Ep 149: The World Order Is Breaking, and Why Australian Property Isn't Coming Back

The following podcast is produced by Total Money Management AFSL 568642. Everything you're about to hear is general information and education only. It does not take into account your personal objectives, financial situation or needs, and it is not financial advice. Before being a silly sausage and acting on anything discussed, consider whether it's right for your circumstances and speak to a licensed advisor. Welcome back to Total Money Management, the Signal and Noise podcast, week ending 21st of August. August. We're almost there. Father Christmas is almost here. Absolutely. I've been told off this week, apparently I'm too dulcet and no one can hear me on the on the podcast. It's going to be a grumpy addition because I'm sick, so I'm just like, yeah, they're worth. This week, yesterday and today, oh, it's just going through the world, going, it's all terrible. It's going to we're all going to do all the same as normal then. That's the chemical imbalance. It's like the news, right? You watch 25 minutes of the news, and they're like, oh, he's all the death and mayhem and murder and all that sort of stuff. And he's a dolphin story in the last 30 seconds to make you feel good or a cat video or something. A bit of an dolphin release. I just kept scrolling things going, yeah, no, it's all over. Yeah, no, it's getting worse. Well, what would the highlights this week? Well, I've just considered that I look, I have to say, I think that the geopolitics is just getting really, you know, like saying World War Three is a bit of a stretch, but I don't think it's far away. And in sense of classifying itself, not saying we're heading into World War Three, but I think we're getting close. Yeah, it's, yeah, it's, I have totally checked out from the geopolitics nonsense now because for someone that's working 40 hours a week. Yeah, so difficult to keep up with what's real and what's not. Yeah, like it happened a few months ago. I was like, what am I actually looking at now? Because it's changing so quickly and then it looks the same. Yeah, it's interesting you raise that, Jake, but could say a couple of people I was talking to during the week, who, like you guys, they work and they work, you know, fairly long hours. And it's because I do it basically all day every day, I don't realize how little other access people have to the news that I see, you know, like I'm on X all the time. And because of that, I get all the news, right? And I can read, you know, 20 articles a day, five papers, you know, and all that sort of stuff, whereas you guys can't do that because you're working. And so it's just, it is interesting because I, you know, when I write these things, I'm writing the newsletter going, and you know, like, what do I leave out? Because see, I've seen like 40 things where I think, oh, yeah, that's valid. Oh, yeah, that's valid. But you know what I mean? Like, it's just, I can't write a full one because it'd take you three days to go to him, read it. I think people listen to us for that reason as well. Like every Monday, the feedback that I get when I speak to other clients or just listeners is, yeah, like it's the sounding board. It's a sense check every week. So I think you're doing good work, mate. Yeah. I think, like, I think we might have said a few months ago, you know, like when you get a daily, you know, like I get daily newsletters, right? Where they write to you and say, you know, today goal went up 1.5% and, you know, this happened. And in my line of thinking, that if you're really busy, that doesn't mean anything, you know, because is that relevant? Did we go down 2% yesterday? Yeah, yeah. It's like, okay, what am I supposed to do? It's like nothing. It's like, okay, well, why am I being told? So from that, what I'm trying to do is just pick major, you know, like we talk about the major events and go, okay, we'll keep you up to speed on the straighter hormones, Russia, Ukraine, the Australian property market, you know, they're the big ticket items. And then occasionally we might throw in other stuff, but it's also got to be, you know, at least relevant. Yeah. I think that's always sometimes the tricky bit. And because, you know, like you said before, because people like Donald Trump make a new statement every 15 minutes, it's really hard to go, well, which one's valid? Yeah. I'll tell people about that. Actually, no, that's been updated. I don't need to tell people, I've got to tell them, no, that's out in the water too. So it gets, you know, like the Americans came out today and said, oh, there's, you know, we've been secretly getting oil out of the straighter hormones. Right? 10 million barrels. It's like, no, you haven't. You know, that's, no, you haven't. You're lying. Yeah. Right. So, but that it's moving so quickly in terms of strategy about, well, what are the Iranians going to respond with? And now they look like they're attacking the region. And then yesterday they said, well, we might target U.S. assets in Europe. Right. I didn't see that. Well, if they do that, then boy, oh, boy, all bets are off. Everyone's in the bed together then. Well, the thing that's concerned me for a while is the, you know, after 9/11, they had the sleeper cells. Remember the terrorists, you know, they activated hisbalar secret cells in Europe and America and Australia and places. So that's what concerns me this time around that they've been already doing that sort of stuff. Now, the Americans would be aware of that, but it still drags a lot of, you know, it