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WTF? Life expectancy is falling?!?

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Drugs, booze and dead blokes. What happens when we don't pay attention.

There were a few grim pieces of news this week that show that humanity’s relentless advancement is anything but baked in.

The first is that life expectancy in the UK is going backwards:

British adults’ life expectancy has been cut by six months in the biggest reduction in official longevity forecasts.

The Institute and Faculty of Actuaries, which calculates life expectancy on behalf of the UK pension industry, declined to speculate on why longevity is deteriorating for men and women in England and Wales. Some analysts, however, blame austerity and cuts in NHS spending, others point to worsening obesity, dementia and diabetes.

The institute said it now expects men aged 65 to die at 86.9 years, down from its previous estimate of 87.4 years, while women who reach 65 are likely to die at 89.2 years, down from 89.7 years.

The actuaries said the evidence of slowing life expectancy that first emerged around 2010-11 is “a trend as opposed to a blip”.

Falling longevity has accelerated. Last year’s analysis cut forecasted life expectancy by two months. This year it took off another six months.

Compared with 2015, projections for life expectancy are now down by 13 months for men and 14 months for women.

That’s a full year Brits have lost of their lives. Those aggregate statistics feel kind of meaningless – like they don’t apply to you. But they have to apply to somebody.

And as a society, Britain has to face the fact that its citizens are going to enjoy a year less than expected.

(Where’s the rioting and blood on the streets?)

At the same time as all this is going on in the UK, across the ditch in America, life expectancy has also fallen for three years in a row.

This trend has been driven by drug, alcohol and suicide deaths, which have risen to record levels.

That drugs one is alarming. Look at that sudden spike. But this isn’t your hardcore street drugs like heroin and ice. This is opioids and over-the-counter pain killers.

But the suicide rate is tragic as well (and connected). This is one area where you don’t want to be going backwards as a society. But with rural areas being hollowed out economically, rural American men are becoming very vulnerable to tragedy.

Anyway, I guess I wanted to share this because it reinforces the idea that human progress is human-made. For a few hundred years our life expectancy has been steadily advancing.

But there’s no ‘natural law’ driving it higher. It’s a result that has built on the back of economic development and scientific advances in medicine.

Each additional year was a year hard won.

And now, for whatever reason, we’ve reached a point where life expectancy is starting to slip. We are being dragged back towards the primordial ooze from which we came.

And it shows us that we cannot get complacent. We cannot take what we have for granted. We can’t let our leaders get away with pissing away the benefits that our ancestors fought for.

Life is naturally nasty, brutish and short. It’s only our collective efforts that separate our fates from the fates of monkeys.

Let’s not forget that.

Yellow Brick Road becomes collateral damage

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It’s getting a bit murderous out there… but is it really as bad as it seems?

Some big names are becoming collateral damage in the property market’s turn lower.

With sale volumes down and credit harder to secure, we might be looking at the end of some big household names.

Last week it was celebrity millionaire Mark Bouris’ Yellow Brick Road, which reported a $34m loss:

“It is now particularly hard for mortgage originators and brokers to assist borrowers to obtain an approved home loan,” Mr Bouris said in a statement.

“In all the years of being involved in the home loan business, I have never seen such difficult borrowing conditions. These factors have caused an adverse impact to our new lending, particularly in the December quarter,” he said.

“The whole regulated environment for home loans has tightened, particularly around credit approval processes. Every borrower is impacted, but self-employed, small business owners, and older borrowers are finding it particularly tough to get a loan,” he said.

…The AFR suspects Bouris’ tale of woe may be partly prompted by the need to justify the company’s $34 million half-year loss, overwhelmingly caused by a writedown of Yellow Brick Road’s goodwill in the lending and wealth divisions, from $24 million to precisely $0.

If you track YBR’s share price, it’s been on a slow-bleed down since a peak in mid-2014.

However, YBR has taken another leg-down recently, after the Hayne Royal Commission tore shrapnel holes in the entire mortgage broking industry. Mortgage Choice (yellow line) and AFG (red line) have also taken a bruising this year.

But we can’t really claim to be surprised. APRA and Hayne have ushered in one of the tightest credit environments in recent memory. It was always going to be an attack on the mortgage broking business model.

At the same time, real estate agents are also doing it tough in the light of a down-turn in sales.

