Michael's Musings

10/04/2026

Q: How do you know a property is expensive? A: You don't.

But there are hints and a thinking person can use them to gain some perspective. And the same logic applied to investments more generally. In amongst the turmoil of an investment decision are markets and indicators that the wide-eyed can use for better decision-making.

In this post, I'm going to share a slice of Howard Marks' latest quarterly memo. This legend of Wall Street writes about prices, and trends and the way people always see "this time is different" but eventually, it's see that this is just the same as before but wrapped differently.

Right now, there are arguments that "markets" are expensive. We won't know whether that is true until quite some time from now, when we can all look back with smug faces and point to how obvious it must have been at the time.

Is Perth residential property 'expensive'?

Are the companies listed on the ASX 'expensive'?

Is the current price of gold, 'expensive'?

Are Australian Government bonds, 'expensive'?

These are all excellent questions. And much like any reasonably informed financial person, I can provide you with material that 'proves' these areas are expensive. And I can provide you with material that 'proves' these areas are prices exactly as they should be.

It's no wonder a non-financial person finds all of this confusing and confronting.

Back to Howard Marks. His latest memo includes observations on times when prices look to be, and eventually turn out to be, 'expensive'. Here's the text.. when reading it, I'd ask that you think of people you know, and their attitudes to money and to how they see their financial position versus how they see that of their neighbours, their friends, their work colleagues and their heroes. And think about how you see, and talk about money, markets, and the price of any investment today.

[from Howard Mark's quarterly newsletter : 9 April 2026]

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"Extreme upsurges in the popularity of novel forms of investment invariably share certain features:

🔹 The Essential Element is Newness
When something is new, it’s easy for proponents to tout merits while the flaws remain hidden. Untested assets allow fads to grow into bubbles.

🔹 The "Grain of Truth"
The Nifty Fifty were great companies. The internet did change the world. These truths provide the foundation for what eventually becomes a destructive bubble.

🔹 The Reward of Early Entry
Early investors succeed because they buy before popularity elevates the price.

🔥 The Power of Envy
As Kindleberger wrote: “There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.” Envy is often the strongest force in the market.

📈 Hype vs. Reality
Possibility is confused with probability, then morphs into certainty. Skepticism and risk aversion go out the window.

❓ The Critical Question
Rarely asked in the heat of the moment: "What price is safe to pay to participate?" FOMO and excitement are the mortal enemies of caution.

🤡 The Three Stages
Latecomers swallow promises and push prices to the extreme. As Warren Buffett puts it: “First the innovator, then the imitator, then the idiot.”

⚠️ The Inevitable Disillusionment
Flaws and unfulfillable promises lead to loss when optimism turns out to be excessive or prices simply too high.

"History does not repeat itself, but it does rhyme." — Mark Twain

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There have been so many 'novel' forms of investment or investment trends, in the last decade or so. All have looked amazing, and early adopters have often made a lot of money, while late-arrivers have lost a lot of money. Dinosaurs like myself must be careful of assuming every new trend is going to result in disaster. Most probably will, but some might not, and some might represent a genuine opportunity where things really are "different". But who has the crystal ball for that future certainty? Not I. And nobody I've ever encountered.

Is "artificial intelligence" a genuine opportunity? Is it a trend that will follow the stages outlined by Howard Marks?

Is Perth residential property a genuine opportunity? As in, are current prices indicating a great opportunity? Even we Financial Planners are inundated with messages telling us of the great opportunities to be had in residential property right now or in private credit and lending into residential property in one form or another.

If you go back to Howard Mark's notes on these investment trends and cycles, you'll notice that he's not saying some people won't make a lot of money. And he's not saying a lot of people will lose money. But he is saying that there's a bit of a cycle going on here, and stepping back to try and work out what cycles we might be looking at, and where we might be on each of those different cycles, can at least give us some idea of whether we are closer to one 'end' of the cycle than another.

What do you think?

