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Peter Switzer
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+ 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

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

Friday, November 16, 2018

It’s freaky Friday when I cop a barrage of insults on twitter from the Armageddon Army, who firmly believes that fire and brimstone is heading our way when it comes to house prices. I don’t know if this is a coincidence but the tsunami of taunts and reckless ridicule seems to build up to a crucifying crescendo around 6pm on the last working day of the week for most. 

I have wondered if the vitriol towards my more measured views on what happens to house prices is somehow linked to the country’s happy hour, which seems to create a lot of unhappy economics commentators.

In a nutshell, (and I use the word ‘nut’ without any hidden meaning meanness), I don’t think we’re in line for a 40% house price collapse, which featured in a 60 Minutes piece a few weeks back. This was picked up by sensationalist media outlets and lots of people were spooked by the headline.

To ensure that consumers don’t get too scared, I’ve attempted on my TV show, my radio segments and on this website as well as on programmes such as Weekend Sunrise and the Sky News breakfast show, to explain that a lot of credible experts are not fearing Armageddon for house prices.

They see substantial falls but these aren’t so scary compared to the big rises in prices in Sydney and Melbourne. This chart actually shows how significant the house price falls have been over the past 12 months.

As you can see, Sydney is down 7.4% across the city, while Melbourne is down only 4.7% but certainly some suburbs have fallen more, while others less, which explains the 4.7% figure in the Windy City.

One less motivated critic of twitter asked if I’d be more negative if an exogenous shock came along. An exogenous shock is often called a ‘black swan’ or surprise event that shocks smart people and economies. And if China or Donald Trump did something crazy to rock stock markets and we had a stock market crash, I’d be more negative on house prices. And if it caused a recession, I’d be even more negative.

But I think the next US recession is more likely in 2020 or maybe 2021 and the stock market will keep rising, with volatile ups and downs for a year or so. That helps me believe that house prices here will fall but not collapse.

And this week’s economic data makes me even more supportive of my measured view on house prices. In case you missed it, let me recap:

• Employment rose by 32,800 in October. Full-time jobs rose by 42,300, but part-time jobs fell by 9,500. Economists had tipped an increase in total jobs of around 20,000.

• Unemployment was steady at a 6-year low of 5% in October. In trend terms the jobless rate fell from 5.2% to 5.1%. In original terms the jobless rate in October was 4.77%  – the lowest rate in almost eight years!

• The wage price index rose by 0.6% in the September quarter, following a 0.5% increase in the June quarter. Annual wage growth is up to 2.3%. That’s a 3½-year high!

• The monthly Westpac/Melbourne Institute survey of consumer sentiment index rose by 2.8% to a reading of 104.3 in November. The sentiment index is above its long-term average of 101.5 and any number above 100 says optimistic consumers outnumber pessimistic ones.

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 2.6% to 119.8 in the past week. The index is above both the average of 114.2 held since 2014 and the longer-term average of 113 held since 1990.

• The NAB business conditions reading, which tells us how businesses are feeling right now about how well their business is going, eased from +14 points to +12 points in October but the long-term average number is only 6! This is a very positive reading of how business is thinking about the economy as it affects them now.

This follows the Reserve Bank telling us that it’s pointy-headed figuring says we grow at 3.75% this year and next! If they were tipping low growth and rising unemployment, I’d be on the side of my Freaky Friday ‘friends’ but the Big Bank is more positive than me! And that’s saying something.

What about the stock market? Could it be the trigger for an economic slump and house price collapse? Well, Citi keeps tags on certain indicators and before the dotcom crash, 17.5 out of 18 indicators said a crash was coming. Before the GFC, it was 13 out of 18 but if the debt rating agencies had been more frank about collateral debt obligations, maybe the number might have been 15/18, which would have been ‘red light’ flashing time for people like me, central banks and chief economists, who were hoodwinked.

The latest Citi score in July was 3/18. I’m trying to get the latest but I’d be surprised if it’s more than 5/18, with Trump’s trade war and rising US interest rates possibly adding some negatives that encourage bears to head towards stock markets.

Just to ensure that if I’m not kidding myself, I checked out some respected economists and property experts to see what they think about Sydney house prices going forward. Here’s what they told me on Thursday.

Craig James, chief economist at CommSec said: “The fall so far is 8.2%, after rising almost 75%, so perhaps there’ll be a decline of 10-12%, before going sideways for a time.”

AMP Capital’s chief economist, Dr. Shane Oliver, who a few weeks ago pushed his forecast from 10-15% to 15-20%, emailed this to me: “Yep, no change there, so still at 20%.” And that’s top to bottom, so if Sydney is down 8% now, he’s expecting a worst-case scenario of another 12% fall.

Economist Marcel Thielan from Capital Economics gave me a nice summary of what this respected economics outfit is thinking about our house prices: “We don’t currently have forecasts for house prices at the city level, but I’d like to make a few observations,” he said. “We are forecasting a 12% fall in house prices across the eight capital cities from their peak.

“We estimated last year that house prices in Sydney are more overvalued than in any other capital city. Prices in Sydney have now fallen by 9% from their peak but we estimate that they are still 25% overvalued. That suggests that prices will fall more sharply in Sydney than elsewhere.

“Our sales-to-listings ratio for Sydney has rebounded a little in recent months (see chart below) but I suspect it will fall again soon. That’s because we only have reliable sales data until July, as it takes time for registrations to take place. But we already know that new listings have surged by 30% since July, so unless sales also jump by at least 30%, the ratio will fall again. At current levels, the ratio suggests that prices will keep falling for a while yet. So by early next year prices will probably have fallen by more than 10% and I’d expect them to eventually fall by at least 15%.”

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Is the stock market ignoring a damn good economy?

Thursday, November 15, 2018

In case you missed it, the Oz economy has had a pretty good week when it comes to data that tells us how we’re doing growth-wise. Therefore the big question is: why is the stock market ignoring our rude economic health?

Let me recap on what the data show-and-tell has told us this week. Here goes:

The wage price index rose by 0.6% in the September quarter, following a 0.5% increase in the June quarter. Annual wage growth is up to 2.3% and that’s a 3½-year high!

The monthly Westpac/Melbourne Institute survey of consumer sentiment index rose by 2.8% to a reading of 104.3 in November. The sentiment index is above its long-term average of 101.5 and any number above 100 says optimistic consumers outnumber pessimistic ones.

• The weekly ANZ-Roy Morgan consumer confidence rating rose by 2.6% to 119.8 in the past week. The index is above both the average of 114.2 held since 2014 and the longer-term average of 113 held since 1990.

