reception@amcotax.com.au | Suite 8, Level 6 / 402-410 Chapel Road Bankstown NSW 2200 Ph:9790 6277 Fax: 9790 0673

chelsea

About Chelsea Tran

This author has not yet filled in any details.
So far Chelsea Tran has created 56 blog entries.

AI comes for the software giants, and Australia is no safe haven

Daniel Petre has invested millions of dollars in software companies over the years. Now, with markets worried that rapid advances in artificial intelligence will all but wipe out their growth, the veteran venture capitalist is the first to warn that there will be plenty of casualties.

Or, as he describes it, “roadkill”. With every new announcement outlining new tasks that AI platforms can automate – the latest was Anthropic’s Claude, which can apparently replicate the work that specialist legal software does – technology stocks look deeper into the abyss.

That development, overnight on Tuesday, pushed the Nasdaq-listed shares of LegalZoom, which provides services to small legal practices, down 19.7 per cent. Thomson Reuters dropped 17 per cent. Atlassian, the Sydney-headquartered, New York-listed workplace software developer, saw its shares down 8.7 per cent. On the ASX, accounting tool Xero and logistics management platform WiseTech Global both took big hits.

“For some big software companies there are big switching costs, or they may have inputs from lots of changing private datasets that are difficult for an AI platform to match, but the key driver in the market today is that there will be lots of [software] businesses that aren’t that strong,” said Petre, the co-founder of Airtree Ventures and a former Microsoft executive.

Beyond the public markets, Petre is heavily invested in some of the country’s biggest and most promising private software businesses, from graphic design platform Canva to workplace tracking group SafetyCulture.

“Investing has now got a lot harder than it has been for the last 10 years and if a venture capital firm is not worried about this, then you have to question their capabilities in understanding what is happening,” he said.

Markets have been stunned by how quickly AI platforms like Claude seem to be able to offer tools that are comparable with software firms, allowing so-called vibe coders to build models without possessing specialist skills.

Alex Pollak, the chief investment officer at Loftus Peak, which has more than $1.1 billion under management, said the sell-off in software stocks was “probably overdone” and that products released by companies like Anthropic were unlikely to match those produced by traditional players, who can also provide ongoing support and frequent updates.

On Tuesday, Xero chief executive Sukhinder Singh Cassidy made a similar argument as she tried to convince investors that Xero’s accounting software was AI-proof. Atlassian chief executive Mike Cannon-Brookes will be pressed to do the same at his company’s quarterly earnings call on Friday.

Cloud and software names account for about 19 per cent of the Loftus Peak Global Disruption Fund, with about $700 million under management, and Pollak said it hasn’t sold these names yet. But he said the AI revolution “was creating this schizoid stockmarket” as investors fret over disruption, spending on infrastructure and how to monetise the new technology.

“This is the most disruptive moment for business and society since the introduction of the internet in 1999. We’ve been poring over this for months now, we can’t find a single industry that’s not affected by AI,” Pollak said.

“It is going to work. It’s already commercial, it’s deployed widely enough. It’s got enough acolytes, power users and corporations using it. We’re not going back. The question then becomes, is it being priced properly?”

Defensive moats

Two start-up founders who recently raised big money to build AI that will automate professional tasks also claim to be unperturbed by Claude.

Thomas Kelly, the chief executive and co-founder of Heidi Health, a medical scribe platform last valued at $US465 million ($662 million), and Phil Thurner, whose legal practice management software developer Nexl is now worth $100 million, both said their products were too embedded in the way that their customers worked to be easily replaced by AI-led replacements.

“The key question is where value actually accrues. In industries with low regulatory barriers and high interoperability, large general-purpose AI platforms will put real pressure on specialist software by abstracting away systems of record. We are already seeing early signs of that,” Kelly said.

“Healthcare is different. Value does not accrue solely to the model, it sits in regulatory compliance, deep clinical integration, trusted workflows and longstanding partnerships. You cannot simply plug in an API and operate safely at scale, and consumer AI platforms are not compliant with healthcare regulation in Australia, the US or Europe.”

An API, or application programming interface, is used to let different digital services and applications communicate and work together.

Thurner said Anthropic was an API business rather than a software rival, making its money from token usage, with more interest in pulling users away from OpenAI than replacing legal technology software vendors.

He said software like Nexl had a “defensive moat” against the disruption through its own data models, its grounding in firm-specific proprietary data and hard-earned knowledge of those businesses’ workflows. Anthropic and OpenAI were more of a threat to applications with limited features, he said.

“For serious vertical platforms Anthropic is more of an enabler,” Thurner added. “I’d frame this less as Anthropic eating legal tech and more as Anthropic competing to be the backbone for legal and professional-services AI. The real question for vertical software players is whether they’ve built real depth, or just a thin user interface on an AI model.”

Ahead of its earnings call, Canaccord Genuity analyst David Hynes said there was little Atlassian could do to turn negative sentiment around in the short term. He said Atlassian’s own AI efforts were going well, and its margins were generally growing across its applications.

“For an analyst who’s spent nearly 20 years covering a space that’s generally been loved, it’s wildly frustrating,” Hynes wrote. “It’s a fear of the unknown, the disprovable AI-bear thesis, and for that, there’s no magic elixir.”

Petre’s Airtree Ventures co-founder and a current partner at the firm Craig Blair said there was more variation in the impact of AI on software than was currently being displayed by a general market sell-off.

“The market is right that AI will have profound effects across software, services and investment businesses, but it’s not yet very discerning about who will benefit versus who will face headwinds,” he said.

“The future isn’t cleanly utopian or dystopian – outcomes will be shaped by new business models, products and pricing regimes so the future is nuanced and less predicable than simple headlines suggest.”

AI comes for the software giants, and Australia is no safe haven2026-02-05T14:38:35+11:00

Tech sell-off isn’t stopping. Thank goodness for this quiet miracle

Like the audience at a three-ring circus, investors don’t quite know where to look.

On Tuesday night, software stocks got clobbered because artificial intelligence was going to demolish their business models. On Wednesday night, tech stocks got clobbered because AI isn’t demolishing things fast enough.

While the selling pressure on software and data stocks eased, a wave of selling hit AI stocks after investors decided they were very displeased with the December quarter results of chipmaker AMD.

This was a strange one. AMD smashed analyst expectations for both profits and revenue – revenue in its data centre business surged 39 per cent in the December quarter, and is forecast to surge 60 per cent in the March quarter. Chief executive Lisa Su used the very technical term “going gangbusters” to describe the demand AMD was seeing.

“What I would tell yo16 ARTIFICIAL INTELLIGENCE & CYBER CRIMEu from someone on the inside is that AI is accelerating at a pace that I would not have imagined,” Su told CNBC.

And how did AMD’s share price react? Down 16 per cent on Wednesday night, of course.

This dragged Nvidia down more than 3 per cent, tech darling Palantir down almost 13 per cent, data centre junior CoreWeave down more than 7 per cent, Oracle down 4.5 per cent and the Nasdaq Composite index down more than 2 per cent at its intraday low, before it bounced a little.

The problem, apparently, was that AMD’s guidance was a little softer than the market wanted to see. For investors, that clearly didn’t quite add up. If demand is going gangbusters and AI investment is climbing seemingly by the minute from Tulsa to Tasmania, shouldn’t those growth rates be even stronger than they are?

