wealth management – Digital Finance Analytics (DFA) Blog

The Next Incoming Tax Grab: Taxing Unrealised Gains?

I have highlighted the indisputable fact that the share of Government funding taken from households, via higher taxes, and freezing the bands so fiscal drag means we pay more, and despite the promise of tax cuts, has lead to the highest proportion ever. In fact, it is a bigger impost on households that the higher interest payments thanks to rate hikes.

This is also a function of Corporations paying less, thanks to their ability to structure their affairs, get massive Government handouts, and their capacity to pressure our elected officials.

Given the fact that the federal budget is facing a structural deficit, perhaps it should be no surprise that a new front in taxing more is opening. And that relates to taxing assets, and especially unrealised gains. It starts with superannuation, but it is unlikely to stop there. Tuesday’s budget indeed revealed Labor is full steam ahead on taxing unrealised capital gains.

In the budget forward estimates it reveals Labor expects to tax an extra $9.7 billion from superannuation funds over the five years from 2024-25 to 2028-29, compared to what was forecast in MYEFO. And it is worth reading the small print.

If Labor is re-elected with this policy intact, this could be the thin end of the wedge. As well as freezing the protected level to $3million, which means over time more will get dragged, in, so yet another form of fiscal drag. The $3 million cap, unindexed, is a sneaky ‘tax on young people, tomorrow’ that is dressed up as a ‘tax on rich people, today’ so its a deceptive tax grab that borrows from young people’s future by ignoring that in 40 years when today’s 25-year-olds are retiring, $3 million will not be considered a very high balance!

And the precedent would be set to tax unrealised gains is taxing a profit you may never receive. As day follows night, this would be widened, potentially hitting a lot of farmers, small businesses, and entrepreneurs and even eventually perhaps the family home.

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Digital Finance Analytics (DFA) Blog

The Next Incoming Tax Grab: Taxing Unrealised Gains?

00:00 / 00:14:54

Seeking A Value Anchor In Stormy Weather: With Lynette Zang

I caught up with sound money advocate Lynette Zang, who is the Founder and CEO of Zang Enterprises. We spoke about the value destruction rife across markets, what’s behind it, and what we can do about it.

Zang, a self-described “prepper” says the current fiat monetary system is dying, we need to think differently about money, and how to secure our individual futures. Governments and Central Banks are part of the problem!

https://www.lynettezang.com

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Digital Finance Analytics (DFA) Blog

Seeking A Value Anchor In Stormy Weather: With Lynette Zang

00:00 / 00:33:54

DFA Live Q&A HD Replay: Investing Now: With Damien Klassen

This is an edited version of a live discussion with Head of Investments at Walk The World Funds and Nucleus Wealth, Damien Klassen as we consider whether stagflation is a potential outcome from recent policy changes in the US, and how global markets are facing into the greater levels of uncertainty. How do we separate signal from noise, when considering an investment strategy.

You can ask a question live.

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Digital Finance Analytics (DFA) Blog

DFA Live Q&A HD Replay: Investing Now: With Damien Klassen

00:00 / 01:31:41

Bitcoin Hits A Bear Note, So Where Next?

Volatility in crypto has pulled the value of Bitcoin towards $80,000 USD, as the so-called Trump bump continues to fade across markets. With a pro-growth president devoted to deregulation, and bent on asserting US dominance over everyone else, the conventional wisdom was to pile into US assets and crypto, and brace for bond yields and the dollar to surge higher. All that happened in the weeks after the election. But since Donald Trump actually took office on Jan. 20, and particularly in the last week, all the Trump trades have reversed.

It is quite likely we will continue to see extreme volatility in the sector, and the journey up and to the right quite possible, given the limited supply of Bitcoin, so while, as a speculative trading asset people will continue to play with it, as a cornerstone of a secure wealth building strategy, I am less convinced.

My point here is that market uncertainly is broader than just crypto, but Bitcoin and other coins are likely to continue to magnify the volatility also visible in other markets.