becomes really dangerous when you get random terrorist events. Yeah, for sure. Right. That's, you know, really dangerous sort of stuff. And that's what seems to be going on. Well, we talked probably it would have been only a couple of months ago, but around a global order, like the renegotiations of global order, we actually haven't talked about that for a bit. So is there any changes or is it still the same? Well, basically, we're all trying to find out who's friends. Yeah. Well, yeah, I know in the notive, you've put everything's up for negotiation. Yeah. Yeah. Every country for themselves, is that where you see it heading? Yeah, everybody that, as I've said before, is that the world order has changed. The Americans have made a decision that globalised will no longer benefits them. And now there's a lot of countries, you know, Europe is just as rich as America. Combined. Right. Europe combined. It's got about 550 million people. Right. China. Right. India. These places are becoming really wealthy. And what the Americans quite rightly are saying is, well, hang on, you guys are still bleeding off us. You're stealing all our technology. You want us to run the world. You want us to put out all the fights and military and do all the spending that you guys don't want to, you guys don't want to let us into your markets. Yeah. Or, you know, make a contribution to your own backyard. So that's why again, you know, Trump said, I think it was yesterday Wednesday said, well, you know, the South Koreans can bloody will look after North Korea themselves. Yeah. Right. He said, we look at moving bases out of the Middle East. Right. Because what Trump is doing, and it's not just Trump, it's the American strategy saying, well, hang on, we've got a, we've got 800 bases throughout the world. Nobody wants to give us a hand. When we say, hey, listen, you know, we, you guys could help us with the straighter hormones. They all go, yeah, nah, nah, not my fight. And it's like, well, hang on, if it's not your fight, well, why are we let it, why are we protecting the sea lanes for you guys to receive all this stuff, but not give us anything back? Well, that's been America's, I'm not sure whether it was an unwritten rule for so many, for decades that they were the protectors of the sea and trade and things like that. And other countries paid America essentially to have that privilege. Yeah. It was essentially the yanks after the war said, you know, you got to remember too, like, you know, the Europeans have been fighting each other for a hundred to years. Yeah. Right. And, you know, after a while and dragging everybody else into it. Right. So the Americans basically said, all right, look, we're now the dominant economy. We've got the military. We'll, we'll guard so people can trade, but we'll write your military policy. Right. So in other words, we run global security. But hey, if you want to trade and sell stuff to, you know, Somalia or Africa or Eastern Europe, go right ahead for it. Right. But those days are over. And the thing I have, the problem I see all the time, even with a lot of economists, they don't realize that America now doesn't make decisions on the global interest. The Americans are saying, hey, we're protecting our backyard. And that means we don't need bases in Middle East. We don't need bases in South Korea. Right. And in fact, you guys want to export to us. No problem. There's a 50% tariff. Right. And that's, that's what's going on. Now, naturally, enough, all of those all benefited benefited from it. I cranky with it. Yeah. But, but the reality, you know, the reality is, it's a bit like, well, okay, but you got rich off the back of the Americans. But that's the thing. I don't think many of them did get rich. They've all got insane. Yeah, Yeah, to know that I think they benefited from almost, they allowed their industries to grow in other areas like finance and their defensive areas, this is just my take, their defensive areas and trade. In a lot of Europe, for example, just went nowhere because it was all important. Yes and no Jacob, part of the problem with Europe was the Germans. The Germans were changed it in, the Germans wanted the euro and the reason why it was because the German Deutschmark was a strong currency, which meant like America that they would suck in imports, when Germany, when West Germany combined with East Germany, they wanted to export their way out of trouble, right? So they suppressed wages, which is what, excuse me China did, what Japan does, right? So that's where, well after the war, well by two, all of Europe was skint as well. Absolutely. And the Americans rebuilt it with the Marshall Plan. Right? So again, the Americans stepped up and said, okay, well listen, you know, look, the Americans got exports and got rich out of it as well, but they could have sat there and said, oh, well, no, you can just, you know, you guys can just continue to fight amongst yourselves. Yeah, figure it out yourselves. Right? But that's, you know, I know a lot of people see America harshly, but they've done a lot of good in the world. You know, China was a backwater mate until the Americans said, okay, join the WTO and we'll take your exports. Yeah. Right? With the quid quo quo of saying, all right, well, at some point you'll open up your economy and you'll be capitalist like us, right? Because hey, look at us, we're all getting rich that way. Well, the Chinese reneged on the deal. Right? And you can throw mud at the Americans, no one's perfect, but the reality is, you know, you've only got to look at global