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The giant awakens

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It was a strong GDP print last week… and the truth is even stronger.

I just wanted to pull out two things from last week’s GDP release.

First up, every quarter it rolls around, we’re reminded of our record-breaking run without a technical recession (two negative quarters in a row).

We’re now up to 26.5 years!

It’s pretty impressive.

Of course, to a lot of people, it means we’re doomed. The business cycle moves in… well… cycles. So what goes up must come down.

We’ve had it too good for too long. We’re due.

But this was a point Glenn Stevens made before he retired: just because we haven’t hit that arbitrary recession mark, it doesn’t mean that the business cycle is dead.

And if you look at the chart, we still get all the ups and downs of a regular economy. We just don’t stay negative for long.

And in part, that’s been about population growth, particularly through immigration. If you look at the per capita numbers, then we’ve had several recessions in the past twenty years.

So this whole “we’re due” argument… I’m not buying it.

The other thing that jumped out at me from the GDP release is the building pressure on wages.

One of the mysteries of recent years has been the wageless boom in profits – normally corporate profits and wages move hand in hand. Look at the chart below. The correlation is pretty tight.

But at the end of 2016, we saw company earnings pick up, while wages remained flat.

But now wages pressure is building. It looks like wages are catching up quickly, and they’re currently rising sharply.

Looks like we’re heading towards 5-6% per annum.

It could even be more since wages have been repressed for so long.

This could be just what Australia needs.

If you look at the last quarter of growth, it was driven by a surprising surge in exports, together with strong public spending.

Household consumption was unimpressive.

That’s been the theme for a while now.

The Australian economy needs to pass the baton over from the resources sector to the household sector. So far, households haven’t been willing to take it on.

But with more cash in their pocket, they just might be convinced.

The other thing, of course, is that higher wages will eventually feed through into higher rents.

Rental growth hasn’t been keeping pace with prices, and yields have been compressing.

Growing rents will reverse that compression, and once yields get back to normal – say around 4% nationally, then growing rents will feed through into growing prices.

And so as the household sector starts spending again, they will become the engine of house price growth.

And that’s not a moment too soon either. Largely, recent price growth has been driven by credit. But thanks to APRA and the Royal Commission, the credit channels seems to be running out of puff.

There’s a baton change needed there too.

So this is a story of a giant awakening. The Australian household sector is huge, and it’s too important to go on sitting on the sidelines.

It’s a good news story.

Why financial planning is seriously stuffed… ( my opinion)

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Our financial planning system was always going to fall over eventually.

Everyone’s acting all surprised that the Banking Royal Commission has unearthed a graveyard of dodginess and financial abuse.

Probably not my readers since I’ve been banging on about it for years now. And the reason that I’m not surprised in the slightest is that the concept of financial planning, as it plays out in Australia is fatally flawed.

It’s a mess of misaligned interests that was always doomed to fail.

Let me explain.

The key confusion is around whether financial planners sell a product or a service.

Imagine you engage an interior designer. They offer you a service and that service is a interior design for your home. You expect them to be working with your home’s needs first. Maybe they then help you go out and get the individual elements, maybe not. But they’ve given you a service – a design.

Now imagine you walk into Ikea. They offer you a bunch of products. They will try and tune into what your needs are, find the right product for your circumstances, but at the end of the day, they’re trying to sell you something off the showroom floor. They’re not going to recommend you go down the road to the bespoke vintage homeware store, no matter how much your open plan entertaining area is calling out for it.

But that’s ok, because you know that. You’re going to them to have a look at the products they have on offer.

Now what does a financial planner do?

Well, if you look at their marketing, they’re a service. They’re there to design a bespoke financial strategy just for you.

But if you look at how they get paid, particularly by the banks, they get paid as if they’re a product showroom. They get commission based on how many units of certain financial products they sell.

When you look at the remuneration structure, the planners interests align with the banks’, not yours.

But of course, there’s some mechanism that brings those interests into alignment right.

Well, actually no. Not really. There’s codes of conduct and blah blah, but at the end of the day, the only protection you’ve got is your planners’ own ethical sensibilities.

And you know, most of the time, let’s be honest, that’s enough. Most people do the right thing.

But the law isn’t there to protect us from most people. It’s there to protect us from the worst of us.

And as the Banking Royal Commission has shown us, right now, the law is failing miserably.

