Author: venrockfinance

To Fix or Not?

Posted on by venrockfinance

A well-known industry comparison website “Canstar” has suggested that borrowers should consider switching their arrangements to fixed rate options, as the market has in all probability, reached record lows. (This recommendation was issued in late July 2018).

This recommendation also co -incides with a time when several banks have started offering fixed rate mortgages which are cheaper than their standard variable rate loans. Both Macquarie and Aussie Home Loans have recently dropped their fixed mortgage rates by 10 basis points, while increasing their variable rates by 5-10 basis points.

Whilst this option has various pro and cons, and is definitely not for everybody, Venrock believes all borrowers should undertake a review to see if this option suits the borrowers circumstances.

If a fixed rate option is something that you would like to consider, talk to one of our brokers for a free review or a Mortgage Health Check.

Financial Focus : Purchasing your first home

Posted on by venrockfinance

Planning to take your first step into the world of property? The entire industry can be extremely complex and confusing for newcomers – and being such a big commitment, it pays to get it right the first time. To help you get started in buying your first property, here are the resources and processes you will need to purchase your first home in Western Australia.

HOW MUCH CAN YOU AFFORD

Before you go off looking for a home, you need to find out how much you can borrow first. This will differ from lender to lender, and will be influenced by your personal circumstances – from your income to how much you can put down on a deposit.  Typically, you’ll need around 10 to 20 per cent of the value of your home for use as a deposit. A lower deposit might mean that you have to take out lender’s mortgage insurance, designed to protect the lender. To determine how much you can borrow contact Venrock and one of our friendly brokers can prepare a borrowing capacity for your individual circumstances.

WA FIRST HOME OWNERS GRANT

As a first home buyer, you are in a unique position in the property market, as you have access to a number of assistance programmes. Firstly, there is the WA first home owner grant (FHOG), which provides up to $10,000 to eligible people purchasing a new home. A ‘new’ home is a property that has never been lived in before by any other party, or sold to another party prior to you. To be eligible for the FHOG, you must be an Australian citizen or permanent resident, and above the age of 18. Additionally, you cannot have owned a home prior to to the 1 July, 2000. The total value of the new home must not exceed the cap amount. The cap amount is $750,000 if the property is located south of the 26th parallel (south of Shark Bay)  and $1,000,000 if the property located north of the 26th parallel.

STAMP DUTY IN WA

Stamp duty is a tax levied by the Western Australia government, based on the value of the house or land that you are buying. However, as a first home owner, you could be entitled for a reduced rate of transfer duty, especially if you qualify for the FHOG. In summary

  • If the new or established house purchase price is under $430,000 there is no stamp duty applicable.
  • If the value of the vacant land does not exceed $300,000 there is no stamp duty applicable.

HOME BUYERS ASSISTANCE

First home buyers looking to purchase an established property can still apply for the Home Buyers Assistance Account. This provides up to $2,000 for incidental costs associated with buying a property, such as inspection fees, mortgage insurance premiums, and so on. It is available from the Department of Commerce and Venrock Finance can assist in applying for this grant.

The Third Industrial Revolution

Posted on by venrockfinance

I have just read a fascinating article which theorises that the world is just entering it’s third “Industrial Revolution”.

The article was a series of extracts from an interview conducted with a well-known political and economic theorist, Jeremy Rivkin, who has a pedigree and sphere of experience which is imposing to say the least.

Amongst other things his CV contains years of experience as an adviser and consultant to Angela Merkel’s German Government, the European Union, the Chinese Government and various other European business leadership Groups.

In the interim, he continues his primary career, as an International lecturer in Executive Education.

In summary he has analysed the prevailing conditions which lead to the world’s previous well documented Industrial Revolutions, which were the British lead Industrial Revolution of the 18th and 19th Centuries, and the USA lead Industrial Revolution of the early part of the 20th Century.

He summarises that there needed to be three consistent situations, all of which were in sync, for each Industrial Revolution to commence.

These were chronological massive changes in communication systems, energy systems, and changes in respective information/human mobility.

In England these co incided with the development of steam energy, which helped power and develop the printing and manufacturing industry, and the telegram for communication, and then the evolution of the train industry for human and product mobility.

In the USA last century, the key changes were the evolution of oil and petroleum for energy, the development of the telephone, and then radio and TV, for communication, and as a consequence of the new energy source from oil, mobility changed rapidly with the development of cars, trucks, and buses.

