dtcwee: The Value of Nothing

What if it's actually the houses? I spent the last six months in Australia without a car, looking to do some travel, home repairs, and a little blogging about life without a car. That's all come to an end.

Cheap labour may no longer come to you.  Rich western nations may be souring on immigration . Longer term, the global supply of working-age people will shrink . Services inflation outstrips goods inflation , particularly in areas which are hard to automate.

As if you needed another measure to tell you Australian house prices are out of whack. The Price-to-Earnings (P/E) ratio tells you how much people are willing to pay for an asset compared to how much it earns. Currently, the P/E for the world's 100 largest companies is 26.68 . A suburban Adelaide home worth $1.2M bringing in $750 a week rent and costing $12,000 per year (council rates, insurance, maintenance) has a P/E of 44 . [1.2M / ((750*52)-12,000)] via GIPHY

Borrowing to invest in an asset will not simply multiply your returns. It is more accurate to say that leverage amplifies the difference between the returns on the asset and the cost of borrowing. This post was originally published on 18-Dec-2016. I have since made an interactive leveraged returns calculator . Short Form Calculation Return on Equity = Interest Rate Differential x Debt to Equity Multiple + Asset's Return For example: 8:1 Debt to Equity at 4% debt interest with an asset return of 5%: 1 x 8/1 + 5 = 13% Visualisation looks a little something like this: ROE Alpha (Y-axis) by Return-Borrowing Differential (Z-axis) by Borrowing (X-axis)

Eastern and Western humanism has lost to Capitalism. Representative democracy promised ... representation. Neo-Confucianism promised stability through progress. Both seem to have stalled. Gloom now surrounds these humanist ideologies from the East and the West. Capital markets are like, "number go up". What gives?