So in my mind, the only way you can bring financial planning into alignment is to stop financial planners from also selling products.

Make them do what their marketing says they’ll do – design a strategy based on your unique circumstances.

Then we can have financial product showrooms – what the banks used to do. Somewhere you can go to get the right financial products for your needs, once you’ve nutted out what your strategy is.

But there needs to be a firewall between them.

Sure, financial planners can recommend particular products off that showroom floor, but as soon as they’re being paid based on how many units they sell, then there’s a misalignment of interests.

And at some point, somewhere, that’s going to break down.

And this is why financially planning, as it currently exists, is fatally flawed. It’s set up to fail.

But don’t expect to see change come from the financial planners or the banks. The system is set up to serve them. The fight needs to come from the customers.

You up for that?

Nah, me either. That’s why I walked away.

Financial Planners Busted

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Financial planner gets busted… is it really just a few bad eggs?

Just bizarre scenes at the Banking Royal Commission last week, as Terrence McMaster, head of financial planning outfit Dover Financial, passed-out while he was giving testimony.

Perhaps it was the stress. It certainly hadn’t been a flattering few days for him.

The day before his ‘best-performing’ planners had been pulled in for a roasting.

First up it was Adam Palmer. He had been fired from AMP (an outfit now famous for their ethical standards) for poor performance. He had actually received an ‘E’ rating – the lowest possible grade.

Why? Well, turns out he had gone out and set up his own property advisory service – a service that pretty much just flogged off houses on to unsuspecting customers under the cover of ‘investment advice’. As if that wasn’t bad enough, he was then recommending his service to his clients without telling them it was his company.

That’s right, his ‘financial advice’ – advice people had to pay for – was to actually give him more money for a product they probably didn’t need.

FFS.

Next up, it was Andrew Smith. He was accused of pumping 20 customer sales of high-risk hybrid products through the system in a single day.

Then it was Chris Harris, who had also received the lowest possible rating while he was a planner at ANZ’s Millennium 3 planning arm. The royal commission heard one instance where Harris advised a widow with a $32,000 term deposit who wanted to invest to earn $2,000 a year was put into products that instead cost her $2,000 a year and made little returns.

Was Dover financial actively recruiting dodgy planners? Terrence McMaster said that wasn’t their policy when he took the stand, and said that in his industry, poor references were “actually quite normal.”

“Actually quite normal?” Seriously? This isn’t some Yelp review from a customer whose soup was a bit cold. This was an internal audit of compliance.

The only way that is ‘normal’ is if the whole damn industry is dodgy…

… and I’m starting to wonder.

The commission also heard that Dover had threatened a customer who had taken one of their dodgy planners to the Financial Ombudsman with defamation. They wrote them a letter saying that they would report them to Centrelink for fraud.

Finally, McMaster was being grilled over his “Client Protection Policy”. This document was designed to ensure that Dover wore no liability for the actions of its planners. It protected Dover and gave its clients no protection whatsoever.

“It’s a bit Orwellian to describe this as a client protection policy, isn’t it?” said QC Costello. “It’s entirely misleading, isn’t it?”

McMaster looked like he was about to agree and offer some lame defence, but Commissioner Hayne intervened to tell him that if he admits that it is misleading, then he has made a misleading and deceptive financial statement, and that’s against the law.

… And that’s when someone turned out the lights.

McMaster collapsed and had to be taken from the court on a hospital gurney.

I’d actually be laughing through my coffee if it wasn’t for the fact that ordinary people – widows and people on Centrelink – are being ripped off. The people who probably need financial help most are the ones being so shamelessly targeted.

It’s disgusting.

It’s kind of clear to me that these guys aren’t the sharpest tools in the shed. Definitely tools, but not the sharp kind.

I googled their business to write this up. Look at how their result comes up on Google:

Seriously. “In everyone’s best interest except the…”

What? Customers? I’m guessing customers.

Oh no. The full quote when you click through says ‘institutions’, but it still should have raised some red flags.

I mean, why are we talking about ‘everyone’s interests’. Why should a customer care about that? It’s like a car dealership saying “You should buy this car from me because it will be great for both of us.”

I think it goes to show just how deeply entrenched the idea is that customers are there to serve financial planners. They didn’t even think they should try and hide the fact.

