The Experts

Peter_new_normal
Peter Switzer
Expert
+ About Peter Switzer

About Peter Switzer

Peter Switzer is one of Australia’s leading business and financial commentators, launching his own business 20 years ago. The Switzer Group has since grown into three successful companies spanning media and publishing, financial services and business coaching.

Peter is an award-winning broadcaster, twice runner-up for the Best Current Affairs Commentator award for radio, behind broadcaster Alan Jones. A former lecturer in economics at the University of NSW, Peter is currently:

• weekly columnist for Yahoo!7 Finance
• a regular contributor to The Australian newspaper and ABC radio
• host of his own TV show, Switzer and Grow Your Business, on SKY News Business
• regular host of the Super Show on 2GB radio.

Testimonials

Dear Peter, What fun! You are really very good at what you do. I appreciated our time together and wish you continued success in all you do. Have fun (I know you will).

Jack Welch, former CEO, GE, and ‘Manager of the Century’ (Fortune magazine)


Peter, It was great to have worked with you – you really made the event come alive. I hope you enjoyed yourself. I know Steve Ballmer [CEO, Microsoft Corporation] did.

John Galligan, Director of Corporate Affairs & Citizenship, Microsoft Australia


Here’s a home truth, my only real education – or teacher who I actually ever listen to – is your interviews on Qantas. So thank you with sincere respect.

Sean Ashby, Co-Founder, AussieBum


Peter did a wonderful job on the night; keeping the program moving, working around changes to the run sheet, and ensuring each award recipient, and our sponsors, were made to feel welcome and important.
The feedback received from those attending has all been extremely positive.

Peter Mace, General Manager NSW, Australian Institute of Export


Peter, We would like to congratulate you for performing your master of ceremonies role in such a professional, entertaining and informative manner. We were impressed by your ability to tease out each winner’s story so that the audience gained maximum benefit from their collective business experiences.

Greg Evans and Nicolle Flint, Directors, Australian Chamber of Commerce and Industry


Hi Peter, I listened to you speak this morning and thought you were amazing. I am an accountant and in risk management and have never thought about doing a SWOT on myself – thanks for the tip!

Serife Ibrahim, Stockland Corporation Ltd


Dear Peter, Thank you for your valuable contribution to this year’s forum. Ninety-two per cent of delegates rated your presentation highly, commenting on its useful and topical content.

Catherine Batch, Head of Marketing and Communications, Indue


Peter has facilitated our CEO and CFO symposiums over the last three years. A true professional, he takes away the stresses of hosting and organising an event.

Justine Goss, Strategy Group

Bill Shorten, Kim Kardashian and what's wrong with this country!

Tuesday, January 22, 2019

My recent brush with my beloved country has convinced me that Bill Shorten and Kim Kardashian prove that there’s something that needs changing. And fast!

I really hate writing the next few words, but “what’s going on is what’s wrong with this country!” I can’t believe I actually was forced to write these words but my fellow Aussies have driven me to this conclusion.

Or maybe, and I hope this is wrong, I’m getting older!

By the way, I have no problem with age and one day the mob who rule what’s a fair call nowadays might start even defending those who seem to be discriminated on the basis of age.

I once did a speech with the legendary magistrate Barbara Holborow, who was then in a wheelchair traversing the Brisbane Airport and a staff member came up to help her and was shouting as he spoke.

She said to him: “Young man I’m not great on my feet but my hearing is perfectly good!” She turned to me and said: “There’s a certain age when people start shouting at older people!”

Herd mentality is a dangerous thing and the Internet and Twitter, along with all social media platforms, have made it easy for the herd to go stampeding without much thought. Scare a cow and they sure move irrationally but are we allowed to generalize about cows?

This whinge piece by yours truly follows some ‘hero’, who hides behind a nom-de-plume in the twittersphere called Lord Clyde of Hansard MEMBER OF THE CFW 9.

In true modern day silly labelling, he came up with this assessment of me: “That’s because you’re a true blue dink die conservative and no matter what Bill did you would still find fault with him and Labor. Just be honest and say Liberals all the way as that’s what shows through in every article you produce.” (I did tidy up a bit of the Lord’s untidy grammar and punctuation but I don’t want to be too discriminatory.)

This guy could not be a regular reader or he is so blinded by his one Labor eye that he can’t tolerate objective commentary. And that’s what’s wrong with this country.

There’s an old saying that goes: “If you don’t vote Labor when you are under 40, then you don’t have a heart. If you vote Labor after 40, you don’t have a brain.”

There’s an element of truth in this generality and it does conform to what often happens to voters as they learn about life raising kids, buying homes, being stung by bad governments who change rules and tax rates and so on but I don’t agree with the sentiment.

As I’ve argued, the Hawke-Keating governments were critical to the 28 years of growth that Australia has experienced. Their reforms and deregulation, as well as initiatives such as compulsory super, show how valuable they were. Howard and Costello added to the positive changes but all four men made mistakes.

Keating allowed interest rates to go too high, when he ‘controlled’ the Reserve Bank. Costello made super and tax changes that were too generous but politics and short-term economic goals can often explain errors of judgement.

I was made a commentator when no one was  certain who Rupert Murdoch supported and Fairfax was a more middle of the road and slightly conservative mob.

Some commentators like Piers Akerman would always have the same slant and that was his bag. Philip Adams was always leaning to the left but I always tried to play with a straight bat on economic and political matters.

And that’s why I often had Penny Wong on my TV show and our working relationship started when I bagged  one of her policy decisions and she rang me up and debated my view.

Similarly, when Bill Shorten became Leader of the Opposition, he told me that when his wife asked what was I like, when we met in an airport club lounge, he said I told her: “He’s his own man.” Implying that I don’t run any party line but I do champion small business, fairness in wealth advice and fair as well as sensible policy decisions.