This is another perfect example of what veteran tech investor Alex Pollak, chief investment officer at Loftus Peak, described as the market’s “schizoid” approach to the AI revolution.

One day, investors are panicking that AI players such as OpenAI and Anthropic are going to allow businesses and consumers to replicate the products of the cloud computing and software giants that have been market darlings for a decade. The next day, investors are worried that this process isn’t going fast enough.

Both of these sentiments can be right, of course – the AI players could wipe out the software players, and the AI players could face a squeeze on the earnings, operations and balance sheets if the speed at which they are monetising the AI revolution doesn’t match the speed at which they are investing in AI infrastructure.

What investors are wrestling with is the time frame over which both of these things occur, and, most importantly, the price that they should ascribe to these stocks as the AI revolution rolls on.

Indeed, after Wall Street closed for Wednesday night, we got more examples of investor nervousness. Google’s parent Alphabet smashed analyst expectations by producing a 30 per increase in profits to $US34.5 billion in the December quarter, but then shocked Wall Street by doubling it plans for capex spending in calendar 2026 to as much as $US185 billion, far above analyst expectations for about $US120 billion. Google stock fell 2 per cent in overnight trade.

Meanwhile, shares in chip design giant ARM fell almost 9 per cent on softer than expected earnings guidance.

It’s the market’s healthy scepticism

Obviously, this has felt very messy in the past few days. But zoom out, and the direction of travel looks a bit clearer.

Deutsche Bank strategist Jim Reid has examined the drawdown of a set of major stocks connected to the AI revolution (that is, the amount the stocks have fallen from their recent peaks), and the numbers tell the story of two fears. First, of AI disruption, and second, that there is going to be a nasty gap between AI investment and returns.

On the software side, names such as Duolingo (down 78 per cent from its peak), ServiceNow (down 53 per cent), Salesforce (down 45 per cent) and Adobe (down 41 per cent) are among the biggest casualties.

But even the stocks which are thought to be the safest bets in the AI revolution – the so-called shovel and pick names – have had a tough time of it. Nvidia is down 13 per cent from its peak. Palantir is down 24 per cent. Microsoft is also down 24 per cent. Broadcom is down 22 per cent. Oracle is down 51 per cent.

In other words, this has not just been about two days of confusion. This is the market’s very healthy scepticism about AI playing out over a period of weeks and months.

For all that though, it’s important to note that the S&P 500, the global benchmark for risk in financial markets, remains within 3 per cent of its all-time highs.

Indeed, while tech was having another conniption on Wednesday night, something remarkable happened. Eighty-two members of the S&P 500 hit one-year highs before midday, including giants such as Walmart, ExxonMobil, Johnston & Johnston, Caterpillar and wind turbine maker GE Vernova.

Indeed, seven of the 11 S&P sectors were in the green, suggesting that even as investors have shifted away from tech, they have not been shifting away from stocks, and the rally is broadening out.

For index investors – and let’s face it, that includes everyone from retail punters to superannuation funds these days – this is good news. As US strategist Warren Pies notes, never before has an S&P sector that is such a large chunk of the index (software is more than 8 per cent of the S&P’s total market cap) sold off so hard (a more than 25 per cent fall) and the market has remained within 3 per cent of all-time highs.

The numbers don’t lie. But it’s also true that this tech sell-off feels nasty, and for a very good reason: we’ve got lots of stocks down between 30 per cent and 60 per cent, and the market’s concentration around tech has been intense. This feels like a moment because it is.

Tech sell-off isn’t stopping. Thank goodness for this quiet miracle2026-02-05T14:38:09+11:00

Madoff’s lessons on conflicts of interest

When searching for a wise and timeless quote to illustrate one of the two great lessons from the $490 million collapse of the Shield Master Fund, I couldn’t go past a line espoused by one of America’s most successful white-collar criminals.

Convicted fraudster and Ponzi scheme mastermind Bernie Madoff was at the peak of his fund-raising powers in October 2007 when he told a small audience at the Philoctetes Centre in New York about the conflicts at the heart of investing.

“You have to understand. Wall St is one big turf war … by benefiting one person you’re disadvantaging another person,” Madoff said, according to The Wizard of Lies by Dianna B. Henriques.

Her book describes how, within a few months of that speech, an unstoppable run of redemption requests hit Madoff’s hedge fund, culminating in its closure in December 2008 with losses to investors of $US65 billion ($93 billion).

Almost 20 years after Madoff went bust, US capital markets remain rife with conflicts of interest, which are defended using the lame excuse that it all depends on how they are managed.

In Australia, conflicts of interest have been a common feature of every major collapse of a non-bank financial entity for the past 40 years, according to a comprehensive analysis conducted by legal scholar David Millhouse as part of his PhD at Bond University’s law school.

Millhouse’s analysis of 199 senior court judgments published between 1984 and 2018 shows a high correlation in the top decile and top quartile samples between related party transactions and egregious behaviours.

He estimates that about $52 billion in investor funds were lost or impaired during the 34-year period covered by his analysis. That is a huge loss of productive capital that could have supported the economy.

Turning to conflicts of interest at Shield, I should say upfront that Shield was not shut down following a run on redemptions. Instead, it was closed because the Australian Securities and Investments Commission initiated interim stop orders in February 2024.

Also, it was not, as far as we know, a Ponzi scheme, and any allegations of fraud are yet to be fully tested in court.

But it is clear from multiple court filings lodged by ASIC and Jason Tracy, one of the joint liquidators of Shield’s responsible entity Keystone Asset Management, that this particular managed investment scheme was riven with conflicts of interest.

Not all of those conflicts were obvious from reading the product disclosure statements lodged with ASIC or the favourable research reports published by SQM Research.

The PDS and SQM documents were relied on by investment advisers who recommended Shield to 5800 clients who pumped about $500 million into the fund between April 2022 and February 2024.

The PDS and SQM documents make it plain that Keystone’s founders, Ilya Frolov and Paul Chiodo, were directors of Shield’s responsible entity as well as directors of Shield’s investment manager, CF Capital Investments.

In effect, Frolov and Chiodo, as trustees, were guarding the best interests of Shield investors against the actions of themselves, as fund managers.

But scratch below the surface and you find that there were some related party disclosures not made known to retail investors.

The Shield PDS says the direct property component of the “multi-asset fund” is invested in the Advantage Diversified Property Fund, a wholesale property fund which, in turn, “invests in individual property development and financing projects” managed by a company controlled by Chiodo, the Chiodo Corporation.

What the PDS does not reveal is that nine of the 11 property projects financed by the ADPF, with a book value of $214 million, were controlled by Chiodo or companies he was a director of.

Chiodo says that information was freely available to anyone who requested a copy of the ADPF information memorandum. Also, he says he did not attend CF Capital investment committee meetings which discussed investments in the ADPF.

SQM Research founder Louis Christopher says he was unaware that Chiodo controlled the ADPF properties.

“The Shield collapse should be the catalyst for federal government reform of our treatment of conflicts of interest.”