Remember, real estate agents are much more sensitive to a downturn in sale volumes than they are to a downturn in prices.

The McGrath Agency is the poster boy for this. A few weeks ago they released their FH19 results, which delivered an 18% crash in revenue and an EBITDA loss of $2.5 million:

Their share price is now down 88% since the float in late 2015, with investors strapped in to a one-way ticket south.

Looks like John McGrath cashed out of the business at exactly the right time. Well played, sir.

Anyway, even though price declines have so far been relatively modest, the hits to big names like McGrath and Yellow Brick Road give us the impression that there really is blood on the streets.

But the point I would make is that both of these guys, and most of the big property names we’re familiar with, are volumes business.  

And over the past couple of years they geared up to manage the huge volumes of trade that were pumping through the system in the boom.

When volumes returned to normal levels (which was inevitable, but did happen quicker than most people were expecting), they were always going to be left with excess capacity.

But you can’t shed capacity the way you turn off a tap. It takes time to figure out the right organisational size, recalibrate your systems etc.

So in the adjustment phase, you’re always going to have to cop some pain.

And that’s what we’re seeing right now.

And so it’s easy to sell a doomsday story here if you want to.

But so far, everything we’re seeing seems pretty orderly to me.

Economy is crapped-out, but that’s not the real story

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Yesterday’s data showed that the economy wasn’t doing great… but there’s a bigger picture here.

Yesterday, the economy turned a momentous corner.

And not momentous in a good way.

The headline from the Sydney Morning Herald says it all:

AUSTRALIA FALLS INTO PER-CAPITA RECESSION

A “per capita recession”? What even is that? We’ve never heard that before.

Basically it’s economic growth once you strip out the impact of population growth. So if it wasn’t for population growth, and immigration in particular, our economy would be going backwards.

We’ve never bothered to do that before. But now all the papers are doing it. This is a new world.

Australia's economy has slumped into a per-capita recession for the first time since 2006, leaving the country relying on population growth to propel its economy and creating a political hurdle for the Coalition.

The Morrison government has pledged to reduce the migration rate but figures released on Wednesday show that without migrants fuelling consumption, Australia's economic growth would be going backwards.

The Australian Bureau of Statistics data shows the economy grew by 2.3 per cent over the year and 0.2 per cent in the December quarter – below market expectations and well short of Reserve Bank forecasts of 0.6 per cent.

The budget forecast of 3 per cent growth for 2018-19 and the mid-year economic update's revision to 2.75 per cent will struggle to be met, putting a strain on preparations less than a month out from Treasurer Josh Frydenberg's first budget.

The fact that a major paper is leading its reporting of the GDP figures with a comment on immigration shows just what a hot-button topic it is.

And people might be right to wonder why we’re still importing record levels if immigrants when our economy is actually going backwards. People might start to wonder at the sense of that.

Spineless politicians on both sides might look to duck that whole issue and focus on the headline numbers, but there’s not much joy there either.

The headline number was positive, but much weaker than people were expecting, and much weaker than the RBA had been forecasting.

That makes the prospect of rate cuts more likely.

When you break it down by components, you see that growth has been driven by public spending, which was the best performing component.

But that’s not great. It’s saying that if the government wasn’t spending away, the economy would probably be going backwards. You can’t have a government-dependent economy… not for long anyway.

That sounds ok, but when you remember that inflation was 1.8%, it means that in real terms, wages fell by 0.3%.

The figures also showed that average compensation per employee (a fancy term for wages) rose just 1.5% in 2018.

Put all that together, and you don’t have a pretty picture.

Wages are going backwards, on a per-person basis we’re already in recession, and if it wasn’t for immigration and government spending, our economy would be stuffed.

This is not the pre-election snap-shot Scott Morrison was hoping for, I can tell you that.

The Anti Rate-Hike Indicator You Should Know About

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All bets are off now. Rate hikes are a thing of the past. What the heck happened?

Take a look at this chart here. This is a story of a hundred broken promises.

Over the past six or seven years, the markets have continually over-estimated the trajectory of interest rates. They expected them to be a lot higher than they actually ended up being.

And you can understand why. Because for all that time, the RBA was saying that the next move in interest rates would be up. They were saying that they would like to ‘normalise’ interest rates from their historically low levels, and they’ll be doing that just as soon as they possibly can.