How do you see the price of Perth residential property today? How do you look at the prices of shares listed on the Australian Stock Exchange today? Do you see artificial intelligence as an opportunity - or as a threat? How do you measure threat versus opportunity?

In our office, Simon Tomkinson keeps a crystal ball that he offers to anyone who is uncertain about the future. I think there's a good chance the crystal ball is as accurate as many of the definitive declarations of threat or opportunity that cross my desk on any given day.

The weekend is coming up. Anyone spotting glaring opportunities or threats is welcome to list them in the comments. I'll see if my weekend allows me time to add a few as well.

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Please remember the Great Disclaimer
Nothing in this post is to be interpreted as 'personal financial advice'. It is general and factual advice only, and does not take into account your personal circumstances, expectations or preferences.

LInk to Howard Marks' memo :
https://www.oaktreecapital.com/insights/memo/whats-going-on-in-private-credit

26/03/2026

Feeling confused by the rapid changes in news headlines? You are not alone. I've included below this morning's 10-year Australian Government Bond Yield chart, and commentary.

I've highlighted the single most important word in the commentary - "hope". It's not a very strong basis for large economic decisions.

This is a part of the many reasons you might be feeling a tad worried or concerned or confused right now. Possibly all emotions at the same time. You are not alone.

At times such as these, a professional money manager will appear to 'do an ostrich', and stick their heads in the sand. But that's not really what they are doing. A professional money manager will look at all this uncertainty, and markets trading on something as slippery as 'hope', and they will shake their heads then close their eyes and go back to basics. It is a factual statement to say you cannot predict financial markets. Professional money managers know that. But sometimes even professional money managers need to take a moment and pause so they remember that simple basic fact.

What a professional money manager CAN DO, it so better understand what they can impact and what they cannot impact or change. You cannot change what Donald Trump chooses to do tomorrow. You cannot predict it. There's every likelihood that Donald Trump doesn't know what he is going to do tomorrow. He likes "a deal", which means acting and reacting according to circumstance, and being prepared to change anything in order to achieve whatever is today's goals. If a USA President operates this way then their Administration is likely to operate in a similar way. So what CAN you change? A professional money manager - and you - can decide how much money to put in different areas. They can decide how much risk they are going to take with their money and their future outcomes. They can look at higher risks or higher uncertainty, and make a decision to either participate or not participate - or participate at a certain level, and under certain conditions.

Sometimes, the 'fear or missing out' or FOMO, is so great that a person or even a professional money manager will stay invested into areas that they KNOW involve more risk. There's nothing wrong with doing that - but there's no point blaming everyone else if things go wrong with that money that has been put at risk.

In times where 'hope' and 'FOMO' drive market changes, investors of all types need to make a conscious decision to either pay attention to where their money is - and do something about it - or close their eyes and just let things play out. Both are a conscious decision.

Important notes on my note...

As usual, please take note of the Great Disclaimer - nothing in this post is intended to be personal financial advice. It is general or factual advice only and may not be relevant or even appropriate to your personal situation. Do your research. Get professional advice and help if you are in any way uncertain.

A quick note about my early point of not being able to predict the future... well, someone did overnight. Someone placed hundreds of millions of dollars of bets on the oil price suspiciously close (and definitely before) Trump's announcement of a possible ceasefire with Iran. If you search the internet, you'll find charts that make this little trade a pretty obvious target for investigation. But it'll be fascinating whether that little coincidence gets appropriately investigated. So, my primary assertion holds true - aside from potential insider trading or just pot luck, it's a generally accepted fact that it is impossible to accurately and consistently predict the future of financial markets.

17/03/2026

Why are Reserve Bank interest rate changes such a big deal?

I ask this question because there's an awful lot more to life than some official interest rate that is decided by a bunch of folk not overly connected to the average person on a standard wage in a standard home with a standard mortgage. And that little sentence tells you why most of us should pay less attention to whatever that Reserve Bank of Australia official cash rate might be.