dynamics. Nobody's Russian, you know, there's not people, you know, going overseas and high-watered to jump into communist regimes. Right? Everyone swims to Europe or the UK or America. Why? Because that's where you can get rich. Right? You're not going to turn up in China and go, hey, where do I sign up? Where do I get my free money and my bed and breakfast? Yeah, I mean, it's where it's safe as well. It's where there's economic growth and it's interesting. All the expats gone to Singapore and Hong Kong. Absolutely. I mean, to an extent, Saudi now as well. Yeah, yeah. There's just, you follow the money wherever the money is. Absolutely. And the opportunity, right? I can tell you, I've lived in Japan. I mean, it is, it's a different world. Yeah. Right? And it's one of those cultural shocks because, you know, like the Japan still uses facts machines. Yeah, right. Right? They're still distrustful of email. Right? That's it. You look at that and go, oh, please, seriously, no way. I can tell you, you go to a local bench branch. There's probably like 40 staff like this. There's just mountains of paper. The unemployment rate is really low as well. But that's without digressing. It's purpose, it's on purpose. Yeah, yeah. It's really hard to move capital out of Japan. Right? So it's not, it's not the same. And that's where we tend to think that Europe is just like us. And it's like, no, it's completely different. Yeah. Right? Japan, you mean, like Azure or Europe, you're talking about both of them. Yeah. Right? They're much more heavily regulated. Yeah. Right? And so that's why if you want to get rich, you go to America. Right? It's a big market. But Europe's big too. But it's the freedom to be able to say, Hey, two blokes in a garage and we're going to do a startup. It's like cool. Go for it. Right? Whereas in Europe, it's like, I know you can't do that. You've got to have an office and you've got to have 14 agreements and, you know, blah, blah, blah. So that's the, the dynamism of America is its upside. But it's also, it's downside, right? Yeah. You know, you mentioned, you touched really briefly on China. And there's some notes here around new bank loans nearly felt a zero in July and China. Yeah, yeah. I'm not sure where if that's zero being 100,000 really or zero being actually zero, like one jet. No, no, no, zero as in the loans are falling. But this is for residential or commercial. This is generally low in general, right? This is again, what you said, what you're seeing in the mainstream media is it could Trump is so hated. Everybody thinks that whatever goes wrong is America's fault. Everybody thinks America's losing the Iranian stash. You know, everybody blames America for not helping Ukraine, right? All this sort of stuff. And that's not really the case, right? And the, what I'm trying to do is, and again, you see, I saw this with Japan. I studied, you know, I studied Japanese and Japanese economics, right? And that's the reason I kind of fell in love with it and thought, my God, these, you know, these people are unbelievable, right? So what happened was it was only after 10 or 15 years that I realized it wasn't cultural, it was the way the economic model was set up. And it's been done before, the Americans did it, the Brazilians did it, the Russians did it. And it's basically what is called state capitalism. But essentially what it's doing is the government says, we're going to do this, this and this. Jacob, we're going to suppress your wages and we're going to use all the money we save to give to companies to build export champions. Right. And we're not going to let in any imports. Right? Only commodities because that's what they want to turn into the cars and dishwashers to sell back to us. Yeah. Right. So that's the way their model works. But the problem they get is like with every model, there's inherent flaws in it. And I can tell you where China's going to have problems because it's the same where Japan had problems. Right. And it reached a point in the late 80s where the Americans said to the Japanese, you guys have got to stop exporting so much. Right. You've got to start investing directly in America. Right. And so that's when problems started. That's the problem they've got with China. You see China's exports are going inside. Well, it's balancing it as well. And when you've got a communist and a capitalist regime battling against each other amongst other history, it's like, you're not going to find you know, there isn't going to be a result that's even. Well, no, it could see that the benefit with Japan was at least they were allies. Yeah. Right. And they were sort of, they're not free marketers, but at least they're capitalist. The problem with China is it's a communist government. They have no intentions of being capitalist and democratic. Right. So that was when the Americans worked out, unlike Japan, where they sent, oh, what was his name? Jared Baker. They sent them over in the late 80s and said, right, we need an accord here. You guys need to raise your currency. Right. You guys need to start investing directly in America, right? Building car factories. And that's what the Japanese did. Yeah. Okay. The Chinese can't do that because they're communist. Right. They're their spy on them. And they're a military threat. So from that point of view, you can't, the Americans can't say to the Chinese. Yeah. Yeah. Yeah. Please come and build factories. Yeah. They wouldn't want them doing that. Absolutely. Tom, because they're spying on them. But the, the, they're a global force. Right. They, they want to rule the