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Jeor

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  • Lord Commander, Night's Watch
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  1. Well the June lows are being tested and the market is giving every indication that they'll crash through substantially. I don't think this is a "buy the dip" situation yet, but I do think that will come earlier than people are expecting. Lots of things to potentially spook markets at this time: Ukraine/Russia war, potentially nuclear developments UK fiscal policy meltdown and possible currency crisis Coordinated interest rate rises across the globe Inflation that might still not behave I'm itching to put a little more into equities but telling myself to wait a bit longer.
  2. Volatility is opportunity, if people have the stomach for it. My own particular stocks have come off the boil a bit - I had a good run in the past 2 years, but I think I need to rotate a few and refresh my portfolio. My investments are in the ASX so most probably won't know the companies, I'll mainly talk sectors. In YTD 2022 I'm almost exactly even, which I guess is an okay result considering the ASX200 (the benchmark I measure my performance against) is very mildly down YTD. Winners: My energy stock is up a bit, but has gone sideways for most of YTD 2022. It had a good run last year (+50%) so I think most of the gains have been made, and I may trim them a bit. My banking stock is mildly up, that's a long-term hold as I'm not too fussed about getting big capital growth so long as they keep paying a nice dividend, which they are. Flat: My various mining stocks, which are a big sector in the ASX, are flat altogether. Losers: My telco stock is slightly in the hole for YTD 2022. They were my longest and biggest holding and are sitting at +40% over two years, so it may be time to trim that one too as I've probably squeezed the most out of it that I can. My Vanguard Global ETF (VGS) has followed the US markets, has yo-yo'ed but overall down 15% YTD. I still have a high cash balance (25%), and in current conditions am likely to want to retain a 20% cash balance in my investing portion of my money. But if I trim the energy and telco, I'll have some funds to play with and make a buy somewhere. I'm not sure what I'll put it into yet, but I'm staying away from tech, discretionary consumer. A large-cap gold/copper miner on my watchlist is looking quite tantalising, having dropped 50% since I started looking at them. The thesis being that (1) they're at good book value, (2) they've spent most of their capex and should be getting the returns in the next few years, (3) gold is falling but may rebound with geopolitical uncertainty and currency devaluations, and (4) copper is needed for EV electrification and usually follows an economic recovery. But I'm playing the waiting game as gold may fall further if interest rates continue to rise at a fast clip and in any case, I'd rather not try and pick the bottom, I'll try and snap them up once they start an uptrend.
  3. Big drop and market selloff today, seems like a good time to resurrect the thread! The question is whether equities will retest (and potentially crash through) the June lows. Seems everyone was expecting good news on inflation and got disappointed. Personally I think it'll be somewhere in the middle...at least for Australian equities, a tough next few months but not a gigantic crash. US markets probably a bit more susceptible to that, but we'll have to see.
  4. Just read a crazy stat that 71 of the last 72 Men's Grand Slam titles have been won by Europeans (counting Andy Murray at the time!). The one exception being an Argentinian, Del Potro's US Open win in 2009. The streak goes back to 2004 (Gaston Gaudio, another Argentinian, winning the French Open) and in 2003 there was Agassi and Roddick among the Slam winners. Surprising that for the past 72 Slams the streak has been that strong. The US has historically had a good tradition of Slam champions (Connors, McEnroe, Courier, Sampras, Agassi) but it's been a bit of a dry spell since then. Australia, which had a big tennis-playing culture in the past (Laver, Rosewall, Emerson, Newcombe) that could usually break it up in recent years with a random winner or two (Cash, Rafter, Hewitt) is also in the wilderness, although Kyrgios came close.
  5. Yes, Iga does look like the real deal. She has the lightness/brightness of personality to hopefully have some longevity in her career, there hasn't been much of that going around lately in the women's game (which makes Serena's achievements stand out more).
  6. It's all fine... @Paxter is a good sport! He puts up with my Liberal views from time to time, after all. Though I do find it amusing that he agrees with Dutton on something. To a layman, nuclear power seems reasonable - we have plenty of desert to store all the radioactive crap and we're not at risk of the usual natural disasters (earthquake etc) that cause problems in Japan. But I'm sure there's a lot more to it than that. Small-scale household solar and batteries might ease the load if they were taken up by a large enough proportion of the populace. At the moment, most of the rooftop solar is connected to the grid which has to manage the fluctuations too much. But if most houses had batteries that could smooth out the energy delivery, and say 40-50% of houses had solar/battery installations, I fancy that would have a significant impact on the grid and energy supplies. Currently the figure is about 25% of houses with solar, but most of them without batteries. On a completely different note, sad to hear of the passing of the Queen. I know most on the board here are avowed republicans (and this reflects the general leaning of the populace, I think), but regardless of the institution of the monarchy, most would respect the fact that the Queen personally has been a great example of duty and service. Even more remarkable considering this narcissistic age of self-promotion and big-noting celebrities and politicians.