The CF Capital investment committee has an interesting history. Its only independent member, Werner Stals, only lasted about a year, and his successor as an independent member of the committee, Robert Talevski, says he was not a member of the committee despite his name being listed in a Shield 2023 PDS and in a 2024 SQM report.

Chiodo says Talevski became a member of the CF Capital investment committee after doing asset consulting work.

But Talevski says during the consulting engagement he became aware of inaccurate representations in certain materials of his role, at which point he issued formal legal notice requiring immediate correction and removal. Subsequently, he terminated the engagement.

Meanwhile, there is extensive legal action by ASIC and Tracy to protect the interests of Shield investors, recover funds for distribution and hold people to account.

Tracy is suing City Built Pty Ltd and its owner, Roberto Filippini and their related parties who were paid approximately $158 million in respect of ADPF property developments. Chiodo and Chiodo Corporation are also parties to the claim. Tracy says this could take two years, but Chiodo says it will take five years.

Tracy, who is managing director of consulting firm Alvarez and Marsal, is suing Frolov and his related entities for $17 million paid to them from investor funds. Tracy says this case will go for two years.

Caveats have been lodged on a number of properties owned by Chiodo, Frolov and Filippini to protect recovery from those assets in the event the above proceedings are successful.

Separate from all that, Chiodo Corporation has also filed an application in the Supreme Court against Tracy, setting aside the liquidator’s rejection of Chiodo Corporation’s proof of debt in the sum of $8,939,426. Tracy is fighting that claim.

I agree with Millhouse when he says that the Shield collapse should be the catalyst for federal government reform of our treatment of conflicts of interest.

At the moment, conflicts of interest are statutorily permitted in Australia, provided there is a prioritisation of members “interests” with their “informed consent”. Millhouse says there is no prohibition which applied traditionally in trust law and which applies in other jurisdictions.

“What this means is that it is open to the directors to determine what the statutory best interest duty under section 601FC(1)(c) of the Corporations Act means, or whether they have allegedly exercised it rather than their own self-interest,” Millhouse says.

Banning conflicts of interest in the investment supply chain ought to go hand-in-hand with a new statutory definition of fiduciary duty, which can be enforced throughout the investment chain. This is already law in Singapore, Canada and several European Union countries.

Unfortunately, the vested interests that would argue against these changes to our financial system infrastructure are extremely powerful, especially the industry super funds who would be unable to continue with their highly conflicted investment strategies.

Madoff’s lessons on conflicts of interest2026-02-02T16:59:06+11:00

Self-managed super investors should pay a fee for bailout insurance

Yet again in the chequered history of investment scheme failures, self-managed superannuation funds are at the epicentre, this time in the $1 billion collapse of the Shield and First Guardian funds.

Many of the 11,000 victims were unwitting SMSF members. They were convinced by social media posts, cold calls and high-pressure sales tactics from financially incentivised intermediaries to shift their money into Shield and First Guardian.

Now, the bill is coming due for the wreckage and the financial services industry and/or taxpayers will be on the hook for some of the damage.

Macquarie and Netwealth have agreed with the corporate regulator to pay $321 million and $101 million respectively to clients who lost money on their platforms, but Equity Trustees and Diversa are fighting the Australian Securities and Investments Commission in court.

The federal government’s Compensation Scheme of Last Resort (CSLR) will again be called on to make up the shortfall.

The relatively new scheme, which is only two years old, provides compensation up to $150,000 per consumer who are victims of financial misconduct as determined by Australian Financial Complaints Authority (AFCA).

The bailout scheme is a back-up option when a financial firm cannot pay compensation, often because they are insolvent or refuse to pay, and other recovery options have been exhausted.

“As the SMSF levies bite, I expect we would see a lot less punters choosing to shift out of APRA funds, and less CSLR claims as a result.”

— Angus Barker

The scheme began operating in 2024 based on recommendations from the 2017 Ramsay Review and the Hayne Royal Commission interim report submitted in 2018 under the former Coalition government, which highlighted gaps in compensation arrangements.

Incredibly, fees imposed on the financial services industry to fund the CSLR will be approaching $1 billion by later this decade – much larger than anyone envisaged.

Since its inception, the scheme has raised $345 million from industry.

The scheme’s initial $240 million in costs were overwhelmingly driven by losses incurred by SMSF clients of Dixon Advisory’s poorly performing high-fee property fund, many of them former public servants in Canberra.

CSLR chief executive David Berry released a preliminary estimate that the scheme could cost the finance industry an additional $137.5 million in the 2026-27 financial year alone.

That is a low-ball estimate because it excludes an initial estimate of $125 million that could be paid to some of the victims of the $1 billion collapse of Shield and First Guardian.

Hence, the total cost next year alone is likely to exceed the legislated $250 million annual cap.

Hundreds of millions more will be paid out in future years.

Much of this will be paid to SMSF members who invested in Shield, First Guardian, Dixon, United Global Capital and Global Capital Property Fund, among other failed schemes.

Compensation is funded by extra levies on financial advisers, brokers, banks, fund managers and insurers.

Assistant Treasurer Daniel Mulino revealed last month that large and regulated retail and industry superannuation funds will be forced to pay into the scheme, to help spread the financial burden as thinly as possible across the finance sector.

The $1 trillion SMSF sector has so far been excluded, but large superannuation representatives raised with Mulino the prospect of levying SMSFs.

This columnist has previously expressed strong reservations about the existence of the scheme and its widening net.

The CSLR is a scheme where good operators bail out consumers for the deeds of bad financial players.

The risk is growing that the CSLR is becoming a catch-all for investors who make unwise investment decisions.

The bailout scheme may be indirectly inciting more risky behaviour by both financiers and investors, in a classic case of moral hazard.

But the fact is, it exists, after being progressed by the former Coalition government and ultimately legislated by Labor in 2023 with bipartisan support.

Why SMSFs should chip in

The more one thinks about it, the more convincing it becomes that the 650,000 SMSFs should pay an annual levy if they want to be covered for losses.

Like any form of insurance, if SMSFs can make claims on the CSLR, they should also pay an annual premium.

Clients of financial advisers, banks, insurers, managed funds and stockbrokers (and soon big superannuation funds) already indirectly pay the fees that are inevitably passed on to them, so why not also make pay SMSFs who the biggest users of the bailout scheme?

It is not often that a free-market, small-government Liberal says so.

Company director and former investment banker Angus Barker was working as chief of staff to former Liberal superannuation minister Jane Hume when the Coalition was setting up the CSLR.

Barker had philosophical reservations about the scheme’s moral hazard. He says it has since been worsened by AFCA finding a backdoor way to broaden compensation for “faulty advice” relating to investors in failed managed investment schemes. The Coalition deliberately excluded MISs due to their high risks.

“SMSFs are the root cause of exploding CSLR costs,” Barker says.

“SMSF members make an active choice to take their money out of the safety of professionally managed, APRA regulated super funds.”

Barker has no doubt SMSFs should be among the first levied. He suggests that a levy of, say, $150 a year, on the 653,000 SMSFs would generate about $100 million for the CSLR.

Or $100 fee on the 1.2 million SMSF members would generate $120 million per year.

“If as a society we want less of something, we tax it,” Barker says.

“We want to see less SMSF-generated claims to the CSLR.