He theorised that we have similar changes to the world as we have known it, in these three categories, happening right now.

As he sees it, traditional energy sources as we have known them, such as coal, are dead and buried, and are being replaced by sustainable energy sources such as solar, wind and water.

He then theorises that communication systems are going through their biggest generational change in the world’s history due to the internet, including, email, iPhone technology, and social media outlets such as Facebook and Twitter.

And then, the final link in the chain is information mobility, which has been revolutionised by outlets such as Wikipedia and Google.

I don’t think there could be any arguments that the entire world has never been more connected with immediate information access for the vast majority of us on this planet.

So, if his thoughts are correct, what does it mean for all of us?

The facts are overwhelming that the last two Industrial Revolutions completely changed the world as it then was.

What changes in our day to day lives, and business lives, can we expect FROM THIS Industrial Revolution, which he theorises, has just commenced in terms of its’ evolution?

Firstly, it is undoubted, that across the world, we have seen a slowing in productivity over the past 15-20 years. As the world has changed, issues like climate change have seen an increase in unemployment. If you don’t believe this, consider the case of the US car industry.

He argues that the key to international growth is the building of infrastructure, which is a long term strategy, but this creates a political conflict, as politicians are interested in short term policy, which will get them re-elected in 4 years’ time.

For companies and businesses, he argues that the change has already started, and will continue to gather pace in its implementation.

The old business world was as he sees it, sellers selling something to a buyer.

The old world was all about analysing a business market.

The old world was based on consumerism.

The new world will be service providers providing their service to users.

Think about revelations like Uber, and Air B + B.

The new world will be about networks, not markets..

And the new world will be about sustainability of service.

So…what to do?

I don’t think there can be any doubt, that we are living in an era of the fastest ‘Business’ environmental changes in the history of the world.

So, business people need to consider the fate of dinosaurs, which couldn’t adapt to a changing environment and became extinct, in the process. The time to have flexibility of thought, an ability to embrace and implement new technology, is now. Everybody needs to work out what parts of the new world of communications, of energy and mobility can be implemented into your own businesses.

Who knows…In the process some exciting new opportunities may arise.

It is a whole new world. A world which is being revolutionised – by energy, by mobility and communications.

Survive now, evolve, and thrive later or would you rather be a Dinosaur?

That’s my thoughts

Muzza from Warnbro….

The Beauty of Youth

Posted on by venrockfinance

Our business has been hosting a 16 year old local student for the most part of this year, every Friday, on a ‘work experience’ arrangement.

‘A‘ as we will call him, is on a soccer scholarship at one of the districts’ very good quality private schools, and he plays both junior and senior soccer for one of the WA National Premier League Clubs.

‘A’ has won our hearts with his positive and friendly manner, and his willingness to be part of our team, and keenness to learn. He has strong ambitions in life, one of which is to see if he can become a professional soccer player at some level.

Given the positive feedback our office has received from our involvement with ‘A’, we decided to expand this program and run a two day Workshop, which we entitled “An Introduction to the Finance Industry”, and invite some other local young people to attend.

The class of 2017, as we have now called them attended our office for two days in mid-June, and successfully undertook, and contributed to the workshop.

Some of the topics covered included a summary of the legislative controls which the finance world must comply with, various alternative finance products, some financial analysis and calculation modelling, and some actual live case studies of business finance issues.

It was a rewarding and fulfilling two days for me, and our staff, and we also believe from the feedback we have since received, that it was really worthwhile for the participants as well.

These students may or may not ever work in the finance sector, but whatever happens into the future, I am sure that some of the knowledge they acquired during the workshop will be of benefit to them whatever they finally do.

Let me tell you about the other two participants, who were’ J’, another 16-year-old local boy, who is in year 10 at a good local school, and ‘S’, who is a 19-year-old local girl studying Commerce/Law, in second year, at Curtin University.

Both ‘J ‘, and ‘S’, just like ‘A’, are all studying hard, playing sport, are ambitious, well spoken, confident, well read, knowledgeable, prepared to do part time work, work experience or whatever is going to give them more practical life experience, and consequently, all make solid contributions to their family and home life.

All three of these students are fantastic examples of the quality of young people coming through society today.

We hear so much negativity about today’s youth on a daily basis, in the media, and I regularly hear more senior generations lament that they don’t know where the world is heading.

What I would encourage all of us to do is to reach out to today’s youth, talk to them, listen to their opinions, thoughts, and particularly, their concerns.

