Introducing Damien Klassen, new blogger and MB fundie

After spending the past six years focused on defining economies, markets and policy for investors, MB has decided to create a direct investment fund, for readers who would rather we manage their investments for them. This is something we have discussed for some time with readers who have responded enthusiastically (indeed it was your idea!).

In conjunction with the launch of our new product we have decided to partner with an expert and like-minded fund manager and today I am thrilled to introduce to you Damien Klassen.

Some readers will recall Damian from years gone by when we published his research while he worked at Wilson HTM where he was quant strategist. Before that, Damien was the co-founder of Aegis Research, Australia’s largest independent stock research house that was eventually sold into Morningstar. For the past three years he has been at Schroders where he was a part of QEP, a UK based quantitative fund investing in global stocks, managing around $AUD60bn.

All of Damien’s model asset allocation portfolios at Wilson HTM and the model Australian Equities portfolios at Aegis outperformed their benchmarks.  At Schroders, the last few years were particularly good for international equities (2013, in particular, saw international equities up 45%+ in AUD terms). The QEP team run a range of different funds and strategies (http://www.schroders.com/en/au/). In general, the Quality and Core strategies outperformed benchmarks while the Value and Blend strategies performed in line or below benchmarks (it has been a rough few years for value strategies generally).

We have chosen to partner with Damien because he shares the MB view of the investment world that we live in: macro-driven, high risk, low return and expensively managed. Moreover, he like us sees a troubled Australian economy in the future. Thus we want to provide readers with better returns at much lower fees within a global range of investment options. Over time, this has the potential to add a lot more money to readers’ core super accounts and retirement funds than isolating oneself in Australia’s little pond.

At this stage, the fund will be running early in the new year and we will release the Product Disclosure Statement on April 2nd, 2017. No fools here!

In the meantime, Damien will begin blogging several times per week. It will be his role to offer actionable intelligence on specific themes, markets, stocks and products so he will be adding immediate value to subscribers as well. The MB fund will be a global roaming long-only stock and bond mix so you can look forward to all kinds of allocations and specific investment advice.

I will now pass you to Damien and his opening blog which sets out his view of the world. Let me close by reassuring all that this evolution will not change the blog at all. It will be the same hard-hitting, intellectually driven beast it always has been. By combining it with a proprietorial fund we will be able to grow the blog as well, with more writers over time. In a few years we envision a media spearhead so powerful that all of the rent seekers, the corrupt and the carpet-baggers currently devouring Australia should be quaking in their boots.

Six mega-trends to retire on By Damien Klassen

For the last six years, I have had a relatively consistent view on Australian asset allocation. The Australian economy was at the tail end of a commodity boom; investors needed international equities and Australian bonds while winding back exposure to Australian equities – click here for an example of the kind of research from five years ago that I wrote for WilsonHTM and Houses & Holes would re-publish.

It all seemed so simple (although there were many naysayers at the time): (1) stay overweight international shares, overweight government bonds until the Aussie dollar bottomed in the low 60c / high 50c range, and then (2) switch back into Australian equities. It’s been a boring investment philosophy – we are still in stage 1 five years later. And it worked. And then Trump gets elected, and the outlook is a lot more clouded.

But, I am going to make you wait before we get to the conclusion because first I want to describe the way I look at investment.

There are a number of big, long-term trends that investors need to be mindful of – like the demographic progression of the baby boomers. None of them are “drop everything and buy/sell” themes in the short term, but the effects are relentless, and these are the themes that will drive the decade-long trends.

Then we need to overlay medium term trends, like the tech boom, the US housing boom/bust, or the Chinese capex boom that have major investment consequences over 3-5 years.

Next, there are the short-term trends that will drive 6-12 months of performance – these are much harder to evaluate.

Finally, we need to look at what is (or isn’t) priced into markets.

Today’s post is about the long term trends.

Long Term Trend 1: Rising Inequality

Capture

Rising inequality is an issue. And with Trump’s proposed tax cuts it’s about to become an even bigger issue as the 1% take an even larger slice of US income.

To confuse matters, global inequality has been falling as median incomes in places like China and India have narrowed the gap with developed countries. However, within countries the same trend is apparent – i.e. the 1% in China have done a lot better than the average Chinese citizen.

How does inequality manifest itself? In lots of ways, for the investor the two biggest issues are political instability and lack of demand.