“So SMSFs should be levied for the claims they cause and see what happens: As the SMSF levies bite, I expect we would see a lot less punters choosing to shift out of APRA funds, and less CSLR claims as a result. Mission accomplished.”

This ticks the boxes of the economic policy principles of price signals, cost recovery and user pays.

Treasury last year warned the government it is too easy for criminals to exploit the more than a million people who direct their own retirement savings, suggesting the barriers to setting up SMSFs are too low.

“There are … few barriers preventing people from quickly establishing an SMSF and little-to-no restrictions on the class of assets a trustee can invest in,” the advice from Treasury said.

“This includes the products offered by the entities referred to in this brief [Shield and First Guardian].

“The same ease-of-establishment [is then] used to sign people up to high-risk, illiquid, and/or poorly diversified investments [and] is also exploited by scammers to steal retirement savings from SMSFs,” Treasury said.

The government has flagged it is considering introducing rules that would slow how quickly workers could switch super products.

Meanwhile, according to the head of a national financial advice firm with many SMSF clients, “SMSFs should not be able to claim against a pool of funds they don’t contribute to.”

“Arguably, SMSFs are the most at risk for a claim as there is no education requirement to establish a fund, there is little oversight and dodgy advisers use this to take advantage of people,” he says.

“There is far less compliance and regulation than the large funds and there is no large trustee to make good when a SMSF loses money, so it’s the last-resort pool funding for every person when something goes wrong.”

If SMSFs oppose paying an insurance premium, there is another easy solution.

“Legislate so SMSF trustees cannot make a claim against financial advisers for faulty advice or against MISs in any situation,” Barker says.

Self-managed super investors should pay a fee for bailout insurance2026-01-14T15:44:09+11:00

The right way to give your kids money (and 2 very wrong ways)

It’s the question that 80 per cent of financial adviser Scott Quinlan’s older clients ask him at their first meeting. And if they don’t mention it, he does.

“They ask, ‘How much can we give to the kids to help them into their first home?’” says Quinlan, the co-founder of Brisbane-based Solace Financial. Their second question, he says, is “How do we structure it so that we don’t run out of money before pine box day?”

The consequences of getting it wrong can be costly. If you give too little, you risk making your children struggle more than they need and reduce your overall family wealth. If you give too much, even if you’re wealthy, you could struggle to fund your retirement and even be forced to sell your home.

But if you get it right, it’s a win-win.

“It’s a deeply personal issue, and the approach depends on factors, like the level of wealth, the children’s ages and the children’s own financial position,” says Caitlin Laffey, a partner at high net wealth adviser Koda Capital. The key is “not giving too much too early so that you are not able to live the lifestyle that you intend to live yourselves”, she says.

How that might play out is illustrated by modelling done by Laffey’s colleague, James Hawthorne.

The wrong way No. 1: Giving away your spending money

Hawthorne crunched the numbers to show what can go wrong when a couple with $10 million in total assets – $6 million in their home and $4 million mostly in their superannuation – give $1 million to each of their two children.

The hypothetical couple is recently retired and has income of about $200,000 a year from their super. That amount represents 2 per cent of their total assets each year so they feel they can afford to give 20 per cent away as an early inheritance.

The graph above shows what happens if they were to take $2 million from their super as a lump sum and give it to their children. If they keep spending $200,000 a year, their money runs out in less than 14 years.

The problem is that they took the money from their income-generating assets.

They still have a decent pool of money, but they will be forced to sell their home or drastically reduce their spending to cover that gift to their children.

Hawthorne uses the chart as a lesson to show clients how unplanned giving can lead to unplanned consequences.

“It’s a really crude example, but the parents are just being too generous,” Hawthorne says. “They are not looking after themselves first. A lot of the time it’s our job to say to very generous parents like these: Stop. Just make sure that you can continue to live the way that you deserve to live.”

Hawthorne says he would advise the clients in this situation to consider downsizing their home soon after or around the time they give the money.

Alternatively, the parents could consider initially giving a smaller amount or (if they have multiple children) giving one their share of the money before the others.

“You do not want to eat into your income assets too early,” Hawthorne says.

That’s a point echoed by family office adviser Lipman Burgon & Partners’ Jason Rademan, who provided his own modelling for another big risk that we’ll get to later.

“If there is any risk that a proposed gift could compromise the parents’ future ability to meet their own living expenses, it often makes sense to stage the assistance in several tranches rather than making one large, irreversible payment,” he says. “That way, parents can review their position over time and adjust the level of support if markets or personal circumstances change.”

Another solution might be to structure such a gift at least partly as an interest-paying loan.

How a loan instead of a gift might solve the problem

The main advantage of loaning the money – even if it is a no-interest loan – instead of gifting it comes down to asset protection.

When you make a loan, you still have ultimate control of the money. That means that should anyone make a claim against your child’s assets, it won’t be counted as belonging to them. This is particularly relevant in the case of a divorce or partnership breakdown but also applies to business dealings.

“When you structure support as a gift without conditions, you forfeit any ability to protect that capital,” says Paul Green, director at Vincents Private Wealth.

Loans are also assets of the estate, which is useful if your children don’t need help at the same time, Solace Financial’s Quinlan says.

“If the kids are different ages, they have different needs,” he says.

“Say Johnny is 25 and ready to buy his first home, but Mary is 17, and she might be less mature, and might not buy a home until she’s 30.

“So we do it as a loan, which helps to equalise the will. If Mum and Dad pass away, then that debt forms part of the will – Johnny has to repay his loan or it’s forgiven out of the estate and Mary isn’t penalised.”

Sometimes, it can make sense to give it as a gift outright, Quinlan adds. That can be particularly beneficial if you are planning to access the Centrelink age pension at some stage because after five years, loans are not counted in the means test.

Some families view wealth from a broader, multi-generation perspective. Quinlan gives the example of a client whose child could afford to buy an $800,000 home, but would prefer a $1.4 million home.

If the child were to buy the $800,000 home and then, a few years later when their cashflow was greater, upgrade to the $1.4 million home, Green says they would pay at extra $125,000 in stamp duty and legal fees. That’s a net cost to the family’s total wealth. But if the child was given or lent that extra $600,000, the family is $125,000 wealthier.

“Everyone sees that the entire family is much better off … the children are on their way and there’s plenty of blue sky ahead of them.”

How charging interest can help you and the kids

If you don’t have the capacity to give the full amount, then an interest-bearing loan can also result in a win for parents and children.

If you don’t look at wealth across the generations, and focus exclusively on the needs of the parents, a responsible financial adviser would normally recommend that anything from 30 to 40 per cent of their wealth should be allocated to fixed income.

Assuming a couple had $3 million or $4 million, that could amount to about $1 million in low-growth, income-producing assets, Green from Vincents says.

If the parents loaned that money to their children – making it the fixed interest part of their portfolio – that could substantially improve the wealth of the whole family because it will transform an income asset for the parents into a growth asset (property) for the children meaning both benefit over time.

If the interest rate charged was set at the midpoint between what the children would have to pay a bank and what the parents could get on a term deposit, the win-win is obvious.

Another way to handle that kind of help could be to deposit money in your child’s home loan offset account.

If a term deposit was paying 4 per cent interest and your child was paying 6 per cent interest on their home loan, some parents might ask to be paid 5 per cent for parking their money in the offset account, Quinlan says.