No wonder perhaps that a critical detail from the 2025 meeting is that Warren Buffett’s Berkshire Hathaway’s cash pile hit a record high to over $330 billion, suggesting the Oracle of Omaha and his investment Colossus are on the sidelines.

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Digital Finance Analytics (DFA) Blog

Bitcoin Hits A Bear Note, So Where Next?

00:00 / 00:10:33

Would Refinancing Mortgages To Fixed 30 Year Loans Help Australians?

Today I want to look at the question of refinancing after the RBA rate cut, and whether a long term fixed rate mortgage in Australia would be a good idea.

While the ‘big four’ banks have committed to passing on the full 0.25 percentage point RBA driven rate cut to their customers, meaning those on variable rates will have their interest rate reduced by that amount in the next few months, if your mortgage rate is currently in the high sixes or 7 per cent, then you should definitely look and see if you can get a better rate following the RBA’s rate cut on Tuesday.

Beyond that, there is a fundamental difference between the mortgage markets in the US and Australia. A 30-year fixed mortgage is a dominant product in the US, where they account for about 70 per cent of outstanding mortgages but in Australia the bulk of loans are variable rate loans, which move in line with market rates, and indirectly the RBA cash rate, together with short term fixed rates which are again priced off the yield curve.

In the US, In the US, government-backed institutions like Fannie Mae and Freddie Mac provide liquidity to banks so they can sell 30-year fixed-rate mortgages. As a result, Banks in America are able to offer the riskier loans because of the existence of these so called government-sponsored enterprises (GSEs).

BlackRock chief executive Larry Fink suggested that Australia should introduce 30-year mortgages. The chief executive of the $18 trillion investment giant BlackRock said “We believe Australia should be building a 30-year fixed-rate mortgage market,” in an interview reported in the AFR. Fink, who was a pioneer of the mortgage-backed securities market during the 1980s, says Australia is uniquely positioned to pursue such a development because of the size of its $4 trillion superannuation pool.

Seems to me that engineering long term fixed rates in Australia may sound attractive to the big investment houses, the banks, and even the Government, but I am not convinced it is good for ordinary Australians. And it is worth remembering that through the GFC, US mortgage borrowers defaulted in droves, due to rate resets from low teaser rates, allowing those same investment houses to subsequently hoover up stressed property for a song. They are on the side of investors not prospective home owners.

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Digital Finance Analytics (DFA) Blog

Would Refinancing Mortgages To Fixed 30 Year Loans Help Australians?

00:00 / 00:12:17

Santa Rally In Full Swing; For Now!

Markets are expecting the FED to cut rates again at its December meeting, after the US economy added 227,000 jobs last month, mostly in line with expectations, and the three-month average came in at 173,000, confirming expectations that the labour market is cooling, at a moderate pace.

The Australian sharemarket dropped on Friday in a broad sell-off as investors turned cautious ahead of a key job report in the US that may shed light on whether the Federal Reserve will continue easing interest rates this month.

The big banks had a weak session with Westpac down 1.4 per cent to $32.76, while Commonwealth Bank fell 0.6 per cent to $157.06. That’s despite traders ramping up bets of an earlier rate cut by the Reserve Bank. Money markets imply an around 50-50 chance of an easing in February 2025, up from 25 per cent on Tuesday. The central bank is widely expected to keep the cash rate at 4.35 per cent when it meets next week.

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Digital Finance Analytics (DFA) Blog

Santa Rally In Full Swing; For Now!

00:00 / 00:17:23

DFA Live Q&A HD Replay: Investing Now: With Damien Klassen

This is an edited version of a live discussion with Head of Investments for Walk The World Funds and Nucleus Wealth, Damien Klassen. As we roll into the end of the year, how are marketing shaping up, and what strategies are most appropriate given the Trump effect?

We look at longer term return trends, discuss the Australian economic breadth, and the China connection, among other things.