• The NAB business conditions reading, which tells us how businesses are feeling right now about how well their business is going, eased from +14 points to +12 points in October but the long-term average number is only 6! This is a very positive reading of how business is thinking about the economy as it affects them now.

• The NAB business confidence was the only bummer. It fell from +6 points to +4 points in October. The long-term average is +5.8 points.

• This one surprised me with the housing sector under price pressure. Total new lending commitments (housing, personal, commercial and lease finance) rose by 3.6% in September to a 10-month high of $71.8 billion. Lending is up 6.9% on the year, which suggests that the negativity on houses might be a tad overdone, thought this is a September figure and we’re now in November.

According to the Australian Institute of Petroleum, the national average price of unleaded petrol fell by 6.7 cents a litre last week to 149.4 cents a litre.  This is the biggest weekly fall since the week ended 30 November 2008!

The average credit card balance rose by $3.23 to $3,221.05 in September, up from $3,217.82 in August. And while spending too much on the fantastic plastic might worry responsible types, it’s a good sign for the economy.

Working against this good economic news is the hangover of the Trump-China trade war, which 35% of fund managers in a Bank of America survey said was their chief concern. This took prominence over fears about US interest rates rising too quickly and the falling oil price, which might be saying the world economy is not as strong as we expected six months ago when stock prices were higher.

On the local front, there’s the black cloud of what the Hayne Royal Commission will recommend to change the behaviour of our financial institutions. And then there’s the Government’s response, pre-election, which will have to be hard to impress voters. And there’s Bill Shorten’s promised response, which is bound to be more aggressive.

Our banks are a big part of our stock market and when they get out of the woods, I suspect our stock market will also. My only fear is that we’ll have to wait until after February to find out what the political parties want to do to change our banking, insurance, mortgage broking and other financial services.

The best time for a stock market is December to February, which means the most likely way we’ll get a stock market turnaround will be via a Trump deal with China. I’d like to say that I’m absolutely sure that Donald will do that to help create a Santa Claus rally, which we’d participate in, but, if I said that, you’d know I was lying. Mr Trump is the most unreadable politician ever!

My prime hope is that this current economic story can be sustained until we know what’s going to happen to our banks, regulation-wise. And if that happens, the stock market might actually start to reflect an economy that the Reserve Bank says is growing at a strong 3.75% this year (and next).

Go Australia!

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Why are some Australians rooting for a house price Armageddon?

Thursday, November 15, 2018

The subject of house prices and the excessively aggressive reaction from the ‘Armageddon Army’ (AA), as I call them, makes me wary of continuing the ‘debate’, which on twitter looks more like a pub brawl!

On two Friday afternoons in a row, the twitter guns have fired up against my proposition that the 40% house price call out there seems excessive. I have supported the economists and property monitoring experts out there, which apparently have zero competence and credibility, according to the AA. Central banks are in the same category, with one enemy arguing that they missed the coming of the GFC. This militant tweeter seemed to ignore that debt-ratings agencies pulled the wool over everyone’s eyes, until a smart hedge fund guy started looking into what was in those damn CDOs (these were parcels of home loans called Collateral Debt Obligations, which were thought to have AAA quality but they didn’t).

I suspect that if CDOs had been rated properly, central banks would have been aware of what might happen, just as the smart hedge fund guy did, who later starred in the film The Big Short.

Anyway, on the weekend, as if out of respect for the looming Armistice Day, the guns went quiet. A turning point could have come from a decent bloke called Seton Lillas who tweeted: “Crikey, what’s with all the aggro towards @peterswitzer? He seems like a good dude.”

That brought in others who recognised that I’ve had a history of debating the issues because I didn’t want people to sell their houses, as some did, during the Steve Keen house price fear days. By the way, Steve is a mate and we debated this at the time in my Sky Business TV show and I’d always conclude with: “That’s Steve Keen and I hope he’s wrong.” And he’d then add: “And so do I.”

Steve is smarter than me. We studied and taught together at the University of NSW. And he was right on forseeing an economic collapse linked to a possible financial crunch before the GFC. And he was lauded for that. However, he was wrong on the post-GFC house price collapse and predicting a recession two years ago and now owes me and my wife a meal in the most expensive Chinese restaurant in London!

That’s what reasonable, economic debaters can do — agree to disagree — and then let history sort out who’s right.

However, this isn’t just an academic debate. As with all of my economic/market/political commentary, my interest in the subject is to have the best guess on what might happen in the future. If I’m right on house prices i.e. that the fall will be a more measured 15-20% over two or three years before going sideways then resuming a rise, then consumers who aren’t intending to sell their homes don’t have to be spooked. They might remain more confident, spend more money, borrow more money, help businesses grow and add to employment, which is the best kind of social welfare imaginable.

I disagree with the ‘big bubble bursting’ scenario because respected economists, the RBA, the IMF, property forecasting businesses and others believe that the sell off won’t be akin to an Armageddon.

I got it right fighting those who tipped a Great Depression, those who tipped a house price collapse after the GFC, those who argued we had to go into a post-GFC recession, those who thought the RBA was right holding interest rates high in early 2008 and later doing the same thing again in 2011. I got it right with my “ buy the dips” on the stock market since 2009. My 7000-call on the S&P/ASX 200 for this year was a stretch but it was made with a lot of ifs and buts attached to the prognostication.

I never expected our stock market would fight gravity and underperform as much as it has but it has had to deal with the collapse of the mining boom, APRA’s crackdown on Chinese and property investor borrowing, the Royal Commission’s negative impact on bank lending, someone like Donald Trump as President, who then would attack China with a trade war! That I admit to but after 12 years as an economist academic and 34 years in newspapers, radio, TV and now websites, I should be able to make comment to hose down those who would predict doom and gloom primarily because they ‘know’ all bubbles burst.

One comment that I put out in order to make my attackers think (and no one to date has addressed this) was my answer to why should Australia be different to Ireland, the USA, Spain, Iceland and others, where house price collapses followed the GFC? As one attacker/tweeter put it: “I wonder if people in these countries thought it could never happen here?” or something equally profound.

I must admit that this tweet did make me think, which, of course, is great for progress. What I came up with was the fact that in all these countries, the house price falls coincided with a serious recession and the near collapse of their banking system. It was a credit crunch never seen since the Great Depression and we missed out on this.

There were lots of reasons for this and while I don’t want to get into another argument on this subject, the big question for all my attackers and believers in the ‘big bubble burst’ speculation is: “Do you think a recession will soon help you be right?”