“The kids aren’t paying as much interest on their loan because it’s sitting in the offset and mum and dad are getting a better interest rate than what they would on their term deposit.”

Or you could capitalise the interest, says Green – meaning the interest would be added to the loan and not repaid until the asset was sold or the parents died.

This strategy could be useful when a couple has more than one child. The other children who did not get the loan would not lose out financially as the loan amount, with the added interest included, could be deducted from the child’s share of the parents’ estate.

In all the above cases, proper documentation would mean the parents could get access to the capital if they needed it. Which brings us to the second big mistake parents can make: not preparing for a market crash.

The wrong way No. 2: Not preparing for sequencing risk

One of the big risks when you move from a salary to living off your savings is sequencing risk. That’s the term for the risk of a market crash in any given year.

If a crash happens early on in retirement that can significantly reduce the capital you have to generate income in the following year. Modelling from Allianz shows that a 10 per cent drop in the value of your investments in one year means you need to generate 11.1 per cent the next year to recover the lost value.

Lipman Burgon’s Rademan gives the following scenarios to show what happens when a couple with $8 million in total assets wants to give $500,000 to each of their two children.

The modelling assumes their primary residence is worth $4 million, they have an investment property worth $1 million with a net yield of 2 per cent and $3 million combined in superannuation pensions. Their annual living expenses are $120,000 (indexed at 3 per cent inflation).

If they don’t give anything to their children, after adjusting for inflation their net investible assets of $4 million – their super and their investment property – will be worth more than the $4 million they started with in real terms even if they live to 99. So that’s a big inheritance for their children, especially when you add back in their house.

If they withdraw $1 million between them from their super when they retire at 67 and give it to their children, assuming growth of 4 per cent, the Lipman Burgon modelling shows they remain able to fund their living expenses.

But when that is stress tested with a 40 per cent market crash in the second year of retirement, the couple’s super will run out at 95, meaning they have a cash shortfall that the investment property cannot make up.

“Good giving tends to come from assets that are truly surplus to the parents’ long-term needs and is structured with an eye to sequencing risk and flexibility, rather than simply dipping into whichever pot of money is easiest to access at the time,” Rademan says.

On the other hand, if they sold their investment property at the beginning rather than took the money out of their super, they will always have income surplus to their requirements and can still fully fund their lifestyle even at 99.

Don’t be afraid to attach strings to any loan or gift

If your children are serious about building wealth, they won’t resent any conditions you attach to the loan – like not using it to buy business class flights for a holiday, or even matching the interest rate to movements in the cash rate – says Green.

While the “strings” you add might not be enforceable in court, Green says in his experience it rarely comes to that.

“Almost exclusively kids are just eternally grateful, and they understand the culture in which the money’s being lent, and they generally buy into it.

“If they understand the bigger picture, they’re likely to understand that even from a completely self-interested view, if they don’t toe the line somewhat, there might not be as much coming out down the track.”

Green will show a child – in their late 20s or early 30s – modelling that shows if they accept the money lent with whatever strings attached that “their superannuation at the end of their life is going to be worth half a million dollars more in today’s dollars and that they’ll pay off their house after 15 years”, they are more than happy to accept the strings.

Win-win.

The right way to give your kids money (and 2 very wrong ways)2026-01-08T11:14:25+11:00

I’ve never bought shares. How do I start investing?

nvesting for the first time feels a bit like going bouldering. It looks fun, but the fear of falling on your face and breaking a bone seems reason enough to stay away.

The good news is that it’s far less scary than you’d imagine, and there are many ways to protect against the financial equivalent of a broken bone.

We asked under-30s to send us their questions. Here are the results.

Q: What’s the first step to investing? Do I need a broker to get started?

There are dozens of online platforms that allow you to invest using your phone – no broker necessary. Many platforms no longer have a minimum investment amount, meaning that you can get started with spare change.

Start by creating an account with a trading platform (more about choosing a platform below) and deposit some cash into that account. Once your identity is verified, you can usually start investing immediately. The whole process can take less than five minutes.

The federal government’s Moneysmart website is a good source of reliable information for beginners.

Fractional investing, which allows you to buy a portion of a unit in a share or ETF rather than restricting you to buying only whole units, has made is easy and cheap for beginners to build a diversified portfolio.

Craig Semmens, the chief executive of stockbroking firm Phillip Capital Australia, says trading apps have made real-time news, price alerts, charts and commentary readily available to everybody.

“Advancements in technology have also meant overseas markets that once felt out of reach for retail investors are suddenly more accessible,” he says. “US heavyweights like Tesla, Apple, Meta and Nvidia sit in the same portfolios as the big four banks and the likes of Rio Tinto, BHP and Wesfarmers for example, giving investors exposure to sectors and stories shaping the global economy.”

 

Q: How much do I need to start investing? How often should I invest?

There’s no right answer to this, but investing small amounts regularly can be a good strategy for those who don’t have the liquidity to invest big sums in one go. It’s called dollar-cost averaging.

Some platforms allow people to invest with as little as $5 or $10.

One option is “round-up” investing. If you buy a coffee for $5.50, for example, the purchase gets rounded up to $6 and the additional 50¢ is invested into your portfolio.

Q: Is it better to invest in ETFs or individual stocks?

Choosing what to invest in can be a daunting task.

Patricia Garcia, a financial adviser at Your Vision Financial Solutions, says investing in ETFs is an easy and cheap way to diversify your portfolio.

Diversification is the process of investing across various asset classes, industries and geographies.

ETFs can be bought and sold on a stock exchange, just like a regular share, and they are automatically diversified given their multipart compositions.

“If you’re starting with a very small amount, and adding small amounts over time, you’re not going to be able to get much diversification if you’re building your own stock portfolio,” Garcia says.

Morningstar associate investment specialist Simonelle Mody says she previously bought individual stocks but found she underperformed the wider market so now buys ETFs. Plus, self-managing a portfolio of individual shares is time-consuming.

Q: What’s the best share trading platform in Australia?

Platforms have proliferated so it can feel daunting. The short answer is that different platforms serve different purposes.

The table below lists 20 of the most popular investment platforms, their minimum deposit amount and whether they offer US shares, ETFs and cryptocurrency.

Q: Are there any fees and costs when deciding to invest?

The cost of investing comes down to a combination of things including brokerage, trading, investment and administration fees. There’s no uniform way of charging, so it’s difficult for us to provide a list.

The above table shows the fees charged to execute a single trade. These are generally known as trading fees.

Some are dependent on the size of the trade, others are just a flat fee. Some platforms have zero trading costs, but charge administration fees.

Q: Should I invest in cryptocurrency?

Crypto is a complicated beast. If you get lucky, the returns can be eye-watering, but if you don’t, the losses can bring their own tears,

“Crypto should just be a high-risk part of a portfolio, if you’re wanting to do it as a sort of hobby on the side, and a very small percentage of your overall wealth creation strategy,” Mody says.

Q: Can I manage my own investments or should I go with a ready-made portfolio?

While some investors prefer to select their own stocks, others like the simplicity of investing in a pre-made portfolio, which is usually constructed according to an individual’s risk appetite and investment horizon.

But pre-made portfolios can be a little more expensive.