I think Bill’s negative gearing changes are excessive but if they’re introduced when house prices have stabilized, they could be OK. His tax rebate ban for retirees is too tough and he should put a cap on rebates, if he really needs to get money from retirees.

Shorten could become a good PM but he won’t become that if his supporters cheer every decision he makes. People like me have to stir, just like I did Malcolm Turnbull, who I’ve known since I was his patrol captain at North Bondi Surf Club but that didn’t stop me bagging him for poor communication, ineffectual leadership and a failure to play to his strengths.

It’s interesting that with an election coming up, if we put Bill Shorten in the story, the readership explodes. He’s become like Kim Kardashian but the response is tribal and irrational so we’re not getting anywhere, we’re just shouting at each other.

If he becomes PM, I hope Bill helps to change our infantile, immature tribal ways. If he does, he’ll get high praise from this ‘so-called’ dyed in the wool conservative. (How little those people who criticise me for this know me!)

 

What’s the biggest money mistake too many people make?

Monday, January 21, 2019

In my Weekend Switzer column published last Saturday, I pondered whether young people were unwisely ignoring advice from older Australians after being teased/wound up by a younger colleague that younger people would better relate to a person of their own age group when it comes to money education.

It’s funny but when the GFC hit, the then boss of Sky News asked me to do my once-a-week show five times a week! He was of a thinking that when it comes to global financial collapses and possibly a Great Depression, people wanted to listen and watch someone with either grey hair or no hair!

Personally I know I’d love to be stuck on a desert island with Warren Buffett for a week, rather than a 20-something hedge fund manager. That said, I’d be happy to spend an afternoon with a bright, young whipper snapper who’d become a successful fund manager.

If there’s one thing I’ve learnt after interviewing the smartest in business and finance for over 30 years, it’s that listening to high achievers is a fast-lane way to getting wiser, wealthier and developing a competitive advantage, upon which you can make money.

One interesting reaction to my piece on Twitter came from the Oz journalist, Anthony Klan, who wrote a super story headlined “Retail funds dominate the 50 worst-performing super investments.” He tweeted, asking if I had any advice on super?

I replied: “That’s simple. Don’t worry about short-term performance. Use industry funds or an SMSF, if you’re a good investor, to kill costs. I’ll write on this on Monday.”

Anthony replied with a “like”, which doesn’t always happen to my words of advice in that scary world of Twitter!

In a world where there is a ridiculous attitude to money and therefore wealth-building, despite the fact that most people like the idea of being rich or at least richer, too many of us make too many mistakes.

I’ll soon release a book that will identify the mistakes and how you can kill them to build riches but I reckon the biggest mistake is thinking too short-term.

Thinking short-term makes people buy a house at the top of a boom as FOMO (or fear of missing out) forces lots of would-be home owners to overpay, overborrow and then over-stress at their mistake when house prices fall.

The median price of a house in Sydney in 1970 was $18,700 and by 2000 it was $328,000. By 2016, it had climbed to $1,124,000!

If you’d bought a median-style property in 1989, then you might have paid $210,000. But if you had to sell out in 1990, you would’ve only got $175,000! The looming recession took 16.6% off the value of your home. Ten year later, however, it was worth $328,000, and you’re up 56%! Hang on to it until 2016 and you’re up 435%!

Did I say: “Long-term good. Short-term bad?” I should have to ram home the message in these simple, bold terms because it’s an important message.

Not long after the GFC, I had a nightly radio programme on 2GB called The Super Show. It was a gamble for the station to give up an hour of radio at 9pm but it was thought that sponsors would like the idea. They did and we didn’t lose ratings, in fact they went up. We were staggered how many people wanted to ring in to ask questions and I think the listeners were surprised how simple super revelations were actually interesting.

We got so many callers telling us that “I didn’t know that.” What my colleague Paul Rickard and I liked was that we got so many ‘normal’ person questions on super that our knowledge of super grew exponentially!

However, what frightened me was the number of older callers who said they had gone to cash after the GFC crash of the market.

They’d lost money and they didn’t want to lose any more. I could understand that but it was an unwise, short-term reaction. They took 5% term deposits in 2008-09, when the stock market rebounded around 39% in 2009. If they’d stayed in the market, a good dividend-paying portfolio or an exchange traded fund for the top 200 companies, they would have been up about 120%. If they’d stayed with term deposits, they’d be lucky to be getting 3% nowadays and might have grown their wealth by 40%, if they were lucky.

The price of safety after the GFC was about 80%!

My favourite chart from the recently deceased Jack Bogle’s Vanguard company shows how long-term investing in stocks can be rewarding.

I’ll show this chart until I’m as blue in the face as this blue line, which shows Aussie shares between 1970 and 2009 — one year after the GFC crash of the market.

Over that time, $10,000 endured five crashes and lots of big sell offs, like we saw in the December quarter but it still grew into $453,165!

Mmm…did I say: “Long-term good. Short-term bad?”

 

Kill Bill’s tribal Trump tirades

Friday, January 18, 2019

With most political pundits putting their money on Bill Shorten to be our next PM after the expected May 18 election, the question is: Does he really have to keep up his anti-big business and anti-wealthy persona? And the question we have to ask after 12 years of failed leadership from both Labor and the Coalition (and that was primarily poor leadership of the Prime Ministers’ own parties) is: do we need a divided Australia or a unified one?

And maybe the other question that Bill needs to be clear on is: Did his party become popular because of what he stands for in the eyes of the public, or did he become the frontrunner for the keys to The Lodge because his rivals screwed up and look like a team of losers?

I asked a sanguine business leader during the week if he had ever voted for Labor and could he do it again? His answer was: “Yes and yes, if it was the right one and if it had the same approach as the Hawke-Keating era.”

Like all governments, Bob and Paul had their moments but in their early governments they solved problems and brought business and unions together with the industrial relations plan called The Accord. A lot of the 28 years of economic growth we’ve seen was because a business-considerate Labor Government cleverly brought us all together in, as Hawke called it, “a spirit of cooperation”.