world. Now, you can argue that, you know, whether America is short or the, the Chinese or whoever, but the fact is everybody's busting to get into the American market because it's rich. Right. But soon as the Americans say, hey, cool. You know, we'd like to sell stuff to you. It's like, ah, no. I mean, I can tell you some of the stuff that the Japanese said they couldn't have American beef. And they couldn't have American beef because they digestion and their stomachs were different. They said they couldn't take American skis, right? Snow skis because Japanese snow was different. Right. That's all these arguments where the America was going. What are you seriously? And the Japanese were expecting the Americans to go, right, makes an extensive. It can't have your oil either. That's it. Yeah. But that's what I mean. So this is why we've reached at the point end where the world's changed. And as I said, you it ain't going back. And it's going to be a really rough ride. You know, it doesn't mean the world's ending. But what I'm saying is for investors, it's, you know, the next decade's going to be a lot different. Well, you've been saying for a while now, hard assets, commodities. Absolutely. Tell them the stuff that actually builds stuff. Absolutely. And you can see that, you know, commodities have had the best year in a long time and are now out performing, right? And even when you talk about, you know, they're all talking about AI and oh, it's going to do this and it's going to do that. And all these data centers are like, guys, do you know, you know how much copper, concrete, iron ore, silicon, etc. You need for these data centers because without the hard assets, guess what? You got nothing. But all the money's flowing to stories and visions when you you think about? I'll let the the SpaceX stuff. Yeah, yeah, blows my mind. Yeah, you know, Nvidia at some, I haven't checked it for the last few months. But the fact that was trillions market cap. Tom, the stuff I've written it in the premium newsletter where I've talked about a bit more about AI. But you know, the statements coming out of those mouths of the CEOs unchallenged is absolutely ridiculous. But you just look at it. You go, okay, this all sounds amazing, but what if we don't have enough food? Yeah, yeah, yeah, that's true. What if we, you know, like the materials to build and, you know, facilitate the birth rates we say we need? Yeah, all that other stuff. Yeah, we'll see Elon Musk wrote a man, Zuckerberg, my second favorite person, wrote a manifesto, and said, everyone will have everything, right? It'll be abundance for everyone. Well, clearly that's bullshit, right? Elon Musk came out and said, you know, in 10 years, money will be irrelevant. You know, like, you look at it and go, two, that's, that's amazing. How do we get there? Okay, you know, like just, just wrap that out for me with banks and paychecks and stuff, right? I mean, that's one of the, one of the guys with Dario Armaday said, I wouldn't be surprised to fan tropics the only company left in the world. I mean, they're all trying to sell something. That's weird. They're all trying to sell something they've got investors to plays and they've got a self-image to withholds upkeep. But the reality is like, even if that was true, we're not designed for that. Humans want to do things and work and earn money. But I think it, yeah, I think I wrote in the premium newsletter, you know, it, it, it would be funny if it wasn't so serious. And, and what I mean is, and we've talked about, you know, we've already talked about private credit and, you know, the backing, and see private credit is heavily in the AI spectrum. And the stuff they're doing, I'm telling you, it'll curl your hair. And the more, I'm going to lay it out for us. And again, the reason why is because the trouble is always in the finance, right? It's always in the debt. And what they're doing now is their quote unquote democratizing, you know, investment into AI, right? And when you see that, what it means is, the greatest fool is the retail sector, right? People like you and me, right? Because we've got a superannuation fund. We don't really pay it that much attention. The super funds know that they're looking for returns, right? Private credit comes along and says, Hey, you know, we've got these data centers, and it's going to yield 9%, 10%. They, you know, the superannuation put the money in and next minute it blows up, right? And this is, when you look at the last, probably, 30 years of bubbles, they're all financial crisis, right? The Asian financial crisis 97, Russia in 91. The GFC, you know, seven, um, savings are loans in 1980, you know, about 90, 87, right? They're all catastrophic. And this one is bigger than all of them. And so that's why I'm, I'm really pessimistic about it because I just keep looking at it going, there's no way to save this thing. It's like, you know, it's like getting a couple of robots and going, you know, try and see if you can pull the Titanic over because it's, you know, tilting. Yeah. And it's in multiple areas as well. It's not just one area of finance, it's in like three, four or five different, absolutely. It's a life insurance, you know, they're doing what Warren Buffett did, right, which I won't bore you with now, but we will down the track. But I can just tell you the, the financing stuff, you know, that it's, if you have the same rules, you get the same outcome, right? And after they had the GFC, they just let them, they, they clean the slate and they let them do it all over again. Well, they might just keep