Lack of demand is at the core of most of the world’s current growth problem. Inequality is not the only culprit, but it is a big one – give poor people more money and they spend it, give rich people more money and it is usually saved.  It’s hard to see any reversal in inequality in the short term, quite possibly things will need to get worse before they get better. This lack of demand can be hidden by letting the 99% gear up, which has been the case for the last 40-50 years as well, but there is a limit to debt.

Political instability has been a feature of most elections over the last few years. Voters know something is wrong and that change is needed – they are just not sure what is wrong and that leaves them vulnerable to con men and demagogues. I’m thinking this is going to get worse before it gets better.

I suspect the rise of communism in the 50s-70s meant that capitalist countries worked hard to keep inequality from getting too extreme. The fall of communism since then has meant that its open slather on inequality – unfortunately the fact that capitalism won over communism has also been equated (in my view erroneously) with the view that we should let the 1% accrue as much as they can.

Long Term Trend 2:  Baby Boomers – the pig in the demographic python

1

Following the second world war, most developed countries around the world experienced a baby boom – the charts above show the US experience and many other countries share the same basic structure.

What this has meant is that the proportion of workers in the economy has been growing for the last 40-50 years as this age group went from being dependent (under 18) to workers (18-34) to prime-age workers (34-54). The effect on the productivity and consumption patterns of the economy from this contingent are well documented – one investment theory is that you invest in whatever this age contingent needs next.

Unfortunately for those of us still working, what they need next is for younger workers to support them in retirement. This means that while we have seen the ratio of workers to dependents rising in most countries for the last 40-50 years, that trend is changing as the boomers retire. The chart below is for the US – the increase in dependency is worse in Europe, Japan, China where population growth is lower.

Dependency Ratios for the United States

2

I’m not going to get into the pros/cons of population growth debates here, but I will say that there is globally a backlash against immigration. And I’ll highlight Europe and the US in particular where anti-immigration policies are gaining traction. The chart above is based on a relatively high level of immigration. If Trump leads immigration lower, which seems likely, the dependency ratios will rise more swiftly.

Long Term Trend 3: Women in the workforce  Job Done?

3

Female participation in the workforce has been a key economic driver for a long time, moving women out of unpaid home duties and into the workforce has yielded numerous economic benefits. The above chart is US based, but again a similar trend in most developed countries exists.

It’s been a classic long-term trend; it can be knocked off-trend by medium-term issues like a recession but on the other side of the recession the trend re-emerges intact.

However, the 50 years of gains have come to an end. While women still face issues about equal pay and the number of women in senior positions, it would appear that (in aggregate) women are not being prevented from working, it is now a question of whether women want to work.

The chart below shows a slightly different statistic over the last 25 years (because I can get comparables across a range of countries):

 

4

I do think there are a number of other issues affecting the above chart, primarily that the baby-boomer/ageing effect is overwhelming the increase in participation for younger age groups. However, the effect of increasing female participation does seem to have stalled across most developed markets.

It is also interesting to note Japan as a potential “view of the future” for Europe and possibly the developed world more generally.

Long Term Trend 4: Debt growth

I spoke a little above about the best way to raise demand when a small group of the population (the 1%) are taking the lion’s share of the economic benefits. The way to raise demand is for the 1% to lend the money to the 99% so that they can spend. And that is what has generally happened (from the Australian):

7

So, when does this end? I’m not sure – we don’t seem close. And the saying “you go broke slowly and then all at once” is probably instructive. There are two key ways to resolve over-indebtedness:

  • Inflation: With lots of wage inflation, workers get more money which reduces the real value of their debts. This is relatively painless for most involved, and it is how central banks would like the transition to occur.The reality is that the methods tried to date haven’t created inflation, and Japan is a 20-year example of trying to create inflation but failing.In practice, central banks have lowered interest rates to try to spark inflation, and in doing so they have increased the value of assets which has increased inequality, and we are largely back to square one.The ironic thing is that we know exactly how to create inflation: print money and give it to poor people. Economists generally don’t want this to happen because it usually gets out of control (Zimbabwe, Weimar Germany) and causes hyperinflation. So, what central banks are currently trying to do is create inflation in any way possible without actually printing money. And failing.
  • Debt forgiveness/writeoffs: There have been lots of opportunities to do this – basically if you lent money to someone who can’t pay then you lose the money. It’s a great way of transferring assets out of the hands of the rich.Unfortunately what happened instead is that governments everywhere bailed out the banks whenever they stuffed up. The decision was made to “extend and pretend” in high profile over-lending cases like Japan (zombie companies in the 1990s), the US (housing loans in 2008), Europe (Greek & peripheral debt in the last seven years) and China (the housing market in the early 2000’s and probably the housing market plus a range of state-owned entities again in the not-to-distant future).I’m guessing most governments will continue to take a lot of pain over a long period of time rather than let lenders take responsibility for mistakes.

