Increased participation rate, strong 3 months rolling full-time employment with inflation sticky in the mid-3s against some anecdotal consumer weakness. Might take a little more time for conditions to soften.
RBA Between Scylla and Charybdis
ART moving those under 50 into High Growth from Balanced for its MySuper Option
Australian Retirement Trust (ART) plans to move 1.4m members[1] under 50 invested in the MySuper option from balanced to high-growth. The MySuper default option is chosen for members if members do not elect an asset allocation strategy. It is mostly the balanced option. Whilst a good initiative from ART, it should be mandated by the government as part of its MySuper policy as it would be a better fit-for-purpose policy as we have previously argued[2]. This is especially true for the younger demographic who are decades away from retirement and more disengaged from super decisions. Our age-based switching strategy suggestion (listed below) is not far from what was suggested by ART, except for the balance to conservative section, which ART did not elect to pursue. We still think that going from balance to conservative has its advantages from a portfolio stabilization perspective, especially during the retirement phase of life when pension payment stability/ability takes precedence over accumulation.
| Age Range | Asset Allocation Choices |
| Below 55 | Growth |
| Between 55 and 70 | Balance |
| Over 70 | Conservative |
Furthermore, a government mandate age switching would preserve the homogeneity of the MySuper option, allowing for better apples-to-apples comparisons for the consumer. Perhaps an industry norm will develop going forward.
[1] This represents 8% of the working-age population in Australia.
[2] https://bambootrading.com.au/aged-based-asset-allocation-strategy/
10 Stages of Genocide
- Classification.
‘Us & them” categorization
- Symbolization.
Swastikas, Yellow Star
- Discrimination.
Deny rights to other groups.
- Dehumanization.
Equate other groups with vermin, diseases or insects.
- Organisation.
By State, militia or paramilitary force.
- Polarisation.
Propaganda that promotes extremism. Laws forbidding intermarriage or social interaction.
- Preparation.
Final solution paradigm.
- Persecution.
Identified and separated.
- Extermination.
Mass Killings aka genocide.
- Denial.
Deny that the crime has been committed. Destroy the evidence. Obfuscate the truth.
Dr Gregory H. Stanton Genocide Watch.
Herman Göring on War
During the Nuremberg Trails, Gustave Gilbert, an American psychologist told Herman Göring that the average person did not want to be dragged into war, Göring’s response was “Why, of course, the people don’t want war. Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to the farm in one piece? … It is always a simple matter to drag the people along .. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to greater danger”
Excerpt from Sinai, J. (2022) Walter Barbara F. How Civil Wars Start – and How to Stop Them.
“Those who can make you believe in absurdities can make you commit atrocities”
-Voltaire
Notes on the book in the link below:
https://bambootrading.com.au/wp-content/uploads/2024/07/How-Civil-War-Starts-Barbara-Walters.pdf
Dimension of Populism
No sign of a bottom for beleaguered property funds
“Days before the end of the 2024 financial year, Dexus sold out of a stake in Sydney’s 5 Martin Place that it owned jointly with Canada Pension Plan Investment Board for $310 million after an extended negotiation period, 34 per cent less than the building’s peak value.”[1]
“Dexus, one of the biggest landlords, indicated values across its entire office portfolio would be written down by more than 11 per cent over the past six months.”[2]
[1] Kwan, Campbell, “Office funds post their worst performance since GFC”, Australian Financial Review, 16Jul2024
[2] Ibid
A Martial Arts Story
A martial arts student went to his teacher and said earnestly, “I am devoted to studying your system. How long will it take to master it? The teacher replied casually, “Ten Years”.
Impatiently, the student answered, “But I want to master it faster. I will work hard. I will practice every day, ten or more hours a day if I have to. How long will it take then?”
The teacher thought for a moment and said ‘Twenty Years”
Expectation vs Agreement
Great audio by Steve Chandler, please see below for his Linkedin profile and the mp3.
