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Finance & Fury Podcast
23 minutes | Jun 22, 2022
Alternative solutions to inflation
In this episode, we look at some alternative solutions to solve inflation in the long term beyond interest rate increases. We explore supply side economics to look at helping to reduce prices in the long term and increase our capacity to demand.
20 minutes | Jun 1, 2022
The future state of the housing market.
In this episode, we look at the influence the RBA has and will have on housing prices. We look at interest rate movements and regulations and how prices are expected to respond.
23 minutes | May 27, 2022
The evolution of share markets
In today’s episode, we break down the history of share markets, focusing on the ASX, to look at how we ended up with the system we currently have. We also look at the makeup of the ASX 100 years ago and how this has changed over time.
24 minutes | May 18, 2022
Is the economy back to the 1970s?
In this episode, we will be looking at the economy of the 1970s, the share market correction that occurred and what contributed to this. The aim of this episode is to see if will we experience the same sort of market conditions, or if what we are dealing with is something completely different.
25 minutes | May 12, 2022
Is it better to invest in passive or active funds?
In this episode, we look the pros and cons of both sides of the passive or active investment argument. We review the historical performance of average active manager to the index that they track and explore why they under or overperform.
19 minutes | May 4, 2022
Is it possible to outperform the share market?
In this episode, we look at the works of Fama and French. Two men who stated that it is impossible to outperform the market, whilst also providing a later framework to do so.
21 minutes | Apr 26, 2022
Reducing the barriers to entry for property investments
In this episode, we look at using Real Estate Investment Trusts (REITs) as a way to gain exposure to real estate investments and compare this to direct property ownership. We go through the pros and cons of this structure and explore where they can fit in to an investment allocation.
20 minutes | Apr 19, 2022
How much do you need to save for retirement?
In this episode, we answer a question from Jason on how much you need to retire. We look at an article by the ABC on this subject and explore the figures and assumptions used, as well as considerations that need to be taken
22 minutes | Apr 11, 2022
Is it worthwhile to invest in defensive Managed Funds or ETFs?
In this episode, we answer David’s question about cash assets that held in managed funds or ETFs. We discuss look cash held in unitised investments, look at allocations based around your goals, as well as the opportunity cost of investing in defensive funds.
19 minutes | Apr 6, 2022
Have bond prices already factored in interest rate hikes or will they lose further value when interest rates do rise?
In this episode, we answer the question from David. We look at bond pricing theory and compare this to when prices of bonds change, before or after interest rate changes are announced.
20 minutes | Mar 28, 2022
Will a Russian debt default cause a global financial collapse?
In this episode, we look at the looming Russian debt default and if this is the catalyst for another financial collapse or simply another blimp on the radar. We will look at the ramifications from a Russian debt default and what this could mean for global financial markets.
22 minutes | Mar 14, 2022
When do you know that the share market has bottomed out?
In this episode, we look at that it is almost impossible to time the exact bottom of the market. However, we look at four indicators to tell when financial markets have been oversold and are become cheap to purchase.
19 minutes | Mar 8, 2022
Keep calm and carry-on investing
In this episode we look at some long-term data and explore the reason that holding the course of an investment strategy works better long term than trying to guess what will happen in the short term. We go through four key facts to remember when your emotions are telling you to sell.
20 minutes | Mar 2, 2022
The economic impact from the Russia-Ukraine conflict on financial markets
In this episode, we look at the core reasons as to why markets fall, explore the economic consequences of the Russia-Ukraine conflict to determine if this is a genuine cause of concern for financial markets. We also look at if there can be a buying opportunity through an overreaction from financial markets
20 minutes | Feb 22, 2022
The negative gearing debate – should the government get rid of it?
In this episode, we look at Robert Kiyosaki’s comments on negative gearing. In doing so, we will cover what negative gearing is, does it really help property investors and has it led to property price increases?
24 minutes | Feb 14, 2022
Where do you stand in relation to the average Australian?