If a recession was imminent, I’d back off being less pessimistic about house prices. Last week, the RBA tipped that we’ll grow by 3.5% this year and next. When we grow over 3%, unemployment falls. The big Bank thinks unemployment will fall from 5% to 4.75%. If they’re right, then I think a house price Armageddon is unlikely, at least for a couple of years.

Of course, if a global black swan trumps the USA and Wall Street goes crazy scared, then my attackers could be proved right. But I still think 40% is a huge call.

All bubbles burst but no one has ever proved that the bursting is the same because people, economies, government reactions, central bank responses and many other things can determine the price fallout.

Undoubtedly, I’ll have to deal with a twitter reaction to my maintenance of my less gloomy view on house prices but I’m intrigued about one guy’s comment that I have a vested interest in keeping prices up!

That shocked me but it made me think: “Are these over-reactors actually praying for a house price collapse? Are they waiting for a buying opportunity? Do they want to be proved smarter than people like me and the experts I’ve relied on?”

I railed against the house price boom, calling it ridiculous and even advised people on my radio programme that they should wait for the price turnaround, as they stressed about FOMO — the fear of missing out. Now we have FONGO — the fear of getting out — but how many people want out?

I reckon the most worried are those who bought off the plan and have seen the value of their property fall and have found banks aren’t lending as easily and as cheaply. The current times are bad for them but they were acting as investors and investing brings risk.

On the flipside, price falls now advantage first home buyers and upgraders — it’s swings and roundabouts.  But I don’t want speculators to keep telling us house price devastation is around the corner for no good reason.

The timing of the next recession will be really important to what happens to house prices here and at the moment, the experts (who have little credibility with my attackers) are more worried about 2020 than 2018 or 2019.

Unlike what I used to say to Steve, all I can say about these respected economists/experts is: “I hope you are right.”

PS. Insulting tweeters will be blocked! I love debate but insults and name calling just aren’t necessary.

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

Wednesday, November 14, 2018

The Morrison Government is riding to the rescue of small businesses looking for loans to expand their businesses. This is good government interference.

In contrast, the failure of governments in the past to rein in bad banking behaviour is leading to a nanny state mentality, which even a court had difficulty accepting, as ASIC went after Westpac for irresponsible lending.

Let’s sum up this good move of the Government to provide $2 billion to the small business sector to reduce the need for the nation’s entrepreneurs to always put up their houses as security for ‘having a go’.

Remember, these business builders are not just trying to create wealth for themselves, they provide jobs, training and they create demand for other businesses.

So it’s right to encourage such activity because there’s a collective pay off from more and better small businesses.

What will be created is a small and medium enterprise (SME) securitised fund, which super funds and other big end of town investors could put their money into. This pool of money would then be despatched to SMEs via smaller banks and fintechs and other non-bank lenders.

The AFR says 80% of loans under $2 million still come from the big four banks and the interest rate is often 4% higher than loans where a house is put up as collateral. The Government’s involvement and backing should help lenders access cheaper money so lower borrowing interest rates should result. But, more importantly, smaller businesses will actually get access to loans more easily.

There has been a fast growth of alternative lenders to SMEs but the interest rates can be really high. That said, I know many business owners who have complained that it’s not so much the interest rate that worries them, it’s actually getting their hands on money. Being small has often meant you were treated as a bad risk but with the success of tech companies such as Afterpay, no government can afford to run an economy that doesn’t try to encourage ‘new age’ businesses.

That’s good government. Now for a case of bad government.

The consequence of hopeless banking and insurance regulation over many decades resulted in the Hayne Royal Commission. The revelations have shown how hubris from our financial institutions had gone unchecked and the poor supervision can be slated back to the likes of Scott Morrison, Bill Shorten, Peter Costello and Paul Keating and their respective Prime Ministers, who fiddled while their constituents were being burnt by bad behaviour from banks, insurance companies and other financial participants.

The revelations, the adjusted share prices downwards, the remediation processes that will follow and the compensation are all good results from Labor’s insistence that a Royal Commission was needed, even if it was driven by political opportunism. The results have been significant and, ultimately, beneficial.

However, I fear the nanny state reforms could jeopardise borrowers’ access to loans. And while that’s a social anxiety problem for these people, there’s a bigger concern: less loans, via tougher processes to work out if someone can afford a loan, could hurt the economy and job creation.

Yesterday, a judge refused to accept an agreement between ASIC and Westpac, which was accused of breaching lending laws and was to pay a fine of $35 million for their misdeeds. The judge argued that the deal didn’t say how Westpac had breached lending laws so he wasn’t sure that a law had been breached!

This might sound confusing but it’s a simple case of a general test for a borrower’s ability to pay back a loan versus a specific one. The first way is quick and relies on averaging the expenses of someone, based on their income and some other measurables.

However, since the Royal Commission, banks have been forced to pry into the specific costs of a borrower’s life. So if there are two borrowers of $1 million for a house and person A owns her car, has kids at public schools, doesn’t use credit cards much and has a great record of saving, A gets the loan. But if person B on the same income, with three kids in private schools, two cars on a lease and a wallet full of credit cards, then B might be told to forget the loan.

And maybe B should be told to borrow less. I reckon, however, that there’s a lot of Australians out there who extended themselves, felt the pinch of over-borrowing but muddled along. And the pay off was that they ended up in a more valuable house, despite their time with mortgage misery.

Sure, more care with loans is a good idea but the feedback I’m getting from the mortgage industry is that banks are too scared to speed up the process. And they’re saying “No” far too easily. And what’s the result? Borrowers are going to non-bank lenders and paying higher interest rates!

Two weeks ago, this is what CommSec’s Craig James revealed about the latest in loans: “Loans and advances by non-bank financial intermediaries rose by 11.4 per cent over the year to September, up from 10.3 per cent in August and the strongest annual growth in 11 years.”

“This would not be happening if there had not been a Royal Commission. While greater competition in the financial sector is welcomed, Reserve Bank Assistant Governor Michele Bullock recently said that ‘lending in the less regulated sector could increase macro-financial risks,’” James pointed out.

The Treasurer, Josh Frydenberg and the PM have to come up with a gutsy call on these excessively strict bank tests on potential borrowers, or else the economy will suffer and borrowers will be stopped from buying property. And this could exacerbate the fall in house prices.

Of course, the problem is that an election looms by May and Labor wants the Royal Commission to give everyone their chance to point their fingers at the banks and insurance companies. But I reckon the more important job is to give those who’ve been screwed the chance to get compensation.

We can’t have a bank bashing blood sport ruin the economy that the Reserve Bank is set to grow at 3.75% for this year and next. And when an economy grows so fast, more jobs are created, pushing unemployment down.