In attempting to translate one’s expectation into an agreement, it gives the expectation a reality test. If the expectation can be accommodated or translatable into reality, it is feasible. If the expectation cannot transition to reality, it requires modification or elimination. Depending on the person and expectation, the modification or deletion could be a herculean effort. However, changing their environment/reality to accommodate their expectation, could also be a herculean effort or an impossibility. Cognitive dissonance will remain if both are left unsettled. Depending on the situation, from an energy/resource/effort perspective, it is often always easier to change or eliminate one’s expectations.
Aged Based Asset Allocation Strategy
MySuper is the default option chosen if no decision is made on an asset allocation choice within a superfund. The default option of MySuper is the Balance option, which is primarily a 60/40 portfolio : 60% growth assets and 40% defensive assets. Currently, 26.9% of all total superannuation assets are held in the default MySuper option[1].
This strategy looks to overcome consumer behavioural inertia in selecting the optimum asset allocation strategy, based on age. We propose an automatic switching of asset allocation based on age as seen below:
| Age Range | Asset Allocation Choices |
| Below 55 | Growth |
| Between 55 and 70 | Balance |
| Over 70 | Conservative |
Default options target the widest possible audience with homogeneous preferences and circumstances, where the audience has limited decision-making expertise. It attempts to solve for the majority within the wider choice architecture model. Choice architecture needs to allow for heterogeneous preferences, allowing those to opt out of the default option when looking for a greater variety of choices. This follows the philosophy of paternalistic liberalism[2], caring for those who choose not to decide, while giving agency to those who do.
MySuper was initially designed to focus on cost reduction to the consumer in terms of fees and needless features. However, using the framework above, giving context to aged-based considerations, a better design could be implemented to increase its ‘fit for purpose’ functionality by introducing one simple step, aged-based asset allocation switching.
This solution agrees with Treasury’s MySuper Default option in its efficacy of use, but it can be improved to suit the wider target audience. Considering that the younger demographic will more likely ‘choose’ the default option, their option should be the highest-return option possible to exploit the power of compounding.
Above is the return dispersion of an 80/20 Growth portfolio (ASX200/10y Bond proxy portfolio) with 1-year to 3-year average returns. The Blue dots represent any point in time 1 year returns, following down to the 3-year average, which is the white scatter plot, which almost resembles a line.
Above is 2-year to 10-year average returns.
Above is 5-year to 20-year average returns.
From the progression of the charts, the average return of the strategy is more consistent the longer the timeframe chosen. Following this methodology, even a low-risk consumer, with a long enough time to retirement, would be well served in an 80/20 Growth Strategy, especially in the earlier years, as the average long-tern return is very stable, and the return variance is very low.
If access to super is 10+ years away, consumers would be better suited to choosing a higher-return asset allocation strategy. Moving from Growth to Balance and ultimately to Conservative is done to limit variance as consumers approach retirement. The need for stability of returns overcomes the need for higher average return. This automatically overcomes the behavioural biases above by embedding this functionality into the default option.
Another feature which is not readily visible is the return distribution. A Monte Carlo simulation was run where the standard deviation parameters were increased by a factor of 3,5 and 10. Over 10,000 iterations, the TD strategy outperformed Balance as volatility increased. This implicitly shows that the performance of TD is more robust as volatility increases, thus protecting the consumer from volatile markets as they approach retirement.
By using an automatic aged, based asset allocation strategy, TD Closing Super, white line, outperforms Balance 60/40 Closing Super, red line.
[1][1] https://www.apra.gov.au/annual-mysuper-statistics
[2] Thaler, R.H. (2008) Nudge : improving decisions about health, wealth, and happiness / Richard H. Thaler, Cass R. Sunstein. Yale University Press
Office Vacancy Rate by State Q1 2024 – NAB Survey
Source: NAB Quarterly Australian Commercial Property Survey Q1 2024 pg 5, NAB Group Economics