In this episode we look at the average financial position of the Australian population. The aim of this exercise is to provide a bit of a wakeup call if you are below the averages, and to help provide strategies to close the gaps. But in the end, you should only compare your financial situation to yourself from yesterday and build towards your own financial independence.
18 minutes | Feb 8, 2022
The rules of money – Building a solid financial foundation!
In this episode we do a breakdown on the Richest Man in Babylon. We go through a summary of the classic rules of money that helped me build a solid financial foundation early in my financial journey.
19 minutes | Jan 29, 2022
Don’t budget! Allocate your financial resources instead.
In this episode, we look at an alternative method to traditional budgeting where you instead allocate your financial resources. We explore the concept of paying yourself first and the general categories to direct your cashflow to better your financial position.
19 minutes | Jan 18, 2022
Crypto coming to an ETF near you
Hi – hope you’re all going well and welcome to Finance and Fury. In this episode – look at cryptoasset investments and the increase in accessibility for retail investors through alternative structures – as in Western economies – US, EU, and Aus – these are becoming available for retail investors through structures like ETFs – i.e. exchange traded funds This comes off the back of Treasurer Josh Frydenberg- looking at a series of regulatory and tax proposals covering digital wallets and crypto assets – focus being on reducing scams and fraud The move could also include the introduction of an outline for central bank digital currency - which has been covered in depth already in previous episodes – may cover any actual announcement when there is more news about the actual policy In past episodes - Covered the BIS framework for what they consider cryptoassets – many have viewed this as legitimacy given to crypto – but it is legitimacy purely in the form of an asset – not a currency which was the original concept as a medium of exchange But these recent legislative developments seem to be an adoption from financial institutions to make money – and potentially a barrier to entry for anyone looking to get into supplying crypto – need for a DAO – decentralised autonomous organisation – another topic for another day – but institutions see money being made and want a piece of the action Late into last year - the Commonwealth Bank of Australia announced plans to support trading of 10 crypto assets on its app, which has 6.5 million active users. On top of this – there is a new megatrend – Crypto ETFs – Before we get into that – I want to make one observation - Two ways cryptoassets have been treated by governments – it is based around those countries that adopt and those don’t – and instead outright ban cryptoassets – this has been based around the power dynamic between politicians and companies, in particular banks and investment firms – in other words – who politicians are beholden to based around funding interests Lets first look at countries where the politicians are not influenced by the lobbyists from major global banks – something like China – where the politicians are de-facto controllers of the economy have greater control over the banks due to having a semi-communist/fascist makeup – they have done their best to ban cryptoassets We have seen a lack of innovations in investment products and outright bans on certain investments in cryptoassets – as well as enforcement from governments But in countries where companies – in particular the financial system through lobbyists have the power to influence the politicians who make the rules – essentially, those that are the other way around from China – we are starting to see a adoption of crypto assets – not as a currency to replace what the central bank provides – but as an alternative asset class that banks can capitalise off through the demand of the population Banks and most companies have one goal – to make money – every company wants to do this – investment managers and banks do this through what is known as FUM – the funds under management – the more money that people invest in their products, the more revenues they can generate due to percentage charges – in additional to brokerage I did an episode on the BIS framework a while ago – where they actually defined crypto assets – and talked about the securitisation of traditional assets, such as shares or bonds – in essence – the central banks of central banks sees no problem with the financial system in the west adopting crypto – as long as it is an asset– not as a currency or as a replacement to the fiat monetary system we have in place – as they have their own designs in mind – there can be no competition for the medium of exchange – It is the building block for confidence in the economy – plus – taxation is the key to this – the government needs one single currency they can domestically track and monitor to make sure they get what they determine is their share of your money through taxation. Banks will make a lot of money through governments allowing retail investors the ability to purchase crypto related assets through banks/asset managers – which is why there has been large lobbying efforts from institutions like Goldman Sachs and other