Sign of the times

40,000 Aussies have 6 or more investment properties

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The AFR reports that Mark Burgess, chairman of asset management firm Yarra Capital and the investment committee of industry fund HESTA said,“Two million people had investment properties in 2013 and I’m sure it’s much higher today, 40,000 had six or more.” 

It reminds me of the scene in The Big Short when Mark Baum is talking to the lap dancer about what she’ll do when mortgage rates reset  and admits she has 5 properties and a condo.

It also reminds me of a time when working in London in the early 2000s and my uncle mentioned one of his staff had nine properties. Nine. That’s what I call leverage.

Of course being on the property ladder is sort of a right of passage in Australia. The angst and wailing of first time property buyers not being able to pursue the Aussie dream is ringing louder. When the Victorian government offers 25% of the value of a home as an interest free loan or the federal government allows access to ring-fenced superannuation funds as a way of assisting them it is hard not to think that the bubble is reaching bursting point.

Unlike shares or bonds, properties aren’t liquid in a downturn. With private debt to GDP ratio of 180% and four spots in the global top 10 most expensive property markets what am I missing? Yes relentless overseas buying and a supply shortage but “affordability” exceeding 13x average income vs 7x prior to GFC doesn’t bode well.

Interesting to see another article which read,

“According to a new survey from Manulife Bank, nearly 75% of Canadian homeowners would have difficulty paying their mortgage every month if their payments increased by as little as 10%.”

I’m sure it’s nothing! I guess aliens haven’t entered the global property markets yet.

44% of Americans can’t raise $400 in an emergency. It is actually an improvement

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44%. This is actually an improvement on the 2015 survey that said 47% of Americans can’t raise $400 in an emergency without selling something. The consistency is the frightening part. The survey in 2013 showed 50% were under the $400 pressure line. Of the group that could not raise the cash, 45% said they would go further in debt and use a credit card to pay It off over time. while 25% would borrow from friends or family, 27% would forgo the emergency while the balance would turn to selling items or using a payday loan to get by. The report also noted just under a quarter of adults are not able to pay all of their current month’s bills in full while 25% reported skipping medical treatments due to the high cost in the prior year. Additionally, 28% of adults who haven’t retired yet reported to being largely unprepared, indicating no retirement savings or pension whatsoever. Welcome to a gigantic problem ahead. Not to mention the massive unfunded liabilities in the public pension system which in certain cases has seen staff retire early so they can get a lump sum before it folds.

If Trump is so stupid how come the media keep getting fooled? Now they demand an insurance payout

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I used to read Der Spiegel. I even paid for a subscription but eventually the journalism lost its edge. This week’s article calling for Trump’s removal makes my decision sound. Read the following section several times and honestly ask yourself is this journalism? Put aside personal views of the President and objectively look at what the article ‘Donald Trump is a menace to the world’ written by Klaus Brinkbäumer is suggesting, if not demanding.

“He is a man free of morals. As has been demonstrated hundreds of times, he is a liar, a racist and a cheat. I feel ashamed to use these words, as sharp and loud as they are. But if they apply to anyone, they apply to Trump. And one of the media’s tasks is to continue telling things as they are: Trump has to be removed from the White House. Quickly. He is a danger to the world.”

So how would you suggest we do it? No, that is not an option. Should we ignore the democratic process by which he was elected?  Should we ignore the fact that even if he was a ‘liar, a racist and a cheat’ people voted in full knowledge of all of his ‘pussy grabbing antics’? The problem with this type of article is that it ignores reality on so many fronts. As I’ve written many times, if you are not a citizen of a country your input on their citizens’ voting intentions is irrelevant. Essentially what you are pleading for is the same as making a willingly high risk investment in a stock which goes bust then complaining to your broker you were misled and ask for your money back.

