Weekend Links 18-19 April 2015

reynard

Now with added Gunnamatta …

Global Macro / Markets / Investing:

Americas:

Europe:

Asia:

Terra Ironoria :

Random:

 

 

Comments

  1. Bullet Trains.

    Top speeds of almost 600kph
    http://blogs.wsj.com/japanrealtime/2015/04/17/japans-maglev-train-hits-world-record-590-kilometers-per-hour/?mod=WSJBlog

    That is door to door Melbourne to Sydney in 1 hr 20 minutes.

    Travel time between CBD and Airport in each city is almost 1 hour, plus check in 30 mins , plus flight time 1.25 – is at BEST 3 hours door to door.

    16 trains would carry 23,000 people PER HOUR / PER DIRECTION.

    8 trains in each direction, with each train stopping at only ONE stop – means every single town along the way would have a train arriving and departing every HOUR – and each train would only have ONE stop on its journey adding nor more than TEN MINUTES.

    At $100 a ticket that is $2300000 * 2= $4600000.00 / hr

    Or

    $110,400,000.00 / day

    Or

    $772800000.00 / week

    OR

    $40,185,600,000.00 / annum

    Holy smokes batman we could pay the whole thing off in one YEAR !!!

    Now those figures are at maximum capacity 24 / 7 not realistic – but THAT is the capacity.

    The capacity of this line is half a million people a day heading out and returning home or 250,000 people per city.

    Even if HALF that number were to travel then this system is entirely viable. Even at $50 a ticket, running at HALF capacity this system would be FULLY paid off in 4 years.

    So lets double that time and then add some – 10 years – full paid off.

    Thanks for coming.

    This is the biggest no brainer of ALL TIME.

    Melbourne to Sydney – CBD door to door in 1 hour and 30 minutes for $50

    Seriously – why are we even talking about this.

      • Trains will be in centre of city – as they are in all major cities on earth – not sure how you could be so unaware of such a concrete fact – its the entire point.

        Secondly my argument is that even if tickets were $50, or $25 it would STILL be economical – the $150 each way ($300 per day) is what is limiting travel. If we have tickets at $50 RETURN you would guarantee massive increases in travel.

        Whats more you would be including ALL the population along its corridor opening up the entire region to not only increased patronage but MASSIVELY expanding the economy.

        Quite simply ridiculous responses.

      • Sydeny Melbourne 5th busiest inter-city route on earth – almost every single other in that category has bullet trains.

        Sooooo – embarrassing really.

    • What happens when you hit a kangaroo, or kids throw rocks on the line, at that speed.
      For high speed travel stick with aircraft.WW

      • I dunno Wiley. I guess these are obviously problems that can’t be solved, thus making the development of high speed rail an impossibility./sarc

      • Same thing as anywhere else in the world. They explode in a mist of dust. This is a train travelling at 600 kph – are you even joking with this comment ?

    • Josh MoorreesMEMBER

      And yet you assume there is no travel time to the train station and no check in time for the train and as stated only 5 percent of the numbers you assume. That could be the reason.

      • All high speed trains around the world utilise CBN transit hubs – you have clearly NEVER been on one.

        Trains would massively expand the patronage and the eeconomic returns opening up the entire coast between Sydney and Melbourne would be quite mental.

      • Sydeny Melbourne 5th busiest inter-city route on earth – almost every single other in that category has bullet trains.

        Sooooo – embarrassing really.

    • Fantastic! All the Lawyers and Bankers in Sydney and Melbourne, whose sole aim in life is to parasitise the productive regions of Australia can now operate more effectively and share lunch over a nice glass of French wine?
      We are going to spend a fortune in foreign exchange for what?

      This argument is pretty typical of the proposed analytical frame work for infrastructure projects. It is being assessed on the criteria of the current debt based non-productive economy. No need to change – just more debt, more sales of our regional productive assets to foreigners, for what? So the price of Sydney and Melbourne Real Estate will go up?

      • you are right, what we need is to reduce need for people to travel between Sydney and Melbourne (IT helps there enormously) e.g. removing travel costs from tax deductions for most of businesses would significantly reduce number of passengers – there are very few businesses that actually require traveling and cannot be done using internet. Why would government (other taxpayers) pay share of traveling costs for a bank CEO visiting his office in another city. How can be fair that traveling costs of a cleaner, for example, to his/her usual place of work is not tax deductible but middle level manager traveling from Sydney to Melbourne for a pointless meeting is deductible?

    • we are building trains as well:

      http://en.wikipedia.org/wiki/CBD_and_South_East_Light_Rail

      12km in just under 40min – 18km/h – the slowest light rail in the world

      and that is not all, at the price of 2.2 billion – ~$200mil/km is the most expensive light rail and the most expensive surface rail of any kind ever built, even more … it will disrupt existing traffic, make comute time longer, cause removal of 1000 trees, increase noise pollution, ….

    • Responding to Glenn…

      Sorry to be rude – but you quote a bunch of complete fantasy numbers that are so obviously wrong and then come back and cut the price by 75% and say it is a ‘no brainer’.

      Your revenue quote is the equivalent to 2% of Australia’s GDP

      QANTAS total domestic revenue is around $6bn per annum – 15% of your forecast for one route.

      And how much is this train set going to cost to join a couple of relatively small and far apart cities with a lack of the density of Japan/Korea/China?

      http://www.qantas.com.au/infodetail/about/investors/investorPresentation14.pdf

  2. From Crikey (June 2014)
    Why is Australia so expensive — and who’s responsible?
    http://www.crikey.com.au/2014/06/02/why-is-australia-so-expensive-and-whos-responsible/

    Good summary of why things are expensive and who’s keeping them expensive.
    Covers the dollar, real estate, electricity, food and groceries, cars, financial advice, IT products, taxis and management. We pretty much suck across the board. Lack of competition is at the heart of the problem.

    Some highlights from article:

    Real estate:
    high prices are because of one basic thing: people in Sydney and Melbourne like it like that.

    Food and groceries:
    So why is it expensive to buy groceries in Australia? Our homegrown supermarket duopoly (which also act as an effective monopsony for producers), which earned over $4.5 billion in profits in 2012-13.

    Financial advice:
    Australia has higher costs in superannuation than many other Organisation for Economic Co-operation and Development countries, and retail superannuation clients face “considerably higher” fees than elsewhere.

    IT products:
    the Australian Industry Group claimed that prices shouldn’t change to reflect currency fluctuations because consumers liked stable prices and it would be “impractical”

    Taxis:
    Sydney and Melbourne have some of the world’s most expensive taxi fares, ahead of cities like Paris, New York and Rome. That’s because in the most blatant example in the Australian economy of industry capture, the taxi oligopoly in effect controls industry regulators and politicians

    Management:
    Australia has an ongoing problem of under-performing management and boards that perpetuate some of the worst practices of Australian business

    Have you spotted a recurring theme here? It’s the role of industry itself, and governments, in perpetuating the conditions in which we all pay more than we have to

      • Good to see Jess back at Fairfax letting it rip. Jess is able to provide a considered argument unlike most of Ruperts sock puppets.

      • R2M
        “The Jessica Irvine article in the SMH is great. Makes more sense than this…”

        The articles address 2 separate issues. The SMH one is about tax reform. We all know what needs to be done there. Good luck with that with the current politicians. The Crikey one is about why Australia is so expensive and that’s a more challenging question to answer which is why you tend to dismiss it.. In fact many Australians are conditioned to think that it’s “normal” to pay the prices they are paying for real estate, electricity, food and groceries, cars, financial services, IT products..etc..You just need to spend some time overseas to realize that we’re being shafted..
        At the heart of problem is the lack of genuine competition and it’s a fair question to ask why that’s the case. With increased globalization and increased competition within many countries and industries, Australia is waking up to the reality that we will be left behind and that’s going determine the value of our economy and our currency in the future.

      • Yeah right,
        I don’t get the same read on this you guys do. It appears more to me along the lines of “forget taxing the likes of Google etc, let the the likes of RIO/BHP siphon off revenue to Singapore and instead raise the GST, end all domestic tax expenditures and cease any welfare. So end result tax locals and let the others work out the door with it all.

