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Prediction: Clive Palmer will be PM!

May 2, 2019 by Jon Giaan

The most boring election ever just got a little bit more interesting.

Clive Palmer is going to be Prime Minister of Australia. There. I said it. I’m making the call.

Ok, it’s not going to be this election. And realistically, he’s got such a long way to go it’s probably not going to happen.

But I think we need to start taking The Clive seriously.

Ok, at this point I reckon three quarters of you are thinking, “Look out. Jon’s on the kambo again. He’s really lost it this time.”

“There’s no way that buffoon is going to achieve anything.”

But right now, with arguably the most charismatic buffoon ever in charge of the White House, I don’t actually think it’s my case to make. This is the age of the buffoon. Clive Palmer fits the bill perfectly.

But being a buffoon, just as it was for Trump, is actually a strength, not a weakness.

I mean take this bit of graffiti some frustrated inner-city graphic designers got up to over the weekend, defacing one of Clive’s Billboards.

Ok, I’ll be honest. I laughed. This is pretty funny, but mostly because it’s such a ridiculous thing to do to a political poster. If there’s a subtle point about Palmer’s political philosophy, it’s lost on me.

Two things I’d say about this. One, vandalising political posters isn’t cool, and it’s kind of typical of the thought-police censorship that “progressives” are becoming notorious for.

I mean, imagine the uproar if it was a Greens poster. Like, what if I did this:

Ok, wait. I didn’t do anything to that poster. It’s real (from NZ).

But the point is, you don’t like Clive. Sure. He’s an idiot. Fine. But does that give you the right shut-him down?

The second point is, does this hurt Clive? Does it make him look foolish? Does it make him seem less electable to the people who were possibly going to vote for him.

No. Not at all.

This doesn’t touch Clive. When you are so over-the-top that you are practically a caricature already, this kind of stuff doesn’t touch you. It didn’t hurt the Donald and it won’t hurt the Clive.

(It’s kind of like a magic power.)

The other criticism I’m hearing is that he’s importing Trump-style politics, and it won’t work in Australia.

But this isn’t an accidental tactic. This is a deliberate strategy, and I reckon it’s strong.

And really, you’ve got to think about this from a business perspective. Businesses import successful business models from other countries all the time. For some venture capitalists, that is literally all they do. Clive is just doing the exact same thing.

He’s taking the Trump political/business model, and repackaging it for Australia. It’s the same pitch to the same marginalised and forgotten voters, from a similar personality, with literally the exact same slogan.

That’s not an accident and it’s not laziness. He’s doing it because it’s a proven model.

And I’ve watched a handful of his campaign videos. They’re good. Not good as in “I’m sold and I’m going to vote for him” but good in the sense that they’re tight, well-pitched and professional.

I mean take the one from Palmer’s candidate for Abbott’s seat of Warringah. She’s impressive and genuine.

Or take the one from a candidate they call “Dave the Builder”. He’s put on a nice shirt, but then for some reason thrown a high-vis vest over the top. It’s like a casting agency was given a brief for “most two-dimensional Aussie stereotype possible”, but when he says, “Let’s give these mugs a thong-slap,” I’m there screaming “Good-on ya Dave.”

To some people this is just going to seem like a farce. And they’re the same people who just couldn’t understand how Donald Trump got elected.

Palmer has picked his mark, targeted his base, pitched it perfectly and has a business model with runs on the board.

To me, that means he’s a force to be reckoned with.

Australia, are you ready for The Clive?

Filed Under: Blog, Global Affairs, Social

Is this wages boom too late to change the election?

April 16, 2019 by Jon Giaan

In six months, Morrison could have crushed it in. Shame the election is now.

So the election has been called. What’s going to be the deciding factor?

We like to think it’s about big-picture vision and value positions. It’s about the issues.

But it’s not. It’s the economy, stupid.

I don’t think Bill Clinton ever expected that that little quip would be one of the most lasting contributions of his “legacy”, but it is exactly right. People need to feel secure first and foremost. The economy has to be delivering real jobs and a decent standard of living.

If it’s not, everything else is a side-show.

And on that front, you’d have to think the economic tides are with Morrison.

And they are to a degree. The economy continues to perform reasonable well, especially on the most important metric that matters – employment.

Employment growth is easing, but it remains decent. And most importantly, the number of jobs is growing faster than out labour force population, and the unemployment rate continues to fall. 