banks for this regulatory push In the end – investment managers (fund managers and the banks) will make money through Investment products if people purchase them (i.e. their FUM increases and based around the same % they make more money – 1% at $1bn is more than 1% at $100m) – they will get their hands on anything they can that investors want to hold – and the more they want to hold an asset, the higher the money made from a MER/ICR can be Now – this is Not advice – general information only based around what product are available in the market – need to take into account your own personal situation - Two types of indirect investments – An ETF with an underlying crytpoasset and those that are considered crypto adjacent First type – underlying crypto – these are the simplest Let’s call this Indirect cryptoassets – In a way, this has been the moment the investment world has been waiting for - ETF Securities appears set to be the first Australian ETF provider to launch a listed security that tracks the spot price of two of the world’s largest cryptocurrencies, Ethereum and Bitcoin. This is still Subject to regulatory approval – but if passed - ETF Securities is set to launch into the crypto world – this will done through a partnership with 21Shares, who are the largest crypto provider based in Europe. The agreement will see ETF Securities launch Australia’s first Bitcoin and Ethereum ETFs The two listed funds will be able to be purchased through the ASX rather than purchasing through a wallet or off someone in the blockchain: The ETFS 21Shares Bitcoin ETF and ETFS 21Shares Ethereum ETF will provide Australians with a way to invest in Bitcoin and Ether, via funds operated by ETF Securities, in partnership with 21Shares. BTC and ETH had been two of the two major cryptoassets classes over the past decade and those with the most traction. Once they receive final approval, both ETFs are set to trade on the ASX and Chi-X exchange. This will increase the access for every day investors – but on top of this – access through superannuation for those with platforms that allow access to ASX ETFs This can have major ramifications – mainly through the increased level of FUM – The more money that can flow into an asset – and the higher the desire = the higher the prices can climb The actual structing of this asset is unknown – the PDS isn’t available at this stage as it is sitting with ASIC – but if it is like their precious metals funds it shouldn’t rely on future contracts In the U.S. regulators appear to be reluctant to approve a spot Bitcoin ETF (which holds actual Bitcoin rather than futures contracts), placing Australia ahead in the game. The second type – is a different Crypto assets – many ETFs are not exactly crypto – it is crypto adjacent = through purchasing companies that deal with block chain and other crypto related activities – Australian fund management company BetaShares’ new crypto company exchange-traded fund (ETF) has been in massive demand due to the underlying securities There is a Capital Appreciation Portfolio Diversification (CRYP) fund which enables investors to gain exposure to 50 pure-play-listed crypto companies from around the world, such as exchanges, mining companies and equipment firms. Some of the top companies on CRYP include Galaxy Digital (12.0%), Marathon Digital(11.3%), Coinbase Global (10.7%), Silvergate Capital (10.2%) and MicroStrategy (9.4%). Investors blasted through the existing ETF record of $5.8 million ($8 million Australian dollars) within minutes and soared to a total of almost $31.3 million ($42.5 million AUD) by the end of opening day, signalling massive pent up demand for crypto exposure on the ASX. Many people want to demand these assets – so the prices of these funds can be elevated with the increase in FUM But – since its launce in November 2021 – the price has dropped by 40% - sitting at its low point at around $6.8 when it closed on the first day of trade for $11.19 Plans for more investment products beyond just what has been allowed to date – BTC backed bonds - Goldman Sachs, and a handful of other tier-one US banks, are figuring out how to use bitcoin as collateral for cash loans to institutions, Emulating tri-party repo type arrangements (a way of borrowing funds by selling securities with an agreement to repurchase them, involving a third-party agent) - banks are exploring ways to follow the same path of not touching bitcoin, like other synthetic products. Goldman is working on getting approved for lending against collateral and tri-party repo - And if they had a liquidation agent, then they were just doing secured lending without ever having bitcoin touch their balance sheet, whilst still using the price of this as an offset Goldman is not alone; a handful of big banks are following the trail blazed by crypto-friendly banks Silvergate and Signature, both of which announced bitcoin-backed cash loans earlier this year The regulatory stance on activity like this remains complicated – but ETF providers are likely to start moving into this space Things to watch out for – remember all of this is general information only – not intended to make a financial decision based around There is a shift in western countries – an acceptance of major crypto assets – great if you are into crypto – but don’t confuse this as another step towards something like BTC becoming a dominant medium exchange – where you will be able to use your BTC to purchase goods at Woolworths or other places Instead – this is in an essence enshrining crypto assets as something that purely has a monetary value attached to it based around the demand for the product – Looking at the nature of speculation around cryptocurrencies – there were many uses and hence, many individuals demanding this – people needed it as a medium
