Baillieu Cutting Stamp Duty by 50%

The average house in Melbourne is around A$500,000, which is among the most expensive in the world. In a bid to help first home buyers, the Baillieu government plans cut stamp duty by 50 per cent (according to First Time Buyers Struggling to Keep Up). This is clearly a bad move as it will only increase the demand for houses which will in turn increase prices even more. Those buying houses at a time like this may think they are better off with a stamp duty discount, but with house prices and mortgage interest rates at record highs, it will likely put a lot of stress on home owners. Expect banks to make more money out of this.

My advice to first home buyers is to live with your parents for longer and to pay them rent. Usually parents are willing to charge lower rent to their children because they have been living with you for decades and know that you are trustworthy tenants. With the money you save from living with parents you could take advantage of the high Australian dollar and invest in overseas companies or you could buy shares in Australian banks.

If Australians continue to want to buy houses, this will only result in more bank profits as perpetual demand for housing will result in perpetually rising house prices, which will mean home buyers will need to go into more debt to fund their purchases. Greater demand for debt will mean that banks are able to charge higher prices for mortgages. They can increase interest rates or charge higher fees. This should lead to greater profits, all else equal, will lead to greater shareholder return.

If you want to invest in an Australian bank, I recommend one of the big four: Commonwealth Bank, Westpac, ANZ, or NAB.

Survivor Redemption Island Episode 11

This blog post contains spoilers.

In this episode of Survivor, the former Ometepe tribe members (also known as the Mariano Crime Syndicate) continued to vote off former Zapatera tribe members. In this episode there was a double elimination at tribal council, and the Ometepes finished off the Zapatera tribe by voting off Steve and Ralph. I personally feel like this is justice as the Zapateras threw a challenge early on in the game in order to vote off Russell. Immediately after the merge, what is important in the game of Survivor is numbers, which makes throwing challenges a very dangerous move. That the Zapateras are punished for this very swiftly is very satisfying.

There are now six players left in the game: the three men (Rob, Grant, and Philip) and the three women (Andrea, Natalie, and Ashley). Rob is a former Survivor player who just about everyone looks up to. It would make sense for others to vote him out because he is such a threat. However, Rob has never won the million-dollar grand prize and in my opinion, if he gets to the top two or top three, like Russell, he will find it difficult to convince members of the jury to vote for him. The last time Rob made it to the final two the jury voted against him and instead decided to give the million dollars to his future wife Amber (this happen in Survivor All Stars). In my opinion, the jury voted against Rob because he so clearly backstabbed members of the jury. In Survivor Redemption Island, it is not clear whether the jury will blame him. Many may actually vote for him because they think he played well and deserves the money.

Rob has stated many times that he wants to take crazy Philip to the end because he believes there is no chance that Philip will receive any votes from the jury. Because Rob wants to protect Philip and because he is close to Grant, I believe that there is a good chance that the key alliance in the Ometepe tribe is among the three men. The person at the bottom is clearly Andrea. Once they vote off Andrea I believe then that the men will vote off the women simply because they are women. If you keep a woman till the end then there is a good chance that the jury members will vote for her simply because she is a woman. The men will want to vote off the women to get rid of this threat. From then who is voted off among the men will depend on the immunity challenge. I predict that either Rob or Grant will win the million dollars.

William and Kate Royal Wedding

I am currently watching the royal wedding right now between William and Kate. It's fascinating to watch traditional ceremonies and rituals mainly because it is different. It is also fascinating to witness the practices of other cultures, which is one of the main reasons why I like to travel.

Even though I watched the wedding, many of my friends criticised me for watching, saying that monarchism is authoritarianism. My friends point to the cost of the wedding. Studies done by economists found that because the wedding is declared a public holiday, the impact of Britain taking the whole day off rather than working will cost the British economy about $50 billion and that this loss dwarfs the expected gains from increased tourism and merchandise sales, both of which are expected to result in a $2 billion gain.

I find that many of my female friends are interested in the wedding, many admitting that they wished that they were married to Prince William or at least married to royalty so that they can be princesses. It seems as if all females have a desire to marry high-status men. My observation is that it tends to be females who want to marry princes and not the other way around. Men tend to be happy if they can find a kind and pretty girl, regardless of her social status.