At 5%, it’s a pretty decent outcome, all things considered. By itself, it’s certainly not a ‘turf them out’ type number.

But there are problems for Morrison that are hidden behind this headline number.

The first is that employment growth is uneven. Some sectors, especially the public sectors, are doing well. Others, particularly mining and construction, less so.

That patchiness can create ‘pockets of pain’ in the economy. It can create segments were unemployment is concentrated, and political venom starts to pool. Think the mining communities of Far North Queensland, for example. It’s not possible for a miner who’s lost his job in Townsville to just go and become and community care worker in inner-city Melbourne, for example.

The other headache for Morrison is that while people have jobs, wages growth has been… what’s the economic term? Piss poor.

Wages growth has been hobbling around 2%, which means that people probably feel they’re going backwards in real terms. Technically, it’s still outpacing inflation, but I think that’s probably only a technicality. Ask around and I don’t think people will tell you that they’re keeping pace with the cost of living – especially with energy prices becoming a real pain point.

So that’s a headache for Morrison. It’s something that can shift the electoral dial.

The real irony here though is that wages are actually starting to pick up. Take a look at the chart and you can see that yes, wages growth is relatively low by historical standards, but it has definitely ticked up in recent months.

And the NAB survey is showing that more and more firms are reporting difficulty finding suitable labour.

So wages pressures are building. We’re still six months to a year away from this feeling like things are really on the up and up for everybody, but it’s coming.

So Morrison must be spewing. If only the election could have been called six months later. He probably could have ridden a growing sense of optimism to victory.

But instead, people are still grumbly, There’s not a lot of gratitude in the community.

And if Morrison loses and Labor wins, they’ll enjoy a very sweet honey-moon period as wages continue to pick up and households enjoy the boost in confidence. Even though they’ll have done nothing to deserve it.

That’s just how the cards have landed. Tough break, ScoMo.

Filed Under: Blog, Business, Global Affairs, Social

Negative Gearing Reckoning: who will it hurt?

April 2, 2019 by Jon Giaan

If Labor wins, negative gearing reform is go. But who is it going to hurt?

Labor has announced that their negative gearing and capital gains tax reforms will come into effect on January 1, 2020.

Like most people, I was expecting them to go for the end of the 19/20 financial year, so this means two things:

  1. there’s going to be a rip-the-bandage off approach, and I think that’s probably a good thing.
  2. Labor knows it’s onto a vote-winner and is happy to double-down.

But like all things in politics, there must be winners and losers, so who is going to be worse off under the new policy settings?

Well, literally everyone, according to the Real Estate Institute of Australia:

“The REIA has always been concerned with the impact the policy would have on housing markets, buyers, renters and economic activity,” REIA President Adrian Kelly said.

“This concern is magnified in the current market.

“There is almost truck loads of analysis and reports showing the adverse impacts of the policy on mum and dad investors, home owners, renters, the construction industry, state governments and the economy.

Investors, home-owners AND renters?

How does that even work? I actually struggle to think of a scenario where all three are made worse off under ANY policy proposal – maybe something like “All housing will be nationalised and turned into jumping castles for Swedish tourists.”

Or are we using a definition of “worse-off” that I’m not aware of?

I want to pick this apart a bit, not to be cruel to REIA, but to make a point about how the housing market actually fits together. I think it will be useful.

Anyway, if we’re saying everyone in the market is going to be worse off, then I assume we’re saying that house prices are going to fall (bad for investors and owner-occupiers) and rents are going to rise (bad for renters).

That’s the only scenario that makes sense. If rents fell, that’d be bad for investors, but you’d have to chalk that up as a win for renters.

Likewise, if houses became more expensive that would be bad for renters looking to buy, but would be a win for owner-occupiers and investors.

So we’re talking about falling house prices (though I know a café full of millenials cheering that on), and rising rents. But how would negatively gearing actually make rents go up?

They might go up if the reforms exacerbated our housing shortage, but since negative gearing will remain in place for new stock, it’s hard to see how removing it for existing homes will have any affect on construction rates…

But, just for arguments sake, let’s imagine that somehow negative gearing reform does increase rents.

What happens then?

The point to remember here is that since housing is an asset, like all financial assets, the return is linked to the price.

The link between the rental return and property prices is captured by “yield”.

Now the thing to note about property yields is that they’re affected by structural conditions in the market – interest rates, risk appetites etc. Yields are not determined by rents and prices themselves.