In the short term, what could give us a burst of inflation is if a populist leader was voted in (say in the US) and decided to dramatically increase government debt (say by giving massive tax cuts and/or spending on infrastructure). If Trump this hypothetical leader carefully designed his policies so that the 99% benefited more than the 1%, then we might have a real way out of the major inequality issues. If however Trump this hypothetical leader decided to give most of the benefits to the 1% then what we would get is a short/medium term stimulus that would look like its helping for a few years only to leave everyone in a worse place.

I’m going to come back to this issue in more detail many times over the next few years I suspect.

Long Term Trend 5: Death and taxes – inevitable for humans, but not for companies

Another long term benefit to the stock market has been the falling company tax rate.

8

So, as you can see from the above chart, tax rates have basically halved over the last 30 years. Which is a big deal when it comes to earnings – my estimate is that somewhere between a 30% and 40% of real market EPS growth over the last 30 years has come from lower tax rate.

My rough, back of the envelope numbers for earnings growth over that time looks like this:

Average Annual Real pretax EPS growth 2.0%
+ effect of tax cuts 1.3%
+ inflation 2.8%
= Real annual EPS Growth 6.1%

So, this trend is not looking like ending anytime soon as we have seen the UK cut taxes recently and we are likely to see a huge company tax cut by Trump.

Is there likely to be a backlash at some stage? The moralist in me hopes so. The pragmatist doubts it is coming in the next five years.

Long Term Trend 6: Increasing global trade

 9  

I am a believer in the magic of trade. A buyer and a seller come together, and both leave the transaction thinking that they got the better deal. Comparative advantage, specialisation, relative productivity – it all makes sense in terms of improving global well-being.

Where trade falls down is all about jobs. Like if you had a bunch of states in the US that specialised in manufacturing, and then you outsourced the manufacturing to Mexico and China but didn’t get the manufacturing workers into new jobs, leaving them enraged enough to vote for a reality TV star as president. Or if you sacrificed the bulk of your manufacturing workforce at the altar of the commodity sector and the never-ending Chinese boom, only then to realise that it wasn’t never-ending. Mind you, I guess in the latter case you could just ask them all to be innovative and then it would all work out OK.

For companies in general, and multinationals in particular, growth in trade leads to growth in profits – companies are much better placed than individuals to exploit cost differentials across countries. It’s hard to estimate how much profit growth has come from increased global trade, my guess is that it is significantly greater than zero.

The danger over the next few years comes from the following chart – this shows how far trade fell in the 1930’s when the world turned against trade during the Great Depression.

t

Now, I don’t know how much of Trump’s anti-trade rhetoric is real and how much is hot air.

With Trump’s tax cuts he has the support of most of the Republican party – I’m reasonably confident they will go through.

With his China/Mexico trade war talk, I have no idea whether it will amount to anything. Republicans are generally are pro-trade, and so there may be difficulties getting a trade war through Congress, especially if Trump’s popularity takes a hit. It is also hard to tell how much of Trump’s rhetoric is “the art of the deal”: take an extreme position and then negotiate back to something more reasonable.

I do however think its safe to say there will not be increased globalisation and the risks are tilted towards less. The risk to investors is that trade wars break out and damage both world growth and company profits.

Bringing it all together

So, the last 40-50 years has seen five key tailwinds:  female participation in the workforce, favourable demographics, increasing debt, increasing trade and reducing taxes. These have more than offset the effect of increasing inequality.

Going forward the female participation tailwind looks to have finished. The baby-boomer tailwind is about to (or has already) become a headwind. Trade is no longer a tailwind, it may become a headwind. Increasing debt is still happening, but levels are elevated, and there is probably not much room left on this front. Corporate taxes are still a tailwind. Inequality is still growing – I’m not going to call the end of tax reductions/inequality until we start to see more public backlash. Will Trump’s presidency be the last straw? Often a lurch to the extreme left or extreme right is enough to see a backlash in the opposite direction – but that is 3-4 years away at best.