        I DON’T THINK SO.

        I don’t understand the argument that has been forward that if we tax them they’ll not invest, WTF. What is Google/Apple/Microsoft investing here anyway? RIO/BHP will because we have what they want aplenty.

  3. IF you are not a successful equities trader look no further than the mirror.

    Set foot onto the trading desks of a Wall Street bank or a Connecticut hedge fund and you’ll see a gang of turbo-charged alpha males peering with purpose at their screens shifting millions of dollars into home-run positions.
    But Rande Howell sees something else: emotional wrecks incapable of making proper judgement. That’s how he described a recent visit to Point 72, a US hedge fund that is the second incarnation of SAC Capital, set up by controversial trader Steve Cohen.

    “It’s interesting. They were sitting there and they’re glued to the screens all day and they are racked with anxiety” Mr Howell said.
    “They wake up anxious and they are on their phones, and by the time they get to work they are overheated. They allow 4.15pm to be the judgement about whether they’re feeling good or not.”

    Mr Howell is a trainer of traders, and has seen the system and the minds that drive it, operate in ways that couldn’t be less conducive to deploying capital to make money.
    “What you discover, particularly with Wall Street, is the way they do their incentives. The person that is getting the home runs gets these big bonuses and it encourages this testosterone driven bravado.”

    Mr Howell is heading to Australia to speak at the Australian Technical Analysts Association Silver anniversary conference and to host some seminars. He said his goal is to rewire traders’ brains so that their natural survival instinct is replaced by a probabilistic mindset that forgos the illusion of control, in favour of better judgement.

    “It’s really hard from a biological standpoint being an alpha guy, to give up control. They need to recognise that you cannot control outcomes but you can learn to control the mind you bring to execute [trades]. That’s the edge.

    “It generally takes five to 10 years for a trader to grasp that, and many thousands of dollars.”

    The successful traders are the steady as you types, he said, that are often overlooked in the trading rooms because they’re not swinging the bat in a spectacular fashion.

    “They realise it’s not knowledge but emotional logic. And, until you take the logic of the left brain and the intuition of the right brain, you’re trading with half a brain”
    The skills needed to build businesses are a liability in trading. “If you are a good business guy, you’re taking action, you’re making things happen and controlling outcome. If you take that successful business mind and apply it to trading, it will blow you up. The key to trading is patience, it’s not action.”
    The key to being a good trader is “disciplined impartiality” Mr Howell said. Perhaps the finest trader he knows of is George Soros, who is biologically sensitive to a bad trade.

    “His body aches and all sorts of things that happen to his body to tell him to be out of a position. People that ignore emotion and pretend it’s not there are the ones that blow up. There is no such thing as freedom from emotion. What there is, is freedom of emotion.

    “We are emotional beings attempting to become rational, not rational beings managing emotions. When you cut away the stuff, it’s a belief of inadequacy, of not mattering, unworthiness and powerlessness, that is at the core of performance problems. That applies to everyone but the trading account is sitting there and if he doesn’t face the fear, the fear consumes the trader.”
    This is what he’s tried to teach the traders at Point 72; to step back when they’re consumed by fear, and biology and chemistry has made it impossible to trade with clarity of thought.

    “Emotions are going to have you fight, flight or approach. I want traders to approach a [uncertain] situation with curiosity – not attack with anger and avoid with fear – turn toward the confusion but with a different mind.”
    http://www.afr.com/business/banking-and-finance/investment-banking/training-the-mind-of-a-market-beating-trader–more-emotion-less-alpha-male-20150417-1mmvqz

    • Interesting link WW, not really related but the exact reasons you outline is why I like to sit back and let the Algorithm do it’s job. I spend a lot more time understand what went wrong with past failed Algo trades than I do monitoring the Algorithm. I also take a lot of flack for this approach, senior traders will scream their lungs out saying “blind Freddy could’ve seen that the market had turned” (and they do love to get in your face and SCREAM) but curiously at the end of the day (however not every day) I make much better returns then blind Freddy.
      I’ve spent a lot of time recently analysing where the differences are, (why I made a profit when they made a loss) and you know what most of the upside comes down to the complexity of arbitrage methods that I can deploy. Algorithms can calculate Arbitrage all day long and spot every opportunity human traders simply get tired after a few successes and move back to trading trends.
      It’s tempting to think of ways to combine the two disciplines (algo with human trading) but I suspect it’s pointless because IMHO it’s the human herd instincts that actually create most of the arbitrage opportunities

    • And of course working with Stevie’s mob – getting access to some really good information from your network of industry specialists or, insiders…

  4. About your link “Oil slips below $64 as ample supplies weigh” above:

    The ultimate limits to carbon burning: an order of magnitude calculation

    During the past few years, the development of “shale gas” and “shale oil” in the US, generated a wave of optimism that spread widely in the mediasphere. It was common to hear of “a century of abundance” or even of “centuries” provided by these new sources. However, with the recent collapse of the oil market, these claims seem to have gone the same way as those of the sightings of the Loch Ness monster. But there remains a point to be made: what is exactly the limit to what we can burn? Could we really keep burning for centuries? Or, maybe, even for millennia or more?

    ——-
    Connected:
    http://www.breathoflifefilm.com/

    • What will we do when the Great Burning comes to an end?

      In this short video, Richard Heinberg explores why The Great Burning — the combustion of oil, coal, and natural gas — must come to an end during the next few decades. If the twentieth century was all about increasing our burn rate year after blazing year, the dominant trend of twenty-first century will be a gradual flame-out.

      • The twilight of fossil fuel..
        Investment managers are now beginning to question the value of their holdings in carbon fuels as the pressure builds for the world to limit climate change by reducing carbon emissions.

        Mark Campanale, a former City investment manager, wondered : How much of the reserves of oil and gas written in the reserve books of the world’s energy giants (and used to justify their valuation) could we actually burn in our cars aircraft, ships and our power stations while sticking to the promises governments were making on limiting climate change the global temperature rise below 2C.

        He found that no-one had done the sums. The research he commissioned showed that energy companies have already found more coal, oil and gas than we can burn if politicians keep their promises.
        The report produced a shock-wave. University College London finessed the findings, warning that we must not burn:
        80% of our coal,
        55% of our gas, and
        30% of our oil if we want to meet agreed targets on carbon emissions.

        Meanwhile, a pressure group, 350.org, began urging faith organisations, foundations and pension funds to withdraw funds from fossil fuels, arguing it is morally wrong to put your money in carbon fuels.
        So far, more than 220 institutions have taken the decision to divest.
        These include the heirs to the Rockefeller Standard Oil fortune and the board of trustees at California’s Stanford University.
        Even the Bank of England is investigating whether fossil fuel stocks could cause a destabilising “carbon bubble” in financial markets. WW

    • Have suspected of late with other MB followers that deflation is the result of IR repression and other money printing games (most I don’t claim to fully understand). Here is an example and the link of its source.

      Upshot, is that more interest rate repression to arrest deflation that is in large part caused by interest rate repression since 2008 is NEVER going to be the answer. This low interest strategy won’t work because it can’t work.

      STOCKMAN’S BEST OF THE WEEK, STOCKMAN’S CORNER
      Money Printing And The Bane Of Financial Engineering—–How The Biggest LBO In History Blew-Up

      HOW THE FED HELPED BUSHWHACK TXU

      As it happened, the Fed’s rock-bottom interest rates were contagious and fueled a boom in debt-financed gas drilling that soon caused supplies to soar and natural gas prices to plummet. In this manner, the power plant “fuels arb” was flattened and with it the company’s financial results. The Fed thus unintentionally bushwhacked the largest LBO in history. So doing, it demonstrated just how badly the nation’s central bank had mangled the free market.

