How do you make a buck these days without risking your shirt?

David Hargreaves ponders the mediocre returns available on 'safe' investments and wonders whether technology might lead us to a new path of investment types

23rd Feb 20, 6:02am by David Hargreaves

By David Hargreaves

Seems like it's getting ever harder to make a buck with a buck - unless you are prepared to lose the buck.

All of which is the long way around of saying that returns on 'risk free' investments such as bank term deposits get ever more disappointing.

According to interest.co.nz figures, the average yield on six-month term deposits is running at 2.66%. And that's before the persons of the IRD have had a sniff.

It's now hard to imagine that once upon a time - 1987 in fact - that same six month term could offer 18%. Now, YES, inflation was then running at closer to 20%, but this was still money one got in one's hot little hand.

The Reserve Bank's excellent inflation calculator enables some interesting then and now comparisons to be made.

For example, if one had a nice little $50,000 nest egg in 1987, invested at 18% for six months and with, for argument's sake a tax rate of 33%, one would net about $3,000.

According to the inflation calculator a $50,000 nest egg in 1987 would now equate to a $110,000 sum.

Okay, invest that $110,000 at 18% for six months and we get $6,600 after tax (at 33%), which averages $255 a week, which is very nice.

But...

The 'real world' of 2020 says that $110,000, invested at 2.66% as per current rates, would net us the princely sum of a little under $1,000, or well shy of $40 a week. Well, you're not going to live on that, are you?

So, in comparative terms (spending power) we are now getting less than a sixth of what could have been received in 1987.

Yes, I've compared our historically low interest rates of now with historically high rates, which you might want to argue about in terms of fairness. But it emphasises what a difference there is now in the investment environment.

The reality is, once upon a time we could park money in 'safe' investments and achieve tangible returns.

Now unless we're prepared to ramp up the risk, and that very much means the risk of losing principal, the returns are nothing like the same.

With an ageing population and people looking to be ever more reliant on savings in retirement it's an issue.

And things are not going to stand still either.

Deposits slowing

I guess to no-one's great surprise, the growth in bank deposits is slowing markedly.

While it's a fair enough development on the part of investors, such a thing is not actually without ramifications. And economists at the country's largest bank are already warning that the declining growth in deposits - when put against currently strong demand for borrowed money - could cause "a significant economic headwind".

It's also worth considering what will happen once the planned deposit insurance comes in. By further reducing the risk then the 'rewards' will likely shrink further.

Watch this space on this one, I reckon. The banks need to meet this challenge head on somehow.

In such an environment it was disappointing to see the country's first licensed (in 2014) peer to peer lender Harmoney pull out of the market. Other players still in the P2P area are making noises about ramping up their activity, so, let's see what happens.

Looking for alternatives

I've got to say I'm quite surprised that P2P doesn't seem to have gained more traction in this country. But at the same time, I can disclose that I tried out Harmoney's service in 2015, with a small 'tester' amount of money. At point of writing I've got all but $1.56 of my original principal back (I suspect from what I see anecdotally that I've been pretty fortunate) and a damn fine rate of return - according to Harmoney's website close to 20% pa.

And yet, I wasn't keen on increasing or repeating the investment. And I can't really tell you why. I was irritated by the fact that borrowers could pay back all the money borrowed quickly with no penalty, meaning I then needed to reinvest the money. But that's not the whole thing.

I wonder what you think? Ideally person to person lending should be a great idea, and yet once I got involved in it, then it somehow didn't appeal.

Generally I would say the more types of potential investment there are out there the better. But in does seem that in the foreseeable future there's no prospect of achieving much more than token returns on 'low risk' investment. And that does represent quite a change from the fairly recent past.

As I opined last year, I think the NZ public have shown commendable restraint in the face of these low returns on 'safe' investments. But for how long?

Chasing risk

ASB chief executive Vittoria Shortt was a not exactly uninterested party when she recently cautioned savers to be wary of chasing better returns by taking on risky investments. But the point is very valid.