Morningstar’s Mody compared the fees for pre-made portfolios offered on six platforms. She assumed an initial investment of $1000, annualised monthly fees and a five-year investment period.

Mody also assumed a 7 per cent annual average return for a balanced portfolio over the next five years, which broadly aligns with Morningstar’s long-term return expectations.

The portfolios tend to include a component of ASX, S&P 500 and other high-performing, often tech-heavy, international stocks.

Some portfolios have delivered much higher returns in recent years – who cares if fees are high if your returns are shooting the lights out, right? – but past returns are not a reliable predictor of future earnings.

This comparison is focused on fees, does not account for variation in returns and should only be used as guide for further research by investors themselves.

Stockspot chief executive Chris Brycki defended his organisation’s comparatively high fee by saying: “For our fee, clients get access to a licensed financial adviser and free kids accounts. Our higher allocation to gold has also helped our portfolios outperform all other diversified options over one, three, five and 10 years.”

Q: Should I keep my money in the bank, or should I invest in stocks/ETFs?

While interest rates have been higher recently, the Reserve Bank of Australia is in a cutting cycle. This means the interest paid to savers with money in savings accounts is falling and at present, the best high-interest savings account rates are about 5 per cent. But money in a savings account is safe, which makes these accounts well suited for short-term goals, like holidays and emergency funds.

“Unfortunately, you can’t park all your money in a savings account and expect to build real wealth,” Mody says. “High-yield savings accounts definitely don’t come close to beating inflation over time, and even though it feels psychologically safer, you’re definitely quietly losing money every year.”

If you’re saving for a house deposit and keeping the money invested, it’s possible that if the market crashes, a substantial portion of your savings goes out the window with it. So, exercise caution.

Garcia says the risks associated with an ETF are fairly low.

“If you’re being exposed to thousands of units, thousands of different companies, there’s a very low chance that all of those companies will disappear,” she says.

Q: Should I buy Australian or overseas investments?

One isn’t better than the other, but it’s always good to diversify, and that includes by country. Australia’s economy is relatively small, so exposing your portfolio to larger markets is a useful way of buffering against fluctuations in the domestic market.

“Australia is a small country in the big scheme of things when it comes to the world economy, so it’s good to make sure that you’re exposed to multiple countries, and you can do that through pre-mixed portfolios, ETFs and managed funds,” Garcia says.

Q: Is it better to buy and sell or buy and hold?

It depends on what your investment goals are, but normally, the longer you stay invested in a diversified portfolio, the better.

“Short-term investing is much higher risk,” Garcia says. “It’s about time in the market, not timing the market.”

Mody agrees. “I have a long term-mindset and tangible goals, so I can grow my wealth steadily, as opposed to chasing those crazy returns through things like crypto,” she says.

One of her main goals is to achieve a $100,000 portfolio by age 30. She hopes to achieve this by dollar-cost averaging into ETFs monthly.

Q: What level of investment risk should I take as a young person?

Again, this is goal-dependent, but the general thesis is that the younger you are, the more risk you can afford to take. This is because you have more time to recoup any investment losses you might make.

That being said, if you intend to make a substantial purchase in the next couple of years using the money you have invested, investing may not be the right strategy. If you lose a decent chunk of your portfolio to market fluctuations, you won’t have time to build it back up again.

“If you’re wanting to buy a property in the next year or two, for example, you might not want to invest those funds because you don’t have what we call the right timeframe to invest. You have to be able to ride out the market ups and downs,” Garcia says.

She explains that it’s fine to invest if you’re willing to delay your purchase. Then, once you’ve recouped your losses you can sell all your investments and put the cash towards a deposit.

Semmens says to “be prudent. Don’t rush in. It’s about investing over the long term”.

Mody says losing money early into your investing journey can have a larger impact than later on, when you are more financially equipped to weather bad economic conditions. So, it’s worth considering how much you’re willing to lose.

Q: What are the tax implications of investing?

If you are invested in shares that pay dividends, these need to be included as income in your end of financial year tax return, and are taxed at your marginal income tax rate.

Tax implications also arise when you sell your investments – if they have appreciated in value.

But if you hold on to them, you aren’t taxed until you sell for a profit.

You will be taxed on your profit at your marginal income tax rate, but if you sell an asset like a share, an ETF or crypto that you’ve owned for at least 12 months, you will be eligible for a 50 per cent capital gains tax discount.

All you have to do is declare the capital gains, and the dates you bought and sold the asset on your tax return.

The table below shows the potential capital gains tax implications of a $1000 investment that has appreciated to $1400.

So, there it is. Do your research, start small and don’t be intimidated if you choose to embark on an investing journey.

I’ve never bought shares. How do I start investing?2025-09-05T18:25:05+10:00

What it takes to be in Australia’s top 1 per cent

If you earn a total income of $375,378 a year or higher, congratulations; you are in Australia’s top 1 per cent of taxpayers.

And if your total household gross income is above $531,652, your household earns more than 99 per cent of Australian households.

By contrast, the median Australian taxpayer earns $55,619, while the median household gross income is $92,856, and for the lowest 10 per cent, those figures are just $11,036 and $26,181, respectively.

Among the 1 per cent, there’s been a sharp increase in income over five years. The comparable figures in 2019-20 to be considered a 1 per cent-er were total income of $315,770 and household income of $460,028, which amounts to a rise of 19 per cent and 16 per cent, respectively.

These figures – derived from Australian Taxation Office and Australian Bureau of Statistics data by the Grattan Institute – provide one snapshot of wealth in Australia.

Grattan published the material ahead of Tuesday’s federal budget to help contextualise debates about the budget winners and losers, providing additional insight into what Australians earn and own.

Earnings discrepancies

If you’re thinking the income figures – and especially the average – seem lower that the figure you’ve typically seen quoted, you’d be right.

The most commonly quoted earnings figure is average full-time earnings (currently $104,765 a year), but this figure has limitations, such as excluding part-time workers.

It’s the kind of figure that leads us to think Australians are better off than they actually are.

Grattan’s housing and economic security program director Brendan Coates, deputy director Joey Moloney and associate Matthew Bowes say average full-time earnings is “not a good guide to the typical Australian’s income”.

“More than three-quarters of Australian workers earn less than the average full-time wage of $104,765 a year.”

Instead, considering the median is a more instructive measure. On this basis, the median full-time worker earns $90,416, a figure that drops to $67,786 when part-time workers are accounted for.

Location matters

To some extent, what you earn is a function of where you live.

Western Australia has the highest percentage of taxpayers in the top 45 per cent tax bracket – those who earn more than $190,000 – at 5.5 per cent. NSW and the ACT are not far behind, lagged by Victoria and Queensland.

But even in high-wage Sydney, those in the top tax bracket are an elite class; just 7 per cent of Sydneysiders earn an income that puts them in the top tax bracket, Grattan’s analysis shows.

Net wealth

Wealth isn’t solely a function of income. Debt has a big role to play, as do other assets such as your home, superannuation and investments.

By considering all of these factors, Grattan has calculated how much you need in total household net wealth to be considered in the top 1 per cent in Australia.

And not surprisingly it varies by age. Those between 25 and 40 require net wealth of $3.1 million to be in the top 1 per cent, while for those aged 41 to 64, that figure jumps to $7.7 million.