That may sound counter-intuitive, given that yields are a calculation of prices and rents, but the causation actually runs the other way. Yields determine prices.

If you track yields over recent years, you’ll see that they’ve been very stable.

For 15 years, they’ve barely deviated from 4%. Even though rents and prices have been all over the shop, yields have barely changed.

So if rents go up, what happens to yields?

Well, you’d think yields would go up as well. But that doesn’t happen, because prices are set by people buying property, and the people buying property are happy with yields of 4%, on average.

So if rents go up, yields stay constant, and the adjustment is forced on to prices. Prices go up and yields remain at 4%.

Statistically, that’s been true for as long as we have data for.

But if prices go up, isn’t that a win for owner-occupiers and investors?

Yes.

Personally, I think the reforms will have no impact on rents, and push prices down at the margin, but not by a huge amount. Yields will adjust a little because the ‘cost of carry’ appetite will have changed (I’ll talk more about that another time).

But all this ‘everyone is worse off’ is just BS.

But remember this. If you want to know what’s happening to prices, look to rents and yields first.

Filed Under: Blog, Finance, Global Affairs, Real Estate Topics, Social

Even the bears are relaxed – no recession this year

February 7, 2019 by Jon Giaan

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.

Filed Under: Blog, Global Affairs, Social

If Labor wins, buy this type of property

September 25, 2018 by Jon Giaan

I’m wondering what impact a Labor government might have on the market. I’m not the only one…

With Malcolm Turnbull actively campaigning against the Liberals in his old seat in Wentworth, and the coalition looking like it’s on the brink of implosion, I’ve been thinking about what a Labor government might mean for our property markets.

Turns out I’m not the only one – The annual Property Investment Professionals of Australia survey shows that a lot of investors are worried what impact Labor’s negative gearing and GCT reforms will have on the market:

Australian property investors are shrugging off finance issues, concerns about taxation policy changes, and the market slowdown in Sydney and Melbourne with a growing majority believing this year is a better time to invest than last, the 2018 Property Investment Professionals of Australia (PIPA) Property Investor Sentiment Survey has found.

The national survey, which gathered insights from 820 property investors, shows that more than 77% of respondents think now is a good time to invest in property, with 52% looking to purchase a property in the next six to 12 months.

However, more investors than last year (48% in 2018 versus 43% in 2017) say that changes to investor lending policies have impacted their ability to secure finance for an investment property.

Potential changes to negative gearing and Capital Gains Tax policies are also a growing concern, the survey found, with 45% of respondents indicating they would reconsider their future investment plans as a result of proposed changes.

While a majority of investors (64%) believe it’s unfair to charge investors higher interest rates compared to owner occupiers, most (61%) also indicate they will have no problem meeting higher interest rates when their loans switch to principal and interest repayments.

Even though the Sydney and Melbourne market slowdown has been widely reported, most investors appear unperturbed with almost 90% indicating that concerns about price falls in our two biggest capital cities will not slow down their investment plans.

Brisbane remains the hot favourite for investment, according to the survey, with 44% believing it was the capital city with the best investment prospects (up from 43% last year). About 26% picked Melbourne, down from 32% last year, while only 8% chose Sydney as having investment potential.

This all fits with one of the stylisations I have about the market – professional investors are generally well positioned to deal with rises in rates or anything like that. If anything, it’s amateur investors who are just blindly following the advice of their accountant – that’s who we need to worry about.

If you are self-identifying as a ‘professional investor’, then you are probably well covered.

The focus on Brisbane is interesting. Brisbane has been underperforming for a few years now, and I’m not convinced it’s about to dramatically turn all that around. So I’m perhaps not as bullish on Brisbane, but that might be because I’m not as bearish on Melbourne, or even Sydney.

There’s gems to be found wherever you look.

But it does seem clear that negative gearing reform is rearing its head as an issue.

So am I worried?

I would say I am ‘cautiously optimistic’.

I’m optimistic because I don’t see the reforms having a huge impact on the market, in and of themselves. But I’m cautious, because the market is facing a lot of headwinds at the moment, and a lot of them regulatory.

That’s the thing when you’re camel is fully laden. You just don’t know what’s going to be the straw that breaks its back.

I don’t think it will be negative gearing, but I also think Labor would be smart to wait and see what impact recent changes in the credit market have, before it goes and does anything it might regret.

The other thing to remember is that Labor’s proposal is to remove negative gearing on existing homes, but leave it in place for new builds.