As a country we do have a bit of a history of people climbing into the 'current thing' with disastrous results (think 1987 stock market crash and the 2006-10 finance company meltdown).

And as interest rates have moved lower and lower, I've been looking pensively for where we might see the next big (disastrous) thing developing. The bad thing is that these things can develop (and the finance company sector would have been one example) at such a speed that they are already of dangerous size before the dangers are broadly recognised.

Our regulations are generally much better now than they were (in the 1980s they were virtually non-existent), so, there is some protection there now. But the thing about the next big investment bear trap is that it's invariably unforeseen and therefore there probably aren't contingencies to cover against it.

Financial literacy

I would still like to see much more work going into improving the financial literacy of New Zealanders. As I've said before, one of the big main issues around the finance company losses was a poor appreciation on the part of investors of the idea of 'risk'. Investors were taking a risk (as much of their money was going into potentially illiquid property developments and investments) but they didn't realise they were taking a risk. And that was ironically at a time when the relative safety of bank deposits was offering solid returns not much below the rates being offered by the finance companies.

In theory the fact so many of us now have KiwiSaver investments should help, but I'm actually not sure how many people do actively monitor what's happening with their KiwiSaver money and how it is being invested. And we should do that. We should keep those who are attracting the fees for managing the money on their toes so that the returns are as good as they possibly can be.

Increasingly, I can't help but think that more and more people are going to be drawn more and more into the housing market - particularly now the capital gains bogeyperson has been taken off the table.

And really, I don't think you could blame people for that.

But if you look globally, the world seems to be full of asset bubbles, which is not a comfortable situation.

Personally, I hope technology will provide some answers here. Perhaps there is a whole new type of asset class waiting to be developed that can be accessed by individuals readily and will offer relatively safe returns.

I think the world is ripe for it.

We need the next big thing. What we don't need is the next big disaster.

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53 Comments

by JRSNZ | 23rd Feb 20, 7:32am 1582396377

Financial literacy is one major problem, agreed. So is financial apathy. You touched on that with kiwisever. So many are content (or blissfully ignorant?) that their money is sitting in default funds. The biggest problem though is the pending retirement crisis. At a time where we have a wall of baby boomers about to retire we have historically low interest rates. Boomers will have two choices, drastically reduce spending and accept a lower standard of living, or begin liquidating their investments to top up their dismal interest income. What we do about those with no investments, I dont know!!

by Audaxes | 23rd Feb 20, 9:28am 1582403326

What we do about those with no investments, I dont know!!

Generally, the majority.

by Sibrit | 24th Feb 20, 12:43pm 1582501412

Or the Boomers will buy up existing residential property stock and become amateur landlords because, even with the capital outlay to buy a place and get it up to code, they end up seeing a trickle of money coming in every month which will most likely be more than any TD they have, coupled with the fact they now have all this spare time on their hands to "manage" their rentals, and that they've been told for decades that "property is the way to wealth".

Meanwhile, the number of middle-class poor grows, FHB's under 40 are priced out of the market, and small NZ businesses just can't attract funding needed for modernisation/expansion and end up closing shop, forcing mature skilled workers into a job market rife with ageism.

by CourtJester | 24th Feb 20, 1:57pm 1582505840

"the Boomers will buy up existing residential property stock and become amateur landlords"
I think the majority of the people with the means to do this have already done so.

by Alter Ego | 25th Feb 20, 3:17pm 1582597046

Or we could all invest in an Old People;s Home.......most costly ever known.

https://www.dailymail.co.uk/femail/article-8039419/Royal-Family-shares-…

by CourtJester | 24th Feb 20, 1:35pm 1582504549

>"What we do about those with no investments, I dont know!!"

