Michael’s Musings Facebook Posts – Latest Financial Insights & Musings

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Welcome to Michael’s Musings Facebook page feed. Here, you’ll find all our latest posts, thoughts, and updates on financial planning, current trends, and practical advice.

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Michael's Musings

Michael's Musings

Musings on money and finance, from a Financial Planner based in East Perth, Western Australia. Nothing on this Facebook account is to be considered personal financial advice.

Michael’s Musings

4 weeks ago

Michael's Musings
Sharemarkets around the world have fallen in response to the imposing of punitive USA tariffs on friend and foe, alike. Today’s share market is down, but lifted a little as some buyers emerged. What is important for a portfolio is the impact on bonds. As more people have sold investments in risky assets and placed some or all of that money into more defensive cash and bonds, the price of bonds has risen. The impact is to reduce the ‘yield’ or the percentage of income received. The effect is to see long-term (10-year in this case) government bond yields fall from 4.5% on the 27th March, down to 4.1% just now. This is a fairly standard move for investment markets. And it’s handy when you have some bonds mixed in with your shares. There is, of course, much debate and hand-wringing over what unexpected or foolish next-step the USA Administration will take. If you were Donald Trump, you’d bring forward those massive tax cuts, wouldn’t you? More money in the hand will help massage consumer anger over rising prices, as a falling USA dollar (compared with its major trading partners, but definitely NOT Australia) combines with tariffs to see steep rises in many products.As usual, please remember to not panic – check your investments to ensure they are where you think they should be and they are aligned with the levels of risk you are comfortable to hold in volatile times. … See MoreSee Less
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Michael’s Musings

4 weeks ago

Michael's Musings
I want to post a placeholder in time here, because what has played out in markets over the past year is such a stark example of failure to remember the mistakes of the past. A year or so ago, the Future Fund and other large institutions declared public markets were showing heightened risks. Many fund managers searched for ways of investing outside of measurably over-priced markets. But managers who moved away from an observably over-priced USA share market were faced with lower returns in what are very competitive markets. The result? The Future Fund ventured back into USA share markets and was able to show reasonable returns in a year where average returns were to my mind, becoming ridiculous. Hearing managers boast of 25% returns only to see another fund boast of 56% returns reminded me so much of conditions before the 1987 sharemarket crash; the 2007 Global Financial Crisis and the many turbulent times in between. Articles were written on the USA ‘exceptionalism’ and how USA share and economic market dominance would continue forever. Who would have guessed the USA would engineer a self-harm so dramatic it resulted in the overnight evaporation of USA exceptionalism? Donald Trump specifically moved his "Liberation Day" gamble of the entire USA economy away from April the 1st because he was worried it might be confused with an April Fool’s joke. I do wonder if the childish tariff announcement (now seen to have been based on a ChatGPT query) will come to be linked to the April Fool’s Day joke that it has turned out to be? Not a funny one, but a joke nonetheless.On the 2nd April 2025, the USA ditched any claim to moral, ethical, market or economic superiority. So here’s a placeholder in time, where we can just sit back and look at the extent of nationalistic foolishness that has managed to play out in plain sight.Now for a note of sanity and prudence. Please remember the basics of investment – 1. Reserves – have you sufficient cash and access to cash that allows you to weather difficult times?2. Time – have you aligned your investments with your timeframes? Can you leave long-term money alone for long enough for it to weather the stupidity of humans and markets? Eventually, rational thought overtakes the temporary dementia of markets and men. You need to think of this ‘eventually’ in terms of 7 to 15 years because markets can be irrational for a long time, and take a long time to get back to rationality. Remember, all the the biggest falls have created the biggest opportunities. But you need time for all this to play out.3. Diversification – have you spread your money around sufficiently to avoid having too many eggs in the one basket? Huge returns are available to those who are brave or ignorant or foolish enough to bet everything on the toss of a coin. But we need to remember that the odds are against you in that coin toss. Even though everyone wants to win Lotto, there’s only going to be a tiny handful of people who do. Don’t play Lotto with your investments unless you’re completely aware that is what you are doing, and you are absolutely comfortable with doing so.4. A second opinion – we humans are hard-wired to follow our preset wants and needs and expectations. Quite often, our viewpoints are blurred or false or limited. Having an objective appraisal of your financial position and your intended financial decisions can be a handy counter to our human foibles. It’s not a guarantee, but it’s a good deal better than not doing so.That’s enough of musing for now. Let’s all hope the current market ructions are just the readjustment the market needed, and we can all get back to doing whatever it was we were doing pre Donald Trump’s belated April Fools joke. … See MoreSee Less

