Is the Australia I once knew gone for good?

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When I first started writing about the Australian property bubble in 2003 I knew it was big. But even I didn’t think it would reach its current absurd proportions. The bubble has now engulfed not just our economy but our politics, our media, our social structure and entire strategic outlook. Not one of these is defensible in terms of the national interest but together they converge on Australian disintegration:

• The economy is now a hollowed out wasteland of finance, speculation and consumption. Other than dirt, we do nothing else.

• Politics is now warped completely around the bubble with elections won and lost on house prices alone. Policy is forgotten.

• The duopoly of Australian media is focused entirely on maximising for sale listings for Domain and realestate.com.au. It has become a bald-faced real estate propaganda machine.

• Multi-culturalism is being increasingly strained as immigration is sustained at economically destructive levels purely to support house prices.

• ANZUS is now fundamentally undermined by the “citizenship exports” sector that drives house prices and construction and brings with it a “hard-edged” Chinese soft power push.

The Australia that I grew up in was based upon the principle of the “fair go” balanced against a vibrant and mixed competitive market economy, of policy made in the national interest, of successful multi-culturalism within a liberal Anglosheric context, and of unshakable faith in the US as our strategic partner in the world.  Now, thanks to the bubble:

• The “fair go” is dead.

• The US alliance is dying.

• Multi-culturalism is under assault.

• Liberalism and the market economy have been subsumed by specufesting.

Regret Minimization Framework by Jeff Bezos

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Here’s the story as told by Brian Christian and Tom Griffiths, in their excellent book, Algorithms to Live By: The Computer Science of Human Decisions:

Regret can also be highly motivating. Before he decided to start Amazon.com, Jeff Bezos had a secure and well-paid position at the investment company D. E. Shaw & Co. in New York. Starting an online bookstore in Seattle was going to be a big leap — something that his boss (that’s D. E. Shaw) advised him to think about carefully. Says Bezos:

“The framework I found, which made the decision incredibly easy, was what I called — which only a nerd would call — a “regret minimization framework.” So I wanted to project myself forward to age 80 and say, “Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.” I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day, and so, when I thought about it that way it was an incredibly easy decision.”

Keep Calm and Carry on investing - Howard Marks

• 90s were the best. and it doesn't get better. if it doesn't get better, then it gets worse.

Today 5.5% yields are pretty good - Howard Marks

Not Bubble Prices now - Howard Marks

Good times or up cycle in the seventh inning, you could be in the eight or ninth but you don't know - Howard Marks

Today 5.5% yields are pretty good. - Howard Marks

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Annualized gains of 5.5 percent “strikes me as the most reasonable expectation,” Marks said Wednesday at the Bloomberg Markets Most Influential Summit in New York. “It’s a big problem because most endowments need 8 percent, charities need 8 percent, and pension funds need about 7.5 percent.”
Marks said high-yield bonds are expected to return about 5.5 percent, stocks 5 percent to 6 percent, Treasuries 2 percent and high-grade corporate bonds 3 percent. Alternative assets such as private equity and real estate would yield higher profits, the billionaire investor said. In a balanced portfolio, that mix would work out to about 5.5 percent.

Future expected returns on pension funds

when you buy a bond, you get interest, when you short a bond, you owe interest. when you short a bond, if it does nothing for a year, you are not breakeven, you are down by the coupon. - Howard Marks

since 1986, a blend of equities 9.8%, high yield bonds 8.4%, mortgages 6.6%, treasuries 6.2% yield 7.5% which is what pension funds historically hope to make.

I think that currently you would do well with 5.5% - Howard Marks

7% sounds about right for GIC CPF - sauce

Will Singapore CPF model go down the same path?

granted singapore's cpf model is primarily based on individual savings so there is lesser chance of osmosis of your own savings efforts towards providing for the others who did not save as much.

even so, there is a tyranny of the one size fits all model for CPF resulting in inactive investors leaving their CPF under 2.5% p.a. which in today's world will not retain your prosperity in the global context any further. a comparison of the greying population under the european system (minus the state pension that puts the younger generation under the yoke that provides for the older generations that had spent and spent) with the new rising asian generations rapidly reaching majority middle class, sees the prosperity of the former unretained.

Voting in a populist government will certainly make life easier for a whole generation of Singaporeans to live off the reserves built up previously. But how long and how soon before it becomes yet another enslaving of future generations?

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As the working population ages, more money gets put away, which in turn also helps drive yields lower. Pension funds among countries in the Organization for Economic Cooperation and Development, for example, have reached a record $25 trillion. 

"There are a lot of very negative feedback loops," Credit Suisse Chief Executive Officer Tidjane Thiam told the audience at the Bloomberg Markets Most Influential Summit in London this week. "There's been a glut of savings that impact real interest rates. You can't make any money on the assets, and the liabilities explode. People born in 1968 and the following 15 years will have an enormous pension deficit because they've made nothing on their assets."

Jim Leaviss, who helps oversee about $374 billion at M&G Investments in London, argues that the world demographic picture suggests bond yields should be much, much higher than they are. In the past, projecting population changes gave you a good guide to what economic growth would do, how labor-market supply would affect wage demand and inflation, and how demographics would affect production versus consumption of goods and services. 

Those economic indicators in turn told you where bond yields would likely settle. Using that model, Leaviss says the 30-year U.K. gilt yield, for example, should be closer to 12 percent than the 1.4 percent the government currently pays to borrow for three decades, with U.S. Treasuries similarly mispriced:

Standardized parts bringing down production cost of crude oil

deflation into oil consumers countries.
support of growth
turning oil producers and explorers more resilient.


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Nergaard Berg estimates that standardization of sub-sea forgings alone—the massive steel spools used in deepwater drilling—has resulted in a 30 percent reduction in project lead times. Christie, of GE Oil & Gas, also reckons that standardization can lower drilling expenses by an average of 30 percent.