In some countries it's quite common for the children of retirees to financially support their parents. Of course it's not ideal, but it's also not as extreme as you'd think.

by Brutus Iscariot | 23rd Feb 20, 8:06am 1582398387

This is a feature, not a bug. The RBNZ and friends want everyone to be in riskier investments, that's exactly why rates are so low.

They want to make the risk free rate unattractive to stimulate other types of investment.

by Audaxes | 23rd Feb 20, 9:57am 1582405058

They want to make the risk free rate unattractive to stimulate other types of investment.

They do not.

Banks, due to central bank RWA regulatory capital bias favouring residential property mortgage assets, starve the community of funding for productive GDP qualifying investment for the majority.
Why the banks just want our houses
Or our shares:

Of note: unable to find outside deep-value investments in a market that is overvalued and overflowing with liquidity, Berkshire bought back $5 billion of its own shares in 2019, with the buyback in Q4 rising to $2.2 billion, the most ever. The company changed its buyback policy last year, and some shareholders have been frustrated the company hasn’t spent significantly more cash repurchasing its stock. Ironically, it is none other than Buffett who has repeatedly urged his investments to engage in aggressive buybacks even as Berkshire has sternly resisted in putting Buffett's money where his mouth has been for years.

by Te Kooti | 24th Feb 20, 10:04am 1582491840

Actually you're wrong (again), and he is correct. The RBNZ lowers rates to stimulate consumption/investment and keep the currency competitive so as to hit the inflation target. It is designed to force investors/households into taking more risk.

by Audaxes | 24th Feb 20, 3:22pm 1582510921

It means, unequivocally, that low rates are not stimulative at all, rather they are indicative of monetary contraction. Another way of saying that in mainstream terms is if a central bank “needs” to stimulate year after year after year it isn’t actually stimulating anything, it is being slowly strangled by the same monetary noose in sympathy with the real economy. The real economy loses function and activity while the central bank loses (rightfully) credibility. Link

The RBNZ halved the Official Cash Rate three times since July 2008.

by Te Kooti | 24th Feb 20, 4:49pm 1582516158

Seriously, you post a quote from a bucket shop-based in a financial backwater?

by Yvil | 24th Feb 20, 4:56pm 1582516569

Yes but it is posted on a blue background, so it must be true

by Audaxes | 24th Feb 20, 8:13pm 1582528410

And who are you to question the obvious reality of the claim with nothing more than a smear?

by Alter Ego | 23rd Feb 20, 8:44am 1582400643

Borrowing money into God knows what has given us the option of buying Gold, Frankincense and Merde.

When people realise their assets will not sold to the highest bidder as most are a load of cr-p....then we may revert back to means.....Not Debt. Buyer Beware.

by Audaxes | 23rd Feb 20, 9:15am 1582402553

I guess to no-one's great surprise, the growth in bank deposits is slowing markedly.
... And economists at the country's largest bank are already warning that the declining growth in deposits - when put against currently strong demand for borrowed money - could cause "a significant economic headwind".

by Audaxes | 16th Feb 20, 9:09am
.Asked whether the deposit pressure could feed through to lending Shortt said; "We're well funded. I don't have any concerns about being able to lend."
They certainly can be well funded by their own internal artifice:

We start with the idea of credit creation, specifically a swap of IOUs between a bank and myself involving a bank loan that is my IOU and a bank deposit that is the bank’s IOU. Nothing could be simpler, and yet the mind rebels, especially the well-trained economist’s mind, because this simple operation increases my purchasing power without decreasing anyone else’s. It seems like alchemy, or anyway a violation of some deep conservation law. Real productive resources are the same as they were before, and the swap doesn’t change that, does it? Spending of the new purchasing power adds another layer of perplexity.

If spending increases but real resources do not, then it seems logical that the increased spending must exhaust itself in higher prices—that is the intuitive appeal of the quantity theory of money. My purchasing power may increase, but everyone else’s decreases because their money balances buy less. From this point of view, the alchemy of banking seems like a kind of theft, something to be deplored in the name of economic science and if possible outlawed in the name of the general good.