The markets took them at their word…

… and everyone was wrong.

Now, things have become interesting. Markets are actually expecting lower interest rates.

It started when the RBA gave up trying to sell the world on rate hikes and admitted that, actually, the next move in interest rates might not be up. Maybe things are about right where they are, and it’s a coin-toss as to which way the next move in rates is going to be.

That led to most market economists downgrading their expectations as well. This week, Westpac’s Bill Evans broke ranks and said he now believes the next move in rates will be down.

The curious thing here is why anyone thought interest rates would be going up in the first place. When you look at inflation (the metric that the RBA is supposed to care most about) – it’s barely making it into the RBA’s target band.

There’s hardly a case for rate hikes there.

Probably where they got the idea that rate hikes would be going up is this chart here. This is employment growth vs the RBA’s cash rate.

As you can see, historically, they’ve moved pretty closely together. When jobs growth is strong, interest rates rise, and when it’s weak, they fall.

For twenty odd years that rule of thumb served us pretty well.

But around 2013 it started to break down. Jobs growth was strong – going great guns actually – but interest rates were stuck to the floor.

And to be fair, most economists were thinking it would have to happen sooner or later. Strong jobs growth would feed into stronger wages growth, which would turn into stronger inflation numbers.

But it just didn’t happen.

And I reckon the key to understanding why that transmission mechanism broke down is this chart here. This is the part-time employment share across the anglo-sphere.

What it shows is that a lot of jobs in Australia are part-time. It’s 32% here – almost one in three. It’s just 20% in New Zealand.

So while jobs growth has been strong, we’re not adding full time jobs. More and more we’re creating part-time jobs.

And the thing about part-time work is that it tends to be a bit precarious by nature. If you’re only on a part-time contract, you’re not in a position to be hustling for higher wages.

And so the growing share of part time employment helps us understand why wages growth has been so underwhelming.

… which in turn helps us understand why inflation outcomes have been so soft.

… which in turn helps us understand why the promised rate hikes just never materialised.

I think a lot of economist in the market and at the RBA thought that this would just sort itself out.

But now, they’ve collectively given up on it.

The wages boom isn’t coming. Rate hikes are off. This is the new reality.

They just started giving money away… Whaaat?

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The 20th anniversary of the zaniest moment in economics shows us just how far we haven’t come.

This month marks the 20th anniversary of one of the strangest events in economic history.

Maybe you never heard of it. It was 1999. The internet was still getting of the ground. Facebook was still just a pimple on Mark Zuckerberg’s teenage mind.

But one small pacific nation decided to do something ‘radical’. They’d be having a bit of a rough trot, and the economy was in the doldrums.

So their wacky leaders came up with something zany – FREE MONEY.

Yep, they just made money free. They were giving it away.

Not only that, when people weren’t taking it off their hands fast enough, they started buying stuff off people, to put even more money in their pockets.

It was crazy-town. La-la-ville. Why-don’t-you-have-your-pants-on-palace.

Every economist in the world was predicting fire and brimstone.

And what happened?

Wel… not all that much, actually.

Nothing really happened. Inflation never materialised, growth never happened, and the economy barely changed stride.

And that’s when we entered the twilight zone. It rewrote the economic rule book.

And what this little pacific nation did became a template for America in the GFC, Europe in the 2010 EuroFunk Contest, and Australia in 2020.

(Did he just say that? Oh no he didn’t.)

This radical and crazy policy became the economic orthodoxy. It became the new normal.

I’m guessing you’ve already tweaked that this ‘small pacific nation’ is actually Japan – still one of the most powerful economies in the world, though less so than in 1999.

And what I’m talking about is ZIRP – the zero interest rate policy, and quantitative easing – buying financial assets off the financial sector.

Ok, so it’s not exactly dropping money out of helicopters on ordinary people – the money still had to be funnelled through the financial system.

But if the interest rate is the price of money, then ZIRP really is just free money if you are close enough to ground zero – like if you happen to own an international bank or something. (Those guys need a break.)

But whatever the case, it certainly was radical. Minutes show that board member Yasuo Gotoh told his fellow board members that it felt as if they were “stepping into a fairy tale like Alice in Wonderland.”

They didn’t know how things would turn out. But they didn’t feel like that had a choice.

So they swallowed the pill and jumped.