Then I love McMaster’s complaints about ASIC’s ability to ban dodgy financial planners and name and shame them.

This is what he actually said:

“For example, in my legal practice I have encountered doctors who cannot see children, and male doctors who cannot see female patients without a female nurse present. Obviously, serious misconduct had occurred, but still the right to earn a living is not taken away.

“ASIC, or anyone for that matter, can in effect rob a person of a right to earn a living, as a financial planner or otherwise, by simply posting on the internet.”

So your argument here is that dodgy financial planners should be treated the same way as rapists and paedophiles?

That’s powerfully persuasive, but probably not in the way you think it is.

And of course, the real tragedy is that the whole financial planning industry trades on the idea that finance is too hard – that you need to pay a professional to do it for you.

Yes, it’s work. Yes, you have to put some time into it and skill up. But do you really have a choice?

You need to be able to make sure you’re financial planner isn’t another Dover, but how do you know? The only way to tell is to do some research yourself.

But if you’re doing the research, why not just go that extra mile and manage the whole show yourself?

Seriously, it’s not that hard. I mean, these tools could do it.

Anyone can.

Hypocrisy at new heights…

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I’m not letting those mongrels claim credit for it now.

The hypocrisy over the banking Royal Commission really is breath-taking.

After fighting the need for a serious inquiry for over a year, and throwing every chair they could find in it’s path, the Coalition government is suddenly very proud of the Royal Commission that they delivered.

Are you guys for real?

I mean, it still wasn’t until sh!t was really getting real that the government started changing its tune. The CEO of AMP quit after admitting that they systematically charged customers for services they weren’t getting, while the CBA admitted that it knowingly charged dead people for advice.

(They really are the best customers).

And that’s barely the half of it. But no, now Barnaby Joyce is shocked and appalled.

“In the past I argued against a Royal Commission into banking. I was wrong. What I have heard is so far is beyond disturbing.”

C’mon tubby. Everyone knew the system stank. Where were you? Living under a Gina?

Treasurer Scott Morrison has found a sudden need to be talking tough too.

“I find what came out of the royal commission, as I said yesterday, deeply disturbing, and this type of despicable behaviour does carry jail sentences under the corporations act.”

You’re shocked too? Where were you? Living under a Barnaby?

And it’s all well and good to talk about jail time, but I’ll believe it when I see it. Remember Morrison labelled the calls for a Royal Commission “a populist whinge”. I expect calls for jail time will get the same treatment.

Meanwhile, Financial Services Minister Kelly O'Dwyer is taking credit for including life insurance companies.

“I think it is right that we have a broad inquiry that can look into all aspects of misconduct in the financial services sector, the ALP had argued for a very narrow one simply into the banks.”

I’m calling BS on that one. Total BS. The only reason you wanted to look at the entire financial services sector was so that it would dilute the focus on the big banks. You got lucky when it turns out AMP was pulling some pretty dodgy stuff.

But remember you lot were fighting this from the beginning. To try and take some ridiculous high-ground because Labor’s vision was too narrow (never mind that their focus on the banks has been stunningly vindicated) is gob-smackingly outrageous.

I am gob-smacked.

Of course, most media commentators have now switched sides as well. Many agreed with Morrison that it was a class war. No one’s singing that tune anymore.

Except maybe John Howard.

Just five months ago the former PM said:

“I would be staggered if the Coalition proposes a bank royal commission, that is rank socialism.”

You lot really are hopeless. Shamelessly running cover for your banking masters. You deserve to be hung out to dry with the (embarrassingly small number of) executives who will lose their heads over this.

But it won’t happen.

Giving a fuk about the integrity of the banking system is not ‘rank socialism’. Without a functioning financial sector, there is no capitalism.

Defending the integrity of the financial system is defending integrity of capitalism itself.

This is one area where we need to be extra vigilant. Once rot takes hold in the finance sector, the economy unravels.

You want a free and democratic economy, you need integrity in the banking sector.

It really is as simple as that.

But no, you’re all shocked.

Arse-hats.

Negative Gearing Reform – HUGE Possibility

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New Zealand leads the way

Bit of news from across the pond. Looks like New Zealand’s new Labour government is setting the stage to remove negative gearing, by ring-fencing losses on residential property so they can’t be offset against salary income.

An Issues Paper has been released by the Inland Revenue Department on the proposal to change the rules in what the Government says is “an effort to level the playing field between speculators and investors – and home buyers”.

