Blogging from Sydney | Australia
Some past thoughts

Speculation: Negative gearing is on the chopping block

I'll believe it when I see it, but if they have the guts to do the right thing and remove this artificial negative gearing distortion saving many billions of $$$ (of course it's a scam, why should I and the members of the millenials in effect personally be paying thousands of dollars in taxes or interest on ballooning government debt to prop up existing house prices), they'll get my vote at the next election even though they've completely stalled what little progress was being made on the NBN (Turnbull, we brought you in to get things moving, not stall it completely). Thanks MB and SBS for the speculation.

Of course, I can only personally say such a thing because if I choose to stay in Australia, which is looking like a very BIG IF over the next 5 years, this is a necessary (but sadly unlikely to be sufficient) condition to deflating house prices into a somewhat affordable range.

Take a reasonable long-term historical perspective, such as average loan size just 10 years ago, c.2003 was A$120,000. Then flip it and just consider today, for instance that Boston median house prices are around US$400,000 (vs more like A$700,000 in Sydney). Or that I could buy (today with no debt, like WOW that was an eye-opener!) a dogbox studio apartment in Boston for just US$65,000 (thanks Flipping Boston S2, Ep8 via Foxtel, the worldwide perspective alone has just paid for itself many times over) whereas the bottom in Sydney starts around A$200,000. This is a lot of ranting, but it's supposed to be theraputic to get the problems off one's chest.

It's worth it if some of our politicians do get the message that outside of the 24 hour news cycle, people still need to make ends meet, still need to figure out how to plan to have a family, and want a reasonable (I'd say fair, but it became unfair when the pension age didn't start rising 20 years ago) deal from the society they are a part of. Ross Gittins has some excellent articles on economic rent-seeking, or basically taking a larger piece of the eco-cake than you should reasonably be entitled to. People will stand some oppression (for instance I fully support any efforts to reduce income inequality though I believe in bottom up economics where the poor will generally spend the money they get, boosting the economy, and even though that will disproportionately hurt me as a relatively high income earner), but too much will break the proverbial camel's back. I'm also aware that the grass always appears greener on the other side which is why I'm OK with getting a somewhat unfair appearing deal. Mostly because I think that I'm a reasonable enough person that once I've found a way to pay for one of these houses or 3+ bedroom apartments, I'll be pretty close to having "enough", then at that point I don't care if the rest goes to charity or porkbarrelling or whatever else, it's all cherries on top =)

It would be nice if the government also reduced demand in other ways, e.g. by not boosting immigration to the moon (407,000 new people or 1.8% per capita, yes it's not Libya's 20% per capita but it's still a lot, though I believe asylum seekers should be classed as immigrants), but I'm a realist so I don't support reducing that intake. An argument could be made that we actually should take these people so we have a greater societal capacity in the longer term to handle the inevitable climate refugees without having huge societal shocks, since little real progress seems to be being made on climate change.

The solutions remain as they have always been - primarily about supply, e.g.

  • Cutting red tape stopping developers getting out there and building houses and apartments (some positive signs on apartments at least).
  • Considering a broad-based land tax replacing stamp duty, to reduce the effectiveness of land banking speculation.
  • Releasing more government land for purchase by private citizens, for instance the NSW goverment appears to be planning to release land for about 800,000 people over the next 17 years (8 regions identified, around 100k per region). If one third of the 400k p.a. immigrants come to Sydney and surrounding regions, that's easily 2.2 million people (at a constant immigration quota) or a shortfall in housing for up to 1.4 million people (yes there are regional centers outside Sydney, don't know how many people can move there without an NBN) which will need to be made up by building upwards or increasing dwelling sizes just as the baby boomers kids are leaving and probably needing dwellings of their own. <Insert generation rent joke>...

To our good politicians (from all sides, primarily state and federal), I sincerely hope the electorate rewards you if you make the tough choices and pop the bubble.