  5. Guys, much has been written about the overvalued housing market.
    HnH has published a list of USD exposed stocks someone promoted as value.
    Below is a summary of the PE of those stocks. Remembering the long run value of PE for the market is 13, and this time it isn’t different. Those with neg, have negative earnings, thus negative PE.
    This whole friggin lot is a ponzi. Be very careful with your “equity investments”. WW

    ResMedInc 32.9
    Ansell 61.4
    AristocratLeisure Neg
    QBEInsurance 19.5
    TreasuryWineEstates Neg
    JamesHardieInd 95.8
    IncitecPivot 27.5
    SonicHealthcare 21.6
    Cochlear 35.1
    CrownResorts 20.3
    Brambles 29.2
    CSL 29.8
    Amcor 21.8
    WestfieldCorp Neg
    Computershare 54
    SimsMetalMgt Neg

    • Check out the performance of ANN yesterday and you will see what buying stocks with buggerall growth at PEs over 20 will do for your wealth. Slammed.
      At these prices this thematic is about relative returns and not absolute.

  6. NZ + Australia merger?

    Given their respective sizes it would be more “hostile takeover” than merger. A bridge (brudge ?) too far at this point in our histories maybe.

    But since the NZ banking system is really an offshoot of the Aust banking system, perhaps a single currency is worth considering.

    • what would be the benefit of single currency?

      who would benefit from merger?

      we need to split our country into independent states, but only few that we have, we need to split it into 100 states so that democracy can function

    • innocent bystander

      yep, have met 3 or 4 in that boat in the last week. plus a few I have known long term who are now approaching trouble. all getting ready to sell properties.
      the single blokes are still optimistic, even tho they have been unemployed 3 or 4 months. families a bit more worried.
      I know guys who have tripled their annual salary of 5 years ago – 5 years of winning lotto and they are so geared they are sh*t*ng themselves.

  7. WW those PEs are interesting(and possibly frightening) but the comparison with the long run 13 obscures several factors:
    1. The USD exposures of this group plus the near certainty of a weaker AUD/NZD means that future AUD earnings are understated
    2. How useful are historical PEs if risk free rates have come down by 2-300bp?(for say the next decade)
    3. Many of these are growth stocks with an inherently higher PE than the market average.
    Its more complicated than it looks at first blush.

    • Terry all you are trying to tell me is that this time it is different, The AUD may not stay lower, the Interest rates may rise, etc. There are any no of arguments either way, always have been, but the long run average is still 13-14. Below the PE for the banks; WW
      ANZ 13.3
      ABA 14.4
      BOQ 17.4
      BEN 13.1
      CBA 16.7
      GMY 122.8
      HOM 11
      MOC 17.5
      MYS 15.6
      NAB 17.4
      WBC 16

      • Consider also that bank PEs globally are typically closer to 10 – though like everything else – the whole sector is trading a bit rich at the moment.

        You can argue that CBA etc are superior businesses (and they have been) with ROE at 18. But this is a backward looking measure and is set to struggle for various reasons. It is based on over-earning from an already over leveraged client base, excess margins and insufficient capital.

        Are Australians prepared for a derating of their bank holdings to global norms? Let alone a proper shakeout.

        It has been like this for a very long time now – 1991 being last recession – Australian bank investors truly believe deep down that their companies are ‘different’ and they have all forgotten what it felt like getting that rights issue application in the mail in 2009 when CBA was $25.

        Where does it go when the property market craters, loan growth goes deeply negative and bad debts explode?

        Banks are highly leveraged plays on their resident economy. Hence the low PEs in markets where things aren’t ‘different’.

        Some global examples 2015-16 PEs:

        Wells Fargo 12.9 – 11.9 ROE 12%
        JPMorgan 10 – 9.4 ROE 10%
        Toronto Dominion 12.9 -12 ROE 14%
        Royal Bank of Canada 12.7 – 12 ROE 17.5%
        Development Bank Singapore 12 – 11 ROE 10.5%
        OCBC 11-10 ROE 11%

        The Canadian Banks are interesting as they have also been over earning pumping up a property bubble fueled by a now busted commodity boom – they are down 10-20% since September (when oil cracked) while the Aussie banks are whistling past the cemetery of iron ore prices.

        Briefly to the point on ‘risk free rates’ being 200bps cheaper. The lower rate doesn’t markedly change the volatility of earnings – it more than likely actually signals that earnings are at extreme risk. Check out the US banks, they have ZIRP and the bank equities trade at deep discounts to Australia. You could assume their market still has a memory of owning bank equity in bad times.

        The yield chasing thematic has been very powerful for three years. It is now an extremely crowded trade that has captured a lot of money from what I would call ‘weak hands’ – people who can’t bare to accept a 10% decline in their capital.

        I think when volatility increases again (let alone downgrades to EPS and dividends) – you will want to be very close to the exits – because they are going to get very crowded and the algos will get turned off.

    • “This would reduce annual permanent immigration from around 250,000 (including NZ) to around 70,000, and include flexible skilled, family reunion and humanitarian (refugee) components.”

      Seems they still want to let in 70,000 people every year, the filthy scum.

      • Australians aren’t smart enough to support zero growth.

        So, yes, desperate filthy scum.

        Still. They’re not an environmental party so they pale into fourth place. With the lying filthy scum the Greens winning without challenge. They are the best. Greens win year after year as the most deceptive lying scum in Australian politics. That’s not easy.

      • 70k immigrants a year would very soon actually produce population loss. With number of births going quickly down and number of deaths going up, in about 5-10 years 70k immigrants will not be able to offset natural population loss

      • @Annoying Devil. Why? It’s a stupid paradigm we’ve all gone along with. It’s time it was questioned. There’s far more pain than good associated with it.

    • this policy is in line with Greens’ ideas: refugees and family reunion visas would not reduce much

      our immigration is just another way of selling higher education services, our universities (especialy for profit ones) are not selling education, not even degrees, they are selling visas

    • Australia can’t fund its current entitlements.
      Who will be paying the taxes to keep the boomers in their pensions and health entitlements?
      It is an interesting take on the world that when something gets too hard, like providing infrastructure for a necessary growth in population, that you give up on it and effectively ignore the realities of demographics.
      Didn’t work for Japan.

      • @88888

        Or…..we could live with less opulence and leave a more viable country for our kids. Wow. Imagine that. Thinking of our own offspring.

      • So what benefit gets cut to remove the ‘opulence’ of retiring on the aged pension and going to public hospitals?

      • drsmithyMEMBER

        Australia can’t fund its current entitlements.

        According to fairly reguarly articles here on MB, Australia most certainly can fund its current entitlements, it just chooses not to.

      • What about savings right across the economy?

        Taxing multinationals? Bank tax (FFS, they’re making BILLIONS), change neg gearing?

        People/government have an individuals entire life time to save for 20 odd years of retirement and health care. People would pay an amount for health care (in addition to existing medicare levy). The only reason people blew up was idiot LNP wanted to do it in isolation of everything else.

        Australian medical as an aside issue is obscenely expensive. Overseas it’s half for dental in the US. A quarter for selective surgery in most of Asia.

        Immigration is a ridiculously short sighted solution that erodes all our lifestyles. Or rather we take the cream of it this generation and leave our kids a nightmare. It’s a disgrace the way we find such pathetically selfish solutions.

        An individual could save 15% their entire working life and live very comfortably in retirement. Other countries manage it.

        Anti population growth is gathering momentum and most certainly will be a debate that politicians will have to address soon. Politicians are so dumb and corporations so greedy, they can’t even throw us some crumbs and build adequate infrastructure. This will blow up in their faces.

      • IMHO the answer to this dilemma depends on your beliefs, I’m not talking religion but something far more fundamental:
        Is a nation’s wealth created by its people or exploited by its people?
        If you believe wealth is created, then diversity and skills are the corner-stone of wealth creation and therefore naturally a larger more diverse population is the route to riches for all.
        However, If you believe wealth is simply the monetization of exploited nature than naturally you want to reduce the number of people with a birth right to engage in said exploitation.
        Those of us that are members in the first group are completely unsuited to life in Australia because at every turn we must battle economic / legal / business and societal realizations of the second premiss. This Aussie fixation with granting and getting monopoly rights has become the corner-stone of all policy, even a commodity as abundant as Aussie land is not free to be used efficiently rather it must be controlled (monopolized) because the free exploitation of this abundant commodity could only lead to wealth destruction ( land housing being the one true natural wealth).