22 minutes | Jan 10, 2022
Critical thinking for making investment decisions
Welcome to Finance and Fury. Sorry for the break over the past two months – been busy with moving into our newly built place – been in a process of trying to clear out lantana and fallen trees from 5,000sm – that combined with helping take care of my daughter and the excess work in a led up to the end of the year I didn’t have time to get an episode out – sorry – all weak excuses aside – in this episode – We will go through Critical thinking for making investment decisions to make 2022 your best year yet This is a great episode to start off 2022 – as this can become your most powerful ability to make correct decision when it comes to where to allocate your finite resources – everyone on earth has finite resources financially – even Jeff Bezos or Elon Musk has only so many billions they can spend – this is a massive amount – but without creating more – if they spend it all the money runs out – Your individual ability to maximise your wealth - Is based around your ability to decern the correct financial decisions to make time and time again – making just one decision, or getting lucky once often isn’t enough to help maximise your wealth in the long term – can help in the short term – but over a long period of time, such as 20-30 years, you will make many decisions – each of these can compound off one another or they can result in set backs the aim of this episode is to try and teach a method of critical thinking not only can this be applied to this year to help work towards your financial goals – but for the rest of your life – in every area of your personal life when making a decision – when applied correctly – you will become a master of critical thinking What we will discuss is a process that helps to make a decision based around your personal situation that will equate to the best outcome for your as an individual – hence – this can be the most powerful tools in your arsenal – if you have the ability to make more correct decisions, over time, the further the compounding effects start to accelerate your life outcomes – those previous decisions become a compounding outcome the more of them you make Thinking critically isn’t taught – but it is something that we all have the ability to do We are all born as critical thinkers but this is beaten out of us from an early age – especially through institutionalised schooling – we don’t think but learn to absorb and regurgitate information Kids are in a constant state of learning – which is why they ask ‘why’ so often – they are trying to learn In high school – how many times do you ask the question “why” or “how” something works the way it does – most assessment is to get as high a score as possible on a rubric grading system and you get a grade from A to F, or out of 100 – so you lean how to get a high score without critically thinking about the assessment But it is never too late to start critically thinking 3 Steps to critical thinking – Identify the correct question, evaluate and then make a decision at its core - The solution to critical thinking is really four simple words: Why, does, how and what? These are four simple words that help anyone to develop their critical thinking skills in all areas of life The key to thinking critically about investments – or anything in reality – is this skill that can be applied to any area of your life – which requires you to think about things – the only way to really think about something is to ask yourself the correct questions, then evaluate these – helping you to narrow down to the correct decision The very nature of understanding a question comes in the form of understanding the answer – but many of us have no idea about the answer to our own questions Sure – you can sit back and have someone else spit information at you – which you can blindly follow – but this isn’t critical thinking – it is being told what to do and following without a fuss – but this can lead you down the wrong path Critical thinking is important – allows you to come to the correct conclusion for your own situations Taking a step back and looking at my own personal experience when it comes to initial meeting with clients - Most people I have met don’t think about the investment itself and if it is best option for them – they simply want to invest into an asset class because they have heard of others doing it – i.e. their critical thinking around making a decision is that others have done it – i.e. monkey see monkey do – is this real critical thinking? Some examples – Someone in their mid-60s who is looking to retire in the next few years purchases an investment property that is leveraged at 80% because they went to a seminar about property investment Why might this be the incorrect decision? Take a minute to think about this – if they are looking to retire, they won’t have an income to cover the debt and