A simple concrete example may help to fix ideas. Let us suppose that the swap of IOUs is a mortgage loan, and that I use my new purchasing power to buy your existing house. At the instant of sale, I swap one asset for another, and you swap the other way around, presumably because each of us prefers the asset held by the other. For present purposes, the important point to appreciate is that the alchemy of banking has made this sale possible, by creating new means of payment that you are willing to accept. After the sale, the bank’s new IOU is owed to you instead of to me. In fact, by accepting the bank’s IOU as payment, you are funding the bank’s loan to me, at least temporarily.

But that’s not the end of the story. You were willing to accept new purchasing power as means of payment for your house, and in doing so you wound up funding the bank’s mortgage loan in the first instance. But by no means does that mean that you are willing to fund the loan for its entire term. Indeed, what matters after the moment of payment is not so much your own portfolio preferences as the preferences of the rest of the world to whom you pass along the new purchasing power as you spend it. The question is, when you are no longer funding the loan, who is and in what form? Read more

by Shamino | 23rd Feb 20, 9:36am 1582403787

"Personally, I hope technology will provide some answers here. Perhaps there is a whole new type of asset class waiting to be developed that can be accessed by individuals readily and will offer relatively safe returns."

Its time for Plan B.

by SmoKey | 23rd Feb 20, 10:33am 1582407221

Let us first agree about what should be the ideal rate of return, post tax today that would satisfy the savers.

Do we have the historical data available for the various risk premiums and the real life return for various types of investmens in one place for investors to access ?

by Mark Hubbard 1965 | 23rd Feb 20, 10:54am 1582408456

I agree the most likely scenario is for low interest rates (for as long as our Soviet inspired central banks can cling to the Harry Potter markets they've recklessly created), but given the 67% correction to S&P that started last Thursday :) anybody switching from low rate low risk to high risk share portfolios at this particular time would be unwise.

by J.C. | 23rd Feb 20, 11:51am 1582411878

You make some good points but I think your references to communist history are somewhat misguided. Communism is quite often used by people to describe an alternative system that is not actually representative. If you're trying to suggest that central banks are not independent, just say it. Describing them as "Soviet inspired" doesn't really add anything to what you're trying to say.

by Mark Hubbard 1965 | 23rd Feb 20, 12:48pm 1582415302

Command economies that communist economies are based on are run by central planning agencies that destroy the price discovery of free markets.

That is central banking which controls the value of all financial assets via the cost/volume/speed of money and overrides the price discovery of a free market. Central banks are no part of a free market capitalist economy: no part at all. They represent hubris, like all command systems. It's economies run by bureaucrats who seriously haven't got a clue, and worse, are now working for the US president's re-electioneering campaign. No central bank can create policy that takes in the complexity of a truly free market of billions of individuals trading with each other to fulfill their needs and desires. Our current markets are the most over-regulated (tax, securities and AML laws) and distorted (central bank stimulunacy) than any markets I've seen in my thirty year career and forty year adulthood). '87 and '08, plus the dotcom distortions are nothing on this and our historic debt levels.

Actually, are these Western economies any freer than the Soviet economy was? Certainly state surveillance we have now via AML rivals anything the Soviets had. No, we don't have the brutality of the KGB or Stasi, but the surveillance of private citizens in the West is now far more comprehensive.

You obsess over which way the toilet roll fits don't you?

by J.C. | 23rd Feb 20, 12:52pm 1582415556

OK, so your references to 'Soviet" and 'communism' are as a reference point to 'freedoms.'

I don't "obsess over rolling toilet rolls" but I often see reference to communism bandied around without any rhyme or reason (Jacinda Ardern is often labelled a 'communist' and Donald Trump's supporters use it with gay abandon to describe anyone who doesn't fit within their narrow vision of the world). I think you were particularly riled about the state imposition of rent controls when you last referred to the evils of communism.