Roughly a third of Australians have a mortgage. An interest rate will likely increase the minimum monthly repayment for most of those folk. There aren't a lot of fixed mortgages left in Australia after most of the covid-era super-cheap fixed terms rolled over to variable. And the RBA itself tells us that a lot of people are ahead of their standard loan repayment requirements and/or they are paying more than the minimum repayment. So the actual impact is probably less than you think.

Roughly a third of Australians rent. Those folk won't feel much until the next rent review, where many landlords will try to get more rental income to help meet their higher mortgage costs. But Australia's average rent has increased dramatically over recent years, so there's a limit to how much extra rent people can pay.

The balance of Australians already own their home. They aren't really that interested in RBA cash rate changes. Unless they have a solid block of dollars in the bank or in term deposits. Many of these people will be retired. Many will be on a part or full age pension from Centrelink. And Centrelink doesn't change the pension just because the official interest rate has changed... Centrelink assume that cash in the bank earns at a "deemed" rate, which hasn't really changed much in a long while.

Google's Gemini provides the following helpful information on deeming rates...

"From 20 March 2026, Centrelink deeming rates will increase to 1.25% for the lower rate (on the first $64,200 for singles or $106,200 for couples) and 3.25% for the upper rate (on amounts above these thresholds). These updated rates, replacing the previous 0.75% and 2.75%, are applied automatically by Services Australia. "

A person with $200,000 in the bank can be earning anything from nothing (in some transaction accounts) through to a little over 4% (in some bonus accounts or high yielding cash trust accounts). If they look around, they'll get up to a little over 5% in a 1 year term deposit. In fact, you can track down a 5% pa return in shorter term deposits at the moment. So a retiree on Centrelink can track down a higher income and not have any loss to their pension.

If you think about it, these RBA interest rate decisions get a lot more press than they deserve.

Another way of looking at things.. Every 10c increase in the average cost of fuel, leaves motorists incurring an extra $1,600,000,000 a year in costs. Now you might do the maths, and tell me that the 0.25% interest rate rise - which will lift average mortgage rates to 6.0-6.5% - will result in a hit of up to $5.4 billion of interest costs for Australians holding roughly $2.16 trillion of home loan debts. True.. but if fuel rises by 35c a litre, the impact will be higher than the interest rate rise cost.

All of which is the sort of stuff financial advisers argue over their morning coffee. What is more important, is that this extra cost will hit people with mortgages, right when they are already struggling to cope with higher living costs through broad inflation. There's no denying that even though many people / most people, will cope with this interest rate increase, it doesn't mean they aren't feeling a lot more pressure on their day-to-day finances.

The official interest rate is now 4.10% (up from 3.85%).

A potentially bigger issue, is that the Australian Government 10-year bond yield is now sitting at 4.986% (it's bound around a lot today and in the next month or so, as investors try to work out if rate rises are ongoing or if things might settle after this one). If you've listened to my musings for a while, you'd be aware that this is what's known as the "risk free rate". If you can hand $1m off to the Australian Federal Government and receive 4.986% pa for 10 years and then get your money back, then that's a bit of a benchmark for measuring against other places you could invest your money. Because other places will entail more risk of changing income or maybe not getting some of your money back. The end result of this lift in the "risk free rate" is that risky assets are likely to be checked for value more closely. If you're putting $1m into a rental property and receiving an after-expenses income of 1-2%, then you're very much hoping that prices will keep rising enough for you to make up for the annual shortfall in what you could have earned without any risk. That's the sort of balance in risk and return that financial advisers talk about over the coffee machine in the morning.

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Postscript... this Facebook post must be a tad negative, because I asked ChatGPT to provide me an image based off it, and the attached picture is what it handed me. Gosh, I certainly did not mean to appear that negative! I'll post a link to the wonderful RBA website to provide some fascinating interest and humour as a balance against my apparently negative text..

https://www.rba.gov.au/statistics/cash-rate/

09/12/2025

Is Ai a bubble? It's a simple enough question. I think it is. But I'm just me, and I've been wrong about a few things from time-to-time.