Aided and abetted by the union boss, Bill Kelty, smarter wage deals were struck, productivity was raised, better budget outcomes were delivered and even a budget surplus showed up! Inflation fell and unemployment dropped but a Wall Street crash and the failure of central banks to understand monetary policy in a new, global, deregulated financial system resulted in ridiculously high interest rates and a recession in 1991.

Still, those Labor Governments laid down the foundations that were added to by John Howard and Peter Costello, who also learnt to unify and gain support from one-time Labor voters to remain in power for 11 years and 267 days. And it’s no surprise that Bob Hawke was the longest-serving Labor PM, coming in third behind Bob Menzies and Howard.

Australians will support special leaders and we even give first-term PMs the benefit of the doubt, as Julia Gillard found out by the skin of her teeth, and some independent supporters in 2010. And Malcolm Turnbull discovered it as well in the 2016 with his one-seat majority, which was the smallest win since the 1961 election!

Now I don’t want this to be seen as an anti-Labor diatribe but more a “kill Bill’s tribal persona” not only for the sake of the economy — which is my main interest, as it affects all our jobs, businesses and wealth-building, but for the sake of the ethos that will rule the country after Labor wins in May.

Scott Morrison is doing his best to bring us altogether in the short time he has to rebuild his Coalition’s battered reputation. He’s shown he has learnt from the Hawke approach of getting out there and looking like a good bloke with brains. Bob did that in spades and it worked for quite a long time and helped win elections because deep down we Aussies like “bringing us altogether” leadership.

What Bill has to remember is that we might prefer Labor over the Coalition in The Australian’s Newspoll but we’re still not Bill Shorten fans!

The December 2018 Newspoll said the Coalition continued to trail Labor on a two-party preferred basis — 55 versus 45! And while Shorten has narrowed the gap as preferred leader, the actual love-hate score is 44 to 36 in favour of a new boy leader in an unpopular Government! Yesterday, Bill got stuck into his election campaign bussing it around Queensland, ripping into BHP and the wealthy. As the AFR put it today: “In an attack that had shades of US President Donald Trump targeting individual companies for offshoring jobs, the former union leader later chastised one of Australia's largest companies, BHP, for axing 70-80 jobs on ships that transport iron ore from Western Australia to Wollongong, and replacing workers with foreign crew.”

I’m not saying he can’t call out bad behaviour by big business and the wealthy but right now he’s creating a conga line of hated targets from property investors, to retirees who get tax refunds, to any investor who gets a capital gains tax discount, banks, retail super funds…and the list is growing.

The Bill Shorten who impressed me was the one who put on an impressive scene rivalling Eddie Maguire and David Koch at the Tassie coalmine disaster at Beaconsfield in 2006 and the one who was Minister for Financial Services and Superannuation, when FOFA — the future of financial advice — was introduced to try to improve the honesty for financial advice.

That Bill Shorten was not Trump-like and I hope it’s the Bill Shorten who re-emerges after the election or else we might have a Bill ‘Short-term’ as our next PM. This country needs a leader of a Hawke or Howard stature, and fast!

Great leaders deliver a growth dividend and it comes from everyone — business, unions, consumers, investors, job-creators, etc. — all buying into a dream that can be sellable to as many people as possible.

 

Don’t get caught out by a super sucker punch

Thursday, January 17, 2019

The one good thing about the super battle looming between the Morrison Government and Bill Shorten’s Labor is that it might shake a lot of Aussies out of their money-killing ignorance of arguably the best asset they’ve got — their super!

The superannuation system is actually a battleground where the fighters are the union movement’s beloved industry super funds, the financial institutions with their retail funds and the self-managed super fund sector.

The AFR recently told us that the “Government is actively considering allowing a federal institution such as the Future Fund to offer low-fee superannuation accounts in a potential major shake-up move to inject competition into Australia's underperforming $2.7 trillion retirement fund system.”

It comes as the Hayne Royal Commission is bound to make recommendations to improve the super industry, which does suffer from the problem that most Aussies don’t show much interest in their super, so they pay too much in fees, they get poorer returns than they need and they end up retiring poorer than they should. Also, a number of financial planners have not covered themselves in glory by using their client’s super as a ‘cow’ they’ve milked for their own benefit.

Of course, you could say “caveat emptor”, which is Latin for “let the buyer beware” and no one protects us from lawyers, accountants, plumbers, builders and retailers, who can make big profits by over-charging, but super is compulsory, thanks to Paul Keating.

It’s taken from people’s wages, along with the tax take, so governments should care who is looking after our 9.5% of our pay that ends up with a super fund of varying quality. There’s talk that dud funds should be shown the door and I think there’s some merit in there being a fair process to assess the calibre of a fund. Their performance, fees and processes should be looked at by a professional body and second-rate players should effectively be deregistered.

However, you have to understand that there is a big political battle going on with super. The retail funds have been beaten up badly by the industry funds that have been better performers and lower fee chargers. It’s why I have often shown my followers the tables that show industry funds have been the best option compared to retail funds because they have an advantage.

You see most industry funds have wages being ‘banked’ into the fund virtually in a compulsory sense. Various trade and industries have piled their worker members into an industry-related fund, so hospitality workers go to Host Super, retail workers go to Rest Super, health workers go to HESTIA and so one.

The fund managers can be pretty certain that there will be a constant flow in of money so they can invest in unusual things like dams, office blocks, etc. Meanwhile, retail funds haven’t got that amount of certainty so they have to play things like stocks, bonds, etc, where they can get cash if there’s a stock market crash and their members want out.

Industry funds have done well but they’ve had an advantage and it’s what the Future Fund could do if it was allowed to enter into the low cost super fund arena.

Labor is saying it would oppose the idea because of the union-industry fund connection, which is understandable, while the Coalition knows the industry super fund-Labor association is a politically force they can’t encourage.

