The End is Nigh!

[red750]

There is a growing movement for tiny houses, not much more than a fixed caravan, converted shipping container or large bathing box (a la Mornington Peninsula beaches. There is a company creating prefabs which can be assembled in a few hours, like Ikea furniture.

 

 

 

 

 

 

[pmccarthy]

Years ago I renovated a house built in 1865. I still own it, it is my only 'real estate' investment. It is rented out for $400 a week, the market rate here. Based on the council valuation, my return on investment is 1.4%.  The lease has expired. Should I renew the lease, the tenant wants to stay, or sell it?

[spacesailor]

Financial 'rip-offs ' & A Ponzi scheme ! .

before we 'payed off our mortgage,  we were warned ,to be careful were the " title deeds " end up .

It seems , left with the ' lawyer's ' they could be used by said ' solicitors office ' . 

As collateral for their schemes . 

I looked at our title deed & found a miscellaneous entry. 

The previous , & first owner said he didn't know anything about it , as he had never seen those deeds .

My lawyer told me it could have been the first owners,  solicitor company .

spacesailor

Edited Sunday at 08:39 AM by spacesailor
Tidy up

[old man emu]

30 minutes ago, pmccarthy said:

Should I renew the lease, the tenant wants to stay, or sell it?

As a lifetime renter, I offer this: if the tenant has been satisfactory; paid rent on time and looked after the property, then renew the lease. A good tenant is a bird in hand. If you sell the house, you will only end up with a wad of money that is decreasing in value due to inflation. If you have already paid off any mortgage on the house, then the $400 per week is mostly yours, after allowing for maintenance and agent's fees. And don't let the agent con you into upping the rent. Agent's only do that to increase their cut. If your tenant has been good to you, why not give a reward by not increasing the rent. You can always let the tenant know that it might go up later if costs rise too much.

[onetrack]

A good tenant is worth their weight in gold, but a bad one will cost you a fortune. I know people who thought they could make a motza buying and renting properties, but quite a few got badly burnt by bad tenants.

[octave]

Even if you have a great tenant, it is a little unrealistic not to increase the rent. Every year, council rates increase, as well as insurance costs.  A landlord also has to have enough money put aside for future repairs. Modest rent increases in line with increased costs and inflation are reasonable and necessary.

[Jerry_Atrick]

11 hours ago, old man emu said:

Getting back to the original theme of this thread, we are facing a total collapse of our global civilisation simply due to the imminent collapse of the financial system. At the moment the global financial system is backed by a sort of promisory note called a Derivative.

 

Jerry will correct me if I am misunderstanding what a derivative is used for. Basically money is loaned on a promise to repay it. The lender holds the record of the promise, but can use it to borrow money from a third party. The third party can then use the second party's promise to borrow from a fourth party. The problem arises if the first borrower fails to pay back the original loan. Then the original lender, who has become a borrower, cannot pay back what was borrowed from the third party, who can't pay back the fourth. The arrangement collapses. It has been estimated that currently the amount of money involved in these promises amounts to 600 trillion dollars - more money than actually exists in the global economy.

 

And who thought up this wonderful financial scheme? Pretty sure you would fing the brilliant minds if you walked along Wall Street.

 

A derivative is a financial instrument that derives its value from an underlying financial instrument. The most commonly known one is an option - the right - but not the obligation - to buy or sell a financial instrument at some future time for an agreed (strike) price. Depending on whether the option is on the buy or sell side, it will rise and fall with the underlying instrument - typically shares for retail investors. 

 

What your describing could be a derivative, but is more likely the credit multiplier effect which exists in any economy that facilitates lending. What is happening is collateral, in the form of future promised cash flows, is being put up as collateral for borrowing money. This is a form of leveraged finance and has leverage risk. It can be a derivative (such as a repurchase agreement, commonly known as a repo), or it could be a bog standard loan sold off in the loan markets. Or it could be an asset backed security (ABS), which package loans into an asset pool and sell cash bonds off the back of them. They are not technically derivatives, but collateralised loans. Although the structures are different, they are all forms of financing lending. A repo, is considered a securities financing transaction as it offers up a financial security (e.g. bond, share, exchange traded commodity derivative) and receives money in return; at the end of the agreement, the security is returned to the borrower, and the cash is returned to the lender. 

 

Different structures have different rules and problems associated with them. ABS is the riskiest to the economy, however, Lehmans failed by gaming the repo market in what was called repo105. (https://en.wikipedia.org/wiki/Repo_105). It used short dated repo agreements to get risky assets off its balance sheet and have case in the bank at reporting times.. was the gist of it, anyway. But that was a fraud as opposed to market operation.

 

The value of USD $610tn in OTC derivatves was a couple of years ago from memory. This oft quoted value, whilst true, is the notional value of the market which bears little semblance to the amount of the actual value of the market, which as I recall was arounf $20tn. And that is because almost all derivatives are a future swap of cash flows based on some financial measure. For example, an FX forward is where two counterparties agree to swap foreign currency at some pre-agreed exchange rate, sometime in the future. For example, I may enter into a forward rate fx contract with you, where I give you $100,000 AUD, at .63 USD. On that future daye, I will give you $100,000USD and you will give me $63,000 USD. The notional in USD is $63,000, but that is not the value of the trade. The reason is that is not the value of the trade is because if I default on the $100,000, you don't give me anything. You keep your $63,000 and have lost nothing. Well, sort of..

 

We measue the loss in what is called xva and credit risk, as well as the difference in the spot price and the forward price. If the AUD was up a a lot, say it went to .68, that would mean you could have converted yout $100,000 received from me into $68,000 USD; you have lost $5,000 on my default. Of course, it the AUD went down, you are ahead of th curve because it means you don't have to worry about taking less from my $100K then you gave me.   The true value of the derivative is calculateed daily with discounted net present valuation calculations well into the future. Some derivatives can go on for 50 or so years..  But we tend to value them on 1 day, 3 day, 5 day, 7 day/2week, month, 3 month, 6 moonth, 12 month, 3 year, 5 year, 7 year, 5 year and 30 year basis - depending on how long they have to run. The maths is complex, and I don't pretend to uinderstand 1/10th of it.

 

The chaining of loans as collateral is an oversimplification of the issue, especially in the credit multiplier sense. Yes, bonds can be reused as collateral. But, a) they have haircuts to their value applied; b) wrong way risk further recudes the value we can take, and c) there is usually some economic value/output added along each link. And, at least in Europe, there are tight controls on this and big fines for not complying (reporting is mandatory). So far, these seem to have acted as a strong deterrent.. I know from experience how seriously we take compliance and only a buy side firm, Aviva has had a breach worth fining - and that was for the breach of reporting rather than collateral reuse (we self-declare breaches of reporting and fix them very quickly).

Edited Sunday at 10:06 AM by Jerry_Atrick

[old man emu]

Thanks for that explanation. Unfortunately, like most people, I did not understand concepts whose word describing them was not defined. That's not a complaint against you. It just means that to understand it all, one has to be involved in it. It's a bit like looking at musical notation. I can't understand what it means, but when a musician interprets it, I can enjoy the sounds.

 

The thing is, is the use of derivatives something that could go bad and destroy the global economy?

[pmccarthy]

I should have explained in my story, that the question of selling my property now arises because half of the $400 rent goes in costs. That now includes the Vic government land tax, rates, services etc etc. costs were much lower a couple of years ago. I will let you know what I decide, has to be decided quickly if the lease is to be renewed.

[onetrack]

Is the 1.4% ROI based on just the rent return, or are you counting the capital gain increase as well? That capital gain must be running at least around another 5% annually?

Here on the Left Coast, houses have gone up more than 10% in value, just in the last year alone.

If you put the money you get from the rental house into a term deposit, will you get a better return overall? Remembering that term deposit rates can go down, but (good) property prices rarely do.

Then there's the issue of CGT that you will possibly incur as well, if you sell the house? I guess that depends a lot on timing of the original purchase, and your financial (tax) position.

[Jerry_Atrick]

Sorry OME.. I tried to break it down in terms of derivatives. There is a lot to go through to make sense, I suppose. I just don't have the time to write up the real basics, but there is plenty online. If you have the inclination to spend the time, you can do the foundation level of the chartered financial  analyst course here: 

 

You can skip the quantitative methods and go straight to issuers. It will give you good insight to the markets and basic instruments. 

 

Here is his level II stuff: 

 

 

And here is a level II course (the above fella doesn't seem to have one)

 

Note, this is not a trading course. but from a buy side, or asset manager perspective. 

 

There doesn't seem too be free video courses of Chartered Institute of Securities and Investments.. which has a trading component. 

 

 

[Jerry_Atrick]

3 hours ago, onetrack said:

Is the 1.4% ROI based on just the rent return, or are you counting the capital gain increase as well?

Until one sells, one can't realise the capital gain as a return. But, what residential investors have been doing in Australia for years is to profit from that + negative gearing. It goes something like this. Buy a run down hovel at next to nothing. Refurb it as cheaply as possible to increase the value of the property. Have the bank value the property, which goes up - often by multiples of 10%. The loan to value ratio decreases. So, say you bought a house for $400K (I know, an impossibiolity in the cities in Australia anymore). Say you borrowed $300K to buy it. You renovate it for $15K and it takes the value to $500K. Where you had a 75% loan to value, you now have a 60% loan to value. You use the additional value as collateral on the next loan. Some banks will proxy this as a deposit on the next house, because they will poolk the houses as collateral under the one loan, and increase that one loan. Therefore, you don't need a new deposit because the icreased value of the first home means allows you to increase your borrowing as your collateral has increased. So, you buy a second home to tip in as collateral on your first loan, and because that house has value, it increases the collateral, which allows you to borrow the cost of buying that second house without having to put in more money yourself (maybe except for legals/converyancing and stamp duty). You refurb that house, and so the cycle goes on.

 

Sadly, I was financially illeterate, like most of us are, for a very long time. By the time, I learned about what was possible, it was too late - at least for the Aussie market, which is a perfect residential investment market - for investors. Over here, the dynamics are totally different and it doesn't pay at all unless you incorporate and make it your full time occupation. Unless you want to get ionto a certain segment which should have been outlawed decades ago.

 

You may be paying back more than the rent pays, in which case you can offset that against your income as negative gearing. Done properly, you don't have to pay any tax on your normal income. Which frees up money to put into the legals and stamp duty of the next property. Rinse, and repeat. 

 

@onetrack is correct - with property, it is both income and capital gains that should be taken into account. However, our tax standards don't require it. 

Edited Sunday at 06:00 PM by Jerry_Atrick

[spacesailor]

NOW , the. Rich use "  novated leasing " that give them a $ 250,000 Mercedes EV ,

Including all ancillary expenses! . All paid before Tax .

spacesailor

[facthunter]

The Inflation part of a capital gain should NOT be taxed.  Leasing gives you a Known situation and you don't have to use your own Capital   To claim it on tax you Need to Justify it's use as Non Personal and be income earning related . Nev

[old man emu]

Onetrack posted this graph elswhere. 

The blue line shows what the US Stock Market is doing, and the red line shows employment. The froightening thing is that it inicats that the rich are getting richer and the poor are getting poorer. It makes me wonder if the value of stocks is in fact a reflection of the real value of actual things, or if it is an indication af rampant speculation. If people are not getting employed, what is creating value?

[Jerry_Atrick]

The most commoon ratio quoted in reference to share prices is the price/earnings (p/e) ratio, which measures the stock price against the earnings per share. There are other formulations as well, such  net asset value, etc. but the accounting treatment skews such valuations and they don't take into account good will.

 

There are different p/e ratios - thee is the forward (projected) p/e ratio, historical average p/e ratio, and current p/e ratio. Also it is important to understand a share prioce isn't  valued based on its financials today, but what those financials will be in the future. That is why sometimes, for example, Citrx (a US company that has a vitual monopoly on remote working software) had massive profits over the Covid lockdowns, yet their share price fell at the same time. 

 

Historically, the average p/e ration have been around 15 - 18: 1; these days it is around 25 more or less... 

 

Valuations also depend on demand and supply. The supply of moeny to invest drives demand. As pensions and super, etc have been mandated, the amount of money to invest increases. This creates an increase in demand of quality investments - e.g. for equities (shares). This will drive the price of quality or potential future quality shares. Tesla, for example, reached a p/e of 400. In other words, it would take roughly 400 years to return each $ invested at that p/e ratio.

 

This was driven by that other market factor - herd mentality, whgich drives bubbles such as the dot com of the 1990s, railways in the 1800s and tulips whenever that was. 

Edited Monday at 11:54 AM by Jerry_Atrick

[nomadpete]

Yes Jerry, BUT....

 

I think OME's point is that S&P 500 reflects the profitability of those businesses ($), without reflecting actual physical useful produce.

 

The financial situation is no indication of overall wellbeing of the masses. Are they fed any better when the economy is (to quote the orange muppet) "The BESTEST ever!"?

 

No. It only tells me that the investers can now afford bigger yachts.

 

 

Edited Monday at 08:25 PM by nomadpete
Sarcasm added, as usual

[facthunter]

The Stock Market runs on Fear & Greed. Leave some for the Next bloke and miss the collapse after the Peak. Nev 

[Jerry_Atrick]

23 hours ago, nomadpete said:

Yes Jerry, BUT....

 

I think OME's point is that S&P 500 reflects the profitability of those businesses ($), without reflecting actual physical useful produce.

 

The financial situation is no indication of overall wellbeing of the masses. Are they fed any better when the economy is (to quote the orange muppet) "The BESTEST ever!"?

 

No. It only tells me that the investers can now afford bigger yachts.

 

 

Yes... Apologies - too higher level skimming and not enough reading..  (Was bored in a meeting at the time).

 

I am not sure the stock market ever reflected the wellbeing of the masses except for that short period after the war, where workers rights were better respected because the demand for labour well outstripped the supply.

 

Note, in the graph, the red line I think shows job openings, rather than employment. 

 

Interestingly, up unitl very recently, the job openings largely tracked the S&P 500.. However, lately it climbed will it and started to fally only very recently. 

 

The graph is too small for me to see the timeline, but, assuming the last 5 or so years, I think it is a culmination of a few factors (intuitively - not through stats):

 

• COVID Hangover.. During COVID, jobs were protected, but there was a fall in new openings for many reasons. Uncertainty, uptick in automation, etc. Profits, however, thanks to online retailing and the like remained strong. But investment in automation also rose or more likely was coming to fruition. Those Amazon warehouses use a lot less people to do the same thing than warehouses previously did. 
• Increasing fiunds available for investment push up prices of quality companies, like the top 500 on the NYSE because there is more supply of cash, but a fixed supply of top quality stocks. That could cause the S&P value to rise regardless of the underlying economy - it can become stagnant but with more demand of those stocks, prices will go up.
• AI adoption. About 5 years ago, companies started grappling with AI. And regardless of the myth it doesn't take jobs but lets you do yours quicker, it does take jobs: https://www.theregister.com/2025/11/06/ai_job_cuts_senate_bill/.

At the moment, the economy can abosrb the job losses, and this is where economic lag comes into the picture. More and more people get laid off, but profits soar due to lowering costs as a critical mass of layoffs has yet to hit, and because when people are laid off, they still have some cash. When that critical mass hits, and the consumer cash pool starts drying up, revenues will start to drop, and then profits will, too. Stock prices will drop as, at the end of the day, all economic activity is the result of consumer spending. No comsumer spending results in no business, results in no tax, results in no spending. 

 

I can't remember if it is in the article or I read it somewhere else, but unemployment in the US has been forecast to hit 20% thanks to AI. Unlike previous tech trends that have led to wild unemployment forecasts, this one seems sustainable. I hope I am wrong, but I already use AI in my daily work that saves me a heap of time. While it may not (yet) replace me, it will probably come to a point where I won't hire people when I would have previously. So, it may not be lay offs, but simply deferred or, for want of a better term, deleted hiring. 

 

Eventually, through civil war or starvation, the S&P will normalise with the open job count, but earth will be scorched, the billionares will be on Mars and all will be fine. 

[nomadpete]

I'm softening my view on A.I.

 

After all, at my level in the world, it seems to be simply a new development in the interwebbything.

 

By itself it isn't stealing jobs, just rearranging jobs. And rearranging the playing field of the oligarchs.

 

Real job stealing will be done by A.I. empowered robots. They will breed a new bunch of oligarchs. 

And the plebs will either starve, or maybe supported by universal subsistence income.

 

[Jerry_Atrick]

At my age, it won't take my job, but to be honest, I am at this job long enough that a redundancy, though not life changing, would be very nice. 

 

But for people in their 30s down, it will be firghtening

[facthunter]

Obviously AI could be a disaster for some but for all of us it will be a reduction of REALity. It has severe shortcomings if it's used improperly and let's face it, WHAT hasn't?  Nev

[octave]

I tend towards optimism.   The future could be challenging for many; however, throughout history, innovation has killed off some jobs but created others.  If I were still in high school, I would be choosing a career that was not so vulnerable to AI.

 

 

🇦🇺 Australia: AI “At-Risk vs High-Growth” Occupations (based on JSA & PwC 2025 data)

Category	Occupation	AI Exposure (JSA)	2035 Outlook	Why It’s at Risk / Resilient	Recommended Upskilling Path
⚠️ At-Risk	General Clerk / Office Clerk	Very High	Declining	Highly routine — data entry, scheduling, record-keeping.	Learn digital workflow tools, AI supervision, or shift into office management.
	Receptionist	High	Flat / Declining	Routine information-handling now automated by chatbots & kiosks.	Customer-experience, CRM systems, or service management.
	Bookkeeper / Accounting Clerk	High	Declining	Transactional bookkeeping automatable via AI & accounting software.	Cloud finance systems, financial analysis, data analytics.
	Call-centre Operator	High	Declining	Voice AI and chatbots handling Tier 1 support.	Escalation support, customer success, technical training.
	Data Entry Operator	Very High	Declining	Fully automatable — no interpretation needed.	Move into data quality assurance, analytics support, or automation oversight.
	Retail Cashier / Checkout Operator	High	Declining	Self-checkouts and AI-based payment systems.	Retail operations, logistics, customer service.
	Paralegal / Legal Clerk	Medium-High	Declining	AI can draft, summarise, and search legal documents.	Legal technology, compliance, AI-assisted legal tools.
	Telemarketer / Sales Rep (Outbound)	High	Declining	Generative AI automates email and phone outreach.	Digital marketing, account management, CRM analytics.
	Junior Programmer / Coder	Medium-High	Flat	AI code assistants reduce entry-level demand.	Software architecture, cybersecurity, prompt engineering.
	Warehouse Clerk / Inventory Officer	Medium-High	Flat	Automated scanning & robotics streamline logistics.	Supply chain analytics, automation maintenance, safety systems.

---

Category	Occupation	AI Exposure (JSA)	2035 Outlook	Why It’s at Risk / Resilient	Recommended Upskilling Path
🌱 High-Growth / Resilient	Registered Nurse / Midwife	Low	Strong Growth	Requires empathy, clinical judgement, and physical presence.	Clinical tech, patient data literacy, telehealth.
	Aged Care Worker / Personal Carer	Low	Strong Growth	Human contact & manual support — low automation potential.	Digital recordkeeping, health safety, coordination.
	Teacher / Education Professional	Low-Medium	Growth	AI assists, but human guidance remains essential.	EdTech tools, AI tutoring systems, curriculum design.
	Construction Labourer / Tradesperson	Low	Strong Growth	Manual, outdoor, and safety-critical tasks.	Robotics operation, site automation safety, project management.
	Cleaner / Laundry Worker	Low	Growth	Physical/manual, not cost-effective to automate widely.	Facility management, equipment maintenance.
	Chef / Cook	Low	Growth	Creative, sensory, and hands-on role.	Food innovation, sustainability, automation oversight.
	Engineer (Civil / Electrical / Mechanical)	Medium	Strong Growth	Design work augmented, not replaced, by AI.	Simulation software, AI-aided design, systems integration.
	Data Analyst / Scientist	Medium	Strong Growth	AI increases productivity but expands demand for interpretation.	Machine learning, ethics, visualisation.
	Cybersecurity Specialist	Low-Medium	Strong Growth	Growing AI risk landscape drives demand.	AI-driven threat detection, security automation.
	Hospitality Worker (Waitstaff / Concierge)	Low	Strong Growth	Customer-facing, interpersonal, and dynamic.	Hospitality management, digital booking systems, service design.

---

 

 

 

 

 

 

 

[old man emu]

From the list above it seems that the occupations with the best outlooks are those which involve, broiadly speaking, providing personal service to others. It is not an exhaustive list. I wonderwhich list military service would fall into. AI won't bring peace, unfortunately.