costs, so the property will need to do all of this – and at 80% LVR – if interest rates rise their net incomes would decline If you haven’t thought up a question and then answered your question at least 10 times on one decision, then likely not critically thoroughly about the initial problem – potentially creating a poor outcome Which when it comes to investments can be costly – but being able to narrow down your own decision process to get the right outcome is simple if you start to practice and implement this process Our decisions can be influenced easily – it is impossible to avoid a flow of information that aims to influence your decisions – from media, friends and marketing – many brand names in the supermarket sell for double the price of some generic brand even though they have the same active ingredients – like Panadol or ibuprofen Critically think about it – see some ad about a product or a news story – need to ask questions about it beyond the surface level – in a way, you not to not trust your initial response – but ask further questions about this When it comes to investing - People want to invest to make money – that is simple - but this isn’t thinking critically There are plenty of situations where someone puts money into something and it goes up – was this situation critically thought through or was it luck? This can then reinforce the behaviour to not critically think 3 Steps to critical thinking – Identify the correct question, evaluate and make a decision Critical thinking is about asking and then answering questions – this is where the core four words of Why, does, how and what come into play Answering questions isn’t about simply wrote answering based around what you assume the correct answer to be – but taking the time to answer each in full A simple rule I have for myself when critically thinking about any subject or question – is asking at least 10 questions prior to making any decision – and then aim to answer them in an unbiased way – if there is an opportunity cost to this, i.e. another alternative – do the same for that and see which answers match best with what I want This can be hard – the very way we search questions can be biased and result in a biased result Works in a chain – example – one question can open the door to other questions – and it should – once you get to the bottom of one answer – this will naturally open the door to many other questions You need to evaluate each of these questions through answering these in full – once you have your answers – you hopefully have thought through your situation to make the correct decision Let’s look at some Examples – First step it to determine what you want – through critically thinking about it – ask yourself questions – say you want to invest, and you come to the conclusions that this is to generate a passive income to retire early – then you have to make a decision on what to purchase Property – I want to buy an investment property – why? To make money is not a good enough answer – It goes back to the basics of investing – everyone invests to make money – so you need to deeper in questioning your motives and what this property can do for you - what do you want it to do for you? Is it to get Capital growth or an income return? If income, does a property help this? Go further – what income can you get? Do the calculations: Let’s look at an average apartment investment property in Brisbane and debt servicing and run through some numbers – so you need to ask yourself some questions, like: How much are you purchasing the property for? What is your estimated rental income? What will it cost you in outgoing cashflow? How long do you plan to hold onto it? What level of capital growth do you need to make it worthwhile? Let’s say the initial purchase price is $550k – you would need to cover around $18k stamp duty plus a $110k deposit – so you need $128k of initial capital and you end up with a $440,000 loan You could rent this property out for $480 per week or $24,960 p.a. which after agent’s fees of 8% is about $22,963 p.a. in net rent – for outgoings, you have rates and BC which say are $3,500, landlord insurance at $1,500, other outgoings like utilities and maintenance at $2-3k p.a. Your total costs are about $7,500 plus monthly PI interest repayments of $2,050 assuming a 3.8% interest rate on an investment loan – so what do these numbers translate into: A net cashflow loss of about $9,140 p.a. – so you would need to put $760 p.m. of your own cashflow into maintaining this property – this brings up another question: is this feasible from your current cashflow? Also – what are you after if it is income then this property may not be for you – is it capital growth? Then do you expect this property to at least go up by $10k in value each year? These are all initial questions – but get a deeper understanding about the dynamics of property What affects capital growth? Interest rates, number of properties and demographics = supply and demand - If you do your research and come to the conclusion that it is Low interest rates and demographics – then you are better positions to answer the next question in critical thinking – are interest rates going to remain where they are or go lower to help Are apartments in the area susceptible to an increased supply: available
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