I think that many of us ‘oldies’ may be surprised at the quality of people coming through this generation…, if we take the time to get to know them.

We all know that future generations are going to face some major issues, which even today, are causing them grave concerns.

I refer to global issues like poverty, climate change, terrorism, world peace, social media domination, mental health, localised issues (e.g. employment and possible home ownership), and more generalised issues like the changing workplace due to technology. These are massive challenges that young people are going to have to deal with as their lives unfold.

Sadly, as I see it, when they look towards our world’s political and social leaders for inspiration, they are left flat and disappointed, as solving problems seems to take second place behind ‘ leaders’  self needs and self-preservation.

I am hopeful that this generation coming through into leadership roles in the next decade or so will do a better job of problem solving that our current leaders are today.

So, my advice to all of us, is to embrace the beauty of today’s youth – acknowledge their intellect, respect their opinions, give them a regular good ‘listening to ‘, and see how much positivity together we can create.

We all need more positivity in our lives, and I believe that todays’ younger generations can provide that spark of hope for us all.

I think many of us would be surprised at the outcomes, if society could just embrace some positivity regarding this.

That’s my thoughts,

Muzza from Warnbro

The Fear Factor

Posted on by venrockfinance

The documentary Bowling for Columbine was a satirical, and even sarcastic look at the USA’s gun laws and the country’s fascination with being able to lawfully carry a weapon.

But the hidden theme in this classic piece of television journalism, was its veiled conclusion that there is a daily fear factor in most people’s lives in the 21st century, which is unheralded in our history.

This fear is driven daily by all forms of media and is now becoming even more accentuated by what it seems is almost the entire western world’s fascination with all formats of social media.

In the blink of eye, all of us can find on the internet an entire video library of death and destruction, fear and loathing, hate and bigotry, racism and radicalism, sickness and abject poverty, depression and social disorder, extremism and terrorism, and every other type of activity which is known to make mankind feel less secure and less safe in their own environment.

And just in case we dared to try and be happy one day, that nights news bulletins, and the next days’ newspapers, will try and bring us all back to the previous levels of insecurity with the bad news stories of the day.

This stuff is the stuff which sells newspapers, and gets news programs ratings. Its good stuff for media moguls. Its bad news for humanity’s state of mind.

And it is the thing which the world of terrorism thrives upon. We all seem to accept that on any given day, somebody will die on our roads in Australia.  Many of us don’t even blink an eye, even when we pass a serious accident scene. Most of us certainly don’t even bother reading newspaper articles about serious car crashes – we just accept that they are an inevitability.

But when one of these car crashes is a deliberate action of a terrorist, it takes our breath away, and dominates our thought processes for days.  It seems that the reason for this is more than likely the ‘fear factor’ that this could happen to anybody in the world, if you happen to be in the wrong place at the wrong time.

The same logic goes for the recent US elections, where Trump targeted and got the ‘fear’ vote, by targeting terrorism, as one of his major policies – it was a telling aspect of his election.

Yet the actual statistics are that, including the 4000 approximate deaths from the 9/11 terrorist attack in New York, deaths in the USA from gunshot wounds, from 2001 until 2017, outnumber deaths from terrorism, by the ratio of 1117 to 1. In other words, the average US citizen is in excess of a thousand times more likely to die from an indiscriminate gunshot wound in the USA, inflicted by a fellow countryman, than they are to die from a terrorist act.

But are people in the US sacred of guns? Yes, maybe a little, but nothing in comparison to how scared they are of Terrorism!!!!!

The illogicity of this is staggering, but probably no more illogical than the average Aussie’s ambivalence to road trauma and death.

Or dare I say to deaths in Australia from domestic violence. Here in WA, a big part of the population are terrified of dying from a shark attack, but as detailed above, the chances of a woman dying in Australia from domestic violence is several hundred times more likely than dying from a shark attack.

The oxford dictionary defines fear as “an unpleasant feeling or emotion caused by the awareness or thought that danger is present or imminent”.

So is the wrong sort of fear being propagated by the media and in the process creating unrealistically insecurity – absolutely!

That’s my opinion.

Muzza from Perth

Is Australia having its own financial crisis in 2017?

Posted on by venrockfinance

We all lived through the infamous GFC of 200. Which just to refresh some memories, was a worldwide crisis where the banking industry lost confidence in itself, as a consequence of convoluted funding schemes (called subprime loan securitisations), which their own internal banking brain trusts had created.