IRD is proposing that the new rules will apply from the 2019-20 tax year and will mean that investors will no longer be able to offset losses on property investments against their other income. It’s not definite yet that the new rules will be applied in entirety from April 1 next year as the IRD says it would be possible to phase the rules in over a two or three year period (by gradually reducing the amount of losses that can be applied against other income). However, the IRD appears to favour applying the rules in entirety from next year.

Revenue Minister Stuart Nash, in “encouraging feedback” on the proposed changes, says the “persistent tax losses” that many property investors declare on their investments indicate that they rely on capital gains to make a profit..

The changes will “make the tax system fairer” Nash says…

“In conjunction with the recently announced extension to the bright-line test, ring-fencing losses from rental properties would make property speculation less attractive and level the playing field between property investors and home buyers. The time is right to test the detail of this proposal with investors and other stakeholders,” Nash says…

IRD is suggesting that the ring-fencing should apply on a “portfolio basis”, which means that investors would be able to offset losses from one rental property against rental income from other properties – calculating their overall profit or loss across their portfolio.

Also under the suggested changes, a person’s ring-fenced residential rental or other losses from one year could be offset against their residential rental income from future years (from any property) and their taxable income on the sale of any residential land.

I think this is all pretty interesting. For me, if New Zealand pulls the trigger first, you can pretty much lock it in that Australia will go at some point. The same way that Trump’s tax cuts breathed life into the prospect of tax cuts in Australia.

It’s working at the collective consciousness level.

And I actually don’t mind some of the proposed changes. The idea of a portfolio basis – where loses in one property can be offset against income from another – is a great idea. It’s about recognising that property investors are running a business, and treating all their activities that way.

But I didn’t know what the ‘bright line test’ was. I had to look it up:

The bright line test – which requires tax to be paid on any gains made from a residential property sale – was first imposed by the National-led Government in 2015.

The Labour-led Government has argued the measures don’t go far enough and that extending the test to five years will help deter property speculators and “may” have of a dampening effect on the housing market.

National opposed the changes, despite it being a bill that “in the normal course of events, we very much would have been supporting,”.

“But we cannot support this bill because of the egregious, and I think in fact duplicitous, way in which a stealth capital gains tax is being imposed on New Zealanders through this legislation.”

So the gain you make on any property you sell within 5 years is added to your personal income and taxed. And that’s new because NZ doesn’t have capital gains tax…

(Why aren’t their prices higher?)

But seriously, 5 years is a pretty long time in property investment. I don’t think you’re just going to deter ‘speculators’ and ‘property flippers’ with that. You’re deterring everyone.

It’s that old narrative again. That everyone investing in property is just flipping and speculating and getting something for nothing.

I guess unless you’ve actually owned an investment property, you don’t realise how much work is involved.

It’s not nothing. And there’s risks too. You could get a bad tenant. Or no tenant. As an investor, you’re wearing that risk.

So I’m a little tired of this narrative that all investors are speculators and gamblers. That we’ve got nothing to offer the world.

Give us a break.

But I just don’t know how we’re going to shift it.

JG

The Secret to Win/Win

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Putting win-win in its proper place for full power

“Why do you think he’s going to go for vendor finance?”

“Oh, well, you know. He gets to help me out. There’s a feel good factor. It’s win-win.”

This idea of win-win is deep in the collective consciousness now. I don’t know exactly who came up with it, but I’m pretty sure it was Stephen Covey in The 7 Habits of Highly Effective People that made it famous.

But like a lot of things on the way into popular culture, the message has been diluted, distorted and bastardised.

Like my mate. ‘Win-Win’ is not a persuasive tool. “C’mon mate. Give me some money. It’s win-win.”

It’s not something you apply after the fact to justify a decision or bring someone around to it.

It’s a mindset. It’s a way of coming up with solutions. Not a method for selling them.

I see a lot of people get this wrong. Even if their intentions are more genuine that my mate’s.

They decide on what they want, and then look for a way ‘sell the benefits’. And in that moment, they’re not trying to deceive the other party. They’re genuinely looking for the things in the deal that are good for the counter-party.

But this isn’t where you apply win-win.

At its heart, win-win asks you to step into the shoes of the other. Before you’ve decided what you want, empty your agendas and look at the situation through the lens of the other person’s interests.