That’s more important than having pedantic borrowing rules that force borrowers into higher interest rate alternatives or deny these people funds. The Government now has AFCA (the Australian Financial Complaints Authority), which I wish they’d tell people about. This will give aggrieved financial industry customers a low cost way of getting sorted, if they’ve been mistreated.

This is decades overdue and is a good idea. However, I worry a looming election means the Government won’t do anything to make it easier for banks to lend. And if Bill becomes PM, I can’t see him cutting the banks any slack, which could have negative economic effects.

Nanny state actions can sound good but they can have bad, unexpected implications.

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

Tuesday, November 13, 2018

The big stock market question whether the current stock market sell off is a correction and buying opportunity, or the start of a market crash, has been resuscitated overnight, with the Dow Jones index down over 500 points with a couple of hours left to trade (when I jumped out of bed).

This follows a nice rebound in stocks after the midterm election result, which didn’t surprise key market influencers on Wall Street but wasn’t exactly what the Street wanted. A win to the Republicans in both the House and the Senate would have augured well for US economic growth but it was always going to be a big ask, given the voter interest by anti-Trump forces.

With the election out of the way, what negatives could be behind today’s negativity?

The trigger for the sell off was bad news for Apple and it has continued the questioning about the share prices of other big tech names. And this piles on top of other concerns, which I’ll list, for brevity purposes. Here we go:

• The US dollar is creeping higher.

• Global economic growth is stuttering, with the EU and China not as robust as expected, say, six months ago.

• The US-China trade war is still out there and what Donald does next is anyone’s guess. And it’s not pro-stock prices.

• The US economy is robust so concerns that the Fed will raise interest rates too quickly represent another nagging doubt for investors.

• The oil price is falling and US stocks don’t like this development.

As you can see, there are lots of reasons why the stock market is fighting to beat gravity. Throw into the mix that a key supplier to Apple — Lumentum — cut its outlook for next year, which instantly raised doubts about the demand its getting from the late Steve Jobs’s ‘baby’.

Apple

Source: finance.yahoo.com

Six weeks ago, Apple was a $US232 stock. It has lost 16% since October 2 and if it loses another 4%, it will be in bear market territory. But to put Apple into context, since May 2016, it’s up nearly 100%, so a 16% pullback might be overdue. And let’s face it, this China trade war wouldn’t be the ideal setting for a company that sells about $18 billion worth of products into China per quarter!

In July, the Washington Examiner looked at the effect of the Trump trade war on Apple’s sales. “Revenue from the world's second-largest economy grew 19 percent to $9.55 billion, the Cupertino, Calif.-based company said in a statement,” it reported. “The numbers show Trump's 25 percent tariffs on $34 billion of Chinese imports and President Xi Jinping's retaliation have yet to dint Apple's performance.”

However, economies work with lags, so market junkies are wondering if the trade war is creating a casualty out of Apple.

This Apple problem underlines what has happened to the famous FAANG stocks, which include Facebook, Apple, Amazon, Netflix and Google (Alphabet), whose share prices have been growing faster than was rationally believable.

To explain why US stocks are so negative (apart from the list of big economic issues), the tech stocks have had a reality check. They’re still good companies but their values were just too elevated. “The FANG trade is dead and the market is struggling to find a replacement,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group in the US. (CNBC)

Meanwhile Goldman Sachs fell 7% after a stoush with the Malaysian Finance Minister, who demanded a return of fees paid for what was seen as bad advice to a publicly-owned investment fund.

To throw fuel on a stock market fire, news out says President Trump is looking at slapping a 25% tariff on cars made outside the USA. His thinking is that the strongarm tactics worked on Canada’s Justin Trudeau, so he might double up on global carmakers who sell imported vehicles into the States.

All this runs ahead of a meeting between the US President and China’s Xi Jinping in Argentina on November 30. That means we could have 17 days of Donald Trump playing ducks and drakes with markets, countries and the whole world. And it explains why stock markets (that hate uncertainty) are struggling in 2018. We’re down about 2% year-to-date, while the USA’s S&P500 index is up only 2%, so we need some good news sooner rather than later, or else that usual Santa Claus rally we see in December might be kissed goodbye.

It will be Donald who’ll be doing the kissing and that’s an image I’d rather do without!

I still think we’re looking at a correction not a crash but one silly, impetuous, false move by the US President and a buying opportunity for stocks could turn into a selling imperative.

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Negative gearing: Shorten won’t budge

Friday, November 09, 2018

The AFR confirmed what ex-Communications Minister (under the former Labor Rudd-Gillard-Rudd Governments), Stephen Conroy, told me during the week: Labor will not backdown or water down their negative gearing policy that they’ll take to the election.

Even when I said: “What if house prices are falling rapidly, would they delay it?” And he said “No”. And even when I compared it to Labor’s ill-timed mining tax, when the mining boom was de-booming, he just said all the negativity about the negative gearing changes is just ‘vested interest’ hype.

And while I think Labor has a much more unified and professional-behaving team, who really look like they want to win, they have an aspect to the way they play the game that worries me — they aren’t flexible!

This morning’s AFR tells it this way: “Bill Shorten has stuck fast to his plans to curb negative gearing if elected, likening the effects of the change to turning down the flame under a boiling pot.”

Of course, the Government is now waking up that this is a key policy battleground and Bill is giving Scott Morrison a chance by not being flexible on this big change. The PM says it could KO our AAA credit rating but that’s debateable. But given his position in the polls, it’s worth arguing that.

Bill’s defence is that if you have negatively geared properties, you can keep doing it — that’s called grandfathering — and that’s fair. But when you come to sell your investment property, the policy will have two negative effects that all voters should understand.

First, when you come to sell your grandfathered property, it’s likely that less buyers will show up because property investors won’t be able to get the loans to buy the property because there’ll be no negative gearing on existing properties.

Labor is letting us have negative gearing on new properties. OK, we get that. But when you come to sell that property, it will then be an existing property and therefore future sales won’t attract future landlords and, therefore, the likely price will be lower.

We know that the price should be lower because that’s why the policy is being introduced. As Bill said, he’s “turning down the flame under a boiling pot.”

So in logical terms, this policy is good for homebuyers but less so for home-sellers.

And according to the AFR, once the changes came in, “all new negative gearing would be confined to new properties and other assets, such as share purchases.”

Bill has been in Perth and that’s where he came up with the line: “Property values in Perth have gone down about 13 per cent while the federal Liberals have been in, but apparently when you're a Liberal federal government, these are good property price falls,” he said.

It makes for great politics, Bill, but it’s not great economics. Remember Perth’s property price fall was linked to the end of the mining boom and this reminds us of that poorly-timed mining tax. That was a case of Labor being inflexible. And it’s a part of their game that they become mature enough to change in power.