If you are wondering about Ai from an investment perspective, you must read Howard Marks' latest newsletter. In it, he covers most of the points I've encountered in trying to make sense of Ai from an investment perspective.

There's a pdf you can download. https://www.oaktreecapital.com/docs/default-source/memos/is-it-a-bubble.pdf?

Or you could listen to the newsletter while doing other, more important, things. https://www.oaktreecapital.com/insights/memo-podcast/is-it-a-bubble

If you can make the time to read or listen to this email, you will undoubtedly walk away with some sort of opinion about Ai's financial impact. LOTS of people are happy to talk about Ai's social or workplace impact but for a good number of us, its financial impact is going to be bigger - and far more immediate!

I'd be interested in your thoughts and comments.

04/12/2025

What's happening with interest rates? Well, they're not trending down right now..

When I say 'interest rates', you may envisage any of a number of different rates. But here, I'm talking about Reserve Bank of Australia official rates, and also the 'yield' or rate for Australia's government 10-year bonds. The RBA official cash rate is your approximate benchmark for movements in variable home mortgages, so it's incredibly important to a lot of people. You may recall that the 10-year bond rate is often seen as a proxy for the "risk-free rate" of investments. This is the comparison rate for valuing other assets. The logic is that instead of buying another asset, you could just park your dollars in an Australian government bond at 'no risk', and receive your ongoing income return each year, and after 10 years, get your original capital back. So both the short-term variable rate and the longer-term 10-year bond yield, are incredibly important to Australian finances.

I've attached two charts - they're both focused on the 10-year bond yield. IF this 'risk-free' rate rises, it's a generally accepted logic that long term investment holdings should fall in value. That is, shares and property and businesses that might be valued against this risk-free rate. It's not a rock solid rule, of course. Some companies might be on a roaring growth phase and keep growing regardless of interest rates. And some properties might be attractive enough to overcome broad economic factors.

From a portfolio point of view, seeing bond yields spiking higher would suggest a reasonable time to look at portfolio's to see whether there is some rebalancing required. There is no single hard-and-fast rule, of course. You will have to do your own homework or ask someone to do it for you. My observation is just a broad market observation. At a time where some are arguing that sharemarkets overseas and locally might be stretched in terms of valuations, it seems a reasonable time to look at how much of a portfolio is left loose for growth in share and property markets, and how much you would need or prefer to sit in more defensive areas such as cash, term deposits, fixed income and bonds?

Every professional update I attend to tune into of late, has emphasised market valuations and the need for care. Yet most have also suggested it's a time to hold what you have and not sell out, because there is likely some level of growth ahead. While those words can sound alarming or comforting, they are no different to what is the standard case at any given point in uncertain markets. What the higher interest rates are telling us, is that the economy is humming along at some level - even if at other levels people and businesses are feeling immense cost-of-living and other pressures.

From a financial planner's perspective, this is a pretty good time to be looking at your own circumstances as they apply to YOU. Not general discussions on general markets that might or might not apply to anyone or everyone. What are your cash reserves? How long can you last if some 'leg' of your work or investment income were to drop or even stop? Is your money and where it is invested likely to surprise you over the coming year or so? And have you appropriately balanced long term growth and return expectations against short term needs for cash and medium term expenses and large cost expectations?

As usual, please remember the Great Disclaimer. Nothing in this post is to be considered personal financial advice. It is general and factual notes and discussion only. Check your own position or have someone do it for you, and do not implement anything in this post without having done that checking!

07/11/2025

Want to know more about Australia's Reserve Bank? About inflation, interest rates and wages? Follow this link to the RBA's newest explanation site. It's genuinely good!

https://www.rba.gov.au/education/unpacking-inflation/?utm_source=rbanews&utm_medium=email&utm_content=button&utm_campaign=2025-nov-inflation

04/11/2025

The RBA has kept official interest rates level today. Those with loan repayments would have preferred a drop in interest rates as a Melbourne Cup present. But that couldn't really happen, when inflation is - yet again - higher than 'expected'.