The Coalition used to fight for the right of consumers to have choice between industry and retail funds but you had to believe they were trying to help the financial institution funds that were competing with a disadvantage. It would have been an easier fight if the fees were comparable but alas finance businesses hoped ignorance would allow them to charge too much.

The Hayne Royal Commission has changed all that.

There is one more battle that’s going on and needs to pointed out. The industry funds don’t like self-managed super funds because they lose their best customers to this sector of super.

Australian Super says for every $50,000 you have in the MySuper product, you’ll be charged $330 each year. And you’ll be charged $78 in administration fees, regardless of your balance. So if I had a million dollars in my super, I’d pay 20 times $330 or 0.66% but I could do an SMSF and get help for $5,000, which is a lot of help and only be charged 0.5%.

Lots of super members have worked this out and have driven their costs down to 0.2% or 0.3% and industry and retail funds have lost valuable customers. There is actually more super money in the SMSF sector, though recent reports suggest industry funds could have more by 2020, thanks to the bad press for retail funds from the Royal Commission.

The reality is if someone can get their costs of running an SMSF down by doing most of the work themselves by simply having a high-paying bank account and using an Exchange Traded Fund for the ASX 200 index, they could average close to 10% per annum over a 10-year period but they’d have to be pretty well fully invested in that index-based fund. It would be risky for someone over 60 years of age but as most of us will work to age 65 or higher, being exposed to the stock market in a safe ETF could actually be a better option than a lot of these overcharging, underperforming super funds out there.

It’s not easy running an SMSF and that’s why we created our SWTZ fund so people wouldn’t just invest in the four big banks and Telstra that were once seen as a faultless investment strategy. SWTZ seeks out 30 or 40 reliable-dividend payers and therefore gives diversification, which helps reduce the risk associated with stocks, such as dumb CEOs or dumb government decisions!

This chart below shows how we fared against the mum’s and dad’s index based on the banks and Telstra:

Given all this information you, should work out the best super for you because it’s your super for your future.

 

Shocking retail foot traffic and misleading economic indicators!

Thursday, January 17, 2019

One of the more important jobs someone like me has is to flag developments that might tell my readers, listeners, viewers and financial planning clients what might happen to the economy, the stock market, interest rates, jobs and so on.

An early warning can alert an investor to go to cash before a stock market crash, encourage a business owner to hold back on a big investment, or vice versa, ahead of a major turning point for the economy, or it might convince someone to buy property before a five-year boom, which we saw recently in Sydney and Melbourne.

I reflected on my role as I digested the latest scary headline about the economy. The Australian’s Eli Greenblat quoted a Ferrier Hodgson ‘undertaker’, James Stewart, who said: “I have been working in the retail space for 20 years now, and I can’t ever remember those sorts of numbers for Christmas.’’  (James is not really an undertaker but someone who does business recovery or burial work, depending on the economic health of a business.)

This quote was linked to a screaming headline that went like this: “Retail fall ‘worst in 20 years!” (That’s my !)

And as an economy watcher, that headline and the quote seemed a little at odds with the recent actual retail numbers from something called the Australian Bureau of Statistics.

Here’s how CommSec’s chief economist, Craig James, reported the latest retail numbers. “Retail trade rose by 0.4 per cent in November – the 10th increase in sales in the past 11 months. Annual spending growth, however, decelerated from 3.6 per cent in October to 2.8 per cent in November. In trend terms, spending was steady at 3.6 per cent over the year to November – near 2½ year highs. Annual retail sales in the ACT and Queensland were at 2 year highs.”

This made me think retail was doing OK but was a little off the boil but it has increased 10 out of 11 months, so I wasn’t expecting to see such a scary headline.

Further investigation, which is a good idea when you’re trying to guess the health of an economy, told me what the headline said and what James Stewart was talking about was slightly different.

He was noting the collapse in shopping centre traffic in the two weeks before Christmas and because it was the worst he’d seen in more than 20 years, it told him that retail business failures were on the cards. Now I’m not saying this is a good thing — businesses going broke — but it’s better than saying retail is collapsing and this is an early sign that the economy will collapse into recession!

Retail hasn’t fallen but foot traffic in shopping centres has and this is when you need to differentiate between cyclical and structural issues in an economy. I know you might be doing a Homer Simpson and thinking: “Boring!” However, I’m talking about a new age issue you should be aware of.

It’s no coincidence that Australia’s most famous shopping centre families — the Lowy clan — sold their Westfield shopping interests last year because the structure of shopping is changing.

We live in an online world so there’s a growing percentage of shoppers who do it digitally, which helps to explain lower foot traffic in shopping malls. Some of the lower retail spend is also because we outlay a lot more on services. Big boofy blokes like me actually have massages and have even been seen having a manicure! (Hey, I am on TV and throw my hands around a lot! That’s my story and I’m sticking to it.)

The buying online and the greater interest in buying services and experiences rather than goods reduces the reliability of retail numbers in telling us what’s going on in the economy. And interestingly, while overall retail is dropping in importance when it comes to our spending, over the year to November, growth of spending at supermarkets and grocery stores rose by 4.5% – the strongest growth rate in four years!

By the way, I’m sure the consumer in Sydney and Melbourne could be less confident as house prices have fallen by about 9% and 7% respectively in both capital cities over the past year. On the other side of the equation, the growth in jobs has been spectacular as well over the past few years so I’m not writing off the consumer, retail and the economy just yet.

Undoubtedly, we are seeing some slowdown in the economy and a lot of it is related to the air going out of the house price balloon but international trade, the labour market, business investment and infrastructure spending are all pretty strong, so I’m not converting from optimist to pessimist just yet.