The great Labor Governments under Hawke and Keating were not excessively left, they listened to business and Keating had the guts to change policies that looked like good ideas but were not working. His backdown on killing negative gearing was a case in point. He also championed a retail sales tax but later railed against a GST.

What I find interesting is that people like Stephen Conroy are telling me that “all credible economists says it won’t have much effect on house prices” and I do know a number of good economists who do say that. However, even though they are good and I always respect their economic figuring, they have made mistakes.

All economic modelling is based on assumptions and they will always determine your conclusions. I really don’t know how we can work out the number of landlords who stop buying investment properties, when the laws come in.

I guess a lot of people will find out how important property investing bidders are at auctions and open house sales but one trend is worth making you think about. Over the last two years, APRA made banks freeze out investors and foreign home loan applicants because they were worried, like the RBA, that house prices were rising too fast. And guess what has happened since then?

Yep, house prices started to fall. If Bill takes away the incentive for property investors to buy, the price drop might be bigger than many expect. If that happens, I’d like to think our PM would be flexible enough to respond to ensure that the property price doomsday merchants end up being right!

One final point. The AFR said the Tax Institute’s Bob Deutsch explained that Labor's changes to negative gearing would apply to all investments, not just property.

“This means that individual taxpayers would need to look at the totality of their investments,” Professor Deutsch said. “For example, if the total of the interest and deductions related to investments exceed the investment income, the excess will not be able to be used for offset against other non-investment income.

“This excess will need to be carried forward for offset against future investment income or capital gains.” (AFR)

Originally, Labor said losses from property and shares could still be used to offset tax liabilities, so this is another huge change that will worry the investing community.

That’s gonna surprise a few investors out there.

 

 

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

Thursday, November 08, 2018

Over the weekend, the house price Armageddon Army (or AA as I call them) ripped into me on twitter when I dared to question their certainty that house prices will crash in Sydney and Melbourne. Of course, just like an old-fashioned street fight, once a donnybrook has started, all those with anger management issues tend to get stuck into the blue like an old western bar fight!

And some of the swings thrown at me came from all quarters of the AA faction — from those concerned about first home buyers, who want a crash to help out young battlers, to ‘market experts’ using stock market analysis to explain why a bubble must burst, to others who think I’m the Minister for High House Prices and the Filthy Rich! There were even people in Chatswood complaining about Chinese buyers pushing up prices and then the Chinese Government, which is now stopping Aussie house purchases, explaining some potential big price falls.

Property and prices is a national obsession and we’re all ‘experts’. But what has got me into trouble is my insistence that the 40% price fall scare headline, which started on a 60 Minutes programme, has been totally discredited by every credible expert imaginable.

Of course, this brought out the expert haters, who I guess prefer to hear the views of non-experts or guess merchants. That one perplexes me because when I’m sick, I like to speak to an expert doctor, even though he/she can be wrong. When my car stops, I need an expert mechanic. And if I was being sued, I’d talk to a lawyer. But for some of my critics, expert economists, who have spent decades studying the Australian economy, the real estate market and their reactions to interest rates, wages, Government policies, consumer confidence, etc., are just dumb hot air merchants worthy of no respect.

What do you do with bush economists like that?

Anyway, just to make my position clear, I thought I’d outline the main reasons I think the house price collapse scenario for the country generally, and Sydney and Melbourne specifically, looks a tad over-the-top.

That’s why I’m putting forward 10 reasons not to be too spooked about a house price Armageddon:

1. Experts from the likes of BIS Oxford Economics and Deloitte Access Economics have predictions that Sydney and Melbourne property prices will fall from top to bottom by 10-15%. BISOE are closer to 10%, while Access’s Chris Richardson might be closer to 15%. AMP Capital’s Shane Oliver was at 10-15% but has moved to 15-20% but say for Sydney, there has already been a 7-8% fall. As you can see, these numbers are a long way from 40% and Armageddon-ville.

2. The Aussie economy is actually growing faster than 3% and when that happens, unemployment falls. Even the IMF thinks we have two years of 3% plus growth ahead. If people don’t lose their jobs, then they should be able to pay off their home loans. And as growth leads to more jobs, this should create more buyers at auctions and open houses.

3. The US economic outlook is strong and the earliest credible prediction of a US recession is 2020, which implies Wall Street should avoid crashing for at least a year, possibly two. And of course, a stock market collapse could rock consumer confidence and feed on to house prices locally. That said, market crashes can spark a flight to quality and property fits that bill. This happened with the 1987 stock market crash.

4. This chart showing how we get corrections but not crashes:

Note, even when unemployment went to 10.4% in the 1990-91 recession, our price fall was around 5%. That said, the 10% fall with the end of negative gearing in 1985 is a worry and I hope Labor checks out this chart!

5. Interest rate rises from the Reserve Bank are expected until late 2019 or even 2020, so the likelihood of mortgage repayments scaring off homeowners and homebuyers is unlikely for at least two to three years.

6. There’s a lot of scary stories around about people going off interest only loans and being forced into principal and interest loans but my research shows that these loan rates are actually lower than interest only loans and the monthly repayments can be lower! That shocked me and we don’t know how many people are involved and it isn’t likely they’ll be kicked off their interest only loan all in one go. And the RBA, who should know about this, aren’t stressed about this.

7. Those worried about our exposure to home loans always point to our household-debt-to-income number, which is very high, even on global standards. But we were really high when the GFC started and we got through those bad economic times without real estate devastation. The Reserve Bank of Australia’s Assistant Governor, Michele Bullock, who heads the bank's financial stability department, in September this year, explained the surge in household debt since 1990. The ratio of household-debt-to-income has climbed to 190%, from around 160% five years ago, and from 70% 30 years ago. In the early 1990s, Australia had debt-to-income ratio lower than two thirds of countries in her sample; now we’re among the top 25%. Ms Bullock points out that a lot of households have a buffer after over-paying their mortgages because rates are so low. Also, as a country, we have more households as landlords, compared to similar countries where companies hold most of the rental stock. That means a lot of these indebted households are helped by the tax office. All up, our household-to-income numbers are not quite as internationally scary as they look when we’re compared to similar countries.

8. The RBA’s Assistant Governor said this five days ago: “Australian banks are well capitalised and profitable, and have sound lending standards and plenty of liquid assets. The major banks are already very close to meeting the Australian Prudential Regulation Authority's unquestionably strong capital benchmarks. This is good for the resilience of the banking sector in the face of any downturn.” If the banks looked dodgy, that could be a trigger for a house price problem but the RBA says the opposite is the case.