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Michael’s Musings

4 weeks ago

Michael's Musings
I was thinking about tariffs and their impacts – and most especially I was wondering how so many people can be so surprised when someone notorious for saying outrageous things and meaning them, subsequently goes on to to the outrageous things they have said. But then, tariffs are hardly the most interesting topic. And here’s a short clip that made me laugh on this wonderful Perth Friday morning. So I thought that rather than sprouting more information on tariffs, I’d just let this video explain tariffs for me. … See MoreSee Less

Ferris Bueller’s Econ Class Feels Too Real in 2024

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This iconic Ben Stein scene might be almost 40 years old, but it feels like essential viewing now that Trump is tariffing the world.

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Michael’s Musings

4 weeks ago

Michael's Musings
Are you worried about the impact of Tariffs currently being thrown around the globe like a random packet of hand grenades?Simply put – you should be. Once again, I am being far more vocal on these points than I would usually want to be. But the USA is now telling the entire world to bow to its greatness. And not politely or kindly – it’s new diplomacy is loud shouting, name-calling and personal abuse. In such an environment, I believe it is important that those who would usually be quiet, should speak a little louder and a little more clearly. Even if only to dent the impact of the foul-mouths ballyhooing elsewhere.What we are all observing – whether through eyes or bewilderment, bemusement or red anger – is the deconstruction of 80 years of what is accepted as fair and reasonable in global trade. But it’s best to not see this as some blind act of destruction. It’s absolutely an intentional move to redirect global manufacturing in favour of the USA. And the intentions are not a secret.Here’s a link to a 41-page essay "A Users Guide to Restructuring the Global Trading System" by Stephen Miran – an Economist at Hudson Bay Capital. www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_th…In the essay, Stephen sets out an argument the global trade unfairly benefits others at the USA’s expense. Other countries have unfairly stolen the USA’s manufacturing and this has left the USA less secure and unfairly needing to keep getting itself into more debt – in part because of the strong US dollar. And the strong dollar is that way because the USA is seen as the world’s "Reserve Currency" and that makes the USA a haven for safekeeping of the globes larger pools of cash and capital.To me, the essay reads like some high school alpha male’s deep-seated grump at not being appreciated by those around him. It’s core reasons for needing to reconstruct global trade are dubious at best and spurious if looked at from any other than a highly nationalistic USA lens. Here’s a line from the Executive Summary "… it suggests that tariffs are ultimately financed by the tariffed nation, whose real purchasing power and wealth decline, and that the revenue raised improves burden sharing for reserve asset provision." We will be using tariffs to make you poorer and to force you to pay for us having as much debt as we do. That is what he is saying. Even national attempts to balance out income tax as an imposition on workers via a consumption tax (our GST or the UK’s VAT), is seen purely as an international/domestic consumption issue ("Fiscal Devaluations" on p24). While it’s arguable in a narrow sense, it’s a basic misunderstanding of purpose and intent.Much of the essay deals with the USA’s gripe that China is now a large economy and is moving to challenge USA supremacy in a lot of fields of endeavour. While China’s blatant flouting of trade rules and other conventions is readily observable, this is a pretty stupid reason to imposes tariffs unilaterally, on friend and foe. Again, from here in Australia, cancelling Australia’s USA beef trade as ‘retribution’ for Australia actually holding to its quarantine laws, is just the act of a bully. An ignorant, uncaring bully. Page 27 "Currency Policy and Risks" points out that foreign holders of USA debt are in a position to sell down that debt then it’s likely USA long-dated debt interest rates would rise. Add in a bit of inflation, and the outcome is a disaster for the USA. Rather than moderate any of this huge global reset, Miran simply suggests the USA force other nations to agree to increasing their relative currency value and decreasing the USA, to give the USA more advantages in global trade.I’m not going to go through all the areas in which the essay can be criticised. But I will cover a few that I do think will impact most people’s finances, and in a material way.1. Changing the global trade system away from globalisation, towards homegrown manufacturing and supply chains. Covid exposed flaws in the just-in-time supply chain system, so some homebasing has already been in play. But this is globalisation based entirely on some twisted USA version of what’s ‘right’.2. Doing so through a system of punitive tariffs. There are other ways and diplomatic channels that could have been used. But Donald Trump does not have the time the patience or the attention span for that sort of finesse. His negotiation tactics are visible for all to see. Create chaos, demand the impossible, and never, ever accept anything that doesn’t leave the other person worse off than you.3. Changing a system