So, we are at an inflexion point. I believe the long-term trends will be negative, but they are going to be overwhelmed in the next few years by some major medium-term trends – and so we won’t back able to tell how negative the trends are until we emerge from the next boom/bust cycle.

More on that in the next post.

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Comments

  1. Tassie TomMEMBER

    Exciting times – I haven’t read the whole lot yet – I’ll read the rest later this morning. Well done anyway!

    I didn’t register the other month when the forms went out as I had a busy day that day, but I’d be pretty keen to kick in a significant portion of my SMSF and see how it goes. I hope I get another chance to register. You’ve got my email details anyway.

    Cheers, and good luck.

  2. ”By combining it with a proprietorial fund we will be able to grow the blog as well, with more writers over time. In a few years we envision a media spearhead so powerful that all of the rent seekers, the corrupt and the carpet-baggers currently devouring Australia should be quaking in their boots”

    Love it !

    • Ronin
      I am in a similar position. Have you investigated the possibility of setting up a SMSF & doing it through that to avoid the ATO man? I am something of an economic ignoramus so any view helps.

      Oops! I can see others have talked about this further down the blog.. Mind you, I’d still be interested.

  3. Quite a comprehensive analysis there on long term trends. It’s all pretty obvious too you would think, but still some things that I hadn’t considered in there…

    I only have a piddly super balance since leaving Aus, however I’d be interested in moving what I do have into a fund of this sort.

  4. Stewie GriffinMEMBER

    “In a few years we envision a media spearhead so powerful that all of the rent seekers, the corrupt and the carpet-baggers currently devouring Australia should be quaking in their boots.”

    – If that were the case then not only would your fund/site be the biggest in the land, you would all be well on your way to the Lodge.

    Good luck and welcome Damian.

  5. Welcome. Pragmatic, responsive, fluid and didn’t quote The Guardian. Great promise.

    (It’s going to be interesting to see how Trumpolocies like tax cuts and AGW demotion impact or redirect Australian policy. Rand meets Welfare will require finesse. Re trade I suspect Trump will do enough to be seen to ‘reboot’ US manufacture simultaneous with ‘open’ trade. Immigration will continue with the emphasis on ‘legal’. Kanye will be a great apprentice 😉 )

  6. TheRedEconomistMEMBER

    Will there be a retail (non Super) option to the fund?

    I have a decent Industry Fund for my super and I have been Overweight international for about 5 years, So I have done reasonably well.

    But I am keen to park/punt some cash now over the medium term.

  7. armchair economist

    Goodness me,…i would have thought ppl who read this stuff are adept enough to manage their own money…afterall…no one beats the market consistently and beating a generally underperforming benchmark is another way of saying i was the best loser out of all the losers. Alas the old GS gene is reactivated….ppffff….a sell side analyst with no skin in the game now stepping up to lose OPM for a fee!!! Then again I suppose blogging from the burbs doesnt pay for the kids private school and holidays.

    • Each to their own.

      I’m interested in economics but not money so I happily invest it with others. Perhaps you could call me an armchair investor.

    • You can’t consistently beat the market but you certainly can with time with the right strategies.

      Whilst the best outcome is for everyone to fully understand and be able to manage their own money, the reality is that the vast majority are not suited to it (emotionally), do not have the time or do not have the interest.

      Personally I prefer quantitative strategies as the stories we tell ourselves can either work very well or very poorly if we get it wrong.

      As an aside, the millennial demographic in the US exceeds the baby boomers and will likely provide them with more of a tailwind than a headwind.

      • armchair economist

        And by the time the failure is there for all to see. A hefty chunk of change has been hijacked to a nice tax free Island. That’s the beauty of it. Irrespective of the swath of evidence showing hedgies, fundies, consistently lose money over time. There is always enough schmucks willing to buy the story of outsized returns. Just give us 10 yrs & %of your money & you’ll b richer. Can I get in on your FSL?

      • Which evidence, please explain.

        I didn’t say anything about funds.