I guess I understand from the expected mining capex cliff why the Reserve Bank of Australia decided it was safer to go all in on the bubble by dropping rates over the past year or so. Hope they finally get rewarded with some serious inflation that makes us all poorer. In a perverse way, the higher they rise the further they fall... so if the serious (like 30% or so as happened in Ireland) crash comes somewhere between 2017-2024 as the baby boomers look to fund their retirement and get whacked by falling "investment property" prices, I would be quite pleased. But this shouldn't be about intergenerational warfare, it should be about building (pun intended) a sustainable society, not a speculative society.


Goodbye Holden: Let the dominoes fall so we can focus on innovating

From General Motors, as reported by MacroBusiness and many others, Holden is finally leaving in 2017. I'd love to rant more about subsidising an unprofitable industry to the tune of $1.9 billion dollars annually, but we've been given a gift. The gift of certainty.

Jonathan Pincus, a former senior advisor to the Productivity Commission reckons in the long run it will be a significant net benefit. I'd agree wholeheartedly - up to 250,000 employees are now armed with the knowledge their jobs are at best under threat (Toyota) or basically gone (Ford, Holden, Mitsubishi, etc). 

They are now truly freed to think for themselves and start looking for productive employment elsewhere (perhaps other countries if they're really committed to the auto industry), retraining, going back to uni, etc - they are armed with up to 4 years to decide when they want to make that transition - remember the average punter gets two weeks notice when being fired by their boss. Further these auto workers will likely get decent redundancy payments so that gives them an additional margin of safety in thinking about what their dream job is and how to make it happen.

Free. Free and empowered to start innovating, creating, experimenting, learning, coming up with new and better ways of doing things, building things; actually generating more value for all humankind.

We might just get a Liberal government that will be up for some serious structural economic reform after all (hopefully this is not just a one-off). Good work Joe Hockey and everyone else who participated in calling the bluff and getting GM's decision out there for all to know. Or they could with the removed debt ceiling start building a lot of new infrastructure our cities so badly need - that wouldn't be too bad of an outcome either. Shame it takes 10 years to build anything these days with all the red tape that needs cutting.

Oh and when combined with the mining capex cliff there's probably that little recession thing ... I've never experienced what it means as Australia has had 22 years of continuous growth. Of course it's all a dartboard and no one really knows the future. For instance you can get concerned by listening to the gold bears or the demographic headwinds as the boomers retire (e.g. Japan). Or you could try thinking for yourself if the rest of the world starts growing after their GFC blues, they'll probably demand more resources. Or they could demand more of our world-class education system, financial services, tourism and other successful industries. Dartboard. Except for the lucky auto workers who know they have four years to prepare for their now far more certain future. Thank you GM and Holden for being honest with the Australian people.


Awesome Six Dogs Comment & Sydney Housing = Insane, Crisis, Ponzi

Disclaimer: As always, you seek professional financial advice (not listen to my speculative rant) before doing something like taking out a 30+ year mortgage, investing in any Australian or international stock market, or any other thing that could lose (or if you're lucky make) you a lot of money. No one knows the future of things such as real estate prices, and anyone who suggests otherwise is almost certainly lying to you.

I'm just a moderately well-off punter looking at the numbers and the hockey-stick graph of real house prices and thinking there is no realistic way the average Sydneysider can make the numbers work without fudging them. Hence my thesis is what goes up must eventually come down. Why?

It is my hope that a not unreasonable 50% down part happens in the next 5-10 years as the baby boomers retire (needing to sell assets such as real estate to try to finance their retirement, there's support to my thesis if you believe people like Harry Dent on TDI #330 who claims to have been a bull for 20 years turned bear in the last 3 years due to the demographic cycle changes primarily from the baby boomers, applicable to the US and probably by reasonable extension to Australia). I can barely believe my parents only had a $130K mortgage on a double-block house on the Northern Beaches just 25 years ago, but such is life sometimes.

To balance that, it is my fear that governments do nothing about the six dogs (see copied comment below) and Ponzi fever infects the market driving prices even higher - 17th century tulip mania or house prices in Sweden where I think I read it's common to have a perpetual loan you just never pay off, proves it is certainly not impossible. It's easy to add other evidence like Chinese speculation driving up prices. Perhaps I should just give in and change city or even country, it would certainly be a lot easier. Scrap that, it would be hard to give up the fact Australia is definitely a very good place to live. e.g. our biggest long-term gun threat is from 3D printed guns unlike the regular high school and other massacres occurring in the US.