In that way it’s an act of empathy. It’s about being able to connect with and understand the drives and motivations of another.

It’s a very feely process.

But what happens if you can do that is that you open the space right up, and open the door to many possible solutions. You get to see where your interests and their interests intersect. You get to get creative.

That doesn’t happen if you’ve already decided what needs to happen and are just looking for a way to sell it.

This mindset approach to win-win also puts you in a position of strength. If you have taken the time to understand what’s driving another person, you’ll do much better in negotiations. You’ll be able to anticipate where directions will go, and sell the benefits of particular outcomes much more effectively.

So remember this, win-win is first and foremost an act of empathy.

The challenge is not losing sight of your own interests by focusing on the needs of another. This is another important life skill, but we’ll leave that for later.

Who would have thought? So much personal development on the road to becoming a titan of business.

Bad News: Your money in the bank- gonski in 60 seconds.

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Another day, another banking attack on democracy.

Valentines Day will go down as a dark day in Australian history.

It was the day that the banks overturned one of the few protections that depositors had.

Ask anyone how safe their money in the bank is. I'd say 80% wouldn't have a clue. The banks are big. The money must be safe.

Another 20% are probably aware that Australia has a federally-funded deposit guarantee scheme.

So if a banks goes broke, and you had money in the bank, then the government will give you your money back, up to $250,000.

It's called the Financial Claims Scheme, or FCS.

(Not to be confused with the government's current public relations program, ‘ffs'.)

So all good, right? Your money's safe.

Well, turns out, it's not so safe. It turns out the FCS is underfunded, and not actually much of a guarantee at all.

In 2011, the international Financial Stability Board based in Basel, Switzerland, found that Australia's FCS contained about $20 billion for each bank in Australia.

Sounds like a lot right. Well, actually, no so much. Each of the four majors, who account for over 80% of all deposits, they each have something north of $400 billion in deposits.

So if one of the big four went under, the chances that there'd be enough in the kitty to cover it are pretty small.

Especially when you remember how concentrated the Australian banking sector is. It's hard to see a situation where a major goes under without taking some of the regional banks with them.

So not a lot to inspire confidence there.

But that's ok, the government could just go into debt or print money to make sure it hit its FCS obligations, right?

Well, maybe, maybe not.

And this is what happened on Valentines day.

The government sprung a sneaky move on the Senate, ramming legislation through while just 7 senators (of 76!) were in the room to vote on it.

(I guess the others were taking their chief of staffs out for a candle-lit dinner).

It was the APRA crisis resolution bill.

What's in the bill?

Well, a bunch of stuff, but the most alarming was the removal of the guarantee bit from the deposits guarantee scheme.

At this point I have to introduce you to Dr Wilson Sy. He was formerly the Head of Research at APRA, so knows what he's talking about.

As he says, “the evidence collected here strongly suggests that the Bill is designed to confiscate bank deposits to ‘bail in' insolvent banks to save the financial system.”

How?

“Or”.

There was key change to the APRA mandate. APRA is normally responsible for “protecting depositors AND ensuring the stability of the financial system.”

However, in the latest bill, APRA is allowed to make its decision in secret, if it is in “the interest of protecting depositors OR ensuring the stability of the financial system.”

See what they did there?

Now typically, protecting depositors is part and parcel of ensuring the stability of the financial system.

But in the middle of a crisis? When banks are going to the wall and the government is running out of money?

When it's facing the prospect of having to print billions and trash Australia's financial reputation?

It's not hard to imagine a scenario where protecting depositors is not the best way to ensure the stability of the financial system.

And since that decision will be made behind closed doors, it's also not hard to imagine a situation where government lackeys just decide to fleece donors and bail-out their banking mates, given the choice.

As Dr Sy points out, the new bill gives APRA and the government “discretion.”

But it's just not a guarantee if the body behind it has discretion.

It's like your insurer saying to you, yeah, your house and contents are totally insured… you know, unless something else comes up. Let's just see how it flows on the day.

And in the middle of a crisis, with a disaster to blame and their banking mates to protect, you can bet that the politicians will use their “discretion.”

And so that's what happened. On Valentine's Day, in the cold, heart of Canberra, the government quietly rushed through legislation designed to screw depositors over.

Thanks, mongrels.