Households of over 65s have the highest net wealth – with the top 1 per cent of households controlling over $10.9 million each. This makes sense, given they’ve had more time to accumulate their wealth.

By contrast, the bottom 25 per cent of households have total net wealth of $78,000 for those aged 25 to 40, $332,000 for those aged 41-64 and $433,000 for those aged 65 and over.

Super and home equity

One of the questions people frequently ask about their super balance is how it compares to others their age.

Whether you’re tracking for a $5 million, $2 million or $500,000 retirement, where does your super rank in comparison to your friends and neighbours?

Super balances are another metric where age plays a significant role. The longer you’ve worked since 1992 – when employer contributions became compulsory under the super guarantee – the more you’ve received, and the more time that money has been invested.

Despite not having compulsory super their entire working lives, the 65+ cohort still has the highest balances across the age cohorts among the 1 per cent – with $2 million for individuals and $3.3 million for households – possibly as a result of moving assets into the lower tax super environment as they reach retirement.

But many in this cohort also have no super – the median balance for the 65+ age group is actually $0 – which can be attributed to the older end of this cohort having missed out on the super guarantee, and many older women spending little, if any, time in paid employment.

To have a super balance among the top 1 per cent if you’re 41 to 64, you’ll need $1.4 million as an individual or $2 million as a household, while a much lower balance of $293,000 for an individual or $473,000 as a household will get you there if you’re aged 25 to 40.

It’s a similar story for home equity, with those 41 and over – who typically bought their homes earlier and less expensively – having ridden successive property booms and paid down their mortgages significantly.

To be in the top 1 per cent for home equity, over 65s need equity of $3 million in their homes, while for 41 to 64-year-olds it’s $2.8 million and for those aged 25 to 40 it’s $1.3 million.

The overall picture

As shown above, what you need to rank in the top 1 per cent by all measures varies according to your age.

Regardless of your age, you need $375,378 in individual income, $531,652 in household income, but in terms of net wealth, super and home equity, the older you are, the more you need to maintain poll position.

What it takes to be in Australia’s top 1 per cent2025-04-11T09:32:12+10:00

So long, London – Russians buy digs at home

THREE years into the war with Ukraine, Russia’s wealthiest are increasingly bringing their money home, fuelling an unlikely rebound in high-end Moscow real estate.

Faced with fewer options to spend abroad as international sanctions force banks to crack down, many Russians are repatriating cash and parking it in the safe haven of domestic property. Others are using real estate as a hedge against inflation that has surged since the invasion of Ukraine, forcing the central bank to jack up rates to record highs.

“The screws are being tightened on people with Russian citizenship around the world,” said Ekaterina Rumyantseva, founder of Moscow-based luxury real estate broker Kalinka Ecosystem. “Everyone now realises that the safest place to keep capital is in your own country.”

The influx of cash is helping Moscow buck a slowdown hitting other real estate markets from London to Hong Kong. Luxury apartment sales priced at 1.95 million roubles (S$26,703) a square metre and upwards in Moscow gained almost 40 per cent last year, according to NF Group, formerly known as Knight Frank Russia. And prices increased 21 per cent, pushing the Russian capital squarely into the same price tier as Paris and London.

A flurry of high-end apartment and villa projects springing up across Moscow give a glimpse into Russia’s uneven economy as the war grinds on. Government spending related to the invasion has stoked growth, but also inflation and higher rates. At the same time, widening sanctions are choking off the opportunity for Russians to invest overseas, forcing them to repatriate cash and seek a safe haven within their own borders.

And while many large Russian fortunes have been minted over recent years, the latest dynamics are driving some high-end properties to the eye-watering levels more commonly seen in Dubai or London.

Take the 12,500 square feet Art Nouveau-style towered residence in the Levenson project, built in the early 20th century by prominent architect Fyodor Schechtel and located in a renovated mansion in Moscow’s historical core. The project includes two dozen apartments and is being built by Vesper, one of Moscow’s biggest developers of luxury property. The home is near the Patriarch’s Ponds, where the family of Leo Tolstoy used to skate in winter, and was among the most expensive properties sold last year at about 3.8 billion roubles, according to Kalinka.

Many of the high-end projects being developed are located in central areas near the city’s biggest attractions and have vast onsite parks.

“Developers have started to offer unique expensive lots within elite houses more often,” said Dmitry Khalin, managing partner at Intermark Intown Sales, which formerly operated in Russia under the Savills brand. “We see a high demand for expensive residences with good views.”

The Kamishy project, based in the exclusive Zhukovka suburb on Moscow’s western outskirts, is emblematic of the new projects coming online. It includes 11 two-storey villas containing floor-to-ceiling windows and minimalistic interiors, surrounded by gardens and bordered by the Moskva river. Prices start at US$25 million and reach as high as US$45 million. Five have already been sold. The architect is Yury Grigoryan from Meganom, who designed the “skinny” 262 Fifth Avenue skyscraper in New York.

While precise details on the identity of the buyers flooding into the market are difficult to come by, Kalinka said that the majority are aged between 40 and 50. Typically, they are owners of large industrial companies or top managers, but also include clients in IT, show business and sport.

Against the volatile economic backdrop of the war, they see real estate as a refuge from gyrations in local assets including the rouble. While the Bank of Russia’s key interest rate at 21 per cent offers attractive rates on deposits, the local currency sank about 25 per cent last year.

People are taking “a balanced approach to asset diversification”, according to Andrey Solovyev, partner at NF Group.

The dynamics in Moscow’s property market contrast with other global cities traditionally popular with the Russian diaspora. London, for example, gained the Londongrad moniker after attracting residents such as Roman Abramovich and Mikhail Fridman. The UK capital’s top end market had a lacklustre year in 2024 and is forecast to fall this year.

To be sure, wealthy Russians are not turning away from foreign real estate altogether, with the Indonesian island of Bali and Thailand seen as among the most in demand. But they are fast dropping down the leaderboard of buyers in places such as Dubai, a notable development given it was a magnet for many after the invasion. Russian passport holders slipped to No 9 last year in the rankings of the top 10 real estate buyers there, after holding the No 1 slot in 2022, according to local broker Betterhomes. That comes as the city sees a huge influx of global wealth.

Overall, demand among wealthy Russians for foreign real estate fell 24 per cent last year compared with 2023, according to Intermark.

Back in Moscow, high interest rates and rising construction costs may cool the pace of high-end property supply this year. Developers may be forced to accumulate land banks instead of launching new projects, according to NF Group’s Solovyev.

Other developments are also springing up, though, in other parts of the country to take advantage of the influx of cash.

Sochi, the Black Sea resort which hosted the 2014 Olympic Winter Games, is among the most popular locations for wealthy Russians seeking to buy property. More recent high-end projects there include the Mantera Seaview Residence – a complex spreading over six hectares which includes a hotel, residences and a plethora of amenities ranging from saunas to a snow room. BLOOMBERG

So long, London – Russians buy digs at home2025-02-13T16:36:30+11:00

AI investor ‘bubble’ echoes dotcom bust: Ray Dalio

New York | Investor exuberance over artificial intelligence has fuelled a “bubble” in US stocks that resembles the build-up to the dotcom bust at the turn of the millennium, billionaire investor Ray Dalio has warned.