      • Is a nation’s wealth created by its people or exploited by its people?

        The answer, of course, is “yes”.

        Natural wealth (eg: coal, iron) is exploited.
        Manufactured wealth – the “value add” onto natural wealth – is created.

        The latter depends implicitly on the former, so ultimately both are finite, and limited (at least within the constraints of technology we have and can forsee being within the realms of possibility).

        You can be the smartest guy in the world, but if you need some type of natural resource to create your widget, and that natural resource is no longer available (or controlled by people who aren’t prepared to let you have it), then you cannot create your widget.

        If you believe wealth is created, then diversity and skills are the corner-stone of wealth creation and therefore naturally a larger more diverse population is the route to riches for all.

        There is a premise here that needs more than the hand-wave you have given it – that “a larger and more diverse population” is required to create wealth with the AI and robotics advances on the horizon.

      • @drsmithy
        If you value on the physical article then I can understand your widget comment however if value (wealth) can be created by refining/ enhancing intangibles than the problem of monopoly ownership of tangibles is overcome.
        I think this point is extremely important wrt the emergence of AI/robotic because if the robotics industry takes the form of a vertical business where the creation of the hardware entitles one to create ALL the applications (and therefore realize all the profits) than we have an industry similar to the main-frame computer business pre 1980 whereby IBM made the hardware and only official IBM software ran on their hardware. The emergence of the generic PC hardware was what enabled profits to be realized in operating systems, application spaces and support/service. None of these endeavours consumes or requires new (additional) natural resources, when I create a better OS I can even create value even for otherwise obsolete hardware. Long term I dont see generic robotics as being somehow the domain of a technical elite (or just the wealthy) because it be cheap and ubiquitous so value will be created by the application of the robot. Socially gifted people might create distinctly different personalities, I can see this as having enormous application in the aged-care environment, technically skilled might create a lawn mowing package or a car washing package. All of these are valuable enhancments to generic cheap robotics.
        Personally I hope I’ll live in a world that’s smart enough to understand this advantage and leverage these tools to create a better society.

      • If you value on the physical article then I can understand your widget comment however if value (wealth) can be created by refining/ enhancing intangibles than the problem of monopoly ownership of tangibles is overcome.

        No it’s not, and it’s got nothing to do with where anyone puts “value”.

        If you need unobtanium to make your widgets, and the only unobtainium in the world belongs to someone who hates you and will never let you or anyone else have any at any price, then you can’t make your widgets (and neither can anyone else).

        No amount of refining or enhancing your intangibles can or will change your need for unobtanium, or your inability to get it.

        Let me put it another way: if I have a robot that can build me a car based on a schematic I download from the internet, but it needs half a tonne of steel to do it and steel costs a million dollars a tonne, then the fact that the robot cost me $50 and the schematic cost $0.99 is irrelevant. No steel = no car.

        Your comparisons to the IBM PC are reasonable to a point, but that point is critical. Software development, once you have a computer (and assuming you have electricity to drive it), requires basically no further physical resources (other than pizza and beer). The same is not true of, say, putting together a car, or building a house, or taking a holiday. Or, heck, even having your robots cook you a pizza and brew you some beer.

        You cannot ignore the finite limitations of the physical world. Unless you think the future is basically the Matrix.

        Additionally, it is *highly* likely that the 3D printers (or maker-bots, or whatever you want to call them) of the future that normal people are able to acquire legitimately, will be locked down tighter than a frog’s arsehole with DRM so that they will only create things from “approved” designs. So, sure, you will be able to download that Ferrari’s plans, but they’ll cost you basically the same as just buying it from the factory would do anyway.

        Yes, there will (heck, already is) be a whole movement of free designs that people can download and use royalty-free, but these will likely be closed out (at least for anything seriously useful) by maker-bot vendors colluding, implicitly or explicitly (eg: legislation requiring maker bots to be “certified” before they can be sold).

        The future of technology is looking a lot more like games consoles than it is like the IBM PC. It is precisely why there has been so much work put into making IP law extensive and brutally enforced.

        Personally I hope I’ll live in a world that’s smart enough to understand this advantage and leverage these tools to create a better society.

        The problem is not people who are stupid, the problem is people who are greedy, and today greedy people run the world.

      • @ China-Bob — while there’s something in what you’re saying, there are also limits to the argument that more people = more potential wealth. There are constraints imposed by the environment, management of infrastructure, education etc.
        Witness the wasted potential of overpopulated countries in our region. A lot of smart people with no opportunities. So if your population is increasing rapidly with incompetent management (as in Aus now), you have the potential of more downside than upside, don’t you reckon?

    • Bringing in 70k unproductive migrants could even be dumber than what we’re doing.

      SPP overtakes Greens for number 1 spot fucking idiot party.

      Let’s just go back to 400k a year. At least I benefit financially.

    • @88888.

      Why does it have to be one or two things get cut entirely?

      We all take a cut and start being more productive.

      • Lets assume steps are taken in the 2015/2016 budget to balance the books with no cuts to retirement and health entitlements to those that need them.
        I’m not advocating a cut to that safety net. It isn’t easy street.
        My argument is that currently there are 20 retirees for every worker
        At zero migration, in 2030 this will be 36 in 2050, 50 !
        Australia needs immigration

        https://data.un.org/Data.aspx?d=PopDiv&f=variableID%3A44

      • The figure in your link is called “Elder depency ratio (per cent)” which sort of sounds like 0.2 retirees per worker currently, etc, which also seems much more plausible after a microsecond glance at Australia’s age pyramid, rather than 20 retirees per worker.

      • Sorry – correct – it is currently 20 retirees for 100 workers – heading to 36 and 50 if no immigration occurs
        My argument remains – how does Australia expect to fund pensions and health care if the people paying for it are going to relatively halve in numbers compared to the recipients over time?
        Japan ignored this and the chickens are coming to roost. Is it possible for some planning to occur to avoid this disaster?
        Considering the country can’t balance it’s books now under the guidance of either side of politics – i don’t hold high hopes

      • @88888

        “Considering the country can’t balance it’s books now under the guidance of either side of politics”

        EXACTLY.

        The solution isn’t to continue stupid population growth. The solution is to get rid of these fucking idiots running the place.

        Greens, Labor and LNP have to go for the benefit of our kids. It’s simple.

      • These clowns can’t get any worse. Instead of telling everyone they need to save for their own retirement they want to use the money to boost housing.

        Greens, LNP and Labor are destroying Australia. There should be a concerted effort on these types of forums to fix that.

        Fix everything?

        Get rid of these three parties.

        Get political MB is my opinion and people like drsmithy need to stop cheering for morons. They are all toxic, all have vested interests that don’t include us, all are corrupt, all have themselves as their number one cause. Only a fool can’t see this.

        Australia needs a hero, to strand up and tell the electorate what’s being done to them. To fix it this hero’s going to say, no more population growth, corporates will be taxed properly, politicians have one term and will come from appropriate industry for portfolio, they will be paid extremely well for their short tenure, politicians pensions will be ceased and put into consolidated revenue, all corruption will be revisited and jail will be applied, no politician will enjoy employment in any of their portfolio companies. MASSIVE REFERENDUM on all issues to start. Don’t do it, and we’re doomed. Rather our kids are doomed. We’ll get out fine. Well done Australia.

      • Sorry – correct – it is currently 20 retirees for 100 workers – heading to 36 and 50 if no immigration occurs
        My argument remains – how does Australia expect to fund pensions and health care if the people paying for it are going to relatively halve in numbers compared to the recipients over time?

        You are fixated on the ratio of workers to non-workers when what actually matters is the ratio of “wealth” to people.

        How much stuff we can produce has become less relevant to how many people we have with every year since the beginning of the industrial revolution.