And this is one of the key lessons for me. Policy makers don’t really know what they’re doing. They pretend that they do, but ask most economists how the economy really works, and they’ll tell you it’s more voodoo than physics.

And again, today, we stand on a bold frontier, where no one really has any idea how the economy works or how we should manage it.

Truth is, there is no ‘managing’ an economy, no more than there is managing a cyclone. We can tinker at the edges, but by and large it is out of our control.

The other point is that our policy-makers’ go-to solution is any crisis is always to “throw money at it.” That’s what Japan did. It’s what the US and Europe did. And it’s what we’ll do too, when our time comes… and it will.

There’s a lot of money to be made if you can get in the way of it.

… I mean, like I did. All that money after the GFC had to wash up somewhere, and a good chunk of it washed up in Australian real estate.

But yeah, 20 years on and nothing has changed. We don’t know how the economy works. We only have a few tools at our disposal, and most of them involve throwing money at the problem.

I know I’m asking you to take a red pill here. I’m asking you to leave behind the comfortable illusion that someone somewhere knows what the hell is going on.

But bite it.

Once you wake up to this reality, you start to see opportunities everywhere.

Drop the ‘doomsday chatter’ – Goldmans

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Goldman Sach busts some of the doomsday hype

Sentiment matters. It’s just one of the realities of the market. Sometimes mood just matters more than fundamentals.

Right now is a classic case in point. Sentiment is low. Ordinary investors are a bit bummed. People are worried about a crash…

But how much of that is based in reality?

Not much, according to Goldman Sachs.

The Australian arm of the old Vampire Squid reckons that market sentiment is currently running miles ahead of reality.

Exhibit one in that argument is this chart here. This is the number of Google searches for the term ‘housing crash’ in Australia.

As you can see, they spiked towards the end of last year. There’s unprecedented levels of searches for that term…

(Though, are people really getting their read on the market by punching ‘housing crash’ into Google?!? I think it says more about how sophisticated most property owners and investors are than anything. The fact that you are reading this blog puts you miles ahead of the crowd.)

Goldman Sachs is calling this phenomenon “doomsday chatter” and they reckon it’s just a bit silly.

“In our view, while there is a kernel of truth to many of the popular narratives, a close inspection of the data suggest most are overly negative.”

Their read on the data still suggests that things are tracking along ok. They are also keen to put to bed the idea that there is some kind of ‘credit crunch’ in effect.

“The evidence that supply-side credit tightening is significantly worsening is not compelling to us…

 “The value of finance approvals to investors in NSW and Victoria continues to fall sharply, but is little changed elsewhere; while the number of finance approvals to owner-occupiers remain fairly elevated in NSW and VIC (albeit a bit weaker) and mixed in other regions…

“In our view, this remains broadly consistent with our earlier view that the primary driver of softer loan approvals over 2018 has been lower demand from investors – driven by a normalisation in expectations for capital gains in Sydney and Melbourne.

“Tighter scrutiny of mortgage applicants' expenses was slowing approval times, but the effect was likely to be temporary…

“This slower processing period may well take a few months to wash through and cause some temporary distortions in the interim…

What is interesting to me is that given all the dark clouds supposedly hanging over the property market – the credit crunch, APRA, the interest only reset, the Hayne Royal Commission etc., the only one they’re really worried about is…

… immigration.

Yep. That’s right. The only downside for the property market is potential cuts to immigration.

“In our view, the much more material risk to both the underlying supply/demand balance and the level of construction activity would be a significant reduction in population growth.

“We note Prime Minister Scott Morrison recently proposed to reduce Australia's annual permanent migration quota by up to 30,000 per annum (or about 15 per cent) and redirect new migrants away from Sydney and Melbourne.

“But while formal changes are yet to be made – and the impact on population growth of this proposal would likely be negligible given (i) actual permanent migration is already below the current cap, and (ii) the measures don't address the large amount of temporary migration – the increasing political focus raises the possibility of a more substantial policy shift in the future.”

So they’re kind of saying that immigration is the only possible downside risk for property, but there’s very little chance of anything substantial happening on that front…

So what? All good then? That’s what we’re saying?

Yep. That’s what we’re saying

Even the bears are relaxed – no recession this year

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How likely is a recession this year? Not much.