9. A doomsday merchant mob, Moody’s, which always looks for reasons to downgrade governments and banks, in June predicted that the worst was over for house price falls in Sydney and Melbourne. I think they’re wrong and we’ll see some more falls but I can’t see them being terribly wrong. Moody’s Analytics housing economist, Alaistair Chan, said dwelling values in Australia's Housing Market are seeing slower growth as a result of past value increases. “Which has exceeded income and rental growth, past supply increases, and actual or expected increases in borrowing costs,” Chan said. “That said, the worst is over, as less housing supply and Australia’s strengthening economy will support income and rental growth, and this dwelling values, beginning next year.” Also, as Chris Richardson from Deloitte points out, our population growth will also help stop prices falling too heavily.

10. Finally, Australians can’t easily be compared to other countries when it comes to home ownership. Our full recourse loans and our passion for property make it hard to look at price-to-income ratios like you might for stocks and say what we’re paying is irrational. We are irrational when it comes to property, like those who have been buying Amazon, Netflix and Facebook on ridiculous values. But many of the people who have overpaid will stick with their properties, as long as they can make their payments. Many who have negative equity won’t know it unless they try to sell it. Being economically rational about what we’ve paid for property shows you don’t understand we Aussies when it comes to our beloved quarter acre block or trendy inner-city apartment.

If my view on the Oz economy was negative and I believed a big global recession and stock market washout was near, I’d be in the AA camp but I think time is on our side.

I learnt from the great Max Walsh, the former boss of the AFR that with most crises or potential crises, we generally muddle through and the economic Armageddon commentators usually get proved wrong.

I stuck with that with my GFC commentary and it’s why I was advising to go long stocks in late 2008. Sure, it took to March 2009 to be proved right but the ‘muddle through’ view proved right, though it was helped by pretty heavy-duty rescue plans created by the Yanks.

Of course, I could be wrong but in all honesty, not one of my critics has the credibility runs on the board for me to dump the likes of the RBA, BIS Oxford Economics, the Economist Intelligence Unit, Moody’s, et al, as well as the history of property prices in this weird country of ours.

Interestingly, I did ask my tweeting critics this question: When have we had a national crash of property prices? One expert came up with 1895 but that was a Great Depression, so it suggests that maybe we need a Great Depression for us to be rocked out of our housing hysteria!

I can’t wish that on us and one reason I rail against excessive headlining of house price collapses is that it spooks consumers and then it could be self-fulfilling.

As Franklin D. Roosevelt once warned: “The only thing to fear is fear itself.”

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

Thursday, November 08, 2018

Given what the Reserve Bank told us on Tuesday when most of us were coping with or enjoying Cup fever, the only argument that doomsday merchants can offer to explain why they expect a property crash, a stock market collapse or a recession sooner rather than later is that the RBA Governor Dr. Phil Lowe is a dope and his team of markets watchers are a bunch of clowns.

And with the Dow spiking over 400 points overnight, reacting to the expected result of the Democrats winning the House of Reps and the Republicans retaining the Senate, it shows that if uncertainties can be removed, such as the China-US trade war, how the key influencers of stock prices still want equities higher.

One tweeter thought he was doing me a favour telling me that the run of local economic data is pointing to problems ahead for our economy. He clearly didn’t take in what the RBA revealed on Tuesday, pre-Cup. 

“The Reserve Bank has pre-empted its own quarterly report by revealing new forecasts,” wrote CommSec’s Craig James. “The economy is now tipped to grow by 3½ per cent in 2018 and 2019. As a result, the unemployment rate is expected to fall to 4¾ per cent by 2020. Having said that – unemployment could hit this target in the next few months!”

Fair dinkum, Dr. Phil is trying to replace me as the country’s most optimistic economist, upping his already optimistic forecasts for growth and unemployment!

As Craig observed: “The Reserve Bank hasn’t changed its policy stance one iota.”

Let’s run through the good economic developments that might explain Dr. Phil’s positivity:

• The jobless rate is 5% but it was 5.6% in April!

• The dollar is 72 US cents but was 82 US cents a year ago!

• The NAB business conditions index rose by 1 point to a 3-month high in September.

• The weekly ANZ consumer confidence index is 116.8 – above longer-term averages.

• The rolling annual budget deficit has fallen to $3.4 billion or 0.2% of GDP!

• The manufacturing expansion is the longest since 2005!

• Job ads were up 3.6% on a year ago.

• The AiGroup services sector gauge fell by 1.4 points to 51.1 in October. Despite the fall, services activity has now expanded for 20 consecutive months – the longest stretch since March 2008. Any number over 50 means the sector is expanding.

• Retail trade rose by 0.2% in September, after a 0.3% lift in August. Annual spending growth was steady at 3.7% in September. Over the year to September in trend terms, spending in Victoria lifted to four-year highs of 5.9%.

• International visitors to Australia rose by 6% to a record high 8.4 million over the year to June. 

• The latest trade is the largest in 19 months and the 9th successive surplus this year.

• Australia's annual imports from China are also at a record high and this is a good sign for economic growth.

• Loans and advances by non-bank financial intermediaries rose by 11.4% over the year to September — the strongest annual growth in 11 years. 

In the spirit of balance, here are the negative developments that surely Dr. Phil hasn’t missed:

•  Annual credit growth stands at 4.6% – just above the slowest rate recorded in 4½ years.

• Petrol prices have spiked to decade highs but are falling now.

• National home prices fell by 0.5% in October to stand 3.5% lower on the year.

• In October, 90,718 new vehicles were sold, down by 5.3% over the year but that was a near record year for sales.

• Investor housing finance rose by 0.1% in September but annual growth is at the slowest rate on record of 1.4%. But that’s what APRA and the RBA wanted.

• Personal credit was flat in September, but was down 1.5% over the year – the equal weakest annual growth rate in 8½ years.

• Council approvals to build new homes rose by 3.3% in September, after falling by an upwardly revised 8.1% in August. Approvals are down by 14.1% over the year – the largest annual decline in 16 months. But the year before was ‘boomsville’.

• Commonwealth Bank Business Sales Indicator (BSI), a measure of economy-wide spending, rose by 0.2% in trend terms in September – the weakest growth since May 2017. While spending growth slowed in September, it hasn’t declined in 20 months.

That will do! As you can see, most of the worrying data is linked to the work of APRA and the Royal Commission, which have conspired, for what many would argue good reasons, to make banks tougher on granting loans too easily. Investors, small business and non-conventional borrowers are being treated like lepers, as banks worry about being pilloried for lending too easily. This is poised to be our biggest threat to economic growth.