doing that forever. Absolutely, because it seems to be somewhat working. Well, they don't care. Yeah. You know, if you, you know, I've got to be honest, if you're making 30 or 40 million a year, you're not too worried about if things blow up because personally, you'll be fine. Yeah. Yeah. Yeah. Yeah. Yeah. They're all ensured against it. Absolutely. But I mean, to bring things back on shore. And in the same thread, it's very similar to groupthink. And something I noticed on our socials over the last week or two is people to incessently blaming one or two really easy levers for Australia's property increase over the last decade. It usually comes around to things like immigration and negative gearing. Yep. But in my view, that, that is a factor, but they're, they're easy, understandable things to blame. It's also the incentives that we've had that whole, the whole time. Yeah, absolutely tall. Yeah, negative gearing. It's a fine age again, right? It just can't, like, yeah, it's, it's like, as a, you know, you're in sales. So am I? First thing you do is you look at the commission structure, figure out how to make money. And then you go, okay, well, that's what I'm going to focus on. Yeah. Yeah. And that's one of the things we've done in backslending to over at low interest rates. I mean, that you wrote a book, low rate, high returns on the thing. Yeah. It's just, you know, again, we should address this actually and talk about property. What? What I'm seeing, what I'm seeing at the moment is again, like what you sort of see in stock markets, when the market goes down five or 10%. Everybody thinks it's a buying opportunity, right? And so what happens is the industry switches from. Um, it's a great time to sell stuff because that's how they make money to it's a really good time to buy. Yeah, and what I'm doing is, if you have a look. Again, if you have a look, you can talk about economic fundamentals, right? Immigration levels, but it really comes down to. Interest rates and finance. And as I said, I touched on, I think what have been last week, Jacob, or the week before with you that. The, and I won't bore you, but the rules changed in the 70s about how banks could lend money. We went off the gold standard. So there was a whole raft of things that changed the way banks could lend and banks no longer were conservative. The idea being, oh, well, if we introduce competition, that'll be a good thing. Well, in actual fact, that's a bad thing in finance because what you do is you get lower lending standards. Yeah, everyone's going to be able to raise to the bottom. Absolutely. You know, you, you, you lend to the good people who have got money. Then you go to the trance, who's, you know, kind of okay. Then you get to the ninja loans down the bottom. Then you get governments coming in saying, oh, you only need 5%. Right. So all of this stimulates lending. And of course, they're all trying to get market share. Right. And then you've got buyers agents. Right. Then you've got mortgage brokers. So you've got all these incentives rolled in to promote property, whether there's a shortage or not. And like stocks, it's no good saying. Oh, yes. Just, you know, banks are lending handover fists there. You know, they're greedy bastards. You've got to come up with a narrative. Oh, there's lots of immigration and, you know, we've never built houses and, you know, like there's all these excuses. When you look at it, they don't really stand up. It comes back to things such as the government incentive, everybody to, you know, go out and borrow and buy property. Well, what did people do? Yeah, the problem with immigration argument still doesn't stack up to me because it's not as if people getting off the airplane and buying a million dollar houses. Yeah, it doesn't, it just doesn't make sense to me, but it's such an easy. It's such an easy understandable thing. Well, it's a lazy. Yeah, it's a lazy argument. Immigration is going to stop. So has house prices. Yeah, you must be correlated. But it's the other thing I wanted to bring up was, and I've got a few notes in there. What's happened is, um, the problem we've got here is the inequality amongst the asset owners and the renters. And if you have a look here, it says, you know, that the investors used people who owned an investment property were about 7% of the population in the mid 90s. Right. When, when how it came in and they did all the negative gearing capital gains tax, now we've got about 14% right. So 2.3 million people own investment properties. Right. So in other words, what that means is Some people are not getting properties and others are getting more than their owner occupier. Well, most of the people, not everybody, but most of the people who have done that have been have been wealthy. Either by being wealthy anyway and just pivoting into property or old people, boomers older than me, my age and older, who have said, oh, well, you know, we bought a property in 1980. Now it's were 2 million will, you know, we'll leverage off that to buy an investment property. Right. So that's the problem. And so that's the reason why I think we've got to watch what happens in the investor market. would be interesting because presumably the money will just flow to new builds, right? Because the incentives moved. So I'm wondering how that will. No, because seat on the incentive is not profitable. You see, the builders are saying, well, nobody wants to live at, you know, 40 kilometres out, right? Because new builds don't happen in, you know, like new farm, right? New builds happen out the back of Strath