With prices in Sydney and Melbourne now down 10% year on year, some people are asking me if I think this means we are headed towards recession.

It is true that there is a ‘wealth effect’ – as property prices go up, people feel wealthier and start to spend more. That goes into reverse when prices start to fall.

But I still think Australia will be ok. There will be a period of adjustment, but my guess is that we should avoid recession, and bounce back fairly quickly.

I thought it was interesting that Gerard Minack – one of Australia’s most bearish hedge fund advisors was taking a similar view. I tend to find myself on the sunny side of Gerard most of the time. So it makes me think that if even he is pretty relaxed about our current state of affairs, then we should be right.

Anyway, he reckons that while the wealth effect is in effect, there are some important ‘countervailing forces’ that should keep the boat afloat, and help us avoid a US-style GFC.

First, the mining capex boom inevitably bust, but the bust has now almost run its course (Exhibit 2).

Second, while Australia is building a lot of houses, the pace is normal relative to population (Exhibit 3). (JG – he means we’re not creating an over-supply of housing.)

As a result, Australia’s rental vacancy rate is below average and falling, versus the US vacancy rate that last cycle was above average and rising (Exhibit 4).

A turn lower in residential construction still seems likely in Australia, but there seems less scope for the residential downturn to king-hit growth, as it did in the US in the last cycle (Exhibit 5).

Third, high population growth costs, and one of the costs is rising infrastructure spending (Exhibit 6).  This is a particularly job-intensive sector.

The net effect of the mining capex bust ending and the cranking up of infrastructure spending is that investment spending has rebounded (Exhibit 7).

A fourth, less important offset, is the ramp up of LNG exports (‘mineral fuels’ in Exhibit 8).  This will statistically add to GDP, although it will be calorie-lite growth: the employment tied to these exports is low; very little of the revenues are going to be collected by the government; and shipping so much gas offshore has created a domestic gas shortage, a key reason behind rising domestic energy prices.

At the end of the day, Minack recognises that Australia is in a period of adjustment. We are working through some challenges.

But he also reckons that these challenges have mostly already been priced into markets (Aussie dollar, bonds, equities). He doesn’t see value in shorting any of these things right now.

For these short trades to work, an Australian recession has to be your base-case scenario. For Minack, he just doesn’t see that happening.

And that’s what I reckon too. Yes, house price declines will give everyone a bit of pause for thought.

But the Australian economy is much more than our housing market. It is much more complex and dynamic than just that.

And Australia still has an awful lot going for it. There is still a lot of growth to be had and money to be made.

I mean, even the bears think so.

Hayne: what it means for property… and capitalism!

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Hayne says the problem is capitalism. The solution? Let’s all move to fairy-land.

Ok, so I’ve been digesting the Hayne Royal Commission report over-night, trying to make sense of it all.

But there’s something weird at the heart of it all.

I’ll get to that, but first, what are the implications for the property market and property investors? Here they are in a nut shell:

1. No big changes to the industry

This is being billed as a reset of the financial industry, but I don’t see any major changes here. The banks aren’t having to break up their vertically and horizontally integrated business models (e.g, where a bank owns a funds manager that recommends the banks products to its customers), and apart from doing more to comply with the law, the banks aren’t being asked to change their business models in any real way.

2. No changes to the law

Hayne went to lengths to point out that he didn’t see any need to change the existing laws, only to make sure that the laws were being properly and prosecuted.

3. Regulators need to pull up their socks

On that front, the regulators need to do more, and he wants to see them being less shy about prosecuting banks under the law. Remember how ASIC dealt with the Comminsure scandal by asking for a $300,000 community contribution rather than issuing an $8 million fine? Hayne probably has a point.

4. No changes to the credit environment

As Hayne uncovered more and more dirt on the industry, the banks started tightening up their credit standards. The fear I had was that Hayne would push this further and harder, and credit would slow even more. This hasn’t happened. There’s no recommendations here that are going to crimp credit.

That said, there’s nothing here that relaxes credit either. The banks have already started moving away from income and expenditure benchmarks in favour of looking at customers actual income and expenses, and Hayne wants this to continue.

For property prices, I reckon Hayne is neutral, and given the banks’ history of successfully watering down reforms, possibly price-positive in the long run.