Basically, these funding schemes resulted in there being trillions of money’s lent into unworthy credit risks, which lead to just about every bank in the world having to write hundreds of millions, and in some cases billions, in bad debts, off their balance sheets simultaneously.

Thankfully here in Australia, the Federal Government gave the bank’s own depositors, a Government Guarantee for their deposits, which enabled the four pillars of the Australian banking industry to quickly go back to the Capital markets, and raise additional capital with share issues, and then simply start lending again with their revamped balance sheets.

Some international banks did not survive the inevitable run on the Banks, which follows the traditional wide spread fear of a credit collapse, which was being mooted, with Lehman Bros being the most famous casualty.

There were a host of others including HBOS and Bank of Scotland which would have collapsed if they were not bailed out.

Right now, in Australia, there are some worrying signs, re the health of our financial sector, which is leading to speculation that maybe the Australian Banking sector has again allowed itself to get carried away with recent lending policies which have led to concern about future property market sustainability.

Indeed on, March 20th, The Treasurer Scott Morrison, announced that he is in discussions with Council of Financial Regulators about the high proportion of investor loans on which only interest is being repaid. This combined with recent annual property value rises of between 13 and 18% in Sydney, Melbourne and Canberra particularly, has flagged the likelihood of Bank’s tightening the rules to try and restrict investment loans.

It has already started, and we are seeing

  • Interest rates being increased on investor loans
  • Tough property valuations being completed
  • higher deposits being required
  • Insistence of borrowers being able to demonstrate an ability to meet loan repayments on a principal and interest basis.
  • a limit being placed on the ratio of ‘investment’ lending being conducted, in comparison to owner / occupied lending.

On the same day, the Chairman of ASIC spoke at their Annual forum, about what he considers to be the international ‘norm’, in terms of what the average housing price as a ratio against average income, should be. These figures are generally in the range of 5 – 6 times.

His observation that this ratio in the USA is currently about 5 times. In Melbourne it is currently 9.5, and in Sydney, 12.2. As a point of comparison, in Perth it is between 6.0 and 6.5 times. This is leading to use of the terminology “Housing Bubble”.

It is obvious that the situation is worse and more risky in some parts of the country than others, but it again seems that Banks are bringing in new lending rules, which are standardised around the country, regardless of the local situation.

So yet again, somebody sneezes in Sydney, and we in the West, get diagnosed with pneumonia.

We are seeing ridiculous approval conditions being imposed on modest investment transactions in the Perth Metro area, and even more ridiculous and negative property valuations being produced.

And guess what. It’s already having an effect, but is a slowing of an already stagnant economy what we really want and need at the moment, particularly here in WA?

And the thing which really irks me is that whatever lending has been conducted to allow for this ‘over heating’ of the investment property market, has been conducted by the Banks themselves. It’s been their own policies, their own products, their own marketing and distribution systems, which has lent the money to fund this surge.

And now the whole market suffers because of Bank’s previous policies.

That’s my view point.

Muzza from Perth

Attitude is the Key

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Thanks to the several thousand people who read my first edition of Muzza’a Blog.

There have been many books and educational material produced over the ages, relating to the theory that ‘Attitude is the key to achieving success’, Zig Ziglar and other positivity spruikers have focussed almost exclusively on this theme for decades.

But it seems to me that there is very little literature has been produced which examines the opposite. That is what level of life success can one expect from somebody who exudes ‘bad attitude’.

I was recently driving to an appointment, and stopped at a tricky little intersection which sits at the front of our building. As I was sitting there, cautiously looking both ways I spotted a bit of an old bomb of a car approaching the intersection straight on towards my car. The car was unkempt, so it attracted attention and was approaching the intersection too quickly.

Just as the car entered the intersection, without indication, it cut right in front of my stationary car’s projected pathway.

The driver had a sleeveless T Shirt on, which I could clearly tell as his right arm was fully outside the open window, as he was flicking ash from his cigarette onto the road. His left hand, was I assume, on the steering wheel.

After his car, had cleared away, I turned left and followed my intended route, which happened to be the same route as his car was taking. After a short journey, he suddenly turned right, again without indication. Again, it was my intended route, so, so did I.

He was travelling much faster than me, so by the time I arrived at the commercial office centre where he was trying to park his car, he had already mounted the footpath in his endeavours to park his car right out the front of the local social security office.