Elections are much like stock markets. Your voting intention is akin to investing in your country. In the case of America you had two stocks to choose form. One was the hedge of the other. If you wanted to reinvest in the diminishing returns of the last 40 years you bought Clinton Inc. If you wanted to bet on higher risk with potentially higher high return with a start up you voted for Trump Corp.  The media were slimeball stockbrokers trying to persuade investors (voters) to buy into the safety of Clinton Inc because they knew that the commission pay-off would be larger for them. However investors had enough of struggling through decades of exceptional losses, downgrades, dividend cuts and incompetent CEOs. Even worse they got sick and tired of the shareholder meetings where CEO Obama would talk about how successful his stewardship had been when an increasingly dissatisfied shareholder base kept on checking their statements and questioning the dud investment let alone disapproving of his suggested successor.

Mr Brinkbaumer, your article is exactly the problem with the media. You claim the media’s task is to ‘continue telling things as they are’ but you’ve failed on so many levels so many times that your trust rating is even lower than President Trump which stands in the early 40% range. The problem is that the only insurance you can buy in politics is the opposition. None other exists because the premiums would be too high and the payouts too low.

What your article painfully overlooks is that had the previous mob, who no doubt you think is the solution, was actually the problem. That 40 years of painful neglect led to record numbers on welfare, food stamps and income inequality. The investors knew that backing Clinton Inc, whose entire manifesto spoke to helping the needy that had been neglected by her own party (by deduction including the man she intended to replace), was such a palpable untruth that had the Democrats so brazenly lied in a stock prospectus she would really have been jailed.

After Comey’s decision to testify, my social media feeds lit up like a Christmas tree. I deliberately held back from making any call at the time because there was no evidence other than speculation. Yet social media had already made up its mind – “impeachment! – the orange buffoon is going down!” “The smoking gun!” Of course it turns out that the knee-jerk reaction was proved a falsehood. The media once again let its subjectivity rule the day. Like Rachel Maddow’s scoop on his taxes. She sold it as grounds to get him on tax evasion like Al Capone in The Untouchables. She essentially said “we’ve got the book keeper.” Yet she was gunned down in the elevator by her own leftist journos. You know when the media attacks its own that even it from time to time has flashes of objectivity, albeit too brief because lessons are never learned.

Sadly for the rest of the world, as much as we may despise Trump (he has flaws) and protest at his actions we have absolutely no rights to lynch a democratically elected President much less encourage his downfall. This type of reckless behavior is indeed more disturbing. It essentially says you don’t respect the democratic rights of Americans. What is worse is it the same downright condescending attitude people had during the elections that completely ignored the plight of those that voted for him remains. I remember reading one article suggesting that there be an intelligence test required to have voting rights.  That is totalitarian behaviour if there ever was!

The leftist media continues to forget that the one sure way to help him do another 4 years is to keep up the same broken record dialogue. Indeed in the next 3+ years the Americans will have the opportunity to sack him if indeed they see a better alternative. Trump was always the start-up IPO bet. American voters knew full well he was a risk and they took it. His volatile stock performance is not a big surprise.

Klaus, you conveniently forget that Trump is a by-product of decades of neglect. Had the past four decades of the incumbent political class done a sound enough job he never would have seen the light of day. Instead of putting blame on the causes you simply place it all on him. Instead of some introspection on asking why he is where he is you can’t remove yourself from the group think of attack dogs. That anything he may achieve will be discredited and anything he does wrong will be given full thermonuclear uranium tipped coverage. That my dear friend is shame on you.

It would be nice to see some balance in coverage because if you don’t social media will drag up example after example for you further discrediting your supposed ‘telling things as they are’. We must all remember that digital media has a half-life of infinity. Is it any wonder 25% of the workforce in media has been culled in recent years. It isn’t that advertising revenues are falling it is because you don’t provide enough value for advertisers to warrant posting ads in your publication. Guaranteed if the journalism attracted readers the ad revenue would climb with it.

So once again, the bigger danger to the world is you not him. We should never encourage the overthrow of democratically elected governments because we dislike the outcome. Don’t forget that Clinton had 99% of the mainstream media on her side, leaked debate questions to give her an advantage, a pussy-grabbing video against her opposition and more but still lost. Why? The attitude of expecting a coronation and frankly Hillary Clinton didn’t put in the work.