So if you have these reference points to 'restricted freedom', what is your reference point for your utopian world?

by Mark Hubbard 1965 | 23rd Feb 20, 9:14pm 1582445660

Reading your comments, I've lost the will to live, JC.

... Classical liberal. That's me. End of.

by J.C. | 23rd Feb 20, 10:16pm 1582449390

OK. Probably the nearest you will get to a classical libertarian society is in the 1700s in North America. Unless of course you join some kind of feral community in Australia who share a similar ideal about property rights. Or possibly Montana.

by Mark Hubbard 1965 | 24th Feb 20, 7:46am 1582483591

What's feral about a classical liberal (free) society? That was the resulting philosophy out of our Enlightenment, and has brought billions of people out of slavery to monarchs, church and tyrants of all kinds, and out of poverty on the foundations of free markets (which are now almost destroyed), individual property rights and the rule of law. You the one schooling me about being careful with word choice, after all.

But you're lucky, I've written on what our Western birthright was back in the day (and it's not these massive all-powerful centralised states and Harry Potter markets):

http://lifebehindtheirondrape.blogspot.com/2013/04/the-westminster-prin…

by murray86 | 24th Feb 20, 8:23am 1582485819

Two weeks ago i asked if people can even differentiate between policy going back to the true centre from being right wing, from socialist/communist type policies, and Mr Hubbard you prove my point. Capitalism has proven that it is failing, as bad as communism has, as what you call "true freedom' is only rich and powerful people being able to shaft the vast majority of the population. Your railing against central government regulation demonstrates a fundamental lack of understanding of the purpose of Government, and the point to regulation.

For our societies to be truly successful, everyone has to benefit, not just a few wealthy people at the top of the pile. Recent years under the model of the 'free market" has proven that given a lack of regulation, powerful and rich people and organisations manipulate systems and economies to their favour. The result for NZ? Unparalleled homeless due to exorbitant rents and over inflated prices when a home used to be considered a basic necessity. People having to take up multiple minimum wage jobs just to survive but still falling short, a minimum wage that is not enough to live on, Government subsidising landlords in excess of $2 billion per year. That is not freedom, it's slavery!

by Mark Hubbard 1965 | 24th Feb 20, 8:50am 1582487443

Horrible. Horrible and frightening.

There is no capitalism right now.

And there's socialist illiteracy and foolishness everywhere.

Thank God I'm at the end of my life and career, and I've taken to the bush to be away from you lot and the new gulags you will create.

#Gone

by murray86 | 24th Feb 20, 9:22am 1582489328

Have fun in the bush Mr Hubbard, your demonstrated illiteracy does not contribute to these debates but rather goes to prove the blindness of a few to the harm that is caused by those who would control the system - the capitalists.

Capitalism still rules but there is a bit of sanity peeking through the clouds as many realise just how destructive it has been. A swing is needed back to the centre. Not going too far will be a trick!

by UrbaneGuerilla | 24th Feb 20, 11:06am 1582495619

"Thank God I'm at the end of my life and career, and I've taken to the bush to be away from you lot and the new gulags you will create."

Irony - when someone uses underlying technology and networks created by the state and centralised planning to rail against state intervention in all its forms.

Presumably you'll use roads to travel to the bush, Mark?

by Mark Hubbard 1965 | 24th Feb 20, 11:18am 1582496322

Oh look, fresh from Chris Trotters blog.

Goodness me.

Policy: I don't deal with the Useful Idiots for the next collectivist gulags you're all determined to make in what already is the largest global surveillance state in the history of humanity, where there are no free markets that have been able to survive the intrusions of massive state sectors, and central bank funny money policies that have totally destroyed price discovery to ensure the 1% remain the 1%. The Global economy is right now so distorted by central planning and surveillance, it is the Soviet economy right on the precipice.

by UrbaneGuerilla | 24th Feb 20, 12:21pm 1582500081

Oh look, trite comment when challenged on vapid analysis.