Baillieu, We Don't Want Debt

In an article in the Age today titled State Told Not to Fear Debt with Big Projects, an Australian Industry Group spokesman urges Victorian premier Ted Baillieu to bring the government into debt in order to finance big infrastructure projects like roads and freeways. A member of the Property Council also said the following: "'Governments seem to be averse to borrowing to fund infrastructure, but the community can and would accept that."

An argument can be made for a country to go into debt to build infrastructure like roads and freeways. Infrastructure can attract business into the state, which increases economic growth and tax revenue. But the problem with funding infrastructure with debt rather than with surplus cash is you need to pay interest, and would it make much of a difference if we waited until the financial position of the state is healthier rather than spend now?

The Baillieu government has promised $100 million in surplus per year. It will be interesting to see if he is able to keep that promise.

Why Do Atheists Marry?

It is the Easter long weekend and I am in a spiritual mood, so I will post something related to religion. The question I want to ask readers out there is the following: why in the world do atheists marry?

The idea of romantic love, that is, being in a monogomous intimate relationship with someone, and then marrying him or her and being committed to that person for eternity--it is a very spiritual concept based on supernatural ideas such as the belief in a one and only true love and the belief that each party to the partnership is meant to be together.

Atheists are not supposed to believe this. Atheists are non-religious and non-spiritual. They do not believe in anything that cannot be verified by scientific experiments. The view of science is that humans are mere animals. As animals we procreate to keep the species alive because evolution and natural selection select for traits in humans that allow us to perpetuate our genes. Hence we follow our natural instincts, which for a man is to find a woman, rape her, get tired of her, move on to another woman, and then rape her, and so on and so forth. As atheists believe in science and science cannot prove morality then it follows logically that atheists cannot believe in a woman's right to not be raped. Atheists have no morality, that is, they have no concept of what is right or wrong. True atheists will rape, pillage, and plunder.

But most atheists don't do this. Most atheists don't rape. Most atheists are not true atheists because even atheists want to believe in those concepts not proven by scientific experiment. They want to believe in human rights and justice. They want to believe in the sanctity of marriage and they want to believe that women deserve respect.

To be a proper atheists, to actually start from the premise that you cannot believe in anything that cannot be proven by science and then extend that to all areas of your life--you will live a very sad and lonely life. There will be no meaning, no purpose, and no hope. You may as well hide in the corner and cry, if not just quietly kill yourself. Some atheists may be at this final stage of despair (and if you are one of them I encourage you to seek out help from a therapist, preferably a theist) but most atheists are young and immature atheists, still simply rebelling against some easily-identifiable organised religion because they need to channel their anger at something. But at the end of the day these young atheists still hold onto many other spiritual concepts like justice, purpose, romantic love, and marriage.

Survivor Redemption Island Episode 10

This blog post contains spoilers

I have not written about Survivor 22 (Redemption Island) in a long time mainly because I was on holidays. But now that I am back I have caught up with with the current Survivor season. In episode 10, Dave was eliminated from Redemption Island and Julie was voted off at tribal council into Redemption Island.

Basically the season started with two tribes, one tribe had Boston Rob on it and the other tribe has Russell on it. These two castaways are from previous Survivor episodes. Both these players are known for being very good players, although they have never actually won the million dollars. Rob got along well with his tribe but Russell did not get along well with his tribe. Russell's tribe actually threw a challenge just so they could vote him out, and then when they kept losing challenges thereafter, proceeded to vote off the women who had aligned themselves to him. As a result, Russell's tribe went into the merge with one man down and right now they are being picked off one after another by Rob's tribe.

With Russell gone, there really are no interesting players other than Rob and Phillip. Phillip is wacky former federal agent. His craziness and antagonism may actually help him because it provides an incentive for players to keep him till the end since nobody will vote for him. After Julie has been voted off and the tribe that was once Russell's tribe dwindles down to only two people, I think it is likely that these two will be voted off in the next two episodes and then Rob's alliance will start to cannibalise. It's difficult to know what will happen after that.

Charity Junk Mail

I once gave a donations to Care International and Amnesty International over the internet, which involved giving credit card details as well as my address. These organisations then harrassed me, wanting to get more money from me. Care did so by sending me mail and Amnesty International actual got their telemarketers to ring me. I find it very rude that they do this. It would be much better if they just let people give when they feel like it. I am always very careful to read the privacy policy now and I have made decisions not to give money because of their policy. Why can't these charities just let people give money anonymously or if they collect your details (e.g. if they want to give you a tax receipt) then at least have a policy whereby you can actually opt out of junk mail?