        On current trajectories, within a generation, two at the most, in the ballpark half the population will be literally unemployable because there will be nothing they can do that a robot cannot do faster, cheaper and better. Likely another generation or two after that AI improvements will have made another seriously large proportion of the remaining “knowledge workforce” similarly unemployable.

        Japan ignored this and the chickens are coming to roost.

        Japan is obviously aiming to build an army of robots to look after its people. The interesting question is whether or not they will make it in time, and whether or not they will be able to trade knowledge for the natural resources they need to build and maintain all those robots long term.

        Is it possible for some planning to occur to avoid this disaster?

        Planning ? Sounds like socialism to me !

        Yes, we can plan for the future, but it probably won’t be the kind of planning you like.

        Considering the country can’t balance it’s books now under the guidance of either side of politics – i don’t hold high hopes

        We’ve only really had one side of politics for pushing twenty years now.

      • Get political MB is my opinion and people like drsmithy need to stop cheering for morons.

        If MB “gets political”, they will have issues other than population growth. Consequently, you won’t be happy with anything they do.

      • The benefits themselves are socialism. Planning ahead to be able to either pay them as promised or reduce them to makes them affordable is just honesty.

        From what I can understand your solution is robots – you might be correct – but it sounds like giving up on infrastructure investment while you wait for flying cars.

      • drsmithyMEMBER

        From what I can understand your solution is robots – you might be correct – but it sounds like giving up on infrastructure investment while you wait for flying cars.

        It’s not my solution, the point is that robots takin er jerbs is inevitable on current trends.

        The important question is what do we do when most of humanity literall can’t create enough “value” to “justify its existence” ? Ie: their only way to survive is via “redistribution” from the minority who either a) own everything or b) can do things robots and AIs can’t do.

        The future is likely to be one of:
        * Something like Fuedalism (the neoliberal dream)
        * Something Matrix-esque where most people basically just plug in and live entirely virtual lives (the minebot’s preferred scenario)
        * Something like Star Trek (the “people don’t work for money” part of it, not the flitting all over the galaxy part of it).

  8. Fran O’Sullivan: Housing warning should put PM on red alert – Business – NZ Herald News

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11434452

    When the Deputy Governor of the Reserve Bank issues a warning that the speculative boom affecting the Auckland housing market must be arrested in case it sparks a financial crisis, the Government should first sit up and take notice – then act.

    Grant Spencer put the central bank’s warning in the context “that an eventual market correction is likely to be disruptive to financial stability and the economy”. … read more via hyperlink above …

  9. Waaaayyyy of topic, but…..
    I was chatting to a friend who is a doctor and he told me that he has a no junk health insurer. They don’t do acupuncture, homeopathy, chiropractor or anything else like this. The downside is that it is industry only, so unless I marry a doctor there is no access for me.
    Does anyone know of a similar health insurer for the masses? I’ve looked around but with no luck.

    • Good question footsore.

      I recall the reports on the release of the draft of the review into subsidised witchcraft and looked forward to the benefits that flowed through to everyone, including the Believers, and hopefully extending to the catchment beyond the ToR of the review. Just searched, but can’t find, other than http://www.health.gov.au/internet/main/publishing.nsf/Content/phi-natural-therapies

      Maybe I’m missing additional information but we are past the (already delayed) implementation scheduled for 1 April. That date may be significant.

    • The money is going to the UWA business school.(obviously the seat of knowledge over there)
      It was probably them who advised that other disgraced Perth ouftit the Perth Glory. Now kicked out of the league (finals). the Chickens are coming home for the Sandgropers
      We in the Eastern States are going to do it tough for the next few years but those in WA are going to be like the Blackfellahs of the northern region, who just live in humpies from time to time as a nomadic lifestyle choice.WW

    • Lomborg does not ‘deny’ climate change

      ‘Yes global warming is real, it is a challenge, but the typical way that we solve it turns out to be a pretty poor investment of resources

      He is a rationalist and a humanitarian.

      If there were more people like him – far more would be actually be achieved for your cause – as people look for realistic solutions and coping mechanisms.

      • drsmithyMEMBER

        The most charitable thing you could say about Lomborg is he is a can-kicker and thinks we should push problems off to later generations.

      • I would contend he is more interesting in fighting battles with limited resources that can be won to improve humanity.
        As opposed to wasting billions on nonsense like Gillard’s Carbon tax that had zero effect on climate while people continue to die of malaria and water issues in the rest of the world.

        The people burning dung for heat are irrelevant to the rich whitey warm inner glow parade.

      • drsmithyMEMBER

        I would contend he is more interesting in fighting battles with limited resources that can be won to improve humanity.

        By “limited resources” you mean “limited money”, presumably.

        As opposed to wasting billions on nonsense like Gillard’s Carbon tax that had zero effect on climate while people continue to die of malaria and water issues in the rest of the world.

        The comical lies here here are that there were “billions wasted” on the carbon tax and that those billions might have in some way been otherwise used to save people from dying of “malaria and water issues in the rest of the world”.

        The people burning dung for heat are irrelevant to the rich whitey warm inner glow parade.

        Don’t try and pretend the greedy arseholes behind climate change denial have the slightest interest whatsoever in helping people “burning dung for heat”. It’s insulting. They’re not even interested in helping the people sleeping in boxes in their own neighbourhoods – darkies setting shit on fire to keep warm may as well be on Mars.

      • It’s stock denier BS to claim we cannot curtail carbon emissions because “poor people” will suffer. It’s the line 3d runs all the time. 🙄

        Never any mention of how “poor people” the world over will suffer when the droughts kill their crops, or the floods drown their children, or their islands disappear! 😡

      • Having met the guy, I came away with the impression similar to 88888. His morality metric is very much “human lives saved per dollar spent”. Their modelling says that there are better places to spend it than on climate change (although there is some overlap).

        From memory, their predicted loss of life from climate change is lower than the ongoing loss of life from numerous other sources that are supposedly cheaper to deal with.

        There are a number of things wrong with this story, but “Lumborg is evil” isn’t one of them.

      • Having met the guy, I came away with the impression similar to 88888. His morality metric is very much “human lives saved per dollar spent”. Their modelling says that there are better places to spend it than on climate change (although there is some overlap).

        The key questions here are “on what academic basis can Lomborg model climate change impacts” and “over what timeframe is he talking about”.

        The other issue is that his position reeks of false dichotomy. Why can’t we help the poorest today without impacting long-term sustainability ?

      • The Copenhagen Consensus Centre is a think tank that does primarily economic modelling. Ross Garnaut isn’t a climate scientist either. As an economist he only needs to be able to take scientific output and input that into appropriate economic models. I have precisely zero ability to understand or comment on the quality of those models, anymore than I do the models of other organisations who have done similar.

        “The Copenhagen Consensus Center is a think tank that researches the smartest solutions for the world’s biggest problems by cost-benefit. Its studies are conducted by more than 100 economists from internationally renowned institutions, including seven Nobel Laureates, to advise policy-makers and philanthropists how to spend their money most effectively. The Center’s advocacy for data-driven prioritization was voted into the top 20 campaigns worldwide in a think tank survey conducted by University of Pennsylvania.”

        I’d just suggest that if you are going to criticise someone, it might be an idea to understand exactly what their reasoning is.

        *Disclaimer: I don’t subscribe to Lomborg’s position on many issues, but I do enjoy his perspective.*

      • drsmithyMEMBER

        None of that changes what I said.

        What assumptions about climate change is he using to model its impact ?
        What timeframe is his “wait for it” conclusion working on ?

  10. There is an interesting link within the article about Moore’s Law
    http://www.forbes.com/sites/bigbangdisruption/2013/12/16/big-bang-disruption-the-internet-of-things-takes-off-gradually-and-then-suddenly/
    This looks at Phillips’ choice to accelerate the change from incandescent to LED in order to prepare itself for the inevitable shift. This decision was made even though incandescent lighting represented 30% of its profits.
    Plus there is also a cool shark fin graph that is meant to represent the change of disruptive technologies.