I know the banking sector gives us things to be angry about on a daily basis, but if you're looking for a good outlet for that anger, the Citizen's Electoral Council is running a strong campaign on it. Check it out.

And time to rethink our definition of ‘defensive' assets.

To everyone laughing at me right now…

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Copped a few mean digs this week. This is my response.

Right now, I'm giving people a good laugh. I'm a proper comedian.

It's one of the things that happens when you put yourself out there. People want to take you down.

This week, it's all about the crash in cryptos.

“How's your crypto portfolio doing now, Jon?”

“How much did you lose this week, Jon?”

“What tip have you got this week Giaan? Got a crypto pick that's not going through the floor?”

Hardee har har.

And look, I can put on my compassionate zen hat. Some people have so little going on in their lives that laughing at B-grade celebrities on the internet is the only way they can get their kicks.

Really, I should be trying to give them more things to laugh about.

“Hey guys. This week I broke a nail opening the sun roof on my merc. That'll teach me for buying sports cars.”

What? Not funny?

Oh no, that's right. It's only funny when it makes you feel better about your own life.

There's nothing intrinsically funny about my suffering here. Watching other people suffer is only enjoyable when it makes you feel better about your own pathetic life.

Sad.

The other thing I'd say is that while every do-nothing is laughing about the crash in cryptos, the stock market quietly shed $4 trillion dollars worth of value.

Sure, it's no match in percentage terms, but that's like 11 times the dollar value loss in a single day.

And you might say, well, if the crypto market was that size, the losses would have been so much larger.

And to that I would say, if the crypto market was that size, (and really, it's probably a matter of when, not if) but if the crypto market was that size it would be a whole lot more stable.

With size comes stability. That's just the nature of the beast.

The reason why the crypto market is prone to such volatility is precisely because it is small. And it's small because it is still early days. Early, early days.

The final thing I'd say on that is also that, so far, I haven't lost any money on cryptos. As I keep saying, you've got to be in it for the long haul.

And I haven't lost money on any holdings yet, because I haven't sold any yet. Sure, I'm sitting on some paper losses right at this point in time. But check back in at the end of the year.

And the reason why I haven't booked any losses yet is because I don't need to sell. I don't have any stop losses in place.

Why? Because even if I loose everything I've put into crypto, it doesn't touch me.

Do you get that? I've got more than your net worth invested in cryptos, and it's still play money to me, ya stupid wage monkey.

Oh look at me go. Sorry. Arguing with people on the internet again.

But seriously, if you're feeling gleeful now because a single month's market movements have justified your cowardly inaction, you can eat a fat greek sausage.

Maybe cryptos aren't for you. Fine. Awesome. But if you need people to lose money in order for you to feel good about your relationship to the market and your relationship to risk, then you seriously need to have a look at yourself.

(Of course it's the same story for the people who did make money out of cryptos. There was a lot of people crowing about their genius when really all they did was get on a train at the right time…. So I can understand where some of the resentment is coming from.)

And look, I get it. I really do.

We've engineered a system that makes all of us feel insecure. We're indoctrinated into a competitive schooling system that makes some of winners, but most of us losers, and it does that at a very young age.

Then we enter a culture where some of the most creative and brilliant minds on the planet get sucked into the marketing industry – an mega-industry whose sole purpose is to amplify and feed on our insecurities.

And then we're so tied to the machine that the only way we know how to express ourselves and demonstrate our worth to others and most importantly to ourselves, is through flashy material possessions.

We are sick to the core and most of us have no idea.

So when people laugh at others for having a crack and losing some money, I can see it as just another symptom of this crazy system we've got going on.

But seriously, if you're in the market, if you're into or out of cryptos, whatever you're into, you've got to be doing it for you. You can't be measuring your success against others.

There is just no winning that game. You will never be free.

And if you can't be free, then what's the fricking point?

All the money in the world won't save you.

Crytpos + Property = A portfolio for all seasons?

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Everything you need to know about the coming crypto futures market, and why should still hold property.

So you all know I’m getting excited about crypto currencies right now. No secrets there.

Does that mean I’ve fallen out of love with property?

Hardly. I still love property. I’m still committed. We’re just experimenting with a more open, less rigid relationship for a while.

There’s enough love to go around.

No, seriously. I’m still all-in on property. And the crypto madness just means I’m even more committed.