Colour me surprised.

There's never been a free market in the history of humanity.
It's always been distorted by something (the King, the bureaucracy, the wealthy, legislation, absence of information...take your pick).
To think otherwise is pure fantasy.

In the reality based universe, complex social-democratic societies can't exist without a degree of collectivism, which includes a significant state apparatus, some of it good, some of it bad. This is a long way away from your hyperbolic Soviet gulag hysteria.

by J.C. | 24th Feb 20, 8:46am 1582487196

What's feral about a classical liberal (free) society?

Ferals are a subculture who shun society in search of a more primal existence. Quite anarchic. Of course, they take the tenets of property rights seriously in how they relate to one another, but probably side with the Aboriginal people as it pertains to land.

by VictimOfOCR | 24th Feb 20, 7:55am 1582484158

I got rid of 40% of my stock Thursday afternoon. I’ve also a bad feeling the reckoning begun that day. Guess we’ll find of out this week when the US market reopens.

by Mark Hubbard 1965 | 24th Feb 20, 9:09am 1582488567

Markets today and this week will be interesting ... as will be the jawboning from the Fed.

by Yvil | 24th Feb 20, 4:40pm 1582515659

"I got rid of 40% of my stock Thursday afternoon"

Sheep or cattle?

by VictimOfOCR | 24th Feb 20, 7:55am 1582484158

I got rid of 40% of my stock Thursday afternoon. I’ve also a bad feeling the reckoning begun that day. Guess we’ll find of out this week when the US market reopens.

by Davo36 | 23rd Feb 20, 11:10am 1582409406

The RBNZ and other central banks have a lot to answer for I reckon. They've destroyed older people's incomes and will now standby while they invest in riskier and riskier investments and get taken to the cleaners by the wide-boys.

They've also created huge asset bubbles. Both in the property and stock markets. It won't end well.

by SmoKey | 23rd Feb 20, 11:56am 1582412192

How do businesses plan their long term investment strategies in these circumstances ? They still need investments from savers or investors to carry on and expand their businesses. That may show a way to some balanced investment plans for individuals ?

by Te Kooti | 24th Feb 20, 12:38pm 1582501089

It's easy to b1tch and moan from the peanut gallery, but the RBNZ are in the real world trying to guide a small, open economy through a dysfunctional macro-economic world. The RBNZ has had no option but to cut rates, if for no other reason than to save our export sector. Much of the western world has Zirp and QE, we are very much a hostage to these forces. I'm not a huge fan of the current regime either, but they're not doing a bad job.

by Keen Observer | 25th Feb 20, 12:19am 1582543184

Brace for impact Davo36, the cold weather up north of the equator now harbouring the spread of this Covid19, our turn estimated about winter this year.. but as you expect, the RBNZ already calculated it only make a dent about first Q this year, onward will be fine. Do be careful when their next OCR winter announcement, which one of those panel seems to catch a Flu. Their voice could be no longer unified after that.

by Tim Depositor | 23rd Feb 20, 1:07pm 1582416432

I've put some money in Kiwiwealth Managed Funds. You can take out money at any time at the 0.11% Buy/Sell rate. So, $500 in is a 50c fee.

If deposit growth lags banks should have make TDs more attractive.....

by streetwise | 23rd Feb 20, 1:56pm 1582419375

"what will happen when "planned deposit insurance scheme" comes in"

What will happen is anybody with a sizable amount of money in one bank will spread that money around all the banks until they have no more than $50,000 in any one bank or finance company thereby covering all or at least a fair proportion of their funds.

THE IMPORTANT IMPLICATION HERE IS THAT SMALLER NEW ZEALAND BANKS WILL SUDDENLY BECOME THE RECIPIENTS OF A HUGE INFLOW OF FUNDS FROM THE FOUR BIG AUSTRALIAN BANKS AS DEPOSITORS SPREAD THEIR RISK TO MAXIMIZE INSURANCE COVERAGE.