Pine where they do in subdivisions, right? Well, you know, there's not many people who want to invest out there in a new build. You might want to live out there and say, hey, you know, this will. It'll take me an hour to get to the city, but I get a foot in the property market, right? But if you're an investor, you look at that and go, well, hang on, I've got to get a new build. It's probably going to have, you know, there'll be problems with it. Then I've got to rent it out. It's, you know, an hour away from me. The capital gain now has been cut in half with it. The negative gearing is a real issue now. Well, interest rates are rising. So an investor looks at it and says, uh, I'll just go and buy stocks. Well, they still get those benefits of it's a new build though, don't they? Yeah, they do. You're right. Sorry, you're right, Tom. But then who's going to buy it? But that's exactly right. See, the next owner says, well, I can't get those benefits. I don't want it. So therefore, if you do a new build, you could potentially go, well, I'm stuck with this bloody thing for 25 years. There were narratives change now as well. So even developers are going, well, maybe I won't. There's obviously in centres, when government to developers to develop and build, but not enough to make it worth it to, to then sell it. Absolutely. So just the sheer fact, the interest rates have changed up and sentiments changed. No one's talking about anyone. Well, that's why the investor loans have completely died, right? Because investors have said, hey, geeks up. And that's why I'm saying, we've still got immigration. We still got all those issues we had two months ago. What's changed? The change has been the government incentives that said, no, no, we don't want you doing that anymore. And that's where they cut the incentives off. That's when people went, oh, okay, no incentive. I'm not going to do it. I'll find something else. And have you seen the amount of new listings on real estate.com? I think we posted something. No, the amount of listings on real estate.com and domain is like three times or four times more just within the last couple of months. Is it really? Yeah. Because I was like house prices haven't really moved. No, they dropped like 0.7 or something. They're still like 15% last year. Various, but you're right, Tom, if you that we've got some dot points there to go through, right? Like if we throw out a few scenarios, right? What do you think's going to happen? Okay, it depends on the current level of equity, right? If you bought in COVID and the property's doubled, you'll probably a bit shitty, but you're also going, hey, well, at least I've made, you know, 600,000, right? So you could still sell and make a lot of money. Okay, so that's the first part. You have to look at the current cash flow, right? Or the negative gearing, right? So again, you look at the borrower and say, okay, we should really get rid of this place because it's not going to be, you know, we've missed the main boat. So therefore we should get rid of it because it's going to tighten our cash flow, right? Old people who have bought properties may well be saying, hey, listen, it's time we sold that to cash out and fund our retirement, right? So there's those. Prospects for rental increases, right? Or decreases. Well, apparently it's going up 30%. No, that was a suggestion. Right, but it's, look, yeah, right and rent won't go up. Again, all of this, this is all this scaremungering by the property industry to freak people out, but also to keep buyers coming into the market, right? And that's why you get this, hey, you know, it's a good time to think about property. It's like, dude, it's fallen 2%. I mean, seriously, well, and even, even if it doesn't fall anything for 10 years, it's still a bad investment or the 15 years, it's still a bad investment because you've got to hold on to that. You've got to be paying up mortgage and someone's paying 600 in rent, but your mortgage is 1,000 and you've got to hold that for a long time. And it's a big amount of leverage. Absolutely, right? The expected capital gain, right? It reminds me of that old slogan, you know, future returns may not resemble the past returns a bit like, absolutely. And that's why I say, you know, you can, it's like if you look at a chart, if I showed you a chart, you would see post budget night where it collapses and you go, man, what happened that day? And it's like bingo, right? Because the incentives are completely different, right? And investors have done the numbers and gone, okay, well, it's no longer worth it. It might be for some, but the idea now of like, oh, yeah, just get in and buy a property and you'll get rich is like, that's over. The glory days are over there. There'll still be certain suburbs in Australia that are that carry through and do, and do, and do okay, but that's like anything. You can, if you're going to find the magic stock that does 10X, then would all be rich, right? Yeah. And then interest rates, right? Interest rates have gone up. They may drop a little bit, but it's unlikely they'll go back to what they were for a long time, right? And so you've got higher repayments and higher interest rates, lower asset value and lower lending. Yep. So there's that. And then you've got the big one, which is of course the demand for mortgage loans. And that's why I highlighted that with China, because to keep the market, to keep stocks prices rising, you have to have debt for somebody to buy those stocks. To keep the property prices rising, you have to have demand. And you have to have