  7. I don't know that Truss could have done much else with the energy crisis, freezing power bills but early indications are that the cost of doing that will be potentially into the hundreds of billions of pounds, more than the emergency pandemic jobs payments. That boggles the mind and shows you how quickly inflation can ruin things. Even renewables aren't a panacea for this. China is having blackouts because the drought is sapping their hydroelectric capacity. Until battery technology improves, storage isn't going to smooth things out effectively. I think with energy policy it has to be a case of diversification (build up resilience by having multiple generation strategies) and education (build a culture of power-saving habits in the general populace and industry). We're kicking ourselves for not installing solar on our roof the past year or two. Our house was a bit of a fixer-upper and we prioritised other issues, thinking La Nina meant we didn't get that much sun anyway. But it would have been handy to have that now! Our latest quarterly power bill came in at $900 (to be fair we are a family of five - two kids and a mother in-law living with us, with all the associated energy costs that comes with!).
  8. Totally agree that while the RBA's rate is only 2.35%, the loan-to-value ratio is so much higher. I hate it when older people say "I had to pay off my mortgage at 17% rates, what are you young people complaining about" when they don't realise their loan was probably only 3 times their income. Now it's often 6 times income and climbing fast. I liked Fed Chair Powell's Jackson Hole address, particularly where he pointed out that "without price stability, the economy doesn't work for anyone". A case could be made that unemployment is just as significant (hence the ongoing debate about getting the right balance between raising rates and recessions) but inflation is The Enemy. You only have to look at the UK right now, with its spiralling energy and food costs, to know what can happen. Imagine if everyone's power bills (residential and commercial) tripled virtually overnight. Inflation is an economic evil that cannot be avoided by anyone, as it impacts necessities like energy, fuel and food, and then everything that businesses pass on. It must absolutely be actively sought out and destroyed, and interest rates are the only real proven method of doing that.
  9. Back here in Australia, even though sentiment towards the monarchy itself is quite muted, there is great personal affection for Elizabeth II and she will be very much missed. She was a rock through such a historic time for England. I don't think there are any other world figures who commanded as much respect as she did for her dignity, warmth, and absolutely unwavering sense of duty. A sad time for Britain especially given its current political and economic issues, but I think Charles will do the job better than expected. He was very prescient on issues like the environment, he has rehabilitated his personal image, and he's been witness all his life to one of the greats. To the second Elizabethan age!
  10. I think @Paxter will be more horrified at the conservative politician jab than the heartlessness!! While I am quite careful with my money and budget conservatively, my financial situation and living situation allow me to do that. Our family took a calculated risk and upsized our housing during the pandemic. Our finances were good, with a second kid on the way we were always going to have to upsize eventually, and the pandemic (when initially house prices fell and no one knew where they were going to go) looked like a good opportunity. We bought in October 2020 which was just before things started to take off. But I can tell you we had our hearts in our mouths when I bid (and won) at the auction right at the limit of what we were comfortable spending. We didn't count on the RBA and assumed we would have higher repayments down the track. But the low rates allowed us to bridge the gap of repayments on a large loan until we sold our old property 6 months later in what was then a steeply rising market and really paid down the loan with the proceeds. Afterwards we locked in a 2.09% rate for 3 years (expiring in August 2024, so I'm quite comfortable at the moment). Calculated risk but also some luck involved. Contrast that to my friends (also with two kids) who hesitated and bought 12 months later, where history is now treating them brutally. But I can understand them. They desperately needed to upsize, being in a 2-bedroom apartment, and when it comes to family circumstances you can't always make the best/right economic timing for housing and you have this ticking time bomb in your head going off as your kids get born and grow bigger, and all of you need more space. The 2nd parent now has to go to work and they rely on grandparents to provide free childcare. Did they budget more loosely than me? Yes. But budgeting that way wasn't just down to their supposed irresponsibility, life circumstances are bound up in that too.