You can read the Reserve Bank's release statement in the link below.

https://www.rba.gov.au/publications/smp/2025/nov/

I find it rather strange to read the continual calls for lower interest rates, when inflation continues to roll increasing cost pressures on households and businesses.

The Australian Financial Review recently published two articles highlighting the opposite view - that if nothing is done to actually reduce inflation, then inflation is going to stay higher than expected or even increase.

What can be done to reduce inflation?

There are a few things that could be done, but they are not 'free market' and are therefore unlikely to be put into action - or even discussed in public.

One vividly clear starting point would be to focus more society resource to bringing the housing market back into balance. Right now, I've been told there are more real estate agents in Perth than there are properties to sell. Here's what a Google search brings up..

"As of late October 2025, there are approximately 2,800 to 3,000 active listings for sale in the Perth property market, which is significantly lower than what is considered a balanced market (10,000-13,000 listings). This low supply, combined with consistent buyer demand, is contributing to continued competition despite some recent moderation in price growth.
Total listings: The total number of active listings for sale in Perth is around 2,832, based on data from the week ending October 19, 2025, according to Australian Broker News. This includes houses, units, and land.
Market balance: A balanced market in Perth would typically have between 10,000 and 13,000 listings available, so the current number is much lower.
Key takeaway: Despite a recent increase in new listings during the spring, the overall number of properties available remains very low, creating a competitive environment for buyers. "

It sounds so boring and innocuous, doesn't it? "creating a competitive environment for buyers". I'm sorry but that wording is embarrassingly short of where it should be. It would be clearer to say "if you are looking to buy a property in Perth today then there aren't many available. You're likely to pay substantially more than 'fair value'". But nobody wants to hear that. And under the precise definition of 'fair value', the current elevated prices are exactly where they should be in such a market.

From a financial planner's point of view, that's a rather stunted viewpoint. The facts are that a person looking to make a residential property purchase in Perth is going to be forced to make quicker decisions on fewer properties at higher prices than would be the case if there were a 'normal' stock of housing available.

If you are buying a home to live in then that's most likely not going to worry you overly much - you're looking for a place to live, and the actual price you pay here isn't going to worry you all that much in 10 or 15 years time.

But if you are buying for investment - well, that might be a different matter. I could be massively wrong, of course. Perth is, after all, a wonderful place to live and to bring up a family. Our environment is amazing and you could spend your life travelling this state and be quite content with the scope of vistas you'll encounter. Wages are high here (from a global point of view) and there are jobs available to those who are prepared to move and do what the job market asks. There are a lot of reasons why people would continue to want to move to Perth and to live in Western Australia. These reasons could keep demand incredibly high for an incredibly long period of time.

It's just a matter of what level of risk you are willing to take, and what amount of time you have available for any mistake in timing to sort itself out.

There is obviously more to interest rates than just residential housing in the city of Perth. But current conditions here are a good example of pressures present in markets across the developed world right now.

And that's a thought for another time.

Inflation has increased and is back above our 2-3 per cent target range, where we expect it to stay for much of next year. The unemployment rate has risen a little, but the jobs market is still healthy and is expected to remain that way.

15/07/2025

The next big thing! High returns and minimal risk! Learn to do what the wealthy do! Nobody knows this secret to market-beating investment returns! Act now!

This stuff never gets old. For an aged dinosaur financial planner who's been through the 50% or bigger falls since the 1987 sharemarket crash, these slogans and sales pitches never get old. They're vegemite to my morning toast. What really surprises me though, is that people still fall for this garbage. Here's a post musing on this issue of outlandish and extravagant or even just big, claims.