Smaller NZ banks like Coop, Kiwi, Taranaki, Heartland, et al will be swamped. This will create a sea-change in NZ banking.

I have already thought this through and have spread my bank deposits from one of the big Aussie bank to three of them so at least I don't have all my eggs in one bank.

Surely, the RBNZ are aware of this implication. It could mean a bonanza of deposits for NZ banks. I wonder what the big Aussie banks think of this?

As soon as the new insurance comes in I will be transferring some of my funds to the smaller NZ banks to diversify. As a retired baby-boomer I am in the fortunate position of having to worry more about the security of my savings rather than interest rate income.

by Keen Observer | 25th Feb 20, 12:29am 1582543780

Wise move, just reminder that spread those 50K not in one bank, even as simple savings.. you're correct put into several banks, direct OZ banks even or? visited those stable ASEAN countries banks for more interest (just use the US or OZ bank branch if still afraid), as the guarantee means tax payers deal with it, OBR etc - it is odd isn't it? cost us to store our money in, not guarantee of store, risk of loosing? - bring back that memory of putting a 5 tonne vault for storage in gold mine operation.. to store bullion.

by PocketAces | 23rd Feb 20, 4:22pm 1582428156

Perhaps you aren't really supposed to make a buck out of a buck. Perhaps you are supposed to do something or produce something in order for someone to part with one to you.
Economic cannibalism in the form of some owning housing and the rest bring prevented from owning in order to provide a buck for a buck should not be it

by Yvil | 24th Feb 20, 4:44pm 1582515852

"Perhaps you aren't really supposed to make a buck out of a buck. Perhaps you are supposed to do something or produce something in order for someone to part with one to you."
It's not that often that I agree with you but yes indeed, why should those with money expect to put it in a safe place (like banks) and expect to get even more money back later on without doing anything at all?

by avatar99 | 23rd Feb 20, 5:23pm 1582431814

For retirees we need an annuities investment product run out of the NZ Super fund IMHO. If you die early - you are investing in the future of NZ (i.e., none of your investment comes back, but that's OK). Live long - no problem, that's what annuities are for. The current commercially available annuities products are not great and could do with some competition from the public sector.

by Wrong John | 23rd Feb 20, 5:51pm 1582433485

I'm not sure there is such a beast as a safe investment. Investment by its very nature has some risk attached, which is what creates the return funnily enough. But you're right, understanding that equation is often learned the hard way, just like understanding money itself is a never ending quest. I'm a bit more gnarly these days having seen '87/88/89/90 first hand & been bitten, then reliving it in '07/08/09/10 and surviving, I'm a little gun shy of today's promises. Age too has taken its toll, so if I risk & lose, there's not much working time left to underwrite the rebuilding of the temple. That won't be true for all of you however. There is a time for risk & I would suggest it is when you can earn your way back again if something goes wrong. If you can't, then don't. If you can't & do it anyway, you've got bigger balls than me.

by Foxglove. | 24th Feb 20, 8:20am 1582485656

LJM that is the exact point for the let’s say, senior sector. No much rope left to haul yourself back up on. That means capital simply cannot be risked and therefore the low return on the safer deposits, TDs for instance, means costs have to be cut. Aware some retirees cancelling private health insurance, other savings such as reduced heating and diet impact on health at an age where vulnerability naturally increases; all this potentially ends at an already overloaded public health system

by middleman1 | 23rd Feb 20, 7:57pm 1582441035

LongJohnM. Your investment perspective is realistically balanced on both the up and downsides of being in the market. For years int.co comments have been heavy with predictions of impending financial system apocalypse, these over recent times rising to fever pitch as the QE story progresses to its final chapters. But these sixth horseman prophets don't often comment on the grim lifestyle consequences for those who have heeded their dire prognostications and defensively retreated to their investment bunkers over the past decade.