However, this is the RBA’s beat — lending to the economy. So I’m assuming that Dr. Phil is not a dope and that his team’s computer model of the economy has taken in all the local positives and negatives above and given economic growth the 3.5% tick for this year and next.

And yes, they’d factor is the effects of a slowing China being pressured by Donald, a slowing EU but a booming US and again concluded that we’re set for good growth.

The only reason for me to doubt my support for the RBA’s positive economic forecasts would be if I thought Phil and his sidekicks were team of dunces, but I don’t.

Go Dr.Phil!

P.S. One day the run of data will turn yours truly and the RBA into pessimists but now isn’t the time.

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Hey Dude, don’t make us afraid of stocks

Wednesday, November 07, 2018

If our stock market can withstand gravity today (with all the political winds from the US elections, to tough Brexit talk, to the EU chiding Italy over its excessive spending and the Iran sanctions on top of the China trade war), it would be a great effort. But against all these worrying curve balls thrown by a pile of screwballs, the Reserve Bank tells us that they expect us to grow at 3.5% this year and next!

How does that work?

Right now, it feels like it’s the RBA and good guys versus The Dude and the bad guys, with the latter looking at the current stock market volatility and virtually telling me: “See I told you — this is a prelude of things to come!”

For those who don’t know The Dude, he’s an ex-student of mine, who lives the life of Reilly traipsing around the world, living in hotels in places cooler than Portofino and doing exotic trades. The Dude has been prodding me about my market positivity for a few years now. Lately he’s been joined by the house price Armageddon Army, who have been virtually trolling me (as my son jokingly observed) in pooh poohing my “we could avoid a big sell off for now” position.

At the core of my argument is that historically we muddle through. I got it right when we dodged a Great Depression in 2008-09. I got it right when doomsday merchants saw the US losing its AAA-credit rating in 2011 and when there were Fed money supply worries, Grexit, Brexit, oil prices at $US25, Rocket boy, yadda, yadda, yadda.

The Dude started questioning me in February 2016, after a big fall in stocks. The S&P/ASX 200 index was around 4800 and as we’re now at 5875, let’s say my positivity has been worthwhile for my followers. Presuming they invest and get a return at least as good as the Index, then they would have pocketed 8% a year plus dividends (let’s call it 12%).

Positivity and muddling through worked out again but don’t think I’m a ‘genius’ like The Dude. I’m more a historian who plays the averages of what markets tend to do.

There a lot of geniuses out there who’ve been wrong on being long the stock market, and even the property market, despite the fact that their thinking is sound, smart and the domain of really smart people. However, the real world can be unforgettably irrational.

Professor Steve Keen, who’s a mate from my old UNSW days (he owes me a Chinese meal at one of London’s most expensive restaurants — Hakkasan) brilliantly foresaw the GFC and won the Revere Award for Economics for his work. I had him on my TV show and praised his success. Then I bagged him (as mates do) when he got the real estate collapse prediction wrong.

Theoretically, he was right to argue publicly his position but if people took his advice, they missed out on the biggest property boom Sydney and Melbourne have had in my memory. And that’s my point about ‘the bad guys’, who are smart and have good intentions. But the market doesn’t necessarily play ball within an acceptable timeframe for people like me, who talk to those normal investors who want to see what I know.

If I’d ran out in February 2016 and told all my readers on this website and in The Australian newspaper (where I was writing then), viewers on my TV show on Sky and my radio spots on 2GB, ABC Adelaide and 2CC in Canberra, that the Dude was telling me it’s time to cash up and bunker down, they would’ve lost 12% a year for about three years!

Someone like me who can touch a million people over a month can’t afford to be wrong like that for three years. So I have to weigh up the smart stuff from Steve Keen, the Dude, my property price rivals on twitter and the likes of Dr. Doom, (the Marc Faber of the Boom Gloom & Doom Report) who has been wrong for years about Wall Street’s collapse, and get my view right.

So far, so good. I’ve been arguing for two years now that I’d get more watchful of market-threats in 2019, with real worries to probably eventuate in 2020. That said, we could get even more time and I suspect how fast US interest rates rise will determine whether I’m right or not.

And this brings me back to the Reserve Bank and the good guys versus The Dude and the bad guys.

Here we had the RBA, led by the most goodly-looking human being possible — Dr. Phil Lowe — (who’s anything but low), kindly explain that he and his Board of very smart people and his team of really smart economists, econometricians et al, tell us that the Oz economy will grow by 3.5% this year and 3.5% next year.

If Phil and his RBA team are right and he’s supported by other smart professional economists, then we won’t have had a stock market crash and a property crash. Those two huge curve balls would derail confidence, investment, consumer spending and KO big economic growth calls.

Smart argumentative types will tell you the stock market can ignore the economy, which is true. But when it does, like with the GFC, the economy eventually has convulsions. We got lucky but we had a Chinese-driven mining boom that helped. The Yanks went into the Great Recession but if you look at the chart below, you’ll see the economy was losing steam ahead of the big market, and then economic, collapse.

US ECONOMIC GROWTH 1990-2017

Source: Statista.com

I think the good guys, aided and abetted by President Donald Trump and the economic growth he’s generating, should keep this generally positive market show on the road for a bit longer. However, if the midterm election result shocks Wall Street and the China trade war escalates and other political storms get too big for teacups, then the bad guys could eventually be proved right.

There’s a lot of debt out there and as someone who employs a lot of people knows, debt is OK if you’re growing and easily servicing those loans. Take away the growth and you better have a B-plan, which usually involves less spending, less hiring and living within your own little but scary recession!

Go the RBA and the good guys!

By the way, on Cup news, if you’d put $120 in a box trifecta on Tom Waterhouse’s six tips yesterday (that he gave in a video interview with me on this website and I wrote in my story as well AND in our radio podcast yesterday too), you would’ve pocketed $2,541.

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How the Cup gives me insights on our future

Tuesday, November 06, 2018

Yesterday, for the first time in my life, I went to Melbourne’s Crown Towers for the famous Call of the Card, which always happens a day before the legendary Melbourne Cup. While it was a day out that interested me for historical, sociological and even economic reasons, I was also scheduled to interview Tom Waterhouse. On the eve of the big race, Tom has always shared his and his father’s tips, which have a win rate of four years out of five!

So on a day when the ‘world’ is starting to be interested in the race that stops a nation, it’s really timely for me to do the form. 

You might be thinking: “Switzer’s not qualified to do the form on the Melbourne Cup” and I’d agree. That’s why I’ll leave doing that to the Waterhouse family. I’ll do the form on two other races that will stop the nation and also interest the world.