  11. Supposedly October is a toss-up as to whether 25 or 50. The fuel excise is coming off which will contribute to inflation though not the RBA's preferred measure of trimmed mean inflation. I do feel sorry for homeowners who bought at the top of the market in 2021. Although I personally would have been more cautious about the RBA's infamous "low until 2024" promise, I can understand why some people (especially first-time homeowners seeing the tremendous run-up in prices) desperately jumped in. Sovereign countries can never run out of money, but they can certainly run out of money with any value which would have the same effect. Sri Lanka's the obvious example, being unable to pay for imports as their currency is worthless. Australia has more of an export industry which helps prop up the currency (I think the AUD is the 6th most traded currency, which shows it has outsize influence compared to our relative position). And with reference to the US, the almighty power of the USD distorts things somewhat as their currency is not going to be worthless anytime soon (hence their gigantic deficits which don't seem to have a major effect on them). I'm not super well-read on Modern Monetary Theory but it sounds like you're advocating something like that. Deficits are meaningless, and governments can (and should) spend as much as they like and print as much money as they want, with the only limits on this being currency devaluation and inflation. There are some serious economists who acknowledge some merit in these ideas, so I'm not rubbishing it entirely. But I think MMT was easy to say when we had the 40-year non-inflation period and the Sri Lankan case shows that currency devaluation is a real risk too. I'm more open to green policies than most Liberals (ala Turnbull) but I'd still rather do without the negative effects of gigantic deficits. To be fair, there are some policies that don't cost the government very much that should be implemented (e.g. raising sustainability standards for new builds) and others that could have costs mitigated (e.g. subsidising EV purchases and building more EV structure, while introducing some general road usage tax on all vehicles). While I'm still not convinced (and I always hated worms and slugs and anything without legs!) there are some interesting ideas here, though they would require an incredible mind-shift in the way people think about government.
  12. I'm not convinced governments can manage fluctuating revenue responsibly. The Liberals at least paid off the debt in the good times, but they also instilled the structural headwinds (capital gains tax concession, franking credits) with that spare cash. Labor didn't have the good times but established big-spending structural programs anyway (NDIS). Now I'm not arguing against the NDIS, but I can't imagine what it would have looked like if it was trying to be implemented while tax revenues were cratering. The banking sector's a lot more complicated than that these days. I know CBA was government-owned, but that was back in the days before the technology revolution (pre-1991) and the explosion in financial products, and a good chunk of that period the CBA was also Australia's central bank. It's easy to look at the combined $15B (I think) profits and think let's tip that into the public purse. But the moral hazard is enormous - consider the ethics of the government directly making loans to every business in every industry including all the unpopular or unethical ones, not to mention the government foreclosing on small businesses, residential mortgages and booting people out of their homes (and ironically then into government housing), and employing people but not remunerating them to private industry standards. Direct government bank lending is a lot different to government assistance. If you tried to limit this by only partial nationalisation of the sector (e.g. lend only in certain sectors or segments, or startup/takeover just one bank) then the government bank would be uncompetitive and its share of the $15B profit take would be far smaller. If the government were nice to achieve other goals (leave lots of bad loans on the books, pay employees more so talent doesn't disappear) then those profits would disappear. If the rationale for nationalisation is a profit goal in a mixed public/private sector, then the government will be in a real quandary. In my view, like a lot of socialist ideas, bank nationalisation sounds good at first blush but dig deeper and it opens up a can of worms. Yes, it's all theoretical...Shorten had the right idea but the electorate is never going to vote it in. As to your last comment, whether the budget needs to be fixed is something that needs consensus. Some serious economists (and not necessarily as far along as Modern Monetary Theorists) don't think it's much of a priority. But for my kids' sake I lean towards getting it on sounder footing.
  13. Well, Serena's out. She should have won that match, serving for both sets, but basically choked. Tomjlianovic did well to maintain her own composure, especially with all the crowd. I guess sometimes that can be advantageous if the weight of expectation is on you to lose. This article originally from the New York Post is perhaps a bit overly negative but Serena has always been a mixed bag for me. Incredible tennis player, the greatest women's player of all time, legendary competitive spirit, inspiring to many, trailblazer extraordinaire, especially in terms of longevity and motherhood. But added to this are the parts of her that are so often willfully overlooked by a fawning, all-or-nothing fanbase and media - mediocre sportsmanship, abuse of officials, and an overbearing sense of entitlement. People are complex and both pictures of Serena hold true. For the record, I think she deserves the adulations and tributes coming her way in terms of her accomplishments, competitiveness, and career.