of bilateral agreements into a USA-first leaderboard of trading nations based on : dupes; sycophants and enemies. There are no friends in this system.4. Using the USA’s financial system as a weapon. This is an area of unintended consequences. The USA has a huge debt because it spends more than it taxes its population. It’s as simple as that. But Miran and his league don’t see it that way. They see the debt being a problem caused by everyone else. It’d be funny, if it weren’t all in the hands of the highly partisan, highly political leaders of the most powerful military machine the world has ever seen.It’s important to remember there is a schedule here. First, create instability. Apply tariffs. Dramatically. To try and give some stability to the process, set out a clear roadmap of how you want nations to deal with you (this was Donald Trump’s "Liberation Day" announcement while he held up the two tablets with shiny new Commandments for the world to follow (i know, it was a bifold hardcopy visual table, but didn’t it look like the photo intention was Moses holding the Ten Commandments? Argue with me on that one). On page 21, Miran suggests that the sudden shock of tariffs (after 80 years of the USA arguing a globalist outlook and NOT tariffs) can be reduced if they are implemented gradually. Donald Trump is 78 years old. He doesn’t have time for that level of soft when he’s trying to build a legacy from his second term (more on that later – I never expected Donald Trump would willingly hand over power after a second term, and now I see it as an impossibility). Miran then sets out all the other ‘levers’ the USA could use to negotiate tariffs with different nations. But the end result is still that all countries are grouped as either dupes; sycophants or enemies. There really are no friends. And from here in Australia, that’s exceedingly obvious.The next step is not a pretty one. Some character by the name of Poszar (p28) sets out three ways of forcing nations to pay for the USA’s debt pile, and to help fund the USA building its manufacturing base again. The steps amount to forcing nations to:1. buy US Treasury’s2. Buy US "century bonds" (we won’t pay you back for 100 years)3. Swap short term bills for long-term bonds (ala gangster style)All of this makes dramatic sense if you lack self confidence and feel the rest of the world owes you a living. While not specifically expressed this way, there is no other way a supposed ‘ally’ could interpret this sort of mafia-style coercion and brute force. Calls to use some "IEEPA" legal jargonese as a cover for simply not paying back interest on securities – defaulting in any other language – are tantamount to financial declaration of war. Why is my language in all of this so emotive? Because the people putting forward these ideas are highly insulated from the impact. They are well-paid and often hold positions of power. They are wealthy and can overcome most financial difficulties. And they are connected to the corridors of power. If all else fails, they have access to the same US government institutions that so many are currently tearing apart and demeaning. But it is those institutions that are best able to help the world navigate this mess being wilfully and intentionally created by the USA leadership.The potential for changes at this level to go wrong is enormous. A simple recession would be a fantastic outcome when compared with the just-as-likely alternatives. All-out trade wars. Actual wars. Fracturing of generational unions and alliances. A huge level of personal instability as populations try to make sense of what does and will continue to look like a confetti shower of random policy announcements.And don’t even get me started on Dark Enlightenment. Look it up – those wonderfully insular folk are held up as quite good people by the current USA Administration.Finally, back to Donald Trump and his inability to hand over power at the end of his term. Aside from the 6 January riot and invasion of Congress being a pretty good indicator of how badly Donald Trump takes losing any competition, there is the problem of time required for any global trade adjustment benefits (if there end up being any) to actually flow through to ‘normal people’ in a way that will force them to say "thank-you". There’s a slim chance in hell of that level of benefit appearing in a single Presidential term. Think of how long it takes to just get approvals for a new industrial development – never mind the actual construction, need for resources, capital, labour and labour skills, materials and infrastructure. Add in the fact that the USA wants to replace a 50-year reduction in manufacturing capacity in just 4 years, and you get some idea of my line of thought. Ergo, Donald Trump – at the nubile age of 82 – will be highly unlikely to step aside and let someone else take his glory for a revitalised USA (albeit one that’s quite likely to be at war with one or more of its current foes or allies or sycophants). I’m not looking forward to that display.I’ll finish with a link to an observation from The Handmaid’s Tale author, Margaret Attwood. I think it particularly relevant right now.youtu.be/pFkxJSCzjcw?si=-Kiu5eYfdPpEbGDj … See MoreSee Less

Democracy by Margaret Atwood | Democracy 2024

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In a year in which more than half the world goes to the polls, acclaimed novelist Margaret Atwood asks whether democracy is fragile and easily destroyed or f…

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