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22 October 2024

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A dozen highlights from a dozen years

As we move into 2024, the 12th year of publishing Firstlinks, we have gone back over 540 editions and about 1,000 pieces written by me to find some of our most popular and standout articles.

While we focus of investing, superannuation and products, and try not to second-guess the market on where it is likely to head in the coming year, we inevitably write about property regularly. While Australians held about $3.6 trillion in superannuation at the end of 2023, they are investing about $10.5 trillion in residential property. Whereas 20 to 30 years ago, houses cost about four times the average salary, new buyers are now paying double that, or about eight times their income. It has made buying a house (or other home) a massive social problem and the increase in inequality has created a two-system economy.

The numbers are startling in a period of rapidly-rising interest rates. The national Home Value Index (HVI) rose 8.1% in Australia in 2023 according to CoreLogic, but Sydney, Brisbane and Perth rose even more. While predictions are prone to bias and inaccuracy, it seems unlikely that prices can repeat similar rises in 2024 on the back of large increases in interest rates.

In any case, several selected articles focus on housing trends, including the role of homes in retirement and superannuation. We also draw out many of the unknown risks of buying off-the-plan, increasingly important as more people need to buy apartments rather than houses.

The 2019 'OK Boomer' article showed how much my generation had benefited from the times, and we also review comments by Markowitz and Marks.

So take a look down memory lane at some important pieces, as we head back into our usual format during January 2024.

(A reminder that all past editions remain forever on our website, and glancing through an article archive, or perhaps following a particular contributor, reveals a treasure of content to follow).

1. 2023 (Edition 503)

10 reasons owning your home beats super in retirement

https://www.firstlinks.com.au/10-reasons-owning-home-beats-super-retirement

Since the introduction of compulsory super, the industry has pushed its members to put as much as possible into super. It has been a disservice to anyone entering retirement who could have owned a home instead.

2. 2022 (Edition 478)

Homeowner retirees should not ‘run out of money’

https://www.firstlinks.com.au/homeowner-retirees-not-run-money

A retired couple with up to $419,000 in assets plus a family home can receive a full age pension of $40,000 a year (worth maybe $1 million) plus many other benefits. With home equity access, money should not run out.  

3. 2021 (Editions 407 and 408)

Whoyagonnacall? 10 unspoken risks buying off-the-plan

https://www.firstlinks.com.au/whoyagonnacall-10-unspoken-risks-buying-off-plan

https://www.firstlinks.com.au/whoyagonnacall-unspoken-risks-buying-off-plan-2

All apartment buildings, new or old, have defects, and inexperienced owners assume someone else will fix them. But developers and builders will not volunteer to spend time and money unless someone fights them. Parts 1 and 2.

4. 2020 (Edition 365)

11 lessons from my lousy $50K profit on Afterpay

https://www.firstlinks.com.au/11-lessons-from-my-lousy-50k-profit-on-afterpay

Afterpay listed at $1 in 2016 and traded at over $100. How should an investor treat a small holding in a 100-bagger when each new level defies the experts? Should true believers let the profits run?

5. 2019 (Edition 332)

OK Boomer: fessing up that we’ve had it good

https://www.firstlinks.com.au/article/ok-boomer-fessing-up-that-we-ve-had-it-good

The pre-Boomer generations faced global wars and depressions, but Australians born after 1946 have enjoyed prosperity. Superannuation, education, strong markets and surging property prices locked in gains.

6. 2018 (Edition 248)

$1 million is never worth less than $500,000

https://www.firstlinks.com.au/1million-never-less-than-500000-assets

Of course more is more. It's become common to claim there is no incentive to save more than $500,000 because of the loss of age pensions and possibly franking credits. But these arguments overlook the way super is supposed to operate.

7. 2017 (Edition 187)

Howard Marks on expert opinions as a coin toss

https://www.firstlinks.com.au/howard-marks-forecasting-coin-toss

Seven years after we first published this article, it feels as relevant as ever as market experts try to predict the next Fed rate move. Nearly all were wrong at the start of 2023, yet optimism led to a strong conclusion to the year. The memo from Howard Marks titled 'Expert Opinion' explained how forecasting is more art than science, and too much weight is given to expert opinions which are little more than a 50-50 guess.

8. 2016 (Edition 150)

Culture shock: 'Naked Among Cannibals' revisited

https://www.firstlinks.com.au/culture-shock-naked-among-cannibals-revisited

In my study of the way Australian banks operate, the cultural shortcomings have been obscured by the more prominent scandals in wealth management. Without a legal fiduciary obligation to customers, are banks fulfilling the social role expected of them?

9. 2015 (Edition 117)

What real estate agents don't tell you

https://www.firstlinks.com.au/real-estate-agents-dont-tell

The costs of owning an apartment for short term rental consume most of the income, leaving uninformed investors blind to actual returns until the statements roll in. The practice of marketing gross yields is misleading.

10. 2014 (Edition 65)

Harry Markowitz on investing until 100

https://www.firstlinks.com.au/harry-markowitz-investing-100

At age 87 in 2014, Nobel Prize winner and investment legend Harry Markowitz was far from retirement, dividing his time between teaching, consulting and writing. He sat down with me to share his wisdom.

11. 2013 (Editions 1, 2 and 3 by the Hon Paul Keating)

We're living longer and so should our superannuation

https://www.firstlinks.com.au/living-longer-and-superannuation

Where did SMSFs come from, and where are they going?

https://www.firstlinks.com.au/where-did-smsfs-come-from-and-where-are-they-going

Dividend imputation and superannuation are worth fighting for

https://www.firstlinks.com.au/dividend-imputation-and-superannuation-are-worth-fighting-for

12. And a bonus from 2020 (Edition 359)

The most amazing investment lesson of all

https://www.firstlinks.com.au/the-most-amazing-investing-lesson-of-all

If you had to choose one valuable concept to explain to a young person setting out on an investment journey, it should be compounding and the steady accumulation of wealth. 

 

4 Comments
In Frost
January 07, 2024

The main reason we have a housing affordability crisis is that in the main, people buying houses are buying a house for their family and an investment. Up until 30 years ago, people bought their house as a safe Haven to bring up their families and provide their domestic stability. Subsequently, the size of the house, the style of the house, and it's finishes with substantially upgraded, so that part of the housing price was for the domestic stability, and part of the house price was future tax advantaged profit. The median size of houses more than doubled over that period, and that is the reason for the large mortgages. If homebuyers accepted, that a large proportion of their mortgage is future investment, The "housing" Component of the purchase would be seen in the correct light. Ian

Jackson
January 04, 2024

So many of the leading investors such as Buffett and Marks tell us to ignore predictions, and yet that's what most market experts spend their efforts on. Do they not feel they are wasting half their time?

Tony
January 05, 2024

I believe that Buffett and co are saying to ignore short term share price predictions as they fluctuate irrationally. Buffet's message is to study individual companies as businesses and "predict" the long term profit trend. When he finds a quality business selling for a bargain price, then "buy and hold forever."

Yes, I think some people are wasting more than half their time.

Chris
January 04, 2024

Appreciate the close look at off-the-plan as we know more people will be forced into this choice, but developers here often have poor reputations. Cannot see how enough will be built of the quality needed to meet demand.

 

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