Original live stream here: https://youtube.com/live/zYDnJ1yOOhU

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Digital Finance Analytics (DFA) Blog

DFA Live Q&A HD Replay: Investing Now: With Damien Klassen

00:00 / 01:29:43

DFA Live Q&A HD Replay: Investing Now With Damien Klassen

This is an edited version of a live discussion with Head of Investments at Nucleus Wealth and Walk The World Funds, Damien Klassen. As the US election closes out, and the RBA releases the latest decision, how are markets shaping up, which segments are risk exposed, and what strategies need to be considered given the international cross currents and economic uncertainties.

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Digital Finance Analytics (DFA) Blog

DFA Live Q&A HD Replay: Investing Now With Damien Klassen

00:00 / 01:28:47

DFA Live Q&A HD Replay: Investing Now: With Damien Klassen

This is an edited version of a live discussion with Damien Klassen, Head of Investments at Nucleus Wealth and Walk The World Funds. Given the strength of the markets in recent days, and the China stimulus programme, what’s ahead, and how should you position given the level of volatility and uncertainty out there?

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Digital Finance Analytics (DFA) Blog

DFA Live Q&A HD Replay: Investing Now: With Damien Klassen

00:00 / 01:25:51

Stars Align To Create A Bubble Dream; But Is A Nightmare Around The Corner?

This is our weekly market update where we review the market action starting in the US, then Europe, Asia, and Australia and also cover commodities and crypto along the way. This is a data packed segment, so be warned!

This week markets drove higher, pretty much across the board, thanks to the fall out from the Federal Reserve is slashing interest rates, more benign US economic data and China finally moving more determinedly to bolster growth as China’s central bank lowered interest rates and injected liquidity into the banking system, and with more fiscal measures expected to be announced before a week-long Chinese holiday starting on Oct. 1. Listed shares of Chinese companies jumped on the latest series of stimulus measures from Beijing to boost the domestic economy, including those on international markets.

As a result, we saw upswings in markets across the globe, and this despite weaker oil prices and rising conflict in the middle east. MSCI’s gauge of stocks across the globe rose 0.25%, to an intraday record high. Europe’s benchmark STOXX 600 index closed at a record high, ending up 0.5% at 528.08. China’s blue chips jumped 4.5%, bringing their weekly rise to 15.7%, the most since November 2008. Hong Kong’s Hang Seng index also gained 3.6% and was up 13% for the week, its best performance since 1998.

The Dow Jones Industrial Average rose 0.33%, to 42,313.00, the S&P 500 fell 0.13%, to 5,738.17 and the Nasdaq Composite fell 0.39%, to 18,119.59. All three major U.S. stock indexes posted a third straight week of gains. Nvidia’s 2.2 per cent decline was the reason for the S&P 500 and Nasdaq slipping on Friday, pointing to a report that China is urging local companies to stay away from its chips. The NASDAQ Golden Dragon shot to 7.236.16 while the Russell 2000 was at 220.33.

The best performer of the session on the Dow Jones Industrial Average was Chevron Corp (NYSE:CVX), which rose 2.47% while the worst performers of the session was Amazon.com Inc (NASDAQ:AMZN), which fell 1.67 and International Business Machines (NYSE:IBM) was down 1.16% to 220.84.

“It’s a bubble dream,” according to Bank of America equity strategist Michael Hartnett. His data had another $US10.9 billion flowing into US equities in the week ended September 25.

“Fed cutting into recession is negative for risk assets, but Fed cutting with no recession is positive and investors firmly of the view Fed and China is sufficient policy easing to short-circuit recession risk,” Hartnett wrote.

So in the context of overvalued stocks, markets are still betting on higher ahead, which is quite possible but before the surface there are significant cross currents and risks. So volatility will remain the watch word, and the bubble dream might yet turn to nightmare. We will see.

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Digital Finance Analytics (DFA) Blog

Stars Align To Create A Bubble Dream; But Is A Nightmare Around The Corner?

00:00 / 00:21:39