That mean we might just simply see a shift in investor demand from existing to new construction.

Stockland CEO Mark Steinert sees the writing on the wall:

The Labor Party’s plan to limit negative gearing tax breaks to new housing would put a rocket under the business of residential developers because demand from investors would surge, Stockland chief executive Mark Steinert says…

“Our business will rip,” he said at the Property Council of Australia’s annual congress in Darwin.

“We’re all about new product. At the end of the day, half our buyers are first-time buyers, and 80 per cent of our buyers are owner-occupiers. If the investors are going to participate in the market like they have in the past, that means they’re all pointing at our product and other developers’ products”…

Good luck to him. He’s probably right.

And when you remember how busted our planning system is, you could see a surge in demand for new builds meet bottle-necked supply… and that means rising prices.

Hard to know how it will balance out, but it could mean that it could even be a net-positive!

I’m not sure. I’ll have to do a bit more thinking about how to balance those equations.

But I think that is how I’m thinking about it. Labor’s negative gearing reforms probably won’t have a huge impact on the market, with a reconstitution of demand price growth away from existing homes to new builds…

… provided Labor doesn’t fluff the timing.

We’ll see.

Filed Under: Blog, Business, Real Estate Topics, Social

Suckers! How Supermarkets Screw With Our Willpower

August 16, 2018 by Jon Giaan

Will power is a finite resource. You only have so many good decisions in you.

Do you ever wonder why supermarkets are laid out the way they are?

I mean it doesn’t make sense, right? You walk in and bang – fresh fruit and vegetables. Exactly the kind of squishy stuff you don’t want to put in first at the bottom of your trolley.

But that’s exactly what we all do. Building little wheat-bix box fortresses to keep them safe.

But let me tell you a secret: That glitchy lay-out is not an accident. And it makes the supermarkets millions.

Supermarkets know that the logical thing to do is to break right and head to the dry-goods areas and start filling your trolley there. But they know that none of us do. We’re either lazy, or we see all the fresh stuff there and that just grabs our attention.

And then we’ve fallen into their trap.

Basically, a supermarket’s bread and butter is the basics, but the real cream is in the discretionary items – the stuff we don’t really need – the chocolate, ice-cream, fancy hygiene products.

But if you were to ask someone just as they entered a store if they were going to buy chocolate, they would say, ‘No way. I’m going to make some healthy choices.’

And that’s why they don’t give you that decision at the start of the store.

Supermarkets are relying on a phenomenon called ‘decision fatigue’ or ‘will-power fatigue’.

Basically, every decision we make costs us decision and will-power energy. Even choosing the six best-looking apples is a mental load.

So supermarkets give us all the decisions we were going to make anyway straight up. We were always going to leave with cucumbers, no matter what.

They then save up the ‘maybe’ items for late in the game – when we’re fatigued and just looking to get out of there.

Right then, they know we’re vulnerable.

And if we still make it through with our healthy agenda intact, there’s one last temptation. The check-out isle chocolates. Just as we let down our guard and are ready to congratulate ourselves for making so many good, healthy choices, we’re offered the most irresistible treats of all.

“Hey, you’ve made some great choices. Why not reward yourself with a Cherry Ripe.”

None of this is an accident. Supermarkets know us better than we know ourselves. And they know how to play us off against ourselves.

This decision fatigue is something to watch out for. It’s not just in supermarkets

Often salesmen will present the extras (say on a car purchase) one by one, rather than as a batch.

They do that because after you’ve said no to the tinted windows, and the spoiler, and the lambs-wool seat covers, the up-graded sound system AND the alloy wheels, maybe the premium after-sales care plan isn’t such a bad idea.

Will-power is a finite resource. If you know where someone is at with their will power, you can kind of predict where negotiations are going to go.

And watch yourself in negotiations where you are tired, hungry, or having to tick off on a large range of items. You’re game could start to drop if you’re not on to it.

And now tell me. Next time you enter a supermarket, what are you going to do?

Filed Under: Leadership and Growth, negotiation, Social

NO B.S. FRIDAY: Why I (MEN ) can ask for help…

June 15, 2018 by Jon Giaan

It’s a cliché – men can’t ask for help. But I think most the stories we have about why are wrong.

You know, I really love my relationship with my personal trainer. It’s easy.

Well, I find it easy. Why?

Well, you know, he’s a nice guy and all that, but it’s easy because it’s a commercial relationship. I pay him for support in my health and fitness, and he provides it. Actually, he’s legally obligated to.