Suppose no dirt is found on Trump? That constant media mud slinging fails to stick. Evidence surely that maybe he is just a brash, uncouth, narcisstic bully rather than someone that must be removed as a danger to the world. Sure, he doesn’t exactly act in a manner very befitting of the most powerful office in the world but he got there legitimately.  Indeed if he is as unhinged as you imagine surely Pyongyang would be under a mushroom cloud and Assad would be a victim of SEAL Team 6. In fact you might point out that the incredible weakness of his predecessor on foreign policy makes Trump’s more assertive stance a welcoming relief rather than a terrifying prelude to WW3.

Your article is so typical of the snowflake culture. The type of attitude that seeks to ban people from making addresses at universities, once the cradle of free speech. You ignore what you don’t want to hear and pass judgement on those who fail to hear you. Once you learn to listen to others you may find that you come to understand why even people like Van Jones can eventually see why Trump won’t be outed so easily. For indeed if he is as big a fool as everyone makes out the media won’t be needed to point it out. It will be painfully clear and in 2018 Americans will get a trial IPO and 2020 the opportunity to buy or sell stock in Trump Corp.

I should thank you for this article for helping confirm why I didn’t bother renewing my subscription.

Comey testimony proves media can’t stop playing the man rather than the ball

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Comey admitted in his testimony that he was never pressured by Trump to end any investigations. Damn and blast. The media has done another collective Rachel Maddow “we’ve got his tax returns” backfire. So insistent on trying to seek revenge they forgot the old Chinese proverb, “before setting out on revenge, first dig two graves.” So eager are they to play the man they overlook basic check sheets to find balance. Trump may well be a loose cannon at times but the media is the pot still calling the kettle black.

While I long argued Trump would win the election I’ve been an advocate of trying to seek balance to the one sided argument against him. It doesn’t mean I think he is ideal.  I disagree with many (not all) things he has done and petty things (like his attitude to Merkel) are certainly not fitting the most powerful office in the world. Trump derangement syndrome is none-the-less real. The media attack dogs never seek to do moral equivalence with their beloved Obama over the same supposed crimes of leaking sensitive info or whatever. I do think Trump is Turnbull-esque in lacking judgement as well as constant cabinet reshuffles but the most twisted irony is that financial markets would seem to want him there using any wobble on the back of an impeachment scenario as an excuse rather than admit the hyper asset bubble blown for 8 years.

The mainstream media now preys on clickbait. Thinking the number of clicks, likes and shares are endorsements and can replace quality content (as much as they self appraise it’s high value added factual). In fact the revenue numbers of media outlets who continually rant  is telling. Fairfax in Australia has had two rounds of layoffs in the space of 12 months and The Guardian is openly begging for donations.

The media is surely going to keep launching salvo after salvo to try get him out of office. As stupid as they keep suggesting the ‘orange baffoon” is he keeps getting their measure. I issue a caution though. The deplorables that voted him in want him to get on with the job. With all these distractions the quest that they hope will get them under the “have not” hole is pushed further into the future. Getting an impeachment to stick and force a resignation is not high on a have not’s priority list. They need help as I argued at the time of the election. Whether Trump can provide it is a moot point but they voted for change and the “haves” ought to be careful how they indirectly impact the “have nots”

The screaming, carrying on and promoting blood sport may end up creating proper civil unrest. It’s simmering but the media as usual is oblivious to it all. In any event the last thing the world needs is instability in the world’s largest economy at this point in a peaking cycle.

Rona Ambrose to quit Canadian politics

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In what I can only say is a shame, Interim-leader of the Opposition Rona Ambrose has called it quits on politics after 13 years taking up a job at a Washington think-tank, the Wilson Center. I honestly thought she had a shot at taking the Prime Ministership at the next election given she made mince meat of PM Justin Trudeau every single time she spoke in question time. Her eloquence, ability to attack and make sound arguments had Trudeau on the ropes taking massive body blows. Perhaps he will breathe a sigh of relief now that she has gone.

