformed the market ETF NAV by 4% - 12.34% vs 8.31% Inceptions (11 months) – 19.3% vs 12.5% - 7% out return Keeping its own at the moment and doing fairly well Slow start – it was learning – matched the index Diverged since then Features and claims The ETF will create a portfolio of between 80 and 250 stocks, choosing from more than 15,000 companies across the globe. What does it include in the portfolio? Learning to trade other ETFs and take advantage of arbitrage (making money for no risk) Gabriel – Few points from a previous episode 'In a market cap weighted ETF, if a stock price drops, its market cap drops as well, so the ETF does not need to rebalance' – Was talking about companies that fall in and out of the index – A company 300 in the index goes to 304 and is sold off (Sorry if I didn't explain that properly) Amount of market data processed is unmatched - over a million market signals, news articles, and 6,000 US companies analysed daily A lot of noise at first – and there may be some big glitches Can it tell the real from 'white noise' news? – Would it react to 40% drop in price news articles? AI programs like this need to see a lot of information to be efficient and learn the best way of doing something Automated data driven investment process that removes significant human bias and errors End to irrational exuberance? - Bubbles Thing of the past? Computers remove humans all together – acts rationally? Worse in the future? What about if it works to manipulate a bubble to profit off it? Happens now – e.g. diamonds Goes beyond the news and looks at funds to buy based on their metrics Active management that combines fundamental, technical, and proprietary investment efficiency analysis to identify companies with high opportunities for long-term growth Artificial intelligence and machine learning capabilities continually build upon the financial knowledge base driving an investment system that perpetually grows in value What if it becomes 'AI vs AI'? – Efficient market hypothesis becomes real EMP – Market is efficient – Prices rise to high, smart investors will short sell Assumes everyone acts rationally and that prices can't diverge from their true value for long This is where the basis of not being able to beat the market comes from (which is mostly right

In today's Furious Friday episode, we'll be running through the historical life cycle of fiat currencies. This episode is thanks to John – John wrote in with a few great questions; Is it true that all fiat currencies eventually become worthless? Should we be concerned about printing more and more money - is this something to be concerned about, i.e. the longevity of the AUD? We will run through: How do fiat currencies fail and what causes it? Is safe-guarding against it something we need to worry about? How would one do this? History of money Barter economy – was hard for getting values and trading efficiently – hard to travel with a mule to trade their corn Coins – Back by silver or gold Promissory notes – goldsmiths used to house gold for people – those people then give the ownership to others in paper (an "IOU") – early day banks Skip forward to today – All paper but mostly Fiat or digital currency Doesn't have to be fiat to fail – it just has to be controlled by the government A quote from one of the US Founding Fathers – Government is like fire, when it is well controlled it can help a country to grow and support it, when it gets out of control – it will destroy everything in its path. This is why it is important to remove government from Central banks. America fought the war to get away from the Bank of England – controlling their currency Ended up back with one a few hundred years later Beauty of the Gold Standard was in the early days it was hard to manipulate. But even physical currency can be manipulated – as the ruler has control of the currency. Let's go back to Roman times and the Devaluation of the Denarii – Coins were made of silver Introduced 211BC and ended around 400AD (almost 600 years) So, until Augustus the coin was relatively valuable, but in 100 years its value decreased significantly, roughly 2,000% devaluation altogether, when there was almost no silver left in the coins. Like coinage of today, Ancient Rome's coins represented portions of larger denominations. The As (plural assēs), the basic unit – think of it as a 1c coin. Loss of purchasing power - During the time of the Roman Republic, you could buy a loaf of bread for ½ As or a litre of wine for one As. A year's pay for a commander in the Roman army around 133 B.C. was 10-2/3 assēs, by Augustus' rule (27 B.C.-A.D. 14) 74 Denarii, and by the reign of Septimus Severus (A.D. 193-211), it rose to 1,500 Denarii. Stopped using denarii and started paying in gold – Military and officials only Average Roman Joe was forced into Denarii Two-tiered economy. Today – Rather than decreasing the quality of the coins we increase the supply of it, which has the same effect Look at global GDP to Debt Japan has the highest – over 250%! America is over 100% Australia is about 42% According to the last federal update, we (Australia) have decreased our debt, which is great. Liberals are trying to get back to a lower debt environment. An analogy Say you have parents (most people do) – Mum and Dad. Dad is a stickler and won't buy you toys as you don't have the money, but Mum racks up a credit card bill, gets in debt to buy toys. You have the toys now, but then your pocket money is halved – from $10 to $5 because Mum and Dad still have to pay back the debt. Government spends it, but you have to pay it back. Government debt is your debt – they can't pay it back without you paying it off through taxes. Pay in more than one way - The money you have isn't worth as much anymore thanks to inflation – the loss of buying power due to increased money supply. You don't have the ability to increase your money supply as easily though. The government however, can keep increasing the money supply – Let's look at US history… 1900s - National Monetary Commission is established to propose legislation to regulate banking. US. Money Supply:$7 billion - What $1 Could Buy: A pair of patent leather shoes. 1910s - The Federal Reserve Act is signed in 1913. US. Money Supply:$13 billion - What $1 Could Buy: A woman's house dress. 1920s - The Fed starts using open market operations as a tool for monetary policy (what we use today) US. Money Supply:$35 billion - What $1 Could Buy: Five pounds of sugar. 1930s - To deal with deflation during the Great Depression - suspends the gold standard. Executive Order 6102, which criminalizes the possession of gold. US. Money Supply:$46 billion - What $1 Could Buy: 16 cans of Campbell's Soup 1940s - The massive deficits of World War II are almost financed entirely by the creation of new money by the Federal Reserve. Interest rates are pegged low at the request of the Treasury. US. Money Supply:$55 billion- What $1 Could Buy: 20 bottles of Coca-Cola 1950s - The Korean War starts in 1950, and inflation is at an annualized rate of 21% due to low rates – so they increased the rates US. Money Supply:$151 billion - What $1 Could Buy: One Mr. Potato Head toy 1960s - U.S. dollars in circulation around the world exceeded U.S. gold reserves. US. Money