I didn’t like yesterday’s reading from the Westpac-Melbourne Institute on Consumer Sentiment, which fell 4.7% to 99.6 in January, from 104.4 in December. This was the biggest monthly fall in more than three years but you can never get too excited about one month’s data. This is a monthly reading and happens to be at odds with the weekly reading from ANZ and Roy Morgan. This consumer confidence rating rose by 1.4% to 116.8, which is above the average of 114.3 held since 2014 and higher than the longer term average of 113 since 1990. And interestingly, the estimate of family finances in a year’s time was at 7-month highs!

One day a really worrying economic slowdown will happen but that day is not here yet, so beware scary headlines and unreliable economic indicators.

 

Donald and things to fear!

Wednesday, January 16, 2019

I was writing this as the UK politicians were voting on Brexit and what happens today on the local stock market could easily be affected by the result. And it comes at a time when there are too many international curve balls being thrown at both our economy and our stock market, so let’s assess how worried should we be?

In case international politics and economics is not your long suit let me list what could come back to bite you from OS:

• Donald Trump fails to get an acceptable trade deal from China.

• China slows down faster than expected and a failed trade deal could be the cause.

• The Fed raises interest rates too fast.

• Brexit throws the UK and EU into an economic pickle, which we can’t clearly understand because it has never happened before but it could easily spook stock markets, given what Grexit did!

• The US goes into recession this year.

• The EU goes into recession with Germany posting the worst growth numbers in five years.

• The US government is in shutdown mode because the President can’t get his $US5 billion for his Mexican wall — this is a real Mexican standoff!

Okay there’s the list, so now let’s evaluate how worried we should be and then how it could affect our personal bottom lines.

The trade deal between Donald Trump and Xi Jinping is crucial for the stock market and if an acceptable one results by the end of February — the deadline — then I expect a stock market surge. If none results then a share market sell-off is certain, however, I tip a deal happens.

Why? Well, Donald can’t afford a stock market crash and recession going into 2020, which will be his re-election year. Stock markets love certainty and I can’t imagine the US President gambling on a serious trade war, and fortunately China doesn’t need a continuing battle over tariffs.

It is already growing slower than expected and Beijing is taking steps to restimulate the economy, so it’s in China’s interest to come up with a deal. For our part, a slower growing China could hit our exports, and with the housing sector under pressure — both on the price and construction sides — we don’t want to see less demand from our most important trading partner. If growth slows more than expected then jobs growth would be curtailed and the unemployment rate could start rising.

This would be bad for the economy but also could force house prices down faster than I expect them to drop, given my more positive scenario for a trade deal and therefore Chinese growth.

We are a very interrelated world nowadays.

On Brexit, and the UK Parliament’s rejection of  Theresa May’s proposal, uncertainty reigns over the whole affair. The only positive from this impasse was the fact that Wall Street did not react negatively but it might take time before market experts can work out what companies in the UK and elsewhere will be negatively affected by this drama.

On the Fed and it’s likelihood that it will raise interest rates too fast this year, we’ve seen a number of key Fed officials, including the chairman, Jerome Powell, come out and promise patience when it comes to rate rises and the stock market loved these messages last week. Overnight, Kansas City Fed President Esther George said the Fed needs to pause when it comes to rate hikes and the market lapped that up, which means the US central bank is not looking like a threat to the economy and reduces the likelihood of a recession. In fact, Goldman Sachs has released its latest call on the US economy and while it saw a slowdown, it did not see a 2019 recession.

However, the boss of JPMorgan had a surprising view on the US Government shutdown saying it could really hurt first quarter growth.

"Someone estimated that if it goes on for the whole quarter, it can reduce growth to zero," Dimon told reporters on a media call to discuss fourth-quarter results. "We just have to deal with that. It's more of a political issue than anything else." (CNBC)

This maybe an exaggeration, given the stock market is taking this impasse in its stride but complacency can turn to panic and so we can’t ignore this potential threat to the stock market and our super fund balances.

And finally to the EU and the surprising revelation that Germany could be heading into a serious slowdown or even a recession!

Germany’s powerhouse economy grew at only 1.5% in 2018, compared with 2.2% in 2017 and this is the weakest rate of growth in five years. According to Reuters, the economics ministry blames a globally weaker economy, sales problems in the car industry as a result of tougher pollution standards and special effects including an outbreak of flu and strikes.

On the plus side, the European Central Bank’s Mario Draghi is onto the slowdown and is getting ready to bump up stimulus.

"A significant amount of monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term," Draghi said. (CNBC)

As you can see there are a damn lot of curve balls out there but it seems most of the key players holding the ‘bats’, except those in the UK, look positioned to hit these curve balls out of the ground!

And if you need more proof, note this from China: “Some analysts believe China could deliver 2 trillion yuan ($296.21 billion) worth of cuts in taxes and fees, and allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects.” (CNBC)

There are reasons to be vigilant about the external issues out there that could threaten our economy and stock market but they do look manageable. Therefore I remain in onward and upward mode when it comes to our economy and stock market for 2019.

 

Money madness is killing this country

Monday, January 14, 2019

A Fairfax story over the weekend looked at a CBA study of 5,600 customers conducted by Professor David Ribar from the Melbourne Institute. Some 9% of these normal Aussies reported that they were “having trouble” managing their finances but the work done by the academic team found it was really 17% who were really struggling. So 8% didn’t know they were under pecuniary pressure.

How did the pointy-headed university-types know more about the 5,600 than the 5,600 themselves? Well, they had access to their banking data!

Low bank balances, payday loans and dishonoured cheques featured in the revelations from the banking info, which meant objective analysis contradicted the subjective view of the customers on themselves!

Looking at the results of the study, Professor Ribar offered some words of advice for those struggling with their money management.

“Behaviour can be changed through disciplined savings and spending habits,” he said.

CBA will be creating a tool to be accessed on their website so 10 questions answered will give you an idea of your financial wellbeing status, which is a good start for making us confront our money madness but more is needed.

I will soon release a book that will provoke as many Aussies as possible to confront the big money madness problem in their life — YOU!