You'd think that the enormous research potential of the internet would be sufficient to reduce people's attraction to these claims. But no. You'd think that the plethora of 'free' or super-low-cost investment advice newsletters, websites, government material, consumer-focused organisations and well-meaning social media folk, would be sufficient to stop folk from following these silly claims. But you'd be wrong. People continue to not only fall for these claims, but genuinely believe that they are more true than boring old experience or academic studies or learning.

You'd also think that the advent of Artificial Intelligence (now pretty much accepted as 'ai' or 'Ai', depending on how much credence you assign to it), would result in less people being scammed or falling for outrageous claims. But again - no. Ai is being used by the scammers and con-artists, shysters and hucksters, just as much as it is being used by well-meaning folk who are trying to learn about this whole finance thing. The end result is the continuation of an 'information imbalance' or a 'power imbalance' [asymmetry imbalance is a more technical term], where the average person is simply outclassed by a more powerful, knowledgeable or capable person or group.

I am not sufficiently knowledgeable to be able to answer this conundrum. Why is it that access to more knowledge, to greater learning, to easier pathways for confirming facts and what might be true versus what might be false or unlikely... why is it that the modern world's more sophisticated tools still fail to help people when confronted with scams or false or exaggerated claims? Surely there should be less money being stolen or less money being lost to false or exaggerated claims? But this is not the case. People continue to believe false or exaggerated claims. Many continue to believe outright lies. As a financial planner, this upsets me immensely.

A lot of this probably comes down to expectations. What expectations does a person hold for the future? What return do they expect and over what time frame? What is their expectation for possible loss?

What are your expectations? 15% return? 0% loss? Be honest.

If I ponder this for a while, sipping my tea and working through memories and experiences, the observations I notice are that expectations are important. Very, very, very important. And I would like to try and convince you that they are, too.

Expectations are important. This is just my immediate thought. It's foolishly limited, but probably not a bad starting point for considering whether to take some investment action step.

If I invest money in the Australian sharemarket today, what is my likely range of return outcomes in the short, medium or long term? What changes if I invest into the USA sharemarket? What about the Perth home rental market? Gold? Bitcoin?

What is the past return for the area I want to invest into or that I am being convinced to invest into? What are the largest falls in value experienced in that market or investment type, and how often has that happened in the past? What are the chances of it happening tomorrow, or the day after or next week or next month or next year?

Carl Sagan is reported to have said 'extraordinary claims require extraordinary evidence'. I like that.

IF you are trying to convince me that you can achieve some fantastic return or that you are so clever you can assure me you'll be able to outperform in some way, then it is on you to set out an awful lot of evidence in support of your claim. And even if your claim can be proven to be true for the past, there is zero assurance that your claim will be valid into the future. In fact, as a financial planner, I would be fairly certain that your past outperformance is more likely to lead to some level of underperformance into the future. In the world of financial professionals, this concept is known as "mean reversion". There are all sorts of academic studies behind it but in general terms it means that the conditions behind any period of outperformance of or in a particular market are likely to change at some point, leading to an underperformance of or in that particular market. It's a very well established principle of modern finance, and it's one that has yet to make its way into the public mindset.

Instead, the general public mindset is that a really good past performance means you'll do really well in the future. There's a technical term for that as well. It's know as "persistence". The ability to achieve a particular outcome across different timeframes and different economic or regulatory or market conditions. Think of it as a resilience through changing environments. And it's super, super hard to achieve. There is an excellent website measuring this persistence idea. You can find it in the link below. The link includes a look at different markets around the world. If you have a look, you'll see just how few professional managers manage to beat the broader market return - often simply called, 'the index'. https://www.spglobal.com/spdji/en/research-insights/spiva/

To conclude this rather long and winding note, I'll put forward a general and factual piece of financial advice to help you, and to help you to help other people, better deal with extravagant or exciting or fallacious claims...

***When encountering extraordinary claims, ask for extraordinary evidence.***

Or seek the opinion of a suitably qualified Financial Planner. You'll have to pay, but that could just be the best investment you'll make.