24 February 2025

The Scourge of Antisemitism.

Events in the Middle East have been volatile for almost as long as there has been recorded history. Historians have varied interpretations depending on their assessment of historical evidence. Jewish settlement in the land we know as Israel is between 3,000 and 2,600 years old. The current troubles commenced with the Hamas atrocities of 7 October 2023 followed the very next day by coordinated Hezbollah missile attacks on settlements in Northern Israel and joined subsequently by Houthi attacks on shipping in the Red Sea. Hamas, Hezbollah and Houthi are all armed by Iran which has an ambition to supplant Saudi Arabia as the leader of Islam. It is noteworthy that Saudi Arabia, Egypt and other aligned Muslim states did not support Iran’s allies.

The actions of Hamas, Hezbollah and Houthi, supported by Iran constituted declarations of war.

The impact on Australia began with the infamous anti-Jewish demonstration at the Sydney Opera House on 9 October 2023. The failure of our national leader to promptly denounce it in the most forthright terms gave confidence to the demonstrators and their supporters leading to a spate of antisemitic terrorism the volume of which Australia has not previously experienced.

I contrast this lack of political will with the prompt action of Prime Minister Hawke following the Communist Chinese leaders using the Peoples Liberation Army to crush freedom seekers when he immediately condemned the Chinese leadership and indicated that Chinese students studying in Australia who felt unsafe could stay here.

Similarly Prime Minister Howard responded to the mass slaughter of innocent people at Port Arthur by announcing the banning of automatic weapons and pump action shotguns with their national buyback and destruction.

House prices weaken. Those who were overly optimistic at the bottom of the interest rate cycle are hurting badly but a turn in the market will eventually follow a cut in interest rates.

The number of homes for sale in Sydney, normally the hottest housing market, hit a six year high in December. 30% of the properties currently listed were last purchased during the previous market peak in 2021 and early 2022 when very low interest rates during the Covid pandemic drove prices bid toward their highest point. Those artificially induced low interest rates were a result of government/RBA response to the pandemic and were never going to remain at that extreme low level.

In another sign of a weak market, significant listings of average dwellings don’t go to auction but attempt sale by other strategies.

As owners experienced much higher mortgage payments as a consequence of significantly higher interest rates many are forced to sell. According to Domain Research the volume of homes for sale recently was the highest across the eight Australian capital cities in three years, thereby contributing to weaker prices.

It feels attractive to buy at the point when interest rates are lowest but it is actually the worst time to buy and face the increases in monthly payments as rates rise and as the value of their recently purchased home falls.

For those that can afford it we are nearing a sensible time to buy as the period of rising interest rates is probably over and reductions are forecast.

Debt ridden Victorian Government’s unpopularity.  

The recent Resolve Poll published in the Age has Victoria’s Allan Government satisfaction level at a record low of 22% despite the opposition being widely regarded as weak. The poll doesn’t give the two-party preferred vote. Recent Treasurer Tim Pallas treating himself to an expensive overseas trip on the eve of his resignation showed appalling judgement on behalf of the premier who approved it and was condemned even by deputy premier Ben Carroll.

The cost of the trip was an addition to Victoria’s debt while it continues to pile on more taxes and charges.

The Federal Election.

The betting markets have the Dutton led Coalition favored over Labor to win the federal election but a mass of commentators still tip a hung parliament and minority Labor Government.

Energy superpower fantasy?

Global superpower China is building 100 coal fired power stations and ten nuclear powered ones. China is busy producing solar panels and wind turbine blades using coal fired electricity. It sells Australia the panels and blades which having a finite life, ending in landfill, to be replaced by more Chinese manufactured ones. 

Our stock market.

Our market recently experienced its 20-year high point but has come off its zenith in late January/early February. Our most successful investments over a long period remain:

·      ARB Corporation

·      CSL

·      Cochlear

·      CAR Group

·      Hub 24 and

·      I Shares exchange-traded fund of the top 500 stocks listed on the New York stock exchange which are global companies.

The performance of HUB 24, an administrative platform for superannuation funds and private portfolios, is a stand-out.

It is vital when considering investments that readers do their own research and seek advice as necessary. A starting point is to look up the companies you are considering via the ASX then examine their market updates and annual financial reports including the price movements as indicated on the one year, five-year and ten-year price charts. Consider also the company’s major competitors. Also consider the size and regularity of dividends the balance of your portfolio including international exposure and interest bearing securities.

Tariffs end up hurting countries that introduce them.

President Trump has indicated that he will use tariffs as a bargaining tool to a significant degree. Tariffs are a blunt weapon which put up import prices and reduce trade. It is likely that their use will be selective in order to focus the countries involved on the actions necessary to retain appropriate relations with America. Initial targets, Canada and particularly Mexico, are being directed toward dealing with border control issues including the flood of drugs into the USA. Both conciliated US concerns and the proposed tariffs were deferred. Other tariffs have been announced.

China’s economic weakness. Its national property disaster and demographic weakness. 