It’s why I seized upon this story and while I think there are great books out there helping us get our money act together, many Aussies need to be prodded into action.

In that great book Legacy by James Kerr, which has a subtitle that goes “What the All Blacks can teach us about the business of life”, the author talks about how important the vision thing is for this high-rate-winning team. But you can’t just have vision — you have to have action!

Many years ago I got tired of stimulating attendees to my speeches at conferences but then realised many of them, who were stimulated on the day, simply went back to their small businesses or jobs and resumed being the same people!

I created a contact process and would send them follow up stuff to ensure they remained committed to the actions of change. And this is what so many Aussies need — vision plus action and that’s what I want my book to deliver when it’s released in two months’ time.

I think three really important change-factors are needed to improve money management and wealth building.

First, you need to know what you want that is connected to money and that will shape your vision.

Second, you have to create a plan that will make your vision become a real-life thing.

And third, you have to get off your complacent butt and act!

Once you know what you want — the vision — and you quantify what has to happen to make it happen — the plan — things begin to happen, provided you stick to the plan and make changes.

The old saying, which I love, applies: “If nothing changes, nothing changes.”

As Prof Ribar advised, Most of us need to check our spending to create the savings to make the investments that will build our wealth, which in turn will make our money life bloody enjoyable to live.

The starting point is to get real about your money life ahead of creating the vision and then the plan. And finally, get the actions of change happening but you have to measure your progress because if you can’t measure something, you can’t effectively manage it.

As James Kerr learnt from analysing the All Blacks, if you have a vision without action, it’s only a dream, while action without a vision can end in a nightmare.

I never thought I’d ever say this but a hell of a lot of Aussies could learn a lot from Kiwis!

 

Are falling house prices and car sales a BIG worry?

Friday, January 11, 2019

House prices and car sales are heading in the wrong direction for economic optimists, so how worried should we be about these softening trends? Are these developments telling us that the economy is really heading down into worrying territory?

Remember, until we received the September economic growth number, which came in at a lower-than-expected 0.3%, (when 0.6% was tipped by economists) and brought the annual rate down to 2.8% rather than 3.3%, which was forecasted, we thought Aussie growth was heading to 3.5% for 2018 and 2019.

Now economists are less optimistic about a great 3% plus number but they still would expect an OK 2% plus growth result for both the year that has just ended and the one ahead. In case these numbers are double Dutch to you, any growth figure 3% or more is good for the outlook for jobs, so someone like me, who understands these stats, really hopes the September 0.3% result was an aberration. However, the economic data is really mixed and the housing as well as the car data could be telling us that a slower Oz economy, with less jobs, slower wage rises and even falling interest rates could lie ahead.

And while we like the idea of lower rates if you’re in debt, it usually goes with less jobs, less investment by business, lower stock prices, poorer super results and even could run ahead of a recession.

So, let’s examine the car and housing numbers so far.

The CoreLogic Home Value Index of national home prices fell by 1.1% in December to be down 4.8% over the year – the biggest annual fall in a decade. And while the words “biggest fall in a decade” seem scary, when you think about it, if 4.8% is the largest drop in 10 years, then we’ve been on a property party of extraordinary proportions and the hangover so far looks manageable!

And while some think a Sydney house price fall could be over 20%, with some alarmists tipping 40%, accounting firm, KPMG, is less dramatic with its analysis.

KPMG chief economist Brendan Rynne said tight lending policies have driven the declines in prices up until this point, adding that the tight lending standards may begin to ease up over the next few months. Recently APRA backed off its tough lending policies that it made banks impose on investors and with prices down, this could help buyers show up to home showings and auctions.

KPMG says Sydney’s housing downturn will last until mid-2021 when prices will start to grow again and predicted the total drop in prices for the entirety of the downturn, which started last year, would be 12.9%. And get this, Melbourne’s peak to trough fall will only be 4.5%!

While Sydney’s house price fall last year was around 9%, KPMG thinks the fall this year will be around 4%.

Now Brendan and KPMG could be wrong but so could the doomsday merchants but how come only scary price drops get headlines in newspapers and media websites?

Given how much Sydney house prices spiked, I’ve argued that a 15-20% fall over a few years is understandable. Anything worse would have to come with a serious recession, where unemployment really surges. And that’s why I’m looking at car sales as a possible indicator that I should be more worried about the economy.

Recent foot traffic in retail stores was said to be down and that’s another worry. But on the other hand, online sales were up, so this could be simply a sign of the times. With the money saved, Aussie consumers could be taking more holidays, going to more restaurants and having massages like never before!

Interestingly, home price growth started to slow from November 2016, around the same time that luxury vehicle sales started to soften. CommSec’s Craig James has been watching luxury cars in only the way an economist would. “For around a decade, CommSec has been tracking an index of luxury vehicles,” he said. “Changes at the ‘top-end’ of markets – vehicles, houses and other assets – have tended to lead activity more broadly.”

And luxury sales are at 3 1/2-year lows. If you want the actual numbers, here’s Craig’s figuring: “The CommSec index of luxury marques peaked in the 2016 calendar year with sales totalling 106,658 units. In 2017, luxury vehicle sales fell by 5.7 per cent and sales fell by a further 8.9 per cent in calendar 2018. There were 91,642 luxury vehicles sold in 2018 – a 3½-year low.”

Craig says the link between car purchases and house prices has been clear since 1990 but for all cars, the numbers don’t sound as dramatic. According to the Federal Chamber of Automotive Industries (FCAI), new vehicle sales peaked at 1,201,309 units in the year to March 2018 and in the period since, vehicle sales have fallen by, wait for it, 4%!

Sometimes you have to be careful about singling out some scary sounding developments and then look at them in isolation. For example, you could be worried about house prices and car sales but they’re coming off unbelievably high record levels and it might be worthwhile to think of other indicators like jobs.