5. Mortgage Brokers hung out to dry

Hayne recommends banning trailing commission on mortgage broking, and moving the mortgage broking industry to a fixed fee system. Many mortgage brokers reckon this will kill the industry, and they’re probably right. I think your owner-occupiers and mum and dad investors will probably just go back to walking into whichever bank has the cuddliest mascot, rather than paying a couple of grand upfront. Banks will go harder on these customers and they’ll pay more in the long run (while the customers will pat themselves on the back in the short run – look how much I saved, Honey!)

I can see there is a mis-alignment of incentives with trialling commissions paid by the banks, but killing the industry without putting in place something to help your average punter navigate the complex world of mortgage finance is a recipe for ripping people off.

6. Capitalism is a flawed system

This is where we get to the bit where it’s just a bit weird for me.

Hayne reckons there’s a problem with the banks’ “culture”. Not “culture” in the sense of their rock art and quixotic dance rituals, but culture in the sense that many people in the industry seem to be motivated by money.

“Why did it happen..? Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty. How else is charging continuing advice fees to the dead to be explained?

“…Banks searched for their ‘share of the customer’s wallet’. From the executive suite to the front line, staff were measured and rewarded by reference to profit and sales.”

Staff were rewarded by reference to profit and sales… what a highly unusual business model that is. What are freakishly strange culture to have.

I mean, you wouldn’t see that in my business. My staff are motivated by my witty company-wide emails and by premium biscuits in the break-room. Money never comes in to it.

But seriously, what are we even talking about here? Yes, capitalism has its flaws. When people are motivated by money, sometimes people with low ethical standards do things that people with higher standards wouldn’t do. There’s nothing new there.

But are we really suggesting we should remove the profit-motive from banking? And if so, why stop at banking. Let’s just make profit illegal altogether. Let’s move to an economy-wide biscuit-based incentive structure.

Let’s all move to fairy land.

But no, I actually think this talk of culture is a squib. It allows us to feel morally righteous, while doing nothing to address the fundamental issue – the disproportionate power that has been allowed to accumulate in the finance sector, and the captured, wet-lettuce approach to regulation.

But no, we’re not tackling that. We’re talking about some fantasy culture, where no one cares about money.

Off the planet.

Is The Global Economy Making Our Property Prices Fall?

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What does the “globalisation of property” mean for investors?

Do you want to invest in the global economy?

You don’t have a choice.

Even if you’re investing in boring old properties down at the end of the street, these days you are still investing in the global economy.

We are all globalists now.

We’re in the middle of the Knowledge Source Power Challenge and today I wanted to have a look at why I take such an interest in the global economy, and why relentless self-education has to be one of your habits.

Bloomberg was running the story last week about how a number of property markets across the world are following each other lower. You thought it was just Sydney and Melbourne, but no, we’re not alone there.

In Manhattan, the median condo price dipped below $1 million for the first time in three years. Hong Kong home values endured their longest losing streak since 2008, while prices in outer London neighborhoods fell for the first time since 2011. Sydney home owners are grappling with the worst real estate slump since the 1980s.

Luxury residential prices are growing at the slowest rate since 2012, according to a Knight Frank index of prime properties in 43 cities…

Governments became concerned the gains were unsustainable, and reacted with measures aimed at curbing the flows of international money…

Similar dynamics are playing out around the world. The number of home sales in Vancouver dropped 32 percent in 2018 from the previous year, following a series of new taxes, stricter mortgage rules and rising interest rates.

Median prices in Auckland registered their first annual drop since 2008 after the New Zealand government passed legislation to restrict foreign buying that it said was partly to blame for escalating housing costs.

Home prices have dropped 11 percent in Sydney from their 2017 peak after government restrictions on foreign purchases and tighter credit.

I knew this was happening but it was interesting to see the data all in one place.

It’s on the IMF’s radar too. Last year they released a report showing that house price growth has become increasingly synchronised at both the city and country level, particularly since the global financial crisis.

The global economy is a new beast. Financial markets are integrated, inflation trends are global in their reach, interest rates are synchronised thanks to free-flowing capital, and institutional money managers tend to hunt in packs. Taken together, all property markets, even your humble little suburb, are global property markets now.

I mean, it used to be the case that houses were just consumables. They were just things people lived in.

Then, with the rise of the property investing class, they became assets. They became things we invested in as well as lived in.

