Let's celebrate dobbers; ASX heading for a fall

1. Is the ASX heading for a fall?

2. Albanese government's image problem

3. Do everyone a favour and dob in a tax cheat

4. Better home loan deals have arrived

Why do some property listings leave off the asking price? Expressions Of Interest, Price On Application, or just no price guide at all - they all limit transparency for buyers. The latest episode of The Property Pendulum, presented by Fear & Greed and Domain, dives into the world of price guides, including what it means for underquoting.

Listener Jo asks:

"Sean has mentioned several times there are concerns with super fund giants becoming too big in Australia, including the impact they are now having on IPOs and ASX listings.

 

What does it mean for investors? And how will it impact the economy?"

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Thanks for reading my opinions on the week's biggest stories.

- Sean Aylmer

The share market is slightly crazy at the moment. The banks are over-priced with investors betting that bad loan levels won't rise too much and seemingly not worried about the inevitable profit margin squeeze in a lower interest rate environment. The mining companies are bouncing on hopes that China will follow through with more stimuli. A bunch of consumer discretionary stocks and industrials are doing well on the back of expectations of lower interest rates in coming months. There seems to be no end in confidence around tech stocks, while even the property companies are doing well on rate hopes. On Tuesday, the S&P/ASX200 hit an all time high of 8331.7 points. That's up 18 per cent in the past 12 months (although around half of that came at the very end of 2023). The share market is a measure of future earnings forecasts. Based on that measure, investors are very upbeat about the future. But what if inflation doesn't keep falling and rates stay at this level for another six months? What if the economy crashes and unemployment surges? What if people, hit hard by higher energy, petrol, insurance and housing costs just stop spending? The risks to the economy aren't adequately priced into the share market. The market could well be heading for a fall, or at the very least not appreciate much further.

Over the past week, the Albanese government has had a shocking run of events, some unfortunate and others a result of ineptitude. Now, for the first time since being elected in May 2022, The Australian's Newspoll has Labor behind the Coalition on a two-party-preferred basis. (Albanese still is the preferred PM, and that's a problem for Peter Dutton.) The government is trying to show it cares about the cost of living crisis - it announced a review into debit card surcharges. But on the same day, it emerged that the PM and his partner have bought a home on the NSW central coast for $4.3 million. Media reports say the government wants to introduce flat fee options for childcare, to help support families. At the same time the government is facing demands from private health insurers to double the level of premium hikes from last year. The cost-of-living crisis is worsening, not getting better, yet the Reserve Bank is determined to keep rates high. The problem for the federal government is that it looks like it isn't in control of things anymore. While Anthony Albanese and his partner Jodie Haydon have every right to by a home, spending that much money when so many people can't afford the rent is hubristic. And there's an election sometime in the next seven months. 

In the great debate about clean energy, there's generally an assumption that between fossil fuels and renewables, there is enough energy available. But that's not true. The rise of artificial intelligence and data centres has triggered an enormous surge (pardon the pun) in demand for electricity. And there isn't enough generation capacity for forecast usage. The tech companies are taking things into their own hands, and I suspect this could be of great benefit in the transition to cleaner energy. Google has ordered six to seven small modular nuclear reactors to power its data centres. The first should be up and running by 2030. Google hasn't decided whether it will feed excess power from the nuclear reactors into the grid, or keep it all themselves. Microsoft recently said it would commit to buying 20 years' supply of electricity from the mothballed Three Mile Island nuclear power plant in the US, if its owner gets it going again. The tech giants are now big enough to be energy giants as well. They have money and will to get stuff done. They are more innovative than governments, and they have a commercial imperative to create enormous amounts of (green) energy. If Google can get the small nuclear reactors operating, it could be the blueprint for other companies and nations like Australia. 

Banks are starting to cut interest rates on fixed home loans. It reflects changes in bond yields which have lowered the cost of funding for the lenders. It is good news for borrowers and ups the competition in the market. Borrowers should now shop around and get the best deals. According to RateCity's database, Commonwealth Bank, Westpac and National Australia Bank are offering three-year fixed rate home loans starting at 5.89 per cent. ANZ starts at 5.99 per cent. That is well below the standard variable home loan rate (SVR) of 8.9 per cent. The SVR is a misnomer because many borrowers can have percentage points shaved off that rate. A realistic variable rate at the moment is probably closer to 6.89. The decision then becomes whether three years at 5.89 per cent is better than 6.89 per cent today, with the chance of lower variable rate in coming years. Financial markets have priced in about a one percentage point drop over the next 12 months. If there are more falls after that, the fixed rate loan might not be worth it. If there aren't more falls, or relatively little change to the benchmark rate, the fixed rate looks pretty attractive. The moral of the story: lenders are moving on rates and it's a good time for borrowers to start shopping around.       

I don't like paying cash to people doing jobs around the house. I'm prepared to pay ten per cent more, just to get an invoice. I don't like it when my kids have jobs that pay them cash. It seems I'm not alone, with 250,000 tips offs to the ATO about tax avoidance and other dishonest behaviours in the past five years. Incredibly, the Tax Office says about 90 per cent of them are worthy of further examination. The black economy, which is different but similar to the cash economy, steals about $16 billion from taxpayers each year. That's $16 billion that can be spent on childcare, aged care, hospitals and schools. Or it can be spent on roads, policing or public events. The fact that people are now dobbing in friends, colleagues and neighbours should be celebrated. How often have you seen a friend on social media enjoying the fruits of their labour on a fabulous holiday in an exotic location and you've wondered 'how did they afford that'? They might have saved hard, but sometimes you know their backgrounds and what they do, and it does raise questions. Maybe I'm just jealous that they are on holidays but if I thought they were ripping off the system, I'd ring the ATO. I have no sympathy for tax cheats.  

5. Google's nuclear reactor revolution

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AND ONE LAST THING...

What a week for Elon Musk. He started with his We, Robot event, revealing the new Robotaxi and the slightly-terrifying Optimus Robots (which, according to this video, were actually being controlled by humans). Investors didn't love what they saw: Tesla shares fell 11% after the event.

But then came the video we've watched over and over again: the moment Musk's SpaceX rocket booster executed a perfect landing. This video gives you an idea of the speed at which it was travelling, and the way it adjusted its approach before being grabbed in mid-air by the landing tower. It's science fiction stuff - and we love it.