not demand for property, but demand for the money. Right. Which means you've got to have increasing debt through bank loans. Once that stops, it's all over. And that's what's going on. I'm waiting for the banks to miss their earnings projections and see just see what happens there as well, because that's going to impact residential properties, but it's also going to impact Australian stocks. This is so many. I mean, most of the ASX is the banks and commodities. Yeah. Yeah. So if all four of the big banks missed their earnings, which is inevitable at some point, then the banks have been, you know, I did this was probably a decade ago. But the banks since the mid 90s, of course, when property took off, the banks have absolutely killed it in terms of share price. Oh, yes. Right. They've been fantastic. But, you know, they're going to roll over at some stage, unless, unless they can pivot to lending to the business sector. Yeah. Right. So you don't do a residential low, but you do a business loan. Right. But the problem I think with that is you could lend to business. But if everybody's mortgage deep in household debt, there's not going to be a lot of that's why the economy is not that strong because what are the incentives for business? Because that's been impacted massively. Yeah. With these last changes also. Well, you know, if you come a long time and say, hey, Steve, I want you to buy these computers. And I go, oh, Tom, I'm just no deep in debt with my mortgage. Well, you know, you're going to be selling less computers. Right. Businesses are also running really tight. I speak to people every day going, mate, I am not opening an Australian business. I'll open something offshore. Yeah. Yeah. And we'll sing a ball or somewhere else. And I'll run my services back to Australia. But people don't have the margins to invest and keep growing in Australia, especially in property. I think it's just, look, I think it's going to nobody likes paying tax, right? You know, two certainties in life, death in taxes, right? And people hate both of them. So I get that. But at some point, as I said before, I think what we do is we get bigger government deficits in and defense spending. And that will, that will soften the blow. But that doesn't mean, in my mind, that doesn't mean, oh, I should rush in and buy a property. Because again, like I was saying before with the American, you know, the world's changing. There's a little bit of this stuff of this, the assumption is not that you're going to, hey, Jacob, buy a property, you'll yield eight percent. The property yield is still garbage, right? Two percent, right? So you look at that and say, okay, well, even if the property goes nowhere for a decade, I'm getting two percent, well, you can get five and a half in cash, right? But the other issue is the underlying assumption is, yeah, yeah, the yields crap, but don't worry about it, because the prices are going to go back up again, right? And that's why I'm saying, okay, they always do Steve. What if they don't? But no, they do. It's different now. You see, they're all pumping that idea of by the dip. Yes. And it's like, okay, but what if, you know, what if it dips and dips and dips and dips? Right? Which looks entirely possible, given that all the incentives have burned down. And the fact that I've done eight, six, four, this episode was general information and it's you. education. Not financial advice. Yeah, the more you think about it, hey, it's looking for an actual situation. It just feels like any stock market strategy is like a lot of the things. The illustration, the recommendation to buy or sell past, but it's not a reliable indicator of business changes. Consider your own circumstances and seek advice from a license to lose before making investment. But like pricing up from all out, Tom. Yeah. You can't distribute money to low earning family members as easily like this. So many incentives that have evaporated with the last budget. Yeah. And that's why I say the world changed. Right. They're saying to people, hey, we're not interested in capital gains. We're interested in income and income means you got to employ people. And the reason why is simple because we need to build stuff now. Right. The idea that we get everything from China is over. Right. So we've got to start building some stuff. And to do that, first thing you have to do is get capital. Right. So how do you get capital? If the banks are going, no, we just lend into jolly Roger on the residential. So it's like, no, not you more, you know, close that down and start and bring some. I mean, look, there'll be incentives that we haven't thought about that happen over the next chapter. Yeah. It's 10 years that we don't want to thought about to stimulate some parts of the economy that the government want. But we're almost certain that they'll have much more of an impact on everyone's everyday lives. Yes. Yeah. And they have done to say, we're at, we want to steer this part of the economy. Hear the incentives go wild. Yep. Agreed. Agreed. That's why I say, you know, the big, the big thing is the world has changed. And the second thing, as I said, the thing that concerns me is, if we get a really bad blow up in the market, and we get a financial crisis again, Jesus, it's going to be like, you know, stack that on top of the wars. And see, you know, have some dry powder. Well, they're talking funny, not funny. They're talking about having a diesel shortage again. Right? You know, this is what I mean. We, we sleepwalking into these problems where I personally think if you get across