When I ask for help, it’s his job to help me. In return, I give him some money. It’s very clean. It’s very easy.

If I’m honest, I’m probably like a lot of men in Australia. I have trouble asking for help.

When I try to think into why that is, I’m not sure it’s the asking that’s the problem. I have the words.

And it’s not necessarily a shame thing. You hear that in the media, but I don’t really resonate with that. I don’t think there’s any shame in asking for help, just like I don’t think there’s any shame in having a good ol cry if that’s what you’re feeling.

If I see a man in tears, (which, to be honest, is pretty rare) I never go to the thought of, “oh, look at this girly cry-baby.”

(I’m a sensitive modern man).

So what is it then?

If I ask myself, I think it’s that I have trouble letting go the role I have assigned myself – the role of supporter.

I’ve always known that I’m a lucky man. I have a good head on my shoulders, I’ve always enjoyed robust health, I’ve always had a loving family and community around me.

I’ve been given everything a man could want in life.

And so then I see it almost as an obligation to help others – like a moral responsibility to use the gifts that I’ve been given, to help those without the same privileges I enjoy.

(Wow. Sometimes you just write stuff and think, ‘I sound like such a wanker’.)

But this is the truth of it, and I’m not going to deny that that role feeds my vanity. Protector of the weak, supporter of the down-trodden – I like casting myself as the hero.

I feel good about myself when I can support others.

The trap though is that I’m kind of addicted to that role. I don’t know how to step out of it.

To be in a position where I am asking for support is to be in a place where I am no longer supporting others.

It forces me to reimagine myself. See myself in a different light. Experience myself in a different way. Something a shade less heroic.

And so it’s not the asking for support that I find hard. It’s the stepping away from being a supporter to others.

Because it feels like there’s a whole lot of psychic architecture that fortifies the supporter of me. The mental frame-work that keeps me outward looking, willing to place others needs above my own, wanting to please and make people happy.

These things have been life-time in the making. Rome doesn’t come down in a day.

And so I like my relationship with my personal trainer. It’s neat, it’s clean. I have a clearly defined role – I am the one being supported.

I can let go of the need to support him.

“No, enough about me. How are your glutes doing?”

The commercial nature of that relationship makes that easy.

And in that way, my relationship with my personal trainer is easier than my relationship with my wife.

I pride myself on being the rock she can rely on. And I know that she is there for me too, but how do I move from the supporter to the supported? I don’t know the way.

How do I ask for help?

Writing this down now, the answer seems obvious.

My framing is wrong. There is no move from supporter to supported.

Isn’t the truth that we are designed for ‘mutual’ support?

We are a herd species. The strength of the herd is our strength.

Trees grow in clusters together. They support each other.

Support, in the natural world, is always a mutual thing. It’s never a one way street.

So my framing is wrong.

So perhaps my job then is not to step out of one role into another. It is to learn how to embody both at the same time. To support and be supported at the same time.

I can still be the hero I’ve always wanted to be. But I can do it with a foundation of support beneath me – with the recognition that I could never do it alone, and I need others to be happy and healthy and free.

So how do I do that? How do I re-engineer my soul to be a two-way valve – support coming in, support going out?

That, I don’t know. We’ve come far enough for a single day. Have to figure the rest out later…

Love to hear your thoughts.

Filed Under: Blog, Friday, Social

Why your money has to work harder

June 5, 2018 by Jon Giaan

You don’t have a choice. Educate or die.

I’m surprised there aren’t more people in financial panic.

I think it probably comes down to financial literacy. Maybe people just don’t realise how dire their situation is.

On the first front, the income side of the equation isn’t too flash.

The average individual full-time salary is $82,000 pa.

That doesn’t sound too bad, but that number hides a lot of ugliness.

First it’s the average. So it means half of Australia’s income is above that line, and half below.

But we’re not interested in income. We’re interested in people. And so when we look at the median salary (where half the people earn more and half the people earn less), that’s just $55,000 pa.

So half the Australians in full-time work are earning less than $55,000 a year.

But wait, it gets worse still. Because that’s looking at full-time work, and we know that full-time work is dying. There’s been a trend shift away from full-time work, towards part-time and particularly temporary employment.

So the actual reality for the majority (51%) of Australians is probably much worse.

I don’t know about you, but those numbers freak me out a little.