Last year Chinese youth unemployment reached 20% after which it stopped releasing the numbers. Meanwhile the massive apartment building splurge collided with the declining population and huge building company collapses followed. In China the most popular investment was the purchase of rental housing units off the plan with investors having to pay 100 % up front. It is unclear what proportion of major projects were sold before construction commenced. It is apparent that a reduction in sales crippled the builders cash flow as they were in the process of building many more massive buildings leaving many unfinished blocks of units with buyers stranded.

Demography is destiny.

Existing Chinese housing stock has had a massive decline in value as the extent of the impact of declining population and failures in the building industry have destroyed the market. Chinese builders like the insolvent Evergrande relied on continuing off the plan sales to finance existing projects.  As new sales declined financial disaster followed. A vast number of Chinese have experienced a huge loss of wealth with many being responsible for loans taken out to purchase buildings which are unlikely to be completed. Owners of completed dwellings have also seen their values plummet and are unhappy. Local government bodies depended on sale of land to developers to finance their own operations. Land sales have halted abruptly creating insolvent local governments. The many huge unfinished concrete shells are monuments to a failed property boom. As demand decreased with population decline the central government cannot make the collapse disappear by decree. The population decline of working age Chinese is irreversible for a generation, if at all. There is huge unemployment in China but the government is afraid to say how many. This is a 21st century repeat of the Wall Street collapse of 1929, the harbinger of the Great Depression of the 1930’s.

The Chinese solution is to flood the world with its manufactured goods rather like American industry on the eve of the Great Depression which had huge inventories of unsold motorcars and other consumer goods. President Trump, undoubtedly, is aware of the Chinese weakness and his imposition of tariffs aimed at its weakness is calculated for effect. China has hit back but it is difficult to see it winning albeit that American buyers of Chinese goods will pay more as a consequence of tariffs. There is already a vast number of unsold Chinese EVs. The risk for Australia is a lessening of demand for our coal and iron ore. We live in challenging times.

China v Taiwan. 

I doubt that China will risk an invasion of Taiwan. That would create a vastly bigger economic disaster. While its air and naval forces make regular demonstrations in the approaches to Taiwan, the width of the strait between China and Taiwan and the Taiwan terrain make a landing a far more difficult military problem than that of the allied forces on Normandy beaches in World War Two. The US retains its policy of strategic ambiguity while selling modern weapons to Taiwan.

Can Australia/Queensland afford the Olympics? 

Australia’s addiction to major sporting events resulted in Queensland being the only bidder for the right to host the 2032 Olympics. The heavily in debt Queensland Government is now struggling to decide on facilities. The Olympics lost their international appeal after China became the last major power to host them and put on a grand spectacle to demonstrate its international standing. They have since declined in appeal with most host countries heavily out of pocket. The stature of a competition lasting about 16 days once every 4 years has diminished greatly compared to major sporting competitions with recurring seasons which soak up national and international sponsorship budgets and television rights. The Olympics are well past peak appeal. Any football follower of any major competition across the globe is likely to be more passionate about their team winning a premiership than they are about the Olympics. Queenslanders are having a heated debate with many objecting to the cost. Loud voices are demanding a reduction in number of sports, number of athletes permitted to participate and a reduction of IOC guests.

The Victorian Government’s Commonwealth games debacle has diminished enthusiasm for bidding for events which cannot be accommodated using existing facilities.

Best wishes to all

Graham Middleton

General advice and need to confirm. 

As I sold out of an accounting and financial services group, of which I had been a founding partner, on 30 June 2020 I am no longer licensed. The above is general advice and should be confirmed with a currently licensed investment adviser. One I would recommend to you is Campbell Thompson at Ord Minette who is both courteous and experienced. His number is 0407 839 229. His assistant Simone Shelton 0402 085 892 is a helpful person also. If you are after simple transaction advice, they are ideal. I use them but have absolutely no financial interest in any services that they provide to others.

My Financial interest. 

I have no financial interest in the advice I provided and seek no fee. I am secure financially and I seek no personal remuneration. If you find it worthwhile you are able to acknowledge it by making a tax-deductible donation to the registered charity which I support, the Delany Foundation who, I am confident, will apply it to worthy use.

Financial Success for Dentists 

Financial Success for Dentists: Rules for How to Approach Your Dental Career sets out the key strategies which make dentists successful. It is specifically written for those dentists and dental specialists owning their own practices and for those aspiring to own practices. Among the topics included:

·       Understand key practice valuation criteria.

·       Learn how some dentists inadvertently reduce the value of their practice by $500,000

·       Avoid long term errors when purchasing your practice.

There are many accountants, financial advisers, marketing consultants, web site designers and practice advisers who give advice from their particular disciplinary experience, but very few have the wider breadth of experience to define for their clients the key rules to follow to optimize their practice and their long-term financial outcomes. An otherwise competent financial adviser may have little understanding of what makes one practice much more successful than another. Many accountants have detailed knowledge of the taxation rules but cannot identify if a dental client has broached invisible barriers to practice growth or a threat to practice goodwill value.

Please Pass On

If you like these newsletters, please pass them on to colleagues. Past newsletters and articles in Australasian Dental magazine on business issues are at grahammiddleton.com. I can be contacted directly by email at graham.george.middleton@gmail.com and by mail at Graham Middleton, 37 Charteris Drive, Ivanhoe East, VIC 3079.