The first is the political race in the States between the Republicans and the Democrats.  My interest will be to do the form to work out what’s best for stock prices. And the second one is the race to raise interest rates, which could be compared to a horse race that’s having permanent barrier-opening problems!

Let’s start with the race that could turn Donald Trump into a lame duck President, trumped by a political gridlock.

On current political assessments, the Democrats are tipped to win the House, while the Republicans just keep the Senate. “This outcome is largely seen as positive for markets since, historically, U.S. stocks have posted solid gains during government gridlock,” CNBC reports. “If the GOP (the Grand Old Party or Republicans) maintains a majority in both chambers, it could give stocks a short-term boost as it increases the likelihood of further tax cuts.”

However, if the Trump backlash delivers the Democrats both houses, then the prevailing view is that pro-economy policies that have been championed by President Trump could be stopped in their tracks. This wouldn’t be a positive sign for the stock market.

 This puts Trump-haters locally (who want stocks to rise for purely rational economic reasons) in a bit of a dilemma. It could be compared to what we’ve seen going on with our stock market because of the Hayne Royal Commission. The morality of having the investigation into our financial institutions has been proved but it has hurt bank share prices, the stock market index and our super fund balances. I’d say our stock market would be 20% higher than it is today. And if we assume our super funds have a 60% exposure to stocks, our super funds might be 12% higher, if governments in the past had done the policing of the sector and the protecting of taxpayers who’ve always underwritten and protected the financial sector!

That’s the low-ball cost of us having to put up with the political pygmies who let our financial businesses get away with consumer exploitation. 

I was talking to a former banking and insurance CEO, who agreed that if there simply had been a consumer claims tribunal without lawyers run by a single arbitrator, the wins for consumers and the losses for banks, insurers, advisory groups etc., would have been so big that boards would have instructed their chief executives to stop the bad practices and the cost-bleeding.

Oh well, we learnt the lesson and stock players and super members are paying the price.

Back to the US midterm elections that start tonight, our time, and the one irony is that if Donald does become a lame duck President, he’ll still be able to ‘fly’ with his trade war with China because the crazy US system vests that power in the Commander and Chief! I’m not pretending to be an American political expert but if the consensus view is right and it’s Democrats for the House and the Republicans have the Senate, then stocks won’t dive. If the Trump love is greater than the Trump hate and the Republicans surprise, then stocks would spike, but I doubt that’s likely.

I know it’s a US issue but Donald and his impact on global trade, our number one trading partner China and our stock market makes this a race that actually holds more interest for me than the race that stops our nation — the Cup!

Now to the RBA’s race to raise interest rates, and while history shows Cup Day has been a good one for the central bank to slip a rate change in, it won’t happen today. But the big watch for people like me will be the statement that goes with the non-decision. 

Until now, the big bank has implied that rates will rise, eventually. However, some economists have been arguing that maybe the next move is down! Certainly, the current economic growth outlook says these guys are wrong. But the growing negativity about house prices, aided and abetted by the media’s scare campaign and the tighter lending standards following the Royal Commission, could take growth down a peg or two, which could force the Bank to either stay on hold longer, or even cut!

The value of the Bank’s statement will give us a window on what they’re seeing about bank lending, the likely fall in house prices and the overall economic effects, which ultimately will drive their hand when it comes to rates.

Right now, there are a number of economic curve balls being thrown at the economy coming out of the Royal Commission, such as tougher lending standards and too cautious banks. Many banks are afraid of taking chances with customers that could have them negatively exposed and it could be affecting businesses access to loans, which could have serious economic growth implications and could be forcing business borrowers into more expensive lenders not controlled by APRA. 

We might have a nanny state problem that becomes an economic problem looming.

As a form man, I think I’ve just given you the worst-case scenario but I need to see (and would argue that the country needs to see) the RBA say that all these negatives accentuated in the media right now are hype. If we don’t get that message today, I’ll have to redo the form on the economy, jobs, wages, house prices and a whole lot of important hip pocket matters.

And if I have to do that, it will be because I’ll be seeing stuff that could stop the nation from growing!

On the other big race that stops this nation, the racing people at the Call of the Card are starting to stop the racing world, with so many foreign horses in the field. So here’s what Tom Waterhouse told me.

Yesterday he backed Rostropovich to win $1 million and Avilius to win $500,000 but said he’d put more on it today! If you want some longer shots, he had smaller bets at long odds on Cross Counter, Marmello, Prince of Arran and Ace High.

He thinks Magic Circle and Best Solution are good horses but went around them. But his father, Robbie, who likes both Avilius and Rostropovich, seemed keener on the favourite, Yucatan. That’s my pick but I’ll have a small bet on Avilius and Rostropovich simply because I like to be guided by experts when it’s not my long suit.

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Why can’t we enjoy low interest rates while they last? Forget fear!

We're so Royal Commission mad, let's have more of them!

Why I like Bill Shorten but hate his policies!

Should we go to war with Donald Trump's America?

Should you stress out about the biggest house price drop in 6.5 years?

Labor could rattle an improving economy and Bill could do a Rudd torching the banks

Confidence is surging. Come on Mr T - brag about it!

Shorten to win unless Mr T does a Chris Evert

Why did Facebook’s overdue stock market slap in the face happen?

Trump gets another win. Will he surprise us and become a revered President?

I love LinkedIn but have a LinkedIn problem. Please help me solve it!

Why I disagree with Adele Ferguson's cap on SMSFs

Are we heading for a property price crash?

Is your job and super more important than Ronaldo, George Clooney and Meghan?

It's OK to smack but is it right to bash our banks?

Who do you believe on house prices? Headline grabbing journos or the Reserve Bank?

Could this witch hunt Royal Commission haunt our economy!?

Who's right on the Oz economy? Doomsday merchants or optimists?

Trump trade war threat ignored! What just happened?

Love Donald if you want but please hate his tariff tantrums!

Here's why billions of Bitcoins can't get me excited about cryptocrap!

How can you make money the easy way from stocks this year?

No real trade war yet. Let's hope for our super's sake it remains that way

Experts think this trade war will be a fizzer. I hope this courageous guess is right

Will Trump's trade war start on Friday? Will we be collateral damage?

Handle with care: Dumb debt advice from wealthy sharks!

Are 'overpaid' CEOs also tax dodgers?

Will a Shorten Government tax companies that overpay their executives?

Is Bill Shorten's taxing behaviour a death-wish?

The trade war cost on US cars could trump Trump!

The best loans, credit cards and super funds in one easy to read story

Trade war worries whack Wall Street and European markets. We're next!

Top economist says raise interest rates now! Is he mad?

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