Today's Say What Wednesday question comes from Emma, and relates to saving for a house deposit: "Hi, thanks so much for the podcasts - I have learnt so much. My question is about saving for a house deposit in Sydney. We have $130,000 saved (which has taken us about five years to save) however we met with a broker and she recommended avoiding LMI by saving up the full 20% of the purchase price plus 4.50% for stamp duty etc. As we have two children we'd like to buy a modest townhouse which are currently valued at around $850,000. Basically, at our current renting while saving rate this would take us five years or so. Do you recommend using ETFs, LICs in this saving circumstance or using the first home super saver scheme or term deposits etc? I'd love to hear any ideas you have to help us save, stay motivated and finally buy something!" Thanks Emma! Here's what we think... Option 1 – Staying away from risky investments – (5-year period) Given that you want to purchase a place in 5 years, I would probably recommend staying clear of ETFs and LICs. The share markets have had a good run over the past 8 years and historically speaking, we are more likely than not to have some correction in prices within 5 years. Option 2 – Interest accounts Keep doing what you are doing – Savings in personal names Downside at the moment – Low interest rates and income taxed Option 3 – Super (First home super saver scheme) Using superannuation is a viable strategy in most situations, even though it can be a little restrictive. It essentially allows for larger savings through the reduction in total tax paid on the level of savings (through not receiving it as a taxable income). How it works: From 1 July 2017, individuals can make voluntary contributions of up to $15,000 per year and $30,000 in total, to their superannuation account to purchase a first home. Pre-tax contributions. – Taxed at 15%, along with deemed earnings, can be withdrawn for a deposit. Done through employer – Salary sacrifice Self-employed – Can still make the contributions, and claim a deduction on personal contributions later Must remain within concessional (pre-tax) cap of $25,000 Withdrawals will be taxed at marginal tax rates less a 30% offset and allowed from 1 July 2018. Amount of withdrawal = Net contribution plus deemed return (90-day bank bill plus 3%) 4.50% currently – will change as the RBA cash rate changes Withdrawal administered by the ATO - determine the amount of contributions that can be released and instruct superannuation funds to make these payments accordingly. Examples Individual earning - $60,000 a year – Never bought a home before They direct $10,000 of pre-tax income into superannuation increasing her balance by $8,500 (after 15% tax) Continue for 3 years – Contribute up to $30k in total Withdraw $27,380 Net contributions of $25,500 Plus deemed earnings on those contributions (4.5%). Withdrawal tax of MTR (34.5% including Medicare levy) minus 30% offset $1,620 in tax paid Net withdrawal - $25,760 $6,240 more than if saved personally ($12,480 more if you are a couple) Thanks again for the question Emma P.S. Awesome work on being able to get to $130,000 in savings!

How to not get screwed over in property, the warning signs of scams and how to do your property research Warning signs of scams Off the plan/cold calling companies Buying off-the-plan, or purchasing a property that has yet to be built – The time between the sale and completion and settlement of the dwelling means that "buyers are essentially paying today's prices for a product in tomorrow's market" Makes sense in what looks to be a rising market – most off the plan are oversupplied at the moment though Likely be overpaying Inbuilt commissions of up to $40,000 Sales tactic of reciprocity – "I do something nice for you, so you feel the need to do something nice for me" Can blind to shortfalls in a property Free trips/offers with the property Sales pitches – Tax breaks, gurantees on rent and future growth Government concessions – FHOG Negative gearing/tax breaks being the focus point of the sale If tax is the only gain from the property, then look elsewhere No point paying $12,000 into a property to get a maximum of $6k back Better to put money into something that will grow Plus, sometimes they are only negatively geared as they are overpriced e. – Rental yield is low Guarantees Rent – Rental returns sometimes have 12 month rent guarantee Seems nice now, but what happens afterwards? Growth – The one unknown Assume that property will grow with inflation Due Diligence – What you need to do to find a property Work out your property criteria Research your suburb and the surrounding area Walkscore Microburbs Research Rental Income per week SQM Research Calculate (potential) Rental Income Research similar sales in the area DSR Data Soldprice Determine the property's value Research the history of your home Confirm the property's value with a free RP Data Valuation RP Data / Corelogic Research if your home has gone swimming (i.e. flooded in Brisbane)