Recent Government crowing is worth thinking about when you get worried about the economy. More than 1.2 million jobs have been created since the Government came to office in September 2013. The Australian economy created an additional 37,000 jobs in November and the latest labour force figures from the ABS show the number of jobs created in November was almost double the 20,000 jobs the market expected. And get this, seasonally adjusted employment is now 285,700 higher than it was a year ago and total employment is at a record high of 12,694,300!

This is Craig James’s take on the housing and car data: “The softening of new vehicle sales and home purchases aren’t necessarily negative developments. Supply and demand constantly adjust over time. And that is happening now. But the job market remains strong and interest rates are near record lows.

If fewer dollars are spent on homes and luxury vehicles, consumers may pay more attention to other interests. In 2004 and 2005 when home prices softened and luxury vehicle sales flattened, more Australians travelled overseas. Annual growth of tourist departures was up a record 28.8 per cent in the 2004 calendar year. Indeed, the latest data shows that a record number of Aussies are currently travelling abroad.”

The lesson is: beware those who would write off the Oz economy and our economic future too easily.

 

Don’t worry about stock market crashes. Take my advice!

Thursday, January 10, 2019

Another positive day for US stocks, which is bound to help our stock market head higher today. This trend up makes me feel comfortable that I didn’t get on board the doomsday train that many ‘experts’ were driving before Christmas.

Of course, I could be proved wrong and this could be a sucker’s rally and another big leg down could be out there waiting to happen! It did happen in 2008 that a second down-leg resulted after Lehman Brothers went under. The slump and then rebound after Bear Stearns failed saw one of this country’s most respected economists and market analysts call the end of the GFC crash in mid-2008 and boy did he have egg on his face!

He made his call on my TV show but let me say it’s easy to be wrong when you don’t know all the info and lots of big financial institutions and debt ratings agencies were not being upfront about the quality of their loan assets.

However, I do believe the circumstances in 2019 are different from 2008 but if Donald Trump disappoints Wall Street with his trade negotiations, then there will be another sell off. On the other hand, if he cracks a good deal, then stocks will go higher.

Overnight, the Fed minutes showed that the US central bank intends to be patient on interest rate rises and that’s why stocks are up again. Also there has been a rebound in oil prices and the US dollar is getting softer. And when that happens, US stocks head higher.

Stories like this happen every day and I report on them just about every day but it doesn’t determine how I invest for most of my portfolio. I allocate a small amount to stocks that I might buy and hold for a short time to simply pocket some profit.

Most of my portfolio are assets/companies that I want to hold for a long time. I’ve accumulated good income-payers because I know stock markets go up and down and my capital — my hard-earned money — goes up and down. But as long as I get steady income each year, then I know I’ve invested wisely.

I also know time and compounding will ensure that I will do well out of stocks and my favourite chart, which I’ve often showed you is worth dragging out again.

The blue line shows what happened to $10,000 invested in the All Ords between 1970 and 2009 — one year after the GFC ripped 50% off investor’s capital. The blue line shows capital gain and dividends all reinvested each year and shows that there were numerous crashed — big drops in the blue line — but the upward slope of the line graphically shows you what happens to the value of good quality stocks/companies held for a long time.

I don’t want the stock market to crash but I know they often do and 9-10 years is about a typical cycle of boom then bust for stocks. I’d love to get out just before a crash and get in at the end but that’s hard to be accurate about.

If you want to play stocks, my advice to you is decide if you want to be a get in and get out punter or if you want to be an investor.

An investor buys great companies when they are beaten up and then holds them to see their value go up over time. Those who bought the CBA during the GFC at $27 should not be worried that the share price nearly hit $100 but is now $72.33.

 

Why I now ‘hate’ Apple!

Thursday, January 10, 2019

Apple’s CEO Tim Cook added to the stock market sell off last week, blaming China for his downgrade for the company’s outlook. However a lot of Apple experts say the company has internal issues that explain its falling share price and it coincides with the first time in life that I, as a long-term Apple user and lover, have been heard screaming: “I hate Apple!”

I’ve been an Apple guy since the early 1990s and have been a keen follower of the exploits of Steve Jobs, as he created a company that former Saatchi & Saatchi’s CEO, Kevin Roberts, included in his book Lovemarks.

Apple has devoted followers who used to turn up to Jobs’s company updates and new product releases, which were like a rock concert.

Every new product I got my hands on was exciting but I have to admit I probably only used about 20% of my laptop’s and iPhone’s potential, primarily because my Apple products were not bought for my entertainment. They are work tools, which have been terrific for my productivity and it’s why I’ve loved Jobs and his company, which has made it easy for me to do radio reports on the run, look up the state of the stock market and the dollar as well as make it possible to write a story like this at 6am and have it on my website by 8.30am.

The contributions of the Internet, Apple, Microsoft, Google, Yahoo, etc. to my business life have been game changing and their enormous progress from tech companies to global world corporate leaders can’t be downplayed. However, part of their current and future problem is how they stop hubris and complacency getting in the way of success.

Apple has a challenge that it charges too much for its products so lots of people are delaying the changeover to a new phone. In China, local products, which are cheaper, like those from Huawei, are increasingly eating Apple’s lunch.

Also someone like me takes so long to be comfortable with a new pesky product, he or she won’t want to switch to a new phone or laptop unless they have to.

And even then they discover that Tim Cook is making me use Bluetooth earphones because the new iPhone doesn’t have a socket for my old and preferred earphones!

Sure, I get it, Tim is making me buy new products from him but it makes me hate him and his company, even if it’s only temporary. Despite the fact Steve Jobs was reportedly a hard man to love, I always loved his innovations because they helped me. This is a powerful lesson for anyone in business and I hope Tim Cook learns it.

That said, Tim and Apple are not the only tormenter in my computer-interface life right now and in fact it was a great TV series called Succession on Foxtel that made me realise that Microsoft is also annoying the crap out of me. And maybe my hate for Apple has been partly created by whoever is running Bill Gates’ company nowadays!