She will lead the institute’s “efforts to convene U.S. and Canadian officials to explore the benefits of an integrated and competitive North American economy that is focused on job creation and prosperity,”

Canada’s new permanent opposition leader from a list of many candidates will be announced on May 27.  Sounds to me like her own party wasn’t going to give her the full time position which looked thoroughly deserved.

Trudeau lives to fight another day.

Misfiring Motorcycle Market in Japan

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The Japanese National Police Agency has just released its 2016 statistics. Since 2010, there has been a decline of 1,500,000 Japanese men who possess a large bore (401cc+) motorcycle license. In the reverse there has been a 715,000 increase in mid size capacity bikes. Female riders have shown a similar pattern of 178,000 fall in large capacity licenses and 147,000 increase in mid size respectively. While there are still 9.175mn men and 625,000 women willing to get out on the highway with large capacity bikes, the trend is alarming. More frighteningly, new graduates aren’t lining up either. 30,000 fewer students lined up to get a mid or large size bike license between 2014 and 2016 representing a 12.3% dip.

In fact only one prefecture saw a rise in graduates out of 47.

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Even then that was the law of low numbers. Yamagata saw a 9.9% increase in total graduates or 222 people, hardly making a dent on Kanagawa which saw over a 3,000 person decline or 13.3% fall.

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When looking at the large bore market, something the big overseas brands are targeting the stats look grim.

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Nagasaki and Miyazaki, two of the prefectures in Kyushu (which had a terrible earthquake in April 2016) saw a rise in those obtaining a large bore license, which backs up the trend seen in Miyagi and Fukushima when the quake and tsunami hit in 2011. Perhaps the idea of ‘living one’s life’ became a driver to get people to apply for big bore bike licenses.

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So overall the outlook remains bleak. While licenses numbers are falling at a relatively slow pace (2% p.a.) eventually riding schools will end up shutting shop because there is little new business. Tottori-Pref on the Japan sea coast is one of the aging population centers but it saw a 22% fall in new grads from its schools.

This has to be one of the best countries in the world for motorcycling with high quality twisty ribbon throughout. The question is what to do to arrest the situation.

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Dick Turpin Turnbull will chase away foreign capital

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I was asked by a client this week on what I thought of Australia’s political climate. I said to him, “if you asked me 15-20 years ago I’d safely argue that it was the only country in the region which could boast incredibly stable government, sensible economic policy and a safe place to park your money. Today I can’t say with hand on heart that this is the Australia you are investing in today. What I will say is that you should keep your powder dry because it will become a ‘pound shop’ in the not too distant future with a weaker currency, higher rates and fire sale asset prices.”

He asked if I could elaborate. I replied “we have had 5 prime  ministers in almost as many years. Before that we never saw anything like that. Our political climate is vile and volatile. We now have a government that is seeking to put in place knowingly unsound policies to arrest poll declines rather than try to fix an out of control deficit. What they are failing to see is that bashing big banks (especially for a conservative Coalition government) out of the blue chases off investment (Alan Joyce and Don Argua are right about that). Foreign investors must wonder whether they may fall foul of knee-jerk regulations and decide the risk is not worth it. So in answer to your question the current climate is going to offer some fantastic opportunities down the line because all of the political turmoil will eventually force change and buying into the market leading into that will be your best bet.”

So with our Dick Turpin highwayman robber at the helm we invite unwelcome flight of capital. If you want to create jobs, growth, stability and invite foreign investment you do so by providing a platform that supports it. It isn’t won by bashing industry, cranking up public spending and hiking taxes. It is done by making yourself the safest place to invest and all the while that happens the risk falls meaning capital is not only cheaper but more abundant. This isn’t trickle down economics but sound policy. Sadly talking of net debt isn’t going to save this government and what is worse Opposition leader Bill Shorten wants to outspend a budget that makes the Sultan of Brunei’s giveaways look like Venezuelan austerity measures.