This is in the context of hopefully getting to the stage of starting a family and wanting a stable family home somewhere that isn't at risk of up to a 75% decline in price if governments really get their act together (i.e. chase off 4 or more dogs), or run out of magical stimulus bullets, 2.5% nominal RBA interest rates is terrible, but not that far from 0% from which they can't go any lower without money-printing like QE3+. Though with the kind of money we're talking about I could literally add another child or two to the proposed family, buy a half-decent new Ferrari (almost making a really cool status-symbol Tesla look cheap), probably make a small fortune in the stock market, see a huge chunk of the world on overseas trips, go into space, the list of wants is practically infinite ...


The article was good (though I feel MacroBusiness is pushing this housing = Ponzi theme so take it with what grains of salt you will), but this particular comment was just brilliant. Kryptonite for me (since I know while it might go a bit higher in the short term, I believe it's very unlikely to outperform (from such a high base) in the long term, and if a mortgage is typically 30 years then all I'd rationally care about is the long term. All said while the statistics are against you, if you really have done the hard yards researching and found a genuine bargain in real estate then good luck and more power to you!

Stoking Demand and Choking Supply

Government has done something very bad to the supply and demand of starter homes which has led to outrageous prices of starter homes, and supported much higher prices of better homes. In short, government has stoked the demand and choked the supply of starter/marginal/extra homes.

Stoking Demand:

* Government brings in many immigrants

Choking Supply:

* Government rations permission to build extra housing on the fringe or extra units in the city, and new cities
* Government allows landbankers to monopolise the permission and dribble it onto the market to inflate prices
* Government adds taxes, charges and levies to extra housing
* Government requires onerous compliance with regulations
* Government creates delays in approving dwellings.
* Government neglects transport and other infrastructure which reduces the area in which well-located and well-serviced homes can be built

There is much debate on which of the six chokers (refusal, cartel, taxes, compliance, delays, neglect) is the biggest and baddest. Interestingly, if refusal is the big one, then lowering taxes will give a windfall to developers, whereas if refusal is a small one, then reducing taxes will cause a drop in prices. This debate is fascinating from an academic point of view, but rather pointless if the aim is to solve the housing crisis.

It is like watching a man being attacked by six dogs and debating which dog has the bigger bite. Far better to chase off ALL the dogs and save the man.


A new, custom 2.78m desk for an eyefinity setup and more 

A few more illustrative photos are on Google+, for those who prefer the visual summary.

The problem

In the Christmas holidays of 2011, I realised something. I had a more or less standard 1.35m x 0.75m x 0.73m (WxDxH) study desk. It sucked.

Cluttered: Two PCs and a Macbook Air

So c. 18 Dec 2011, I decided to change that.

I think I needed something that could capture a few user stories well:

  • I have up to 3.15m to work with. Why not use it?
  • Potential for an Eyefinity / Surround setup
  • The full depth of the desk felt like wasted space (it's been a long time since CRT monitors were common)
  • I still tinker with my PCs frequently
  • I thought I could use the space far more efficiently, e.g. space under the drawers was barely used - an accessible shelf would be nice for say a few Raspberry Pi(s) and a game console or two
  • I'd grown used to having 3+ drawers
  • I don't care about a bunch of things like wheels or height-adjustability

Designing and planning the solution

Firstly, some constraints. Being six floors up makes taking things in through the window nearly impossible. That leaves the fire stairs and the elevator. Long story short, the elevator had the best potential - a little over 3m on the longest diagonal.

Early planning documents

Further 350mm is taken by a display for some of the trinkets I've acquired on my travels to places like the Great Barrier Reef, Coober Pedy, Lightning Ridge and Cradle Mountain. Hence we come to the first decision - the desk was to be about 2.8m long. Given that, I did some searching and there's really next to nothing out there that comes close, though the 2.4m kitchen benchtop idea is interesting. I had a choice:

  • Outsource it to a furniture builder
  • Capitalise on my woodworking prowess acquired primarily through my high school education, where I'd built a table out of radiata pine with a jarrah shelf and top. Though that was a Year 10 major project, and this was definitely going to be on a much larger scale...