it, you can go, well, hang on. How do we have this, you know, it's six month war with Iran. There's oil shortages, but apparently nobody's worried about it. Right? We're all on that. We're all numb. But Jacob, it's true. You know, but that's how you get into trouble, right? Because it's what happened in the GFC. There were people saying, guys, this shit's getting really bad and out of control. It'll be all right. It'll be all right. Boom. Right. And, you know, that's why I say you can't, there are people responsible that should be saying, listen, we need to, we need to dial this back a bit. Yeah, but they dial it back. They'll set off alarm bells and potentially cause the panic. That's exactly right. You know, nobody wants to dial it back because then they get the blame, right? So what's, so what's the edge? Like one problem, obviously, my massive problem is hindsight. Yeah, let's not leave everyone sad. Okay. Here comes the cat video because I'm feeling heavier. It becomes the dolphin story. No, I just, I just want to highlight there. I, I bang on about this a bit, but it just, when you look at statistics and we use them as well, but what, what we try to do is give people a, a dynamic set of statistics. And what I mean by that is saying, when you look at think, I read an article about superannuation, right? And about the returns. And, but the problem was it, it has a start date and a finish date. And there's no, you know, most of us dollar cost average into super. So the outcomes will be different, right? Most of us have different asset allocations. So the outcomes will be different. So, but when you get a static state, a static statement is something like the average returns about eight to 10, well, we know that's clearly wrong, right? There's, the returns are 16, 11, four, eight, it depends where you start and when you finish, it depends on your rebalancing strategy, depends on your asset allocation, all that sort of stuff. But that makes it dip more, well, it makes it difficult to use a blanket statement, right? So if people say, oh, you know, what do you expect to happen for the next decade? I can say to people, look, generally in the United States, where the Cape is 42, I would probably expect somewhere, you know, below five percent. Now I could, I could be wrong, but I'm using as much data and valuation stuff as I can. If I said what the standard argument was, oh, you know, Tom, eight to 10, it's like, well, okay, where is that happened with the Cape ratio at 42? Because it's only ever happened two times before and each time the decade's been a nightmare. So from, that's where you get those statements of, you know, just investing property, it always goes up. Okay, but that's really always go up, you know, just investing stocks, they go up, right? And it's like, no, it's a little bit more specific, it's a little bit more nuanced than that. And so I've just, what I'm just trying to do is give, when, when you read an article, just read it with that idea of saying, okay, is this a timeless statement, or is it just a simple like, oh, yeah, you know, eight to 10? Well, that's how every financial advisor earns a living. Well, generally, I can beat the average. Yeah, because it just makes it easier. Yeah. You know, and I'm not defending them, for God's sake, but I can understand why they say that because it's really nuanced, right? But you don't walk in and go, hey, Steve, could you spend five days explaining to me what I'm expected to get for the returns? And then that's a, I don't know. The first thing someone asked me when they call us and say, hey, I want to do something with you guys and not really sure what you do. What do you return? Not advice. Yeah, it took me to go, oh, well, X. And I go, I don't know. But, you know, we could, you know, we could say, we could honestly say, here's what we've talked about. And I've all gone gangbusters. But that doesn't mean that every chip we talk about is going to be an absolute, you know, bragging sensation, right? And that's what makes it important to understand and understand the characteristics of the investments, right? Because then you go, oh, okay. So what you're saying is, you know, it could be within this range. And that's based on history. Yeah. We're going to get told off for talking about returns. Yeah. Well, probably. It's just, it's not advice, mate. Anyway, yeah, it's, look, it, you know, the bottom line is no one really looks after your money as much as you do. And it's really worth investing time and effort to do it. Because as we've said, you know, you can make one or two great decisions and it changes your life completely. Lots of people have bought one property and have made an absolute bucket load of money. Now, if they don't do stupid things, they'll have a really nice life, right? From one, only one simple decision. There are people who make one decision and it completely ruins their life. So, you know, you've got to get more educated about it, understand the nuances and then go, okay, now I'm going in with my eyes open. Yeah, even if you don't manage your money, it gives you the tools to question the people that are. Yeah, yeah. Final note, if you're listening to the podcast off, you've listened to it for a while, please leave us a review. It's awesome. Please. We've been sat at around 90 for ages and I know there's more people listening. Right. It's gone. Give us a review. It'd be great. Other than that, let's leave it there. We'll catch it next week. See you then, Jent. Thank you. See you folks. [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO]