Grab your share of Australia’s huge b ounty

Monday, 17 January 2022 — Melbourne, Australia

[5 min read]

Dear Reader,

$2 trillion!

That’s how much Aussie property has risen since March 2020, according to a stat cited in the Australian Financial Review this morning.

Here’s the key quote:

‘Most of the increase was in the value of land.’

Indeed.

It’s also what makes a similar article in The Australian so hilariously nonsensical.

Naturally, only a politician could write something so ridiculous.

The chairman of a parliamentary inquiry into housing affordability is a Liberal MP.

He writes, in part, that the presentations ‘pointed to one inconvenient truth: our affordability challenge comes down to not building enough homes’.

Blah, blah. Economist Cameron Murray has already demolished this argument before the inquiry even finished.

It was never much of an argument in the first place. Economic think house Prosper showed that for years Melbourne had way more empty homes than the official stats showed.

The current ABS figures on increasing land values clearly demonstrate that it’s absurd to say supply is an issue when the biggest fixed cost of a home — the land — is allowed to inflate at such a prodigious rate.

That such an argument can be trotted out with a straight face tells us the government will do nothing to change the basic dynamic of Australia’s housing market.

Therefore, investor interest is going to ratchet up as they chase the unearned wealth to be captured there.

That $2 trillion figure above went into many a pocket across the country. If yours wasn’t one of them, you’re missing out.

I just spent the weekend down at Wye River, on Victoria’s surf coast. An old mate of mine spent $600,000 back in 2017 to buy an old place up on a hill there. The view from his living area is fantastic.

He told me it’s since gone up 85%. Even better, he can Airbnb it half the year to pay the mortgage, with cash to spare!

The rest of the time it’s his weekender, 10 minutes from the pub and a walk to the beach. Heaven!

This is creating wealth and advancing lifestyles for some, on a vast scale, across the country. But only for those that know how to play the game and can afford to buy into it.

The young and the low-paid get torched in this dynamic.

Our Liberal MP also writes in his piece:

‘Any country with as much land as we have and wages as high as ours, should have the most affordable housing in the world, not the least. For years governments, through inaction or special interest lobbying, have denied young Australians their chance at the Australian dream.’

I’m not sure if this man is a fool or just spouting what people want to hear. Australia’s housing market is entirely a function of a tax system that does not capture the rental value of land.

Instead, it taxes wages and profits. That is to say, it punishes productive wealth creation and rewards rent-seeking.

Most of us are happy to go along with this because we get a free kick on the house we own. This is sold to us by the media and financial industry as ‘creating’ wealth instead of what it is…appropriating wealth.

The sheer idiocy of this, at the societal level, can only be seen in the homeless that go cold, in the young that think a free-standing house anywhere you want to live is beyond them, in our sprawling cities that continually consume peripheral farmland, and in the gigantic mortgage debt that most of us carry for our working life.

All because we refuse to treat the land as a shared resource whose bounty belongs to all.

As laughable as such a system is, it’s the only one we are likely to have to live and prosper in. Plenty of others do. It will never be equitable, but why can’t you and I, together, make the most of it? Let’s start with that.

All this will play out on the stock market too.

You should be taking an interest in relevant stocks, like those I suggest here. What a tailwind they have at their back. In my presentation, I sum it up as ‘banks, builders, and REITS’.

But the level of opportunity goes much deeper than that. Retailers and advertisers feed off a strong housing market, as do mortgage brokers and real estate agents.

All can be monetised on the ASX. My humble suggestion is stop listening to political waffle and get real about who makes money in this economy.

It’s certainly not those naive and stupid enough to believe articles about housing ‘supply’ being THE problem of high house prices.

Get wise here! The good times most certainly don’t last forever.

All the best,

Callum Newman,
Editor, The Daily Reckoning Australia

It is grey and cold here in Paris.

Mon Dieu! The government here is even more absurd than in the US. French president Macron says he will ‘emmerd’ those who don’t have the vaccination. We’ve seen that translated as ‘piss off’ or ‘mire in excrement’. A better translation of emmerd is probably something like to ‘make your life miserable’.

But imagine — what kind of society is it in which one group tries to make another group miserable?

In a healthy, consensual democracy, like a healthy marriage or a healthy business, nobody has a monopoly on the truth…and nobody gains much by trying to bully and threaten others. People didn’t need to be forced to take the polio vaccine, for example. When we were in grammar school, polio was still a terrible disease…and the vaccine kept us from getting it. COVID, on the other hand, is not a threat to most people and the vaccines don’t keep you from getting it anyway.

The Washington Post:

‘The omicron coronavirus variant will infect “just about everybody” regardless of vaccination status, top U.S. infectious-disease expert Anthony S. Fauci said Tuesday.’

Does vaccinating everyone really make sense? The issue deserves a contrary argument and an honest discussion. It is opposition that reveals the best way forward, not submission. One side puts forward an idea. The other lets him know what a moron he is. From this exchange of ideas and opinions, a consensus emerges.

But without the yang, the yin spins out of control…without the immovable object, the irresistible force is lost in space. Alas, in France as in the US, the elites conspire to suppress alternative opinions…and the servile press asks no questions. Instead, it gives out the party line. Voters either go along…or else!

Back in the US…

Who asked any questions as the Fed lowered interest rates below the level of consumer price inflation? Who objected when it ‘printed’ more than US$8 trillion of new money since 2000…or raised the alarm as the feds added more than US$23 trillion to US debt?

And now…inflation is officially running at a 7% rate. Romaine lettuce, reports Bloomberg, is 61% more expensive than it was a year ago.

A CNN headline: ‘Analysis: “It’s getting worse every time”: Inflation concerns could spell trouble for Democrats’.

At today’s inflation level, if you buy a 10-year US note, you get a real yield of about MINUS 5%. Put in US$1,000. A year later, you’ll have US$950.

Alert readers will notice that this is not a good way to build wealth. You can’t lose money on an investment and make it up by doing more of it. You have to do something different.

Which is why yields on the Fed’s benchmark bond — the US Treasury 10-year note — are rising. Investors are looking for the exits.

And if yields continue to rise, which seems likely, it creates a big problem for borrowers. They will have to refinance their mortgages…their bonds…and their loans…at higher rates. (30-year mortgage rates hit 3.45% yesterday, the highest since March 2020. They were 2.65% a year ago.)

Which is when they are likely to wonder if borrowing was such a good idea in the first place and whether — when the Fed was getting the whole economy hooked on ultra-low interest rates — someone should have said something.

Nobody did.

Instead, the great and the good — seeing the coast was clear — went right along. And the whole system, with no real opposition or means of correction, became self-serving and corrupt.

The press acted as if Bernanke, Yellen, and Powell knew what they were doing…Congress became a sinecure for partisan hacks…the rich counted their money…(US$30 trillion in stock market gains since 2009)…the public was addled by Facebook and the evening news, punctuated by one scary distraction after another…and the printing presses at the Fed ran night and day (no need to raise taxes…or borrow honestly from savers!).

And now…the entire elite establishment locks arms in favour of more money and power for itself…at the public’s expense, of course…

…and what can stop it?

Regards,

Bill Bonner,
For The Daily Reckoning Australia