Next, consider how much the average Australian has accumulated in their super. The most recent figures on superannuation from the ABS for 2013-14, show that at retirement age, men have an average balance of $322,000 compared to $180,000 for women.

There’s not a lot of fat in those numbers, but again, what we’re saying about average and median applies here too.

The representative Aussie probably has much less than that!

So income is sh!tty, savings is crappy, but at least stuff is getting cheaper, right?

Well, no, actually. Inflation is low and contained, but it still exists. Prices are still rising.

And the low headline figure tends to disguise where the inflation actually is. So while consumer electronics are getting cheaper, housing costs (rent and mortgages) are getting more expensive.

As one economist joked, “The prices on the stuff you need are going up, while the prices on the stuff you don’t need are going down.”

And the net effect of that is that Real Disposable Income is failing to keep pace with the cost of living.

And more and more, as a society, we’re relying on credit to fill the gap.

So put it all together and you have a pretty alarming picture. You have a vision of the majority of society failing to earn enough or save enough to keep pace with the rising cost of living.

The necessarily means growing credit or falling living standards.

And who wants that? And who wants that after 45 years in the workforce?

But with wages stuck in the gutter, there’s no way to earn yourself out of this mess.

Wages are going nowhere, and the increasingly temporary nature of work means that they’re going to stay going nowhere.

To me, the only way out is through leverage. It’s through putting your money to work.

We all do that. Even if you just let your super sit in your industry fund, it’s still working for you.

But could you be getting more out of your money?

This is the question you’ve got to ask yourself and keep asking yourself.

And the key here is knowledge. As the carnage playing out in the financial planning industry shows us, it’s a risky business trusting your fortune and future to someone else.

Far better to skill-up and educate yourself. It’s not that hard. Look at me. I couldn’t even get through high-school on my first crack.

But now I have to knowledge and skills to command my wealth with confidence.

Seriously, do you have another choice?

Because time is running out.

Filed Under: Blog, Social, Success

Property Planning Gone Mad

May 22, 2018 by Jon Giaan

A textbook case of politics driving house prices.

Ok, so I wanted to look at an amazing policy backflip in NSW planning this week, but first, I know a few of you are interested in the art of persuasion, so let’s start with this gem from Opposition Finance spokesman Jim Chalmers. He’s complaining about the way the CBA activated a bunch of kiddie accounts without telling them, in order to juice their sales stats.

“These are appalling revelations and unfortunately also the sort of behaviour Malcolm Turnbull wants to reward with a $17 billion tax handout.

Labor wants to see the victims compensated for the rorts and rip-offs which are being uncovered, the Liberals want to compensate the perpetrators. Banks shouldn’t be rewarded for fiddling with kids’ bank accounts, they should be punished for it.”

Yep, he really went there. “Perpetrators”. “Fiddling with Kids”. The subtle cues are not so subtle. Banks = child rapists.

You might have thought that subtly evoking people’s anger at paedophiles was a step too far over the line. You’re probably right. But welcome to politics in 2018.

But while it’s poor taste, it’s brutally effective persuasion. Banks = kiddy fiddlers. The government (and the tax cuts) are their enablers.

Ouch.

As I’ve said before, it’s going to take something special to get these tax cuts through in this environment.

Malcolm, Morrison, I’m looking at you.

(…but not holding my breath.)

But let’s leave Canberra now for the Capital of modest and sensible, Sydney.

You might remember a few weeks ago that the NSW state planning body gave itself power over certain local government decisions in Ryde.

(Effectively it turned certain higher-density modifications into ‘complying developments’, fast-tracking their approval.)

Called ‘The District Plans’ they were only released in March this year and they called for 7,600 new homes in Ryde over the next 5 years. They also championed the ‘missing middle’ approach to providing terrace houses and duplexes as a way to increase density that is compatible with detached houses.

The 7,600 extra homes sounds like a lot, but we’re still barely scratching the surface of what’s needed. Still, it was a recognition that Sydney is growing fast and the housing stock simply isn’t keeping up.

And this is a point that everyone accepts. Sydney needs more houses. The only problem is, no one knows where to put them.

And Ryde certainly wasn’t happy about being the sharp-tip of the spear in the agenda to density Sydney. Nor was Canterbury-Bankstown.

The Mayor of Ryde was complaining to the papers that there’d be developers and “bulldozers of every block”. The Canterbury-Bankstown Council discussed the proposed changes just over a month later under the agenda item: ‘THE MISSING MIDDLE – A TRAIN WRECK OF A POLICY TOTALLY MISSING THE POINT’.