And now, with the integration of the world’s financial markets, they are behaving like financial assets – like stocks and bonds. What happens here depends on what investors all over the world are doing.

This is the new reality. Property is a global financial asset.

And it means we need to keep one eye on what the global economy is doing. We need to keep our vision broad.

Now that is easier said than done. I’m lucky enough to have a research assistant who keeps me up to speed. (Of course I’ll share the gold with you here – watch this space).  

But for now, it is just enough to take an interest in this space. And even simply being aware that property now behaves like a global financial asset will put you a good stride ahead of the pack.

But the broader point here is that no strategy survives for long. The world is changing. Strategy’s that made sense five years ago are obsolete now.

So we have to treat our education and development as an ongoing concern. It’s not a do-it-once, set-and-forget type thing.

You need to be constantly curious – how can I be better, stronger, more savvy?

Curiosity is the key. Ask the question, and the rest will take care of itself.

Worried about your future?

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I don’t think people realise how scary the future could be. Are you ready?

So we’re in the middle of the Knowledge Source Power Challenge – today, I want you to imagine you’re a horse.

It’s 1919 – 100 years ago. It’s around the peak of horse usage across the planet. Henry Ford started mass producing cars in 1913, but our cities are still geared around horses and horse transportation.

You’re one of thousands of horses in stables all over the city. Another horse gets led in, looking very sad.

“Hey mate, why the long face?” you say, because you are hilarious.

“I’m worried about our future. These cars are already doing things better than we can. In a few years, we’ll be totally redundant.”

“Oh rubbish,” you say. “That’s what they said when they invented the wheel. There will always be demand for horses. And if cars come along and start doing the things we’re doing, we’ll just be freed up to do other things. And those things will be better things.”

But in a few years, you’re dead. And most of your friends are dead, and the horse population plummets.

Ok, now imagine you are you. Imagine you have a job. Let’s say you’re a truck driver. Or an accountant.

I walk in looking sad. I tell you that computers are already doing many things better than us. Truck drivers and accountants will be the first to go, but superior technology is coming for every job there is.

“Rubbish,” you say. “There will always be jobs for humans to do. Sure we might lose a few jobs here and there, but that will only free us up to do better jobs.”

Now I don’t imagine for a second that we’re going to start culling humans or putting a stop on our human breeding programs. But there must come a point at which human labour is no longer economical.

It’s happened in many industries already. In automotive manufacturing it was decades ago. But thankfully, humans are very adaptable. An automotive worker could be retrained into a hair dresser or a graphic designer or whatever.

Our adaptability has meant we have remained economically viable for a long time.

But that can’t go on forever. We are not infinitely adaptable, and technology is advancing at an incredible pace. Jobs are being destroyed faster than we can replace them, and I really think at some point there will be very little left for humans to do.

And that doesn’t mean we’ll all being enjoying lazy leisure time, with robots serving us Margarita’s by the pool. It mostly likely means we’ll be herded into slums and sold opiates and handguns.

If you think our ‘leaders’ are going to look after you, you’re dreaming. That is one thing our system is not set up to do.

Sure, we live in a lucky country. If you’re temporarily out of work, there’s a safety net to stop you from going under.

But that safety net is not designed to support 90% of the population through permanent and irreversible unemployment.

I really think this is going to happen in your life time (unless you’re already 90). The writing is on the wall.

So what are you going to do about it? How are you going to survive the jobs apocalypse?

You’ve got to take your future into your own hands. You have to make yourself, and your wealth, bullet-proof.

This isn’t optional anymore. It isn’t a wishy washy, “oh, wouldn’t it be nice to be financially independent.”

It’s more like, “if I don’t take care of our future, my children might end up eating rats.”

And really, the jobs apocalypse is just one scenario. There are dozens of world changing phenomenon bearing down on us at rapid speed.

The one point I need you to understand is that you can’t rely on anyone else to save you. You can’t rely on the economy – it’s an abstract concept that has no preferences for the distribution of jobs and wealth. You can’t rely on the government – because the government is beholden to its sponsors, and they probably don’t give a fig about you and your whiny needs. And you can’t rely on society, because when everything breaks down, it’s everyone for themselves.

All you can rely on, is you.

So get ready. Get tough. And get yourself sorted.

The future is exciting. But if you’re not ready, it could be terrifying.