by murray86 | 24th Feb 20, 8:29am 1582486159

"returns on 'risk free' investments such as bank term deposits" When I first started to learn about investment, i was taught the 'risk free' standard was set by Government bonds. When did this change? As we have seen, and as demonstrated by things like the OBR, and other RBNZ statements and documents, as well as the Governments, Banks are certainly not 'risk free'. Indeed they already 'own' our money which in itself will be used to provide at least a part of the capital reserves the Government will require of them. Is David trying to change our finance understanding?

by morepork | 24th Feb 20, 11:13am 1582496028

Odd comparison you're marking there. In your 1987 example your real return is -2% before tax (and worse after), so unless you've got nothing to spend unless you want to spend real capital. Compare to today and at least you've got some real return before tax.

In either situation if you need money for day to day living you need to spend real capital, the only difference is whether the absolute number is going down or not, because in both cases the spending power sure is.

by Sibrit | 24th Feb 20, 1:26pm 1582503960

Technology as an asset class... A new technology for something everybody needs, that everyone can buy in to, and that produces low risk gains?

Well. I need air, water and food. Clothing and a roof over my head. Everything else is not essential for survival. I certainly don't need social media, although millions seem to think they can't survive without it. I do need computers. They are a ubiquitous part of my life. So I also need the power that my computers run on. Transport is a 50/50 bet. I can walk to work in 20 minutes but I prefer to either bicycle or use the car.

So that tells me I should invest in advances in computing, power and transport, such as quantum computers, fusion power, and flying cars. But they are all still in their research phase and not for commercial use, so their risk would be astronomical.

by Keen Observer | 25th Feb 20, 12:13am 1582542812

Savings dead, it's for the looser (tell that to our kids), Borrowing is the new mantra, Credit, Loan that is the key now days.
Don't worry, even as our Banks empty to give further - China is willing to supply the money to them.
Now, can I suggest per David opinion above? if technology the answer, then this country should be in the fore front of crypto investment technology, know how, innovation etc. - we are years behind some poor African countries on this, soon they'll be into the orbital space, watching us.. digging, tunneling down to bury our collective heads.

by Alter Ego | 25th Feb 20, 12:03pm 1582585390

I was gonna put my money on a horse....but it just bolted.

I was gonna buy Bonds that bind, but they cut loose.

I was gonna buy Credit, but it was undue.

I was gonna buy the dip, but now he is President, not so sure.

Swear....words beware.

https://www.zerohedge.com/markets/trump-investors-buy-fking-dip?utm_sou…

I was gonna buy a dollar average, but that slipped buy me.

I was gonna exchange for a Dollar Bill, but they wanted a $1:50

I was gonna buy the House, but they had put a roof on it of twice what it was worth.

I was gonna buy another house, but a rich man borrowed more than I could stand, thank God it was a leaky crap doss House.

I was gonna buy the Political Elite another House, but I quit as a Taxpayer and became a beneficiary.

I was gonna Swap climbing the Ladder and bought a caravan. wheel happy about that.

I was gonna put all my money in a bank, but the teller told me off, the manager was not impressed. No account of why?.

I was gonna Trust with an accountant, but he wanted 1500 bucks just to set me up.

I was gonna do the same with a Solicitor, but he wanted 10 grand for his part. I think it was in the Cayman Isles.

I was gonna Trust with Kiwi Saver, but little did I know, ya cannot Trust anybody these days, maybe the returns will pick-up, after they drop em all, long term.

I was gonna buy a lotto Ticket, but the odds were against me, last time.

I was gonna buy Bank Credit, but apparently only an Aussie Bleeder can do it properly.

They said I could buy a house though as I had a small deposit, but I would have to pay em back again for the next 30 years.

I could continue, but my stock has depleted, my words fail me and my belief is in ruins, but I could rebuild em and sell em to a multi-billionaire. How about you?.

I was gonna