I can’t turn on my MacBook Pro without an endless procession of notifications, reminders and updates! In a scene from Succession, one of the leading characters — the son of a very rich, US media mogul — had fallen into a drug den and when his brother rescued him, one of the druggies yelled out: “HEY KENDELL!! TELL BILL GATES MY COMPUTER’S ALL FUCKED UP FROM ALL THE FUCKING UPDATES, MAN!”

Sorry for the “French” but boy did I laugh out loud when I realised others around the world are sick and tired of what Microsoft thinks represents great customer service.

Sure, some tech expert will tell me that I could configure my laptop and phone to stop bugging me but it will cost me time and money, and that’s not a great way to build a beautiful relationship with customers.

My years of analysing Jobs taught me that one of his greatest strengths was that he was consumer-focused and had a fanatical opposition to anything second-rate.

That’s a lesson both Tim and Bill Gate’s CEO, Sataya Nadella, who has done a good job turning around the company, have to learn going forward. And these one-year charts of Apple’s and Microsoft’s share price suggest I could be onto something.

Apple

'

Source: finance.yahoo.com

Microsoft

Source: finance.yahoo.com

Apple’s challenges are greater than Microsoft’s but when you have whinging customers like me, it pays not to ignore them!

 

MORE ARTICLES

You can’t educate a mug

Here’s how to play a stock market rally when it comes

Stop reading crap and learn these 5 get rich lessons

The 7 habits of highly effective investors

The questions you must answer to be richer, smarter and more successful!

11 money lessons for the young and cashless

6 sexy steps to boost your super!

Are we heading down the gurgler?

Is Santa Claus coming to stock town?

How worried should we be about this stock market sell off?

Our Budget is looking good – blame the vibe!

Bank haters are too one-eyed

Scott, what do we want? Loans. When do we want them? Now!

A soft landing for house prices

Trades talk progress and you will get richer

Failure to haggle explains why Aussies end up poor!

Will Donald KO Santa?

Is our economy going down the gurgler or set to bubble higher?

World’s smartest money man not into crash talk

Dow down 800 points. Has Donald kicked the hornet's nest?

Can we be relaxed about the trade war and house price falls?

If stocks don’t surge today, blame bank bashing

Deal or no deal? I’m watching Donald’s hand this weekend

How to make money out of PM Bill Shorten

Stocks surge on a non-mad man! Will other mad men ruin things?

Why the economy and stock market have turned me into a political commentator!

Wanted: Hero to get banks to lend

3 economists reject 40% house price collapse prediction

Incognito Labor Party stooges are ridiculing anyone with an opinion

What will stop this stock market scaring the pants off us?

Bill, you need to rethink your retiree refund tax policy

Wealth Warning: Clear and Present Danger

Let’s get real: Is Hurricane Housing on its way?

Is the stock market ignoring a damn good economy?

Why are some Australians rooting for a house price Armageddon?

Two tales from our nanny state: one good, one bad

Is this sell off a correction or the start of something big?

Negative gearing: Shorten won’t budge

10 reasons why I don’t worry about a house price crash

Doomsday merchants must think the RBA's Dr Phil Lowe is a dope!

Hey Dude, don’t make us afraid of stocks

How the Cup gives me insights on our future

If you’re praying for a house price collapse, find a new god!

PM pisses off billionaire climate warrior

Will this slump turn into a Christmas rally?

Bill, rethink your negative gearing policy

I’m just wild about Harry…& Meghan

It’s official! We’re globally the richest, so why do we whinge?

When Labor flicks negative gearing, will house prices fall?

Why I’m ripping into Shorten

Will Shorten’s policies kill the property market?

Are media headlines killing this economy?

Stocks slump again – blame screwballs throwing curve balls!

A tax on every dollar you earn and a 15% GST?

Could feedback stop these negative SOBs talk down house prices?

Will the world economy crash and burn in 18 months?

US stocks surges but our bank bashing has to stop!

I’m a celebrity investor. Get me out of this market!

Has Trump trumped Trump land and the stock market?

The Clash of the Titans: Switzer & the smarties -v- The Dude

Hey Dude, are the Trump cons outweighing the pros?

Be warned: Shorten, Bowen & Hayne could bring on a recession

Baying for blood from banks

Gimme some truth

Josh, give the banks a break

Stop watching the wrong and start celebrating the right!

Love-v-hate: Two Emmas at the ABC

Donald does China

Hey Josh, “get some guts”

Morrison’s gift to Shorten

Since when were Aussies entitled to an inheritance?

Are our super funds a train wreck waiting to happen?

Slam dunk, cop this China!

Sorry kids, Bill wants to wipe out your inheritance

Fasten your seatbelts. Trump is driving the Big Dipper!

Will Bill Shorten tax our family homes?

Cock-a-doodle-do. Excuse me for crowing

Will Trump’s trade war give us a happy ending?

Is our economy facing good growth or recession?

Are we drowning in household debt?

If Tony Robbins annoys you then maybe you need to be annoyed!

When will leaders learn: no guts, no glory?

“Eat my shorts!” you negative nannies. Go the Aussie economy!

Get some guts: answer these 7 money questions!

Devour these lessons from the gutsy Millman win over Federer

When Gerry met Katie

Will Trump’s trade testosterone tactics topple markets?

Why, oh why, did you do it, Westpac?

Alan Jones tagged ScoMo an economic no hoper. Let’s test that out.

Our fatal property attraction

Stop whinging about the cost of living!

Donald Trump: gift or curse?

If the Libs select the wrong leader, Bill will be popping champers!

How are Canberra moves this week affecting the markets?

What’s the money making lesson from Telstra’s spike?

Who will be our Prime Minister?

What, me biased?

Malcolm’s a goner. Get ready for PM Shorten

Malcolm, you have a problem. And it’s not Tony Abbott

Donald does it again but can he keep it up?