        You sound very bitter and it may be a good idea to talk to someone about it 😉

      • armchair economist

        That’s funny, Ur the clown proclaiming superiority such as to beat all the other similarly self proclaimed clowns out there. And demanding proof that disproves your self proclaimed superiority? Hahaha… Best laugh I’ve had all day…oh now 2Nd best, the ATO crashed & burnt that’s gotto to be the biggest joke of the day

      • MathenomicMEMBER

        “You can’t consistently beat the market.”

        So basically you believe the Efficient Market Hypothesis is in fact a Theory (you believe investors are 100% rational and that insider trading either doesn’t occur or has no affect), and that everything that has disproved it was false, Behavioral Finance included.

        Tell me again how the world is flat, vaccines cause autism, and house prices only go up and double every 7 years.

      • “So basically you believe the Efficient Market Hypothesis is in fact a Theory (you believe investors are 100% rational and that insider trading either doesn’t occur or has no affect), and that everything that has disproved it was false, Behavioral Finance included.”

        No, I didn’t say that. I don’t think that EMH is correct. However, markets are often efficient. Some strategies which work very well over time can go through periods of relative underperformance – hence the word ‘consistently’… it all comes down to the time period in question.

  8. I’m with Red – hope you’ll have the retail / non-super option

    I also missed the registration form as was caught up that day.

    Welcome Damian and let’s all hope that this marks the beginning of a more general appreciation of MB as the ‘go to’ for sensible and meaningful commentary

  9. hello – would it be possible to do single posts on each of the above. its all good stuff, but the devil is in the details as always. the grand canvas histories are too hard to prove or disprove, and for my money, too hard to understand also (mostly due to the information density of what someone is trying to say, words simply are not efficient enough).

    as an aside, too much of asset management is people pretending that it is more complex than it is. The crew here is cluey. Thought bubbles, as long as clearly disclosed and well researched are very welcome.

    Q – ‘long-only stock and bond mix’ – why? if the answer is that operationally this is far easier than executing more exciting strategies, that’s fine. just curious.

    ‘In a few years we envision a media spearhead so powerful that all of the rent seekers, the corrupt and the carpet-baggers currently devouring Australia should be quaking in their boots.’ – excellent. from your lips to the ears of the gods.

    for what it is worth, here is someone else who is doing a similar thing. it is working really well for them. http://www.salientpartners.com/epsilon-theory/ they started as a fund, and expanded into a media presence, obliviously you guys are going the other way, but still.

    • Still working through the details on minimum investment.

      There will be a “broad” fund for investors with $200k+ and a “pathway” fund for investors with smaller balances.

      The shares will be held in your name through managed accounts, which have transparency and tax advantages. However, this limits the size of the investment as it means that you can’t own half a Google (Alphabet) share.

      It will be super compliant.

      • Oh. Terminology. Sorry is that super as in SMSF regs? Or – we are so compliant, and therefore “super compliant”?
        Where is the juriisdiction boundary?
        Not clear on the pitch to be honest but best of luck.

      • For individual investors (as opposed to SMSF’s) you potentially lose access to the CGT discount if you hold your shares through managed accounts rather than through a separate registered managed investment trust.

      • A couple of questions:

        – What fee did you negotiate with Managed Accounts?
        – What fee will the fund carry? Admin and ICR breakdown?
        – Is there going to be a performance fee? If so when will it be charged?
        – Bench mark unaware or benchmarked?
        – What are the risk management parameters for concentrated holdings? Will there be any?
        – How transparent will the fund holdings be to investors? What about the public who aren’t investors? I know there may be some issues here with proprietary ideas.

        Cheers

  10. Damian, or is it Damien? I guess investment is all about the small detail and I prefer my investments to pay exacting detail to, well, the detail.
    Sloppy copy is not a good way to start a contractual relationship, is it chaps.
    Regards
    Damien (not Damian)

    • “Sloppy copy is not a good way to start a contractual relationship, is it chaps.”

      Damien = Damian in a post-truth world.

    • As another Damien (I am NOT Damien Klassen) it was the first thing I noticed. Glad it’s been corrected. Probably best I change my username to something different. I don’t want to get confused as someone who knows what they’re talking about in regards to economics.

  11. I think you’re missing an emerging long-term trend – the rise and rise of technology…Strongly links to inequality as it has increased the returns to capital. I suspect it means inequality will keep rising.