(Hard to tell what they were really thinking there.)

The local governments rallied hard on their constituent’s behalf.

The state government, facing a tricky election, decided to do a backflip. Now the whole thing’s on hold.

It’s just so classic.

Sydney’s population is booming, thanks in large part to an immigration intake that’s set at the Federal level. The greenies don’t want the city sprawling outward into bush and farmland. Existing residents don’t want to see their leafy streets being built upward, and everyone wants to complain about affordability.

Can you see a way out of that one?

Nope, you can’t. Because there isn’t one.

Unless one of those policy levers is shifted, higher and higher prices are baked in.

It’s driven prices over the past twenty years. It will drive prices over the coming twenty.

And we’ll still be complaining about housing affordability in 2040.

Isn’t that hilarious?

Filed Under: Blog, General, Property Development, Social

More money in your pocket… thanks ! ( I think ?? )

May 8, 2018 by Jon Giaan

Tax is looming as the make or break issue. Is that a good thing?

It’s looking like tonight’s budget will be the last before the next election – that means we can expect something thick with sweeteners.

So I’d be looking for tax cuts. I’d expect the Coalition to make one last push for company tax cuts, as well as introduce some personal income tax cuts as well.

That’d be nice, but can we bake it in? Would Labor fight them on it?

Already tax is looming as a key battle ground, and one of the few areas where you can separate tweedle-dum from tweedle-dee these days.

If Labor’s smart, I think they’d roll with the personal tax cuts – match them more or less – and thereby kick that ball completely out of bounds. That would then leave company tax cuts as the only issue – a debate where they seem to be enjoying the run of play.

Bill Shorten is already framing the narrative:

“Unless Mr Turnbull takes his multi-billion monstrosity, his reverse donation to his buddies, out of next week’s budget, the next election will be a referendum on the Liberals’ tax handout to the big end of town.”

‘Tax hand-out to the big end of town.’ Ouch.

And so far, the cross-benches and most of the public, seem to agree with him.

It’s one of the key tricks when talking about tax. Everyone thinks that they personally, should pay less tax. But it’s another thing altogether to think that ‘everyone’ should pay less tax.

Many people also think that rich people should pay more tax, though no one thinks of themselves as rich.

(I personally think of myself as rich, but that’s because I actively cultivate that mindset. I know a lot of people with a larger net worth than me still labouring under a poverty mindset.)

And that’s why Morrison’s response is swing and a miss:

“At this election there is a clear choice between lower taxes under the government and higher taxes under Labor.”

“Higher taxes under Labor” isn’t electoral poison, unless people know that we’re talking about higher taxes for them. Higher taxes in some general sense aren’t really going to move the needle.

It’s going to annoy people like me who are philosophically in favour of small governments, but how many of us are there. A couple of dozen?

And so the Coalition has it’s work cut out for it.

The first thing I would say (I know there’s some political strategists reading this blog), is that you have to neutralise the ‘big end of town’ attack. And the truth is that for most people ‘big end of town’ means ‘banks’, and they couldn’t possibly more on the nose than right now.

And the way you limply stalled and blocked the Royal Commission is too fresh in people’s minds.

Solution? Go hard on the banks. Kick ‘em while their down. They’re too shell-shocked to do anything about it, and people will be literally cheering from the grand-stands.

The bank-levy is probably the mechanism of choice. That was popular when it came in last year.

So ramp it up just as the company tax cut is taking effect, leaving the banks no better off.

(They can’t complain too much.)

That way you get to be the hero, and dodge the criticism that these tax cuts are a hand-out to those who deserve it least.

The other thing I’d do is go hard on personal tax cuts. A recent Per Capita survey found that people in every income group above $80,000 now believe they pay too much tax. That’s up from almost none a year ago.

And that’s a reality. The effective tax rate is increasing.

 

So you’re speaking to a lived experience there – a real pain point in the community.

And then as much as possible, let the corporate tax cut ride on the coat tails of personal tax cuts. As much as you can, bundle them together. Make it clear they’re coming from the same philosophical place.

(Though it would have been good if you started with personal first, but oh well, what’s done is done.)

I’m still not convinced that the government can sell this one. They don’t have an amazing track record.

But tonight’s budget will give us a sense of how they’ll do.

Let’s see.

Filed Under: Blog, Social, tax planning

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