And yes, I said crypto-madness. If you think that this is a sane and normal market, then you, in my professional opinion, are nuts.

Like most hysteria runs, there’s a core of truth and a veneer of hype.

(The trick is knowing which is which.)

Seriously, the more I skill up, the more I realise that this isn’t a space you shouldn’t be wandering blind into.

(If you want a reputable guide, I know a guy… Actually, I paid him several thousands of dollars to personally mentor me – you can get access to him for free – Find out how here)

But Bitcoin in particular, and cryptos in general, are pushing into territory where they’re soon going to be “systemically important.”

And by that I mean, once they’ve been around long enough and people realise they’re not a fad, people are going to start demanding that their fund managers take a position.

Soon, all the institutional money houses in the world will have a crypto fund. Might take a few years, but we’re not far off.

After that, it’s kind of hard to see how it plays out. But once we start talking about serious money – and by serious I mean money that has been in the same hands for centuries – once they start getting involved (if they’re not already) the market can get a little weird.

And given authorities haven’t really caught up with the crypto reality, and are still arguing about whether its an asset or a currency or a contractual arrangement, then you have the prospect of serious money with very little oversight or control.

Imagine ten T-rex’s on a basketball court, while the umpire is trying to decide what the definition of ‘ball’ is.

Oh man it’s going to be wild.

But I hope that prospect is as exciting as it is terrifying for you. There’s going to be serious money to be made for people who know what they’re doing.

(And for people who know how to tell the difference between a T-rex and a bison).

And now people are saying that the big switch has started now that the first Bitcoin futures market has been created on the Chicago exchange.

(Yesterday there were only 22 traders active on the exchange, so it might be a while before we see solid action.)

The argument goes that this will allow the big money to hedge their positions, which they’ll want to do since Bitcoin is so volatile, and therefore it’s going to open the flood gates to a serious onslaught of serious money.

(T-Rexes everywhere).

I think that argument is probably true in the longer run. But in the shorter run there’s some serious risks.

So imagine you own a serious stack of Bitcoin. No one knows for sure who owns what, but the general feeling in the market is that there is a good chunk concentrated in a small number of hands.

So imagine you wanted to close out your position. You’ve had a good run. Maybe like the Winklevoss twins you’ve made a billion dollars, and you think that’s good enough.

Now if you have a serious amount, then when you try to sell it all you’re going to push down the price. The more you sell, the lower the price goes, until the final coins you’re selling get you way less than the ones at the beginning.

Is there anything you can do?

Yes. Hedge.

That is, make a bet on the futures market that Bitcoin will go down. Arrange it so the further it goes, the more you make.

Structure it properly, and for every dollar you lose on the price, you make a dollar on the bet. Effectively you can sell all your Bitcoin at the current price, even if the price ends up falling 40%.

(Fun fact – No Bitcoin will ever be exchanged in these futures markets. It’s totally derivative. It’s just like betting on horses. You don’t actually buy the horse. You just bet on how it will race. Yes. Isn’t the modern financial system wonderful?)

And so yes, the futures market may make the market more attractive to big players.

But it may also make it possible for the T-Rex’s to close out their positions and send the price tumbling.

Just saying.

I expect it could be a bumpy ride.

But if Bitcoin weathers the storm (I feel it will), and then the serious money gets involved, soon enough, Bitcoin becomes too big too fail.

That is, if anything happens to Bitcoin – a better, more functional currency is created for example – then the entire financial system is at risk.

What happens then? Where do you want to have your money?

a) – under a mattress

or

b) in property.

I’ve said it before and I’ll say it again. In a financial system that is 99% fiction and derivatives of fiction, property is the most solid ground you can stand on.

So that’s going to be my strategy.

I initially invested thousands of dollars in several different newsletters and then I joined a high-end mastermind and paid a small fortune to get involved and access to the knowledge required. My mantra is knowledge first – money second.

Find out who my hired-gun mentor is tonight on this special webinar masterclass – book your seat here.

I’m going to ride the wild waves and make as much money as I can.

But I’m going to make sure I’m pulling a good chunk of that money back out and moving it over to property.

Property, as always, is the key to inter-generational wealth.

Just ask T-Rex.

Jon

P.S. I’ve just done the numbers. $2000 invested in 2017 with the top 20 Cryptocurrencies returned $74,357. No trading, No in and out of deals – just frigging BUY and HOLD – but you’ve got to know what to buy and how long to hold.

