— Bob-a-job-alog-a-roonie

Archive
Money

I find it interesting that the markets are punishing businesses affected by the coronavirus as if it will be a permanent thing. As if people will never travel again in future, not even years from now. And some stocks have gained in value because of very short term increases in sales of hand sanitisers. Safe stocks like supermarkets have suffered major declines, as if people will stop eating food.

Yes, there was probably a correction due, so I am going to look for “safe” stocks that have dropped below their price one year ago.

Westpac $27 > $20. Yes, the banking commission was a factor, but it is down from $25 two weeks ago. It now has a 8% dividend yield. Some businesses might go broke because of the virus, but in the medium term they will be replaced by others. NAB is similar.

Telstra $3.23 > $3.40. Yes, up from a year ago, but down from its recent peak of $3.90. This is a great defensive stock, as it is totally immune.

Harvey Norman $3.71 > $3.29.  Recent peak was $4.78. They might have some short term supply chain issues. But long-term they will be unaffected, and the div yield is currently over 9%

BHP $36 > $28. Too hard for an amateur like me, but they are diversified and it feels cheap,  down from $41 recently

Qantas $5.68 > $4.04. Down from $7.40 in December. As long as they have no financial issues, you can guarantee that a year from now everyone is taking that overseas trip they are putting off now.

Flight Centre has almost halved from its recent peak, and is down substantially YOY. It will rise again guaranteed

(nothing is guaranteed)

*historically I have lost money investing on the sharemarket, so smart people would avoid by advice!

Read More

In my next book

(which makes it sound like I pump these out…)

I will argue for a new ism that is not capitalism, or socialism, but somewhere in-between.

This might not make the cut, as it is too radical and odd:

Every time you buy something, four other people get the same thing.

It is an extension of the new businesses who have a model of “buy one, we give one to charity” model.

Let’s start with a basic example. The richest person in the planet wants to buy a kilo of rice, to make a curry. The poorest person on the plant wants some rice, just to survive, to feed their hunger.

Rice is sold at auction. A global, digital auction. Unlike normal auctions, when you win you need to buy four of the item, and you only get to own one of those for yourself. The other three get distributed according to rules (yet to be determined – it is 4am and I am well drunk…)

The new model doesn’t change capitalism much – those who can most afford something bid the most, and win the auction. The order of things doesn’t change, with the rich feeling empowered and superior. But it does bring them down a notch.

But it is surely good for society, when someone buys a $50 jacket, three other people get one. And when someone buys a $500K sports car, three other “undeserving” people get one.

OK, the reality is that the homeless person doesn’t keep and drive the $500K sports car. They sell it to a rich person. So the exclusivity remains, but the wealth gets spread. And every purchase causes thought, maybe even deep thought.

(Obviously this only works for bulk, manufactured products…)

 

OK… a few hours later and a fraction more sober… there needs to be an algorithm. People who enjoy the benefits of “free stuff” will lose those benefits, gradually, as they participate in society economically. People can’t just free-ride on free stuff.

The idea could be described as truly trickle down. The affluence of the rich truly benefits the poor.

 

Read More

Certainly not. There are things in life we choose to spend on, and things we have to have. And in everything there are options and price points. I may not be typical in nature, but I am on a salary that is normal for someone of my age. Here’s what I do spend, and mostly I couldn’t spend much less.

  • Food – $70/day week, if I take my own lunch to work and cook my own meals. I might eat out if I wasn’t single
  • Water – free, comes from a tap
  • Alcohol – $20/week to get drunk as a skunk 4 times a week, if I chose to (cask wine). In reality I also go to the pub but don’t need to
  • Transport – $40/week, tram to the city. This is normal for most of Melbourne if they choose public transport
  • Shoes and Clothes – I’m not into fashion, so $10/week would be plenty
  • Utilities  and insurance – $40/week and I don’t have health insurance
  • Entertainment – $90/week for books, pay TV, internet, Spotify, going out. Otherwise I’d go mad…
  • Child support – which I would pay even if I didn’t have to, $175/week
  • Saving – for holidays (paying off credit card from holidays is more likely), is $100/week

I think you get the idea – I live quite economically, and it doesn’t bother me at all. Material possessions and preciousness are not me. But if they were, my expenses would be way higher.

  • Housing – $430/week. I live in the inner suburbs, because I need to to stay sane. I could live in a very shitty alternative to my 1-bed apartment and pay $350/week. The most despicable of private accommodation in the outer suburbs is $250+/week and I’d literally rather live in a tent.

So, roughly speaking, I spend $1,000/week, and 43% of that is on rent*. If I chose a less nice apartment it would be 35%. And that is as someone who is frugal. If I spent what most people spent on non-essentials, I’d be broke. Or have no life whatsoever.

The perceived wisdom in developed countries is 30% of income should be the maximum you spend on rent, and in Australia the average in capital cities is 40%. Couples have it much easier, obviously. As a single person, being in a relationship could be seen as a massive economic advantage, and while that couldn’t be a motivation for me, it is food for thought.

 

 

Read More

Not my first roll of the dice. In fact my 5th mortgage application, from the same bank, in around a dozen years. Three homes and two investment properties. Every single one, we were told that we didn’t quite qualify, but when they tweaked some numbers we passed by a whisker. Each one we never missed a payment. That’s quite a history and one you would think suggests that I am good for a new mortgage.

Especially when it is a property I already have a mortgage for, and I am easily managing the repayments.

Divorce means that I need to buy “our” investment property so that just I own it. The rent covers the mortgage, and the loan to valuation ratio is 60%. The town typically has zero rental properties available, so keeping it tenanted is quite easy.

But no – I have to pass the affordability test. This is an evil thing that arose from the Global Financial Crisis due to lending practices in the USA. No such problem existed here in Australia, but our government erred on the side of caution.

The reasonable assumption is that, when asked how much they spend on various things each month, people typically under-estimate. So the test, and the numbers you provide, are more complicated than it seems. Because you are compared to everyone else who has made a loan application. If your self-assessed spending is above the average of people like you (basically single / married / dependants), then they use that number.

If you are below average in your self-assessment, even if you are completely honest, your affordability is based on the average. 50% of applicants get assigned a spending figure higher than what they state.

Guess who this disadvantages the most? The frugal, like me. I was a backpacker for 5 years, and I come from NZ. I know how to live cheaply and I do. But the bank says I must be judged by what the average Aussie spends.

On top of that, it is tedious, frustrating and embarrassing, trying to convince a bank you can afford what you already demonstrably afford.

I got there in the end, by lowering my credit card limit to $500, but it took many weeks.

It’s a 25-year mortgage. You can guarantee that somewhere along the way I’ll be without a job, and I’ll get a new credit card with a higher limit. Banks don’t check back every year to see if you can still afford the loan…

 

Read More