There was another car between him and my car, which was giving him a wide berth.  He sorts of straightened the car up, although still had the rear left wheel well up the curb, as he opened the car door and hurriedly exited the vehicle.

Still smoking cigarette which was in his mouth was immediately castaway onto the ground, as he was obviously heading somewhere important by his demeanour.

He was wearing black baggy track suit pants which didn’t cover up his underwear at the back. His T shirt had the sleeves ripped off, which obviously helped show off the art work which covered every square inch of both arms.

His hair was matted, scruffy and looked like it needed a good wash. Of course, he was unshaven, by about 3-4 days. He also looked like he needed a good wash.

I felt guilty because yes, I was pre-judging this man and as he headed straight towards the entrance of the social security office. I thought clearly, that he had every right to social security assistance, and as much right as any other citizen to be attending the local social security office.

But as I watched him enter the social security building, I couldn’t help to be curious about what his real attitudes were in life. Was he ambitious? Was he a hard worker? Did he have a family to support? If I employed him, would he take pride in his work? Would he be an asset to employ? Would he be a good team person? Would he display loyalty and a ‘can do’ attitude?

The words of my first boss came back to me in a resounding answer to my questions “attitude is what sorts out the winners from the losers in business and in life” were the advice he gave me.

He used to tell me that somewhere in the world, one person would be the world’s best petrol pump attendant one person would be the world’s best street cleaner, best hotel porter, etc etc and the reason for this, would have been the attitude they exuded and lived, while doing their job.

I looked again as this person basically pushed his way past two others on the way through the front door nearly bowling them over, and oblivious to their presence, and I think the answers to my questions became apparent.

This person did not exhibit a good attitude, by my definition, in that he had showed a blatant disregard for others in almost every action I had witnessed for the 5 minutes of our brief association.

I felt sorry for him, that he hadn’t worked for my first boss, and didn’t appear to have been given the life training and understanding that I had been given.

Maybe this will develop in him as the years evolve. For his sake, and for the sake of those people close to him, I really hope so.

That’s my opinion.

Muzza from Perth

Missing in Action

Posted on by venrockfinance

I am not an economist, but if I have learned one thing from being involved in the business finance world since 1978, it’s that the finance industry is a good barometer for the economy.

I think this is because we act for the totality of the business market, across all disciplines such as primary production, manufacturing, retail, services, housing, construction, health, mining and hospitality.

When businesses are growing, expanding and innovating, our phone rings nonstop. When it stops ringing, which is normally months before the Government announces that economic growth has slowed, we already know that business has stopped spending.

I have personally lived through a credit squeeze, two recessions, two major stock market crashes, a tech stock collapse, several property boom and bust cycles, and the killer of recent times – the Global Financial Crisis.

I have no doubt that the recent situation in WA, post the construction phase of the last resources boom, has seen the most severe and prolonged economic downturn of all the rest. And one thing which resonates with me very strongly is that the solution to all of the past economic crisis’ was to get business spending again.

This solution is something so basic, that I just can’t understand why the current brains trust within treasury, and within government, never seem to even consider.

And the major thing which got business spending again, in the past, was a thing called an INVESTMENT ALLOWANCE. I have seen the investment allowances of the late 1970’s and the 80’s and 90’s work perfectly, effectively and quickly and play a major role in turning past economies around.

Our current Government is trying to create the same outcome by lowering the company tax rate. that’s fine in that it provides, particularly the big end of town, with tax savings, but how does this   tax saving, guarantee that any of it gets spent on new plant, innovation or expansion.

It doesn’t and as I see it, that’s the problem.

In the old days, if a business ‘spent’ the money on growth and replacing old plant and equipment, it was guaranteed a tax saving. Giving company’s a guaranteed tax saving without getting anything in return, just doesn’t add up to me – particularly in this era, when companies seem to be judged on the dividend rate they are paying their investors. It must be very tempting for Company Directors, to pay more out in dividends, rather than to invest in the future. Particularly if that assists the achievement of their own remuneration KPI’s. If this sounds cynical, its’ probably because I am –  I have seen these issues at Board level.

What is obvious, is that the current Government strategy, has not yet worked and, is not yet providing economic stimulus.

What is clear is that something is missing in action in the Australian economy.

The old investment allowance incentives worked perfectly, so why are they not even a point of discussion in Canberra in 2017?

That’s my viewpoint.

Muzza from Perth