  11. Hugh the problem as you well understand is that there is no political mileage in acting on a housing bubble. What NZ Gov. is going to introduce a CGT, or deal with negative gearing?. A one term Gov. is the answer.
    Politically something has to be devised which targets only a disliked minority-which is maybe investors with multiple properties. But it gets very hard….unless public outrage at the risks around a financial disaster changes the political calculus. It was heroic of the RBNZ to shout this from the rooftops-good on them. Makes their colleagues here look pathetic.
    Interesting to see the level of newspaper support for RBNZ position in NZ.

    • Terry … I am very happy in how these issues are progressing in NZ.

      It could be described as a “cacophony of political noise” … but that’s how a properly functioning democracy should work.

      The most important thing is that they are all engaged … and out of this becoming increasingly better informed.

      It goes beyond just housing of course, spilling over to greater scrutiny of our public bureaucracies and institutions (and much more) … like they haven’t had it in a very long time.

      Much of this is due to the tool of the internet. The best disinfectant for democracy I’m aware of !

  12. Are mortgage lending limits on housing required ? …

    NZ finance minister says home loan limits worth trying in Australia – ABC News (Australian Broadcasting Corporation)

    http://www.abc.net.au/news/2015-04-17/nz-finance-minister-says-home-loan-limits-worth-trying/6399854

    4.5 times household income in the UK … BofE mid 2014 announcement …

    http://uk.reuters.com/article/2014/06/26/uk-britain-housing-idUKKBN0F10UE20140626

    3.5 times household income limits in Ireland … CBofI late January 2015 announcement …

    http://www.bloomberg.com/news/articles/2015-01-30/irish-bank-slows-best-european-market-to-avoid-deja-vu

    • Hugh, unless it also targets investors it won’t be effective. Look at Sydney & Melbourne prices soaring based on investor activity, both local & foreign, FHBs having virtually departed the market.

  13. Is anyone else here who cancelled their MB membership continuing to get their credit card charged by a company called eway?

  14. Neo, you tight ass.

    If you can explain how you haven’t got $100 value out of this sight, besides being talked out of buying a house.

  15. Conversation overheard in a Sydney lift.
    Person 1 tells how their apartment has doubled in value in 12 years. Person 2 trumps that by indicating their property has tripled (timeframe unknown).
    Person 1 laments why anyone would pay the the sum it is now ‘worth’. Tone of voice indicated it was likely a shit-hole.
    No discussion on the additional debt taken on to buy what these properties are now ‘worth’.

    Of course neither has sold.

    Now, *of course* there is no bubble, but it is amazing how many conversations in a day one overhears related to property and property financing. Imagine what it would be like were property in some kind of mania.

    • I met some old uni friends the other day. All well educated and knowledgeable in property investments. They looked at me stupid when I was talking about my/this forum’s views going forward. At most some would agree we are at a peak and won’t go up anytime soon – as in the boom has happened and won’t happen until the next 10 year cycle.

      • “Knowledgeable in property investments”
        If his experience is only Australia – unless he was in property in the early ’90s – he is only knowledgeable in bull market property investments
        Like a CDS seller in 2008 who started on the desk in 2002 – he has no idea what is going on

      • Mining BoganMEMBER

        Some older boomers asked me today about what I thought about their new financial advisors advice. Apparently everything is in a bubble except housing in Melbourne, which is about to boom. Oh, and the ‘products’ they sell. At 5% cost but high return.

        The future of this country is so unbelievably fucked.

      • Yep and if they went to an adviser who said that every thing is overdone and you should sit in a basket of investments mainly in currency other than AUD and wait for real opportunity to present itself – the prospective clients would have left confused they didn’t have a get rich scheme and the adviser would have made no money.
        Housing in Melbourne, wow. Any spiv flogging that under the auspices of ‘financial advice’ would be getting 5% as a minimum and then a trail on the enormous loan and potentially a clip on the rent roll.

        The system is totally screwed and why are boomers even contemplating borrowing?

        Seriously – unintended consequences…

      • Mining BoganMEMBER

        They’re not going to borrow. They’re all cashed up after selling a property they bought 40 odd years ago. They’ve had a once in a lifetime shot and are thinking about ploughing it back In. Madness.

        They ask me because I’m the only one they know who isn’t all in on property. Told them much what you said, 5×8. Foreign shores. They listened politely then dismissed it all as too risky.

        There is no way out of this uneducated mess. It must be total collapse. Terrible.

      • by “knowledgeable in property investment”, I mean they did alot of research on the suburbs and have a good understanding of “market” price e.g. which schools are sort after, which builders are good, crime rates.

        I’m under the same conclusion that cash is the best thing to hold onto right now. Which currencies have you guys got in mind?

      • I’m waiting for people selling apartments that haven’t even been finished yet, i.e flipping a property purchased at developer release.

        That will be a telltale sign we are entering a new phase.

      • V, friends of mine have been doing that already. I’ve also seen new developments finished, and the owners selling them right away.

  16. How accurate is this?

    https://www.youtube.com/watch?v=iFDe5kUUyT0

    It talks about government currency creation via bonds. How they can never fully repay the debt because it’s a never ending scheme. And the Banks “creating money” by lending deposits which then gets put into the next bank which does the same, thereby multiplying currency.

    • Hint…. don’t go to you tube for anything other than entertainment, albeit there are lectures and debates which are grounded in more rigorous methodology, than some site called hiddensecretsofmoney.com.

      Its better to stick too operational reality.

      The Encyclopedia of Central Banking provides definitive and comprehensive encylopedic coverage on central banking and monetary theory and policy. Containing close to 200 entries from specially commissioned experts in their fields, elements of past and current monetary policies are described and a critical assessment of central bank practices is presented. Since the financial crisis of 2007, all major central banks have intervened to avert the collapse of the global economy, bringing monetary policy to the forefront. Rochon and Rossi give an up to date, critical understanding of central banking, at both theoretical and policy-oriented levels. This Encyclopedia explains the complexity of monetary-policy interventions, their conceptual and institutional frameworks, and their own limits and drawbacks. The reader is provided with the body of knowledge necessary to understand central banks’ decisions in the aftermath of the global financial crisis and controversial explanations of the crisis are illuminated from a historical perspective. Academics and students of economics will find this an indispensible reference tool, offering current and necessary insight into central banking and monetary policy. Practitioners in the financial sector will also benefit from this refreshed insight into this fundamental topic.

      http://www.bookdepository.com/book/9781782547433?redirected=true&v=A75X6&selectCurrency=AUD&gclid=COPDzqTK_8QCFYksvQodIWwAKg

      • Yes – at $317 it would appear that there is more than one website hiding the secrets of money – at least hiding them from the casual reader.

        Sounds like I may need to dust off my alumni borrowing rights.

      • Ahhh…. the price patrol is on A alert, some might pull heads in and consider the link was not a shingle, but, simply a reference to the material.

        Skippy… Fear… Loathing…. Paranoia… and Cheaper prices…. snorty….

      • Does this tome of expert opinion break down the absolute failure of the last 20-30 years of monetary policy?
        One chapter should be enough – Megalomania – how Central Banks went from banks of last resort to micro managing asset markets while debasing currencies and enabling fiscal deficits
        The final chapter – Exit Strategies – is yet to be written

      • Aside from the price, at least the e-version isn’t all that prohibitive, is the material itself accessible to a layperson like myself, or a dense dry academic text that requires quite an amount of assumed knowledge to understand?

        PS. I don’t buy into the scaremongering goldbuggery of the linked video.

      • Hamish,

        Not sure but I will let you know (unless Skippy beats me to it). At first glance it looks interesting as it has a short bio on the history of central banks around the world and they are quite different. Appears to take a non orthodox view of the world which means it might actually be interesting. Just a shame it is so expensive – even as an ebook – as it looks like a great father’s day gift idea. Beats socks and undies.

        By the way Skip – thanks for the link even if you dont get a slice of the action!

  17. Red Rag, meet Bull…..“Mario Draghi in Washington on Saturday during meetings of the International Monetary Fund cautioned investors. …”It’s pointless to go short on the euro,” he said. “Do it.”