The Benefits of Printing Money

In the blog post Strong Aussie - Time to Buy Foreign ETFs? I talk about the strong Australian dollar and the weak US dollar. One of the commenters made an interesting point that I will reproduce below:

"[W]ho knows maybe the weak dollar will help pay off the US's debt and may even increase inflation and hence spur people to work more out of desperation."

This point about the benefits of a weak US dollar is an interesting point. Some economists claim that the US's welfare system and minimum wage make it uncompetitive against countries like China. If US dollars are printed to cause inflation, this will effectively reduce the size of the welfare state assuming that the food cheques do not rise with inflation. Furthermore, if inflation increases due to money printing then this effectively reduces the minimum wage, allowing Americans to compete against low-wage countries like China.


What American politicians should learn is that wealth is created through work. You cannot legislate wealth. That is, simply increasing minimum wage does not increase wealth as the wealth increase for those who are currently working is offset by the lost wages that result when companies hire fewer workers because they cost more.

China's intentional devaluation of its currency may seem illogical to some because it reduces the wealth of its citizens. But even though the devaluation of currency hurts workers, it tends to benefit businesses, especially those that are export goods. A weak currency allows businesses to keep paying its workers the same nominal wage but effectively reduce its real wage, and do all this with stealth. Even though it is not good for the welfare of workers, reducing real wages can have some beneficial impacts. For one, the reduction in wages can actually result in greater employment as lower cost of labor means businesses can hire more labor.

This seems to be China's strategy, that is, export-led growth via low-wage labor. The Chinese government seems to be in a rush to get as many people working as possible, perhaps believing that a citizen preoccupied with work is less likely to engage in dangerous activities such as political activism. On the downside, this current export-oriented strategy (a strategy used by many Asian countries when they were developing) is that citizens work and do not consume much, leading to a situation whereby the economy is dependent on a vast pool of consumers to whom they can sell their widgets. The consumeristic and hedonistic Americans currently fulfiled this role of the consumer very well, but after the GFC and the product of GFC (inflation) it is uncertain whether this export-oriented strategy is sustainable.

Vanguard Australian Shares High Yield Fund Now Pays Distributions Quarterley, not Monthly

Vanguard has sent emails to its members notifying them to changes to one of their funds. According to an email I received on 18 April 2011, there have been two changes made to Vanguard's Australian Shares High Yield Fund:

1. The fund will now use the FTSE ASFA Australia High Dividend Yield Index rather that Vanguard's own custom index.
2. The fund will now pay distributions quarterly rather than monthly.

Change (1) is not a huge problem as allowing the index maker to be an independent organisation makes Vanguard more of an index tracker. If Vanguard is both the index maker and the index tracker then there is a risk of active management, whihc is not what you'd want in an organisation that preaches about the benefits of index tracking versus the problems with active management. With FTSE now managing the index I am hoping there is transparency with regards to the index holdings. Most ETFs on the Australian market now have full disclosure of holding, e.g. the iShares ETFs and the SPDR ETFs from State Street Australia. Unfortunately, Vanguard Australia's managed funds and ETFs both do not have the same level of transparency.
 
Change (2) is worrying as most investors would prefer more frequent distributions. Nevertheless, even though this fund's PDS claims to pay distributions monthly, in practice it only pays distributions quarterly or twice quarter anyway, so this recent change to its PDS won't change much.

Australians Must Pay for Carbon Tax

Current Australian Prime Minister Julia Gillard has announced that there will be a carbon tax established. Treasury documents have speculated that the carbon tax may be in the order of $30 or $40 per tonne of carbon emitted. The estimates show that this will result in the cost of living to increase by around $800 to $1000 per year per household.

However, some claim that this is misleading as the Gillard government will use the revenue raised from the carbon tax to mitigate cost-of-living pressures. Some even say that nobody will be worse off and that all increases in cost of living will be compensated for.

The government taking money away from households via the carbon tax and then giving it back again makes no sense. The whole point of a carbon tax is to increase prices. That is what makes people drive less, buy less, and pollute less. If Australians want a carbon tax, they must pay for it.

I fully understand if low-income people are compensated as an increase in cost of living may result in death for these people, but middle-income and high-income people should not be compensated at all. A rise in cost of living for these people will result in a change of behaviour (e.g. taking the train to work rather than driving to work as a result of rising petrol costs) towards more environmentally friendly activities.