dtcwee: The Value of Nothing

Why you should want to work. The fable of the 'The Ant and the Grasshopper' is often used to prime the work-shy for shame and deprivation.

It's not the size, it's the growth. As the world ages, it's worth wondering if retiree benefits will increasingly drive inflation through supporting elderly buying power and enabling them to exit the labour supply. Let's plot pension replacement rates , a measure of pension generosity, against 2023 inflation for the G20, the world's largest economies. In short, countries' circumstances and systems are too diverse for a strong relationship between pension generosity and inflation, but let's break it down further.

TLDR: Individuals pay the most tax, followed by large enterprises (Government-owned and publicly listed). 📊  Code generated by Gemini. Figures from FY 2023-2024. Company tax breakdown (Into large corporates and other) estimated from FY 2022-2023.

It’s claimed that Australia’s stagnant productivity is due to a lack of business investment . That's an easy argument: if companies aren’t investing in better technology and equipment, workers can’t become more efficient .  In fact, business investment has paced the overall economy for decades . The real issue isn't lack of investment, but where that investment is going, and what's driving the rest of the economy.

Why not? Calculators sure changed mine. A lifetime ago, in a safe but stifling job, I found an online mortgage calculator that visualised the power of extra repayments. Having just borrowed to buy a home, it opened my eyes. I was hooked. Learning that early escape from debt was possible made it my obsession. I checked that calculator after every stymied project and pointless restructuring. So, like, twice a day. With few opportunities to flex my skills in my IT role, I wrote other calculators to rationalise and strategise my approach to life.

Can testaments be created that outlast heirs? The Native American practice of looking forward seven generations sounds noble but is essentially vague. Still, it seeds the idea for an investment math exercise that could provide not just for seven generations, but the generations beyond. (Fund Manager Conference Call)

9 years on, Britain is not a smoking crater, so Brexit - and de-globalisation by extension - wasn't all that bad, right? Wrong. And this chart proves it.

"Tariffs are paid by the importer, not the exporter, dummy." And just like that, the trade war is over, everyone stands down, and resumes filling their online baskets. LOL, no.

The British Empire hit peak size in 1919, gaining Axis territories through the Treaty of Versailles. Over the coming decades it ceded cultural, military, and economic power to the United States. How did this play out for Britain's investors?

Global passive investment funds have a large allocation to local shares. Why? It's 2025 and I'm spamming the proceeds of my house sale into the market. Yeah, I've decided to walk the minimalism talk ("the value of nothing") and become homeless. No wussing out on investing into Trump-world 2.0. It's time in the market, babes. My vehicle of choice are ASX-listed, all-in-one, diversified ETFs (DHHF, IGRO, VDHG). However, despite Australia having 2% of global market capitalisation they have around a 35% home bias towards Australian shares. Furthermore, my superannuation fund has a 45% allocation to Australia. Why? What's with this group-think? And is this going to cause regrets later? via GIPHY

(Yeah, you know me.) "All presidential terms that coincided with negative average annual returns occurred under Republican leadership." ( Nightlife Finance 26-Nov-2024  on US politics and the stock market). Trump is ... (checks notes) ... uh oh.

Westerners hearing of Japan's declining population often comment, "Gee, that must be nice." Let's just stop immigration for a bit, they say, until infrastructure, housing, and services catch up. If immigration is inseperable from progress, so be it. If Japan's being stuck in the year 2000 since 1980 hasn't been disastrous, then stopping time in 2025 should provide ample comfort. As much as that sentiment comes from a place of contentment with the way things are (if not discontent with the way they are heading), it misses something important.

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)

 ... not a human guarantee. When someone sanctimoniously claims something is a "Human Right", they often mean that they should get it for free. So what does it mean that housing is a human right?

The cost of kids vs residential care. It used to be that children were a retirement strategy. You'd gently pass away in your mortgage-free bed surrounded by loved ones. Old folks' homes were for lonely deviants who failed at family formation. Let's compare ...

I used to agree with the mainstream view that an aging population was deflationary. The logic: old people don't buy new stuff. Real world examples: Japan, Singapore, Germany, etc. If inflation did pop its head up, governments would reflexively smash it with higher interest rates, never mind the resultant unemployment. Why? Well, the US did it in the 1970s. Since then, much of the neo-liberal project has been to transfer power from workers to consumers. Voters were happy with that trade-off then, so they probably would be again. The numbers stack up politically. Inflation affects everyone. Unemployment only affects workers. I don't work. I'm team higher unemployment. Anticipating a future of stable or falling prices, I relaxed going into the COVID pandemic.

Inflation in Australia may be driven by corporate profiteers, but not who you think. 

Declining labour share of income is no sign of foul play. "Productivity and profits are up, but real wages are down." is an increasingly common refrain, implying that business and government collude to deprive workers of their fair share.

Which industries are ripest for technological disruption? Australia labour productivity and value-add by industry.