    • This is the clincher for me:

      Investor Jonathan Chee, 27, an accountant, paid “just over a mill” for a south-east facing two-bedroom, two-bathroom apartment with parking on level 11.

      He says he’s confident about the prospects for Sydney’s property market.

      “Property bubbles do worry me, because I think it’s pretty expensive and we haven’t been in a market like this from my research ever,” he said.

      “So the way I look at it is that I take a look at other economies that have an investment-based property market like Sydney does at the moment – so places like Hong Kong, Singapore – they’re flooded with investors.

      “Prices go up and down but they’re never smashed.

      “So unless something really bad happens here, which I don’t see it happening … we should be relatively stable.”

      The economic illiteracy is astounding!

    • GunnamattaMEMBER

      ‘A complete load of rubbish’: Economists hit out at negative gearing myths

      IT’S a uniquely Aussie slang term up there with thongs and budgie smugglers, but it’s also the behind one of the most pervasive myths in public debate.
      Economists have hit out at fresh calls to wind back negative gearing concessions in a bid to raise more tax revenue and increase housing affordability.
      In a report released yesterday, peak welfare body the Australian Council of Social Services urged the government to restrict tax deductions for negatively-geared property investments.
      ACOSS claimed the move could save more than $1 billion a year, arguing the current system primarily benefited the rich.
      According to its report, ‘Fuel on the fire: Negative gearing, Capital Gains Tax and housing affordability’, more than half of geared housing investors were in the top 10 per cent of personal taxpayers.
      It argued negative gearing encouraged over-investment in existing properties and expensive inner-city apartments, lifting housing prices and doing little to promote construction of affordable housing.

      So far so good. The ACOSS report basically said that, most of us here at MB know that. The only quibble I would have is ‘economists have hit out’ – I am yet to see a single economist who is not part of the RE lobby say anything remotely against the nub of the ACOSS report

      Sinclair Davidson, Professor of Institutional Economics at RMIT University, described the public debate around negative gearing as “a complete load of rubbish”.

      We have our ‘economists’ – he is here http://www1.rmit.edu.au/staff/sinclairdavidson

      The term itself is an Australianism, so the whole notion of having to explain negative gearing to foreigners falls into the same category as having to explain slang terms to foreigners, he argues.

      The expression ‘negative gearing’ is an Australianism, he is right there. However the difficulty in explaining to foreigners – something I have done more than once, including a number of economists and investment bankers – usually reflects the difficulty in explaining to those foreigners that losses in one asset class/income source [lets say an investment property] could be used to write down income and avoid paying tax in another [lets say wages/salary]. My experience is that this is usually accompanied by considerable shock, some questioning about the limits of ones ability to do this, about the economic intent of the taxation framework which encourages this, and about the beneficiaries. More than once this has been directly related to observations about how eye glazingly expensive Australian residential RE is – which then usually has me explaining there are other factors to contribute to that too

      “ACOSS and other people who don’t actually pay tax themselves don’t understand much about the tax system and so they think it’s being rorted,” Professor Davidson said.

      “People like ACOSS, UnitingCare and Anglicare, they have an incentive for the government to take in more tax revenue because they want to spend more money. They are going for a tax grab.

      This is a cheap shot from the professor, who may not be aware of the particularly complex and exhaustive economic analysis carried out by ACOSS, and presumably has difficulty distinguishing it from charities such as Anglicare, UnitingCare etc. His comment about them going for a tax grab, seemingly suggests an inability to conceptualise that others may already have gone for a tax grab – from memory NG cost the federal budget circa 8 Billion on the revenue side last year. Maybe the professors world is marked by a taxation setting which was handed down from the good lord in stone and has remained untarnished by anyone making a tax grab ever since.

      “I suspect a lot of journalists don’t understand business and taxation, which is probably slightly unfair and a sad thing to say, but unfortunately too many journalists are a little sucked in by salacious arguments about tax rorts.”

      This would be the professors cheap shot at journalists – often quite rightly recipients for cheap shots, however in this case completely missing the point

      According to Professor Davidson’s analysis, the main beneficiaries of the system were lower-income earners, with people earning between $45,000 and $180,000 per annum actually the most likely to be declaring a loss on rental property.

      We all [here at MB] have been through this before. Yes the majority of individuals claiming a negative gear earn lower than 180K. But as Leith, ACOSS, etc have demonstrated time and again, in terms of the actual volumes being negatively geared it is that small slither right at the top which takes home the most off the revenues side of the budget, with an honourable mention to the few thousand people who managed to write down their incomes to less than the taxation threshold last year. They will be the ones not with one investment property which they make a loss on, but the ones with multiple properties making a loss on a considerable number of these

      He claimed myths around negative gearing permeated public discussion, partly because Australia was the only country to have a specific term for what was considered a standard tax deduction in most other countries.

      Difficult to know here if there was a journalist who didn’t know what he was talking about or whether the professor was unaware that around the world there are almost no other nations with taxation systems which will enable losses on one type of revenue to be deducted from income in another, and fewer still where this applied to residential real estate

      “It is standard procedure that if you earn a loss you deduct it against your income. The thing that causes excitement in Australia is we are the only country that calls it negative gearing,” he said. “You ask people in other countries, ‘Do you have negative gearing?’ and they say, ‘Gee, what’s that?’.

      No mention from the professor about deducting losses from one income type to reduce taxable income from another – which is the nub of negative gearing we are talking about when it comes to residential real estate as practised here in Australia

      “But if you ask, ‘Do you have mortgage reduction or deduct loss against income?’, and they say, ‘Of course we do.’ This is not some strange or unusual quirk of our tax system.”

      While some countries only allowed deductions against the same asset class, Australia has a better system, he argued.

      …and in how many nations do they allow this deduction across different asset classes in the one year? In many instances they will allow losses from one year to be carried forward and deducted against income from the same asset class in future years. The professor is bullshitting with a little piece of speciousness

      “A loss is a loss, you should carry a loss against all income. New Zealand has it, Japan has it. In the US, individuals can’t deduct their losses against all other income, so people incorporate as companies. It’s a workaround, but effectively the same thing is happening.”

      so is the professor suggesting that NZ and Japan have negative gearing of existing residential real estate as we have it in Australia? If they register as companies in the US then they would be taxed as companies wouldn’t they? Is it the same thing, professor?

      Robert Carling, senior fellow at the Centre for Independent Studies and former official with the NSW Treasury, Commonwealth Treasury, World Bank and IMF, argued groups like ACOSS only looked at the demand side of the housing equation.

      someone new. He is here http://www.cis.org.au/research-scholars/cis-research-scholars/author/11-carling-robert. From the Centre for Independent Studies – Libertarian research outfit for those not knowing – draw your own conclusions

      “More investment in housing, other things being equal, should lead to more supply eventually,” he said. “They argue people are buying up existing housing, but they don’t have to buy new houses themselves to stimulate supply. If prices are bid up across the board then that will encourage more supply by developers, and we see that happening.”

      Well Robert, ‘other thinsg being equal’, looks like a caveat, indeed it is a caveat, and from here we may well ask ourselves are all things being equal? Well no they aren’t, we could pick that assumption apart almost anywhere but let us start with negative gearing being used in 90%+ of cases for pre existing housing, and not adding to supply but sparking higher demand for existing assets and inflating prices. Thank you Robert.

      In a report released last week, Mr Carling argued much of the “mythology” around potential revenue to be gained from abolishing tax concessions such as negative gearing came from a misinterpretation of the Tax Expenditure Statement published by Treasury.

      He probably did this

      In addition to the revenue cost of some concessions being greatly exaggerated, he pointed to the inability of the estimates to account for taxpayer behaviour in response to changes in tax concessions, and an incorrect assumption that estimates for revenue forgone were equivalent to potential revenue gain.