I chose the latter and set about planning. The plans above capture the high level overview, but are missing many minor details. The devil is always in the details.

Details, details like drawers. Drawers make a table into a serious desk. They also add an extraordinary amount of complexity and intricacy. I wouldn't have gone forward with them if I needed to dovetail and build from scratch. Thankfully I discovered the BA[123]-M/W self-assemble drawers at Bunnings so I updated my plans to add some support rails.

BA3-M/W drawer between four posts and some rails

Iterative construction

Armed with my drawings and sketchup, I spent a small fortune on wood (though still a little less than three 24" Dell monitors cost) - cedar for the top (and drawer fronts I ended up replacing), and maple for the legs, lower shelf and rails. I chose cedar because it's a softwood and hence relatively light for the distance travelled (the jarrah used on my previous project made it heavier than it looked - even the removalists commented on it), and maple as something different to the arguably too common (though cheap and effective) radiata pine.

Left: Wood scouting. Right: Planning the dowel and biscuit locations for the 2.78m top piece

The other details all followed naturally from the above. For instance, given a need to go about 2.8m with a depth of about 600mm, I decided to biscuit-join three lengths (four pieces) of ~190mm cedar with a total end-to-end length of 8.4m. This also made my final depth closer to 570mm, which if anything has worked out even better, though practically quite close to the lower depth limit with my eyefinity setup.

Another point was the need to route many pieces to more easily achieve things such as the 8mm-rounded top, legs and rails. Using a router is always a challenge. There's consistently a need to test (the old adage measure twice cut once) - and plenty of offcuts went through it. The noise wouldn't be a problem back in a suburban house, but can be an issue in high-density urban living, generally restricting use of power tools to working hours. Fencing is a requirement too - indeed I'd often spend twice as long fencing as routing. However routing done right is almost always faster than chiselling.

Routing: Often complicated to ensure precision cuts and wood removed. Bottom left you can see a failed (and replaced) offcut being used as the rightmost supporting fence, part of the excavations to ensure the top fits snugly on the frame

Iterating on the design once I realised I wouldn't like the bare exposed rails
Unplanned, but expected: Chiselling out slots for the drawers

Frequent iterations (ctd): Replaced the prefabricated drawer fronts with cedar

Planning continued throughout the project, I remember a lot more doodles but just didn't have the foresight to take more photos

Final Results

Finished product

Designed to disassemble for transportation

Perspective: 2.64m back rail vs the height of my bedroom

The hidden stash works a charm at hiding things like power bricks and excess cable clutter

I'm loving it

A few things are still incomplete. My Logitech G930 broke, so I shall be looking for a new gaming keyboard in the near future. Sometime a little further off I'll be in the market for an affordable 4K TV, and the geeks out there will determine I'm not running a true Eyefinity yet (the right two monitors are running off the main box, I'm dedicating the left Eyefinity monitor to the Xbox 360 for now, and the leftmost monitor to my legacy Windows XP gaming rig). There are dreams of a watercooled project, subject to the many complexities of implementation...

Overall after a week with this setup, I am loving it. Well worth it for something that really nailed* what I wanted.

* ironically I used no nails, indeed the only pieces of metal in the entire solution are the drawer's rails, screws and handles. I'm not much of a metalworker, especially when it comes to MIG/TIG welding so I prefer to stick with my love of woodworking.


Graduation Congratulations!

A HUGE CONGRATULATIONS to everyone from UNSW who graduated with me tonight - in no particular order - Shaun Ester, Aditya Keswani, Alexei Doudkine, Stephanie Sandoval, Sean Charles Harris, Kun (Kevin) Liu, Alexander Eduardo Newski Rincon and Anoop Jayesh Mehta. And to anyone I've accidentally overlooked, or who's graduated at another time, congratulations to you too!

I wish you all the best in your future careers and every success you deserve after all your hard work, play and study.


P.S. I decided to post this here, for posterity. Because to be honest, I just have this notion I need to be in control of my data...

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