That information you can get access to tonight with our Bitcoin – Crypto webinar

NO B.S. FRIDAY: It had to happen. You can now buy property in Bitcoin.

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Bitcoin and property are completely different assets, but that’s what makes it special.

The internet’s been all a chatter this week with some bloke who’s willing to accept Bitcoin as part payment for his house.

And now here I am giving his property in The Basin, Vic another plug. Check it out. Looks like some pretty sweet digs.

My first thought when I saw this was that it was bound to happen sooner or later. Crypto-currencies are here to stay. I’m still undecided about hitching my wagon to Bitcoin in particular, but crypto-currencies as a concept? Forget it. The genie is out of the bottle. They’re not going anywhere.

My second thought was that this guy is a marketing genius. With a vague promise to maybe possibly accept some bitcoins as part of his deal, he’s secured national TV coverage and wall to wall print.

…For free! I’ll take my hat off to that kind ROI any day of the week.

Domain was first to break the story:

“A vendor selling a family house in Melbourne’s outer east is willing to accept Bitcoin as payment, in what could be the first cryptocurrency property transaction in Australia.

… Rob, who did not want his surname printed, is an experienced builder who buys, renovates and flips houses. He first bought into Bitcoin earlier this year, but had watched the cryptocurrency market evolve over the past decade.

His latest project, 1411 Mountain Highway, The Basin, is up for sale, with its listing declaring the “owner is agreeable to accept part payment in Bitcoin”.

“I see cryptocurrency at the moment as like the early days of the internet dot com era,” Rob told Domain.

He believes marketing the property as Bitcoin-friendly could be the deciding factor in someone’s ability to purchase the house.

“If it came down to two or three people, and both had their maximum borrowing capacity at a certain amount, and one has bitcoin — because the banks don’t look at Bitcoin as an asset — that could be something that could get them across the line.”

If it happens, I’ll be curious to know how they manage settlement. Even over a short settlement like 30 days, the price of Bitcoin can vary a lot. Who carries the risk on that one?

But there’s a second leg to this story.

There was a bit of chatter about the deal on one of our forums and it turns out Rob is a student of Dymphna’s!

Classy play, Rob. You’re doing us proud.

I should have known Dymphna’s fingerprints would be on this one. At her Next 10 event she talked a lot about the disruptive power of crypto-currencies, and the impact the block chain would have on the property market.

If you missed the event, we’re in the process of compiling a bit of a best of. It’s no easy task condensing a full day packed full of info down into 50 minutes or something like that, but we’ll get there.

So stay tuned for that one.

So where to from here? Are we going to see a rush of properties on to the market, quoting prices in Bitcoin?

That’s not really where I see it going. I think there’s a bit of a mismatch of vibrations right now between cryptos and property. The crypto space is very dynamic. Prices are all over the shop.

Property on the other hand is steady and predictable. 10% in a year is a big move. Some days Bitcoin does that before morning tea time.

So their different vibrational natures – their frequencies – means there are challenges in marrying them up. Until the price of cryptos settles, and it will have to eventually, then they’re not natural bed-partners.

But that also means they can be playing different roles in your wealth strategy.

Property is a steady, long run play.

Cryptos however can be your fortune makers. The volatility means that if you’re ahead of the curve, you can make easy money timing your entry and exits… if, of course, you know what you’re doing.

(Or you’ve got someone in your ear who does.)

New entrants into the coin space can also offer huge asymmetric risks. They cost you peanuts to buy, but can deliver 1,000% 10,000% gains in an incredibly short time.

So this is something I’m starting to take a serious interest in. As Rob was saying, Bitcoin’s been on the scene for a while, but these are still very early days in the block chian revolution.

And I’m keen to take you all along for the ride with me. I’m involved in a high-end mastermind group, and I’ve got a couple of mates there who are crushing it right now. Like making insane returns. Serious bananas.

They’re not up for sharing all of their trade secrets, but I have convinced them to open the game up for us. Even just a fraction of their knowledge is going to put you miles ahead of the curve.

So put December the 13th into your diary. I’m going to get them in and run a crypto webinar. I’ll bed down the details soon, but for now, keep that Thursday night open.

And let’s all make some serious coin.

Can you see cryptos and property getting into bed together?