      I actually think he has a point here, but that takes us away from the fact that 8 billion was taken from the revenue side of the budget last year and that he is arguing against looking or touching that scenario

      “If it’s the tax system that’s driving up house prices, why aren’t we seeing it happening across all cities? The tax laws are the same across the country yet we’re not seeing large price increases in other cities. Many countries have had house price booms, and all of them have had different tax arrangements,” he said.

      We do, we are and we have. Australia per se has insanely expensive housing. The average price in Swan Hill is more than the average price in Chicago. Robert is getting to a slightly different issue. The ultra boom phase currently being experienced in Sydney and Melbourne is being driven by speculators [looking to lock in the safest speculative gain] and foreign buyers [looking for a suitable location to stash cash away from other jurisdictions]. The lack of price growth in other cities and regions around Australia may reflect more that the idea of prices continuing to rise there is utterly implausible in view of the collapsing economy becoming increasingly evident

      “The main factor, according to the Reserve Bank, is the secular decline in real interest rates over the last 20-odd years, which has vastly increased people’s borrowing capacity. That’s been the common factor around the world.”

      Yes the rest of the world has also gone massively into private debt and this is largely the underlying basis for why reduced interest rates are ceasing to work as they hitherto have. But the reduced interest rates again gets us away from why we would have a taxation system distorting the ‘market’ for a social good like housing and why we would think there was an economic justification for it

      He said winding back negative gearing might raise significant revenue initially, but after investor behaviour responds net revenue gains would likely be very small.

      Yep maybe, but is the winding back of NG primarily to raise revenue for the budget, to cease revenue being bled from the budget, to force the revenue being bled from the budget to be used more economically effectively, to reduce distortions in the residential real estate market which are significant factors in the competitiveness of the Australian economy? It is the change we want, and as investors start to change the way they avoid tax we should change the way we pursue that. It’s is an evolutionary process

      If reductions in tax concessions were to be justified, they should form part of a broad, revenue-neutral tax reform with offsetting reductions in income tax rates, he argued.

      If we are going to start justifying things, let us start not with the REDUCTIONs of taxation concessions, but with the existence of the concessions themselves. In principle though he has a good idea, let us start by justifying a few things.

      In response, an ACOSS spokesman said countries like the US and UK do not allow people to claim unlimited deductions for investment property losses against their other income.

      The ACOSS man is telling the truth

      “We didn’t rely on Tax Expenditure Statements alone but they are a reasonable starting point,” he said. “We advocate the closure of tax shelters on a number fronts to deal with behavioural responses.

      The ACOSS man is speaking common sense and good policy

      “There are considerable lags between higher property prices and more construction, due to well-known problems on the supply side.
      The ACOSS man is making every statement a winner

      “In any event the main problem is that prices are too high by Australian and international standards. This means, for example, that institutional investors are reluctant to invest because their rates of return from rents alone are too low.”

      The ACOSS man wins over two economists by a length, despite not even being given a mention until the home straight of the article.

      • Gunna,
        It should come as no surprise that our friend Davidson is also a climate change skeptic (how convenient).
        https://ipa.org.au/library/publication/1321487125_document_moran_climatechange-thefacts.pdf

        Excerpts from his section in that book:

        It is quite apparent from the emails that those lobbying for acceptance of the belief in human-induced global warming has worked very hard to create the appearance of a greater consensus than otherwise may have been the case. This has allowed the political slogan ‘the science is settled’ to gain substantial credence. Of course, it is very well-known that science itself is never settled. After all, if that were the case, the learned journals would all close down and scientists would cease their work and simply teach the history of science. Ludwig von Mises wrote on this very point.
        “There is no such thing as perfection in human knowledge, nor for that matter in any other human achievement. Omniscience is denied to man. The most elaborate theory that seems to satisfy completely our thirst for knowledge may one day be amended or supplanted by a new theory. Science does not give us absolute and final certainty. It only gives us assurance within the limits of our mental abilities and the prevailing state of scientific thought. A scientific system is but one station in an endlessly progressing search for knowledge. It is necessarily affected by the insufficiency inherent in every human effort.”

        …and he concludes

        ..But we can have no confidence in the observations that temperature has increased due to human activity because the mechanisms of science have been subverted. This is not rare in academia.

        The most amusing part of this is his using a comment made by Ludwig von Mises on science in order to discount climate science. Amazing the lengths some people go to to advance their agenda.

      • drsmithyMEMBER

        ….and it should not come as a surprise that our friend Davidson is also skeptic about climate change.

        Do not give such people credibility by describing their opinions as “scepticism”.

        Scientists are sceptical – it is what drives them to further discovery about things they do not understand. They are sceptical based on the principles of curiosity and enlightenment.

        It’s easy to see from the even the short passages quoted that Davidson has no interest in pursuing the truth – ie: is sceptical – but instead chooses to be deceitful and disingenuous because reality does not align with his desires.

    • flyingfoxMEMBER

      so places like Hong Kong, Singapore – they’re flooded with investors.

      “Prices go up and down but they’re never smashed.

      Oh brother…if Mr Chee had done any actual investigation, he would have discovered that Hong kong prices have been repeatedly smashed. Infact, the peak of 1997 was only reached over a decade later. Similarly for Singapore.

      20% odd corrections are routine for them.

      • maybe 20% reduction doesn’t mean “smashed” to him – just a “minor” correction. If in 20 years time (1997 to now) it goes back to record high prices – which seems to have happened in HK.

        My guess is the mainland investment has propped it back up in recent years.

        Also, how does a 27 year old accountant get 1 mill anyway? Accountants aren’t paid great and to borrow 1 mill requires one hell of a deposit and salary before the bank approves.

      • flyingfoxMEMBER

        @Ronald

        The drop from peak to bottom in HK and Singapore was ~ 70%…

        1 mill requires one hell of a deposit and salary before the bank approves.
        Ahahahahaha …. you’re being sarcastic right? Ask your local next time you get a chance.

  18. After reading the Krugman article, I don’t think Steve Keen is going to infiltrate his mind anytime soon.

  19. Somewhat old news but Australian technology company Ceramic Fuel Cells has filed for voluntary insolvency.
    I’ve never invested in this company but I’ve kept an eye on it for a long time. The technology is fascinating IMHO it’s just what is needed for supplemental power in a stand alone residential Off-grid solution. Who knows what will happen to the technology now, my guess is it’ll get snapped up by one of the big Japanese fuel cell companies… which is a pity.
    I’ve always thought that this technology was ideal for use as supplemental power for stand-alone residential off-grid power systems. The Fuel cell stack produces around 1.5Kw power so it’s more than enough power (over 24 hrs) to run the average Aussie Home. Ideally this would be combined with a smallish battery bank say (10Kwh with 5Kw solar PV array) and thereby provide very efficient (electricity generation) 60% plus hot water heating for those long cold / cloudy spells experienced in winter in Australia’s southern regions. And it can do this using compressed Natural gas …what could be better. It’s such a pity that unique Aussie technology like this can never get over the initial hurdle and make it into full scale production.

    • well there goes 5 grand i invested about 10 years ago in them, loved the idea back then, to be honest the directors really milked it with constant issues of more shares and bull shit figures for the last 7 years like only aussie directors of broke companies can do

      • Sorry to hear you did your dough. I never invested because they were always a long way from having a commercial product and really just needed patient capital along with good seasoned technical management, instead they got business managers and partnership deals and sales teams and lots of powerpoints. As a result most of the money got pissed away rather than invested in the technology, I know it;s the old story that you can’t have low production costs until you have high volume and with no volume your costs will always be sky-high but IMHO the technology just wasn’t ready for commercialization they always needed to solve some basic reliability problems, that just never seemed to get solved. The last thing any startup technology company needs is a hgh pressure partnership deal for a product that unreliable. Always loved the idea …

      • desmodromicMEMBER

        @ AlbyM Unfortunately I invested substantially more in CFU. Great technology let down by hopeless management. The IP will now likely be pilfered to reappear under the ownership of one of the European energy majors. One wants to believe that Australian companies can deliver in the technology industries but the record is not good.

  20. Found this today, seems appropriate.

    The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries – Winston Churchill