  12. reusachtigeMEMBER

    The people who visit this blog are poor because they have made the never ending mistake of not investing in Australia’s number one and government backed investment scheme – great Aussie housing! Because of their poverty they have no money to offer your new scheme, they only have whining to give. They are lost to the system.

    • Do you have any constructive thoughts or investments rather than constantly banging on about property?
      Any idiot (including yourself) can go out and mortgage himself to the hilt without not knowing what will happen in 2, 5 or 10 years, with said property or more importantly the interest rate.
      You obviously have neither the skill or knowledge to do anything other than to buy a property.
      A born loser1

  13. Missed one key trend that has me up at night – declining eroei

    Another one that literally keeps me up at night – changing climate, less rainfall, weather shifts

    And negative growth…

    A MB allocation for me would be a fat tail strategy play for when markets collapse.

    Would be keen to see how that is delineated.

  14. “By combining it with a proprietorial fund we will be able to grow the blog as well, with more writers over time. In a few years we envision a media spearhead so powerful that all of the rent seekers, the corrupt and the carpet-baggers currently devouring Australia should be quaking in their boots.”

    ‘Tis a consummation devoutly to be wished.

  15. I think you may have missed (or not highlighted) one of the main causes of Rising Inequity and that is wage stagnation/deflation due to cheap labour (globalisation, offshoring and 457 visas) combined with the growth of automation.

    • But surely by its very nature, reducing taxes on the wealthy and cutting income support for the poor would have a much more drastic effect?

  16. Damien, good read. I look forward to the PDS too.
    I’ve held the view lately that the Feminist subset of ‘social justice’ was a ploy to increase female participation rates and thus GDP. What I didn’t know was female participation rates have actually stalled over the last decade or so, I had only factored in worker dependency ratios as the global driver of the Feminist push (reasonable issues aside). This completes the picture. Who else knew knew female participation had stalled? Not many is my guess despite the barrage of media around the subject.

    The workforce participation rate for women in Australia is 59.3%, and for men is 70.4%.. Gender ‘equality’ – we’ve got a long way to go…(actually, it’s about 10% from the target).
    The figure is from the Workplace Gender Equality Agency -staff of 25 – 21 Women 4 Men. #diversity

    https://www.wgea.gov.au/sites/default/files/Stats_at_a_Glance.pdf

    • A couple of the US economists have followed the stalled/declining female participation rate. Recently read one article along the lines “Do women really want to work”. In many cases no, in many cases yes, parttime or teaching or health (flexibility being key). Maybe women are wising up that a lot of jobs are rubbish, or soul swallowing, or boring or
      demanding and difficult?

      A few years ago ACTU commissioned a study on female work issues and was horrified to find that most would prefer not to work if that was financially feasible.

      • Of course there is a huge population of women who would prefer to stay at home and nurture their children rather than plonking them into daycare. The need for both parents to work is just a symptom of the housing bubble. It is just another social ill that has resulted from this mass mis-allocation of money to an unproductive asset. Of course the PC loony left SJW wankers running the asylum means you can’t actually say this without being labelled a misogynistic pig.

      • Or maybe women have wised up to the fact that the cost of childcare means that going back to work is simply not worth it. At $100 per day per child, why would anyone on a low income or with 2 or more children bother working?

      • “A few years ago ACTU commissioned a study on female work issues and was horrified to find that most would prefer not to work if that was financially feasible.”

        I dare say most men would prefer not to work if financially feasible as well!

      • “I dare say most men would prefer not to work if financially feasible as well!”

        A women’s test in life is material. A man’s test in life is a woman…..men have nice cars, not because they like nice cars, but because they know women like nice cars…..that’s how it is….if a man could f*ck a woman in a cardboard box, he wouldn’t buy a house – Dave Chappelle

        Comedic expression i know, but it comes from a place of some truth. Ask some of the guys on here who have held off buying a house. It has prob. pushed their marriage to breaking point. Testosterone (women) is the reason guys bother waking up to do sh*t in the morning.

  17. It is interesting to note that over the years MB has systematically disputed or debunked almost every principal that “investment” in our modern world is based on. Free Markets – manipulated. International currency – manipulated. Digging up coal – immoral. Hi tech companies – bogus value. HF trading – scam. Banking system – criminal. Property Markets – ponzi scam. Manufacturing – sent to China. Value of human labour – declining. Actual value of money – unknown. Robots – coming.