  14. So it seems my GST suggestion is not too popular! I probably should clarify I wouldn't be raising the GST (or any other taxes for that matter) in the current climate, people already have enough trouble with the cost of living. To be fair, a GST (or VAT) is the bedrock of many European tax systems, which have clearly found a way to lessen inequality (usually by spending on welfare). I'm not suggesting we go full European-style (nor should we go full American with tax cuts for the rich) but there's no doubt the current budget position is unsustainable. The "tax the rich" regime is morally sound (impose taxes on the people who can afford it, and avoid overly taxing the masses) but I believe a bit economically dodgy. Not for American reasons (I don't believe in trickle down economics or that a high marginal tax rate discourages enterprise) but for the simple reason that budgets that rely on high income tax are wildly unpredictable and exaggerates deficits in a downturn. California, a US state that does have a very highly progressive state income tax system, has swung wildly from potential bankruptcy to massive surpluses, because progressive income tax depends on the earning potential of a small number of very high earners, which is affected by economic conditions. This article from Reuters has some of the broad brushstrokes of the dangers of relying on income tax. This article from Treasury.gov.au somewhat detracts from my argument in saying that we're not there yet ("individual income tax...continues to be a stable and predictable source of revenue") though it does note in several instances that Australia's overall tax regime is already "highly progressive" and that the "tax burden is relatively low compared to other developed countries". Of the tax system, 39% of revenue is personal income tax, company tax is 19% and GST is only 12% (state taxes are 19% and other federal taxes are 11%). It notes only 47% of consumption is subject to GST given exemptions etc. However, my point about raising GST rate is likely moot as I wasn't aware that it requires unanimous approval from all state governments. To summarise this long post, which does have some inherent contradictions in it... Some tax reform is needed to increase revenues due to the budget position I don't think the GST is a terrible tax and in concert with other taxes it doesn't necessarily mean depriving the poor (see Europe) Abolishing GST and further relying on income tax at higher brackets is unwise in my view due to issues with stability etc (see California) GST is unlikely to be practically changeable so we need to look at other things. Certainly the Stage 3 tax cuts should be abolished. And with the GST legislation putting a stake through my plan...I clearly need to pivot. While I wouldn't rely on raising the top income tax rate, other revenue raisers such as negative gearing, franking credits and capital gains tax (50% reduction) all would have similar effects and in my view increase tax efficiency - these are all carveouts. Given the relatively high number of Australians with investment properties (over 2 million), rather than eliminate negative gearing altogether you'd have to phase it in so that a limit of one property could be negatively geared. Franking credits was a short-sighted move by Costello and should be phased out for wealthy retirees, it's an awful regime that is only set to get worse and worse as retirees grow as a proportion of the population. And CGT exception inordinately benefits wealthy share market investors. By eliminating those loopholes, you aren't necessarily hitting all high income earners because they have a choice of whether they want to do those things or not. This might decrease the revenue from those options over time but it will also decrease inequality and help housing affordability.
  15. Well, it's pretty clear that on the Stage 3 tax cuts, Labor sold out their principles in order to get into power. It was obvious that they were frightened about giving the Coalition a line to attack them on. In any other circumstance Labor should have been firmly against tax cuts for the top earners. The budget deficit really does need to be repaired at some point. I'm afraid we'll go on the American-style politics where no one ever tackles the deficit and it becomes an entrenched feature of fiscal policy, with no party brave enough to deliver a tough budget for the sake of the long-term future. It's clear that the deficit can't be fixed just by cutting waste, so revenues are going to have to rise at some point. I've said this before but in my view the most equitable way to do it is to raise the GST rate and cut income tax for lower earners (e.g. by increasing the tax-free threshold). The GST is the "best" tax to lean on because it is broad-based and gathers from all consumers (unlike income tax, which is only on the working population, and hence unreliable in the future with an ageing demographic). The drawbacks of the GST are that it is somewhat regressive, as everyone needs to pay for essential goods and services and this is a larger proportion of income for lower earners than others. So if you cut the personal income tax rate for low earners (or increased the tax-free threshold) you could balance it out so they're no worse off, while having increased tax efficiency across the board (while incidentally also saying that you've cut taxes for everyone, because everyone uses the lowest bracket). You may potentially have to give an increase to pensioners to ensure they aren't worse off either. But I'm sure you could do all those things and still have an incremental increase in the tax base, increasing revenue and the sustainability of the tax system in the future. With the changing demographics and existing inefficiencies with income tax (given things like negative gearing, which seems like it's never going to be touched), we need to shift from reliance on personal income tax to the GST.
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