    Is it reasonable to have any expectation that you can “make” money in a broken corrupt financial system? Why wouldn’t it be simpler to just put it all on the real estate ponzi. It is broken and corrupt, but at least it is all neatly bundled up in a single easy to swallow package. I am leaning towards the opinion that reusachtige above is actually spot on.

    • have the same conclusion

      only those that can leverage will have supercharged returns, hence having property allows you to leverage into investment strategies -> they come together

    • Yes – I’m wondering if Damien Klassen is aware that quite a few MB readers would be satisfied with nothing less than a large scale roundup of the FIRE sector for afternoon tea with Madame Guillotine. I know it is called MacroBusiness, but sometimes it does seem like an alt social think tank.

  18. NEWSFLASH- MB joins the FIRE sector. But don’t worry, the unimpeachable editorial/writing staff have erected sky-high internal Chinese walls already. They’re solid! It is just the decadent, FlufferMB grandchildren owners we are worried about when we log on in 50 years time. Ho! Ho!

    • They already joined the MSM not long ago either. They have been pumping out “articles” at a rate of knots. As such the quality of the content has declined. The power of the all mighty dollar. I don’t begrudge it, but lets at least be honest and not act like the bloggers are the paragon of virtue in Aussie media.

  19. Does Damien K get a cool handle as well, like HnH or UC or (my fave) Rumplestatskin?

    Perhaps MB can run a competition? Winner gets their mgt fees or subs waived for a year.

  20. So is this fund going to only be for super funds ? or can one lump in 10k (in 100 dollar notes of course) that one happens to have lying around.

  21. +1 for not restricting access to small time grocers outside super. I cannot put in anything more than 10K to start with. Don’t be a fund for elites only! 🙁

    • The slight problem there Willy_Nilly is that I’m a baby boomer (though far poorer than the I’m supposed to be by some here) and investing in my funeral might pose some problems where cashing in the profits is concerned.. Good luck though.

      • Two things are a certain….
        1. You will die.
        2. You will most likely have a funeral that ‘someone’ will pay for and the margins for the funeral operators is quite high.

  22. Could next post have something on AUD following in footsteps of US heating oil which is probably Buggered as the La Niña outlook is flat as a tac? While you’re at it, what’s this Lundy tunes talk about the US Fed rate rise as it’d eat the US budget for breakfast while the budget is trending woresely.

  23. Great initiative MB. Hopefully it will work for expats who are interested and may be nervous about investing in AUD if it goes down the escalator – a high investment return in AUD is useless if AUD goes sub 50c… Easier to keep my $ offshore in a bank account.

  24. All the best Damien! Could be a career path ‘moment’. Best of luck!
    Loved the ‘Up and Away’ debt charts. Gov’ts often pay it back, while the more easily managed privateers, not so readily. I suggest using the typical credit card ‘rate’ on unpaid balances as your ‘benchmark’. If you can beat this (the current world champs) you’ll soon be swimming in money.

  25. When you let someone else handle YOUR money – and you need to OR want to pull out -for ANY reason — -then
    YOU are at the complete mercy of the Fund controller. IF there is a run on Funds – the Fund can be FROZEN supposedly to protect ALL the others. F%$K that. Look after your own $ – – NO ONE else cares as much as YOU do. Just saying.

  26. One of the biggest rorts outside of Banking is Investment management … MB excluded (for now).

    Can you imagine Shane Oliver telling everyone on Prime Time that equities are over-valued? Half of AMP’s revenue would walk out the door over the next 48 hours.

    When equities get properly smoked (as they most certainly will at some point in the coming years) the likes of Shane Oliver will blame some ‘exogenous event’ for the fact that AMP’s clients have been financially destroyed for life.

    The old mantra: “Nobody could have seen it coming …” will be dusted off and replayed for the benefit of the morons invested with the mainstream guys.

    “Gee, Martha, we’re dirt poor, but not to worry, no one saw it coming …”. Therefore, all is well

    • +1
      Ditto for Glenn Stevens, Bill Evans and of course all our politicians…who’d ‘ve known?

      Since 2000 I’ve very closely followed those who did predict the problems with some certainty…but the timing is always difficult…but they predict that too.

  27. Even StevenMEMBER

    Welcome aboard, Damien. I am certainly keen to consider a MB-managed fund in future. Great first post too.