Mr Dalio told the Financial Times that “pricing has got to levels which are high at the same time as there’s an interest rate risk, and that combination could prick the bubble”.

The warning from Mr Dalio, the founder of hedge fund Bridgewater Associates and one of the highest-profile figures on Wall Street, comes as concerns swirl over whether the boom in US AI stocks has gone too far.

Investors also remain concerned about elevated borrowing costs, worries that sharpened after Federal Reserve officials in December trimmed their expectations for rate cuts this year.

“Where we are in the cycle right now is very similar to where we were between 1998 or 1999,” Mr Dalio said.

“In other words, there’s a major new technology that certainly will change the world and be successful. But some people are confusing that with the investments being successful.”

The late 1990s saw a run-up in tech valuations, powered in part by low interest rates and growing adoption of the internet, followed by a brutal correction that came as Alan Greenspan’s US Federal Reserve tightened monetary policy.

The tech-heavy Nasdaq 100 index doubled in 1999, only to fall about 80 per cent by October 2002. The index has doubled since the beginning of 2023 as stocks such as AI-focused chip maker Nvidia have powered higher.

Wall Street stocks slumped on Monday (Tuesday AEDT) after DeepSeek, a Chinese AI company linked to a little-known hedge fund, published a paper claiming its newest AI model rivals those of OpenAI and Meta Platforms in performance, yet at a lower cost and with less sophisticated hardware.

Nvidia shed nearly $US600 billion ($1 trillion) in market value on Monday.

DeepSeek’s apparent success calls into question the potential returns on hundreds of billions of dollars invested by Silicon Valley companies in AI data centres, and whether China has managed to find a way to compete despite restrictions on its ability to import high-end chips from the US.

OpenAI, backed by Microsoft, last week announced a plan to invest up to $US500 billion in AI infrastructure. The company’s ChatGPT was the top-rated free app on the Apple app store until it was displaced on Monday by DeepSeek’s AI assistant.

‘Capitalism alone cannot win’

Mr Dalio, who retired as chairman of Bridgewater in 2021 but remains on the board, has long advocated economic engagement with China.

He wrote last year that “the key question isn’t whether or not I should invest in China so much as how much”. He warned, however, that the stakes in AI are unusually high.

“The tech war between China and the US is far more important than profitability, not only for economic superiority, but for military superiority,” he told the FT.

“Those who are going to pay attention to profitability with sharp pencils are not going to win that race,” Mr Dalio added.

Reinforcing the elusiveness of AI profit, OpenAI founder Sam Altman wrote on X this month that the company was losing money on its $US200-per-month ChatGPT Pro plan because of unexpectedly heavy usage.

As US technology groups invest lavishly, President Donald Trump has pledged to support American AI in his second term.

China has offered financial assistance for its AI industry, including the launch of funds set up to support its embattled semiconductor industry. Meanwhile, the US under former president Joe Biden extended billions of dollars of subsidies for groups to build chips on American soil.

Mr Dalio conceded that state support for jockeying AI developers was inevitable given the importance of winning the global race, even if it came at the expense of profit.

“In our system, by and large, we are moving to a more industrial-complex- type of policy in which there is going to be government-mandated and government-influenced activity, because it is so important.

“Capitalism alone – the profit motive alone – cannot win this battle.”

AI investor ‘bubble’ echoes dotcom bust: Ray Dalio2025-01-30T16:54:46+11:00

Financial Planning Message – December 2024

Following two remarkable years of global equity returns, it is understandable to approach 2025 with degree

of trepidation.

As the curtain draws on 2024, we are heading into 2025 with the same concerns we had at the start of 2024,
namely high interest rates, inflation and uncertainty/ geopolitical risks.

  • All eyes are on the sluggish Chinese economy and consumer sentiment, more importantly how the government stimulus measures will play out to revitalise the real estate sector, boost liquidity and increase demand to cater for overproduction. The potential of increased tariffs under the Trump administration will further exacerbate these challenges.
  •  2024 was the year of elections, more than 60 countries went to the polls, ( 50% of the world’s population ), this in turn created opportunity for the ‘improbable becoming possible’.
  •  Equity markets have largely navigated through the volatility of the bond market, however it is likely that the significant spike in yields going forward will weigh on equity valuations.
  • An optimistic outlook for the US – the base case is that the US ( as the main driver of financial markets ) is expected to progress to a ‘soft landing’ which is supported by further easing of interest rates, increased corporate earnings due to lower corporate tax, further de regulation of the financial sector and an increased investment in technologies leading to improved productivity.
  •  The Australian Economy faces many challenges in 2025. The economic risks in China, being our key trading partner, will impact adversely and become more evident as we progress into 2025. These challenges will be further compounded by high inflation from the geopolitical environment, higher government spending / deficits, inequality and no productivity for almost a decade will weigh on the RBA in keeping interest rates higher for longer.
  • A recent Mckinsey report on the Australian economy notes that our business investment is now at recession level, our productivity growth is at 30th place out of 35 developed countries, living standards are declining and are at a national emergency level. Our GDP growth now is the weakest since the 1990’s recession ( excluding Covid-19 ).

Federal Government spending hit 12.3% of Nominal GDP in September 2024.

The ‘Golden goose’ that produced our fair and prosperous society is gasping for air – (Mckinsey)

On balance, it appears there will be significant headwinds for the Australian households and the economy in
general as we enter 2025.

 

Accordingly, the festive season is a great time to enjoy a break but also make time to reflect on the past, take control of the present and ‘sow the seeds’ of success for tomorrow.

Some practical steps to align your long term strategy may include :-

  • Review Superannuation – Multiple funds or funds with high costs and low performance compromise your long term / retirement plans.
  • Review Non Super Investments – Re-evaluate performance and tax effectiveness, also rebalance / diversify.
  • Review cashflows and eliminate unnecessary lifestyle costs in light of the prevailing environment.
  • Let’s not forget managing your tax position, this is always relevant be it during your working life, in retirement (with respect to investments) or as part of your estate plan.
  • Make incremental savings ‘dollar cost average’ as opposed to taking a significant position when
    investing.
  • Diversification and history are our best friends, reflect and actively rebalance asset allocations.
  • Consider Dividend Reinvestment Plan (DRP) given the attractive investment returns.
  • Confirm borrowing / refinancing options well before due dates and explore potential savings across
    relevant lenders – competition appears to be intensifying across the major lenders.
  • Insurance is always important, potentially critical during extreme business cycles as are likely to
    unfold in 2025. It is not desirable to execute forced sales at depressed values.
  • Those running a business – Document a business plan, complete a business valuation and be aware
    of the Small Business Capital Gains Tax concessions (SBCGT ).
  • Explore and utilise First Home Incentives – Including The First Home Super Saver Scheme ( FHSS ).
  • With the festive season upon us, I would like to take a moment to express my sincere gratitude to all our
    clients and associates, thank you for placing trust in AMCO.

In January 2025 AMCO celebrates 28 years since inception. The practice was founded on the vision of creating a long-term wealth management firm that enlarges and enriches the lives of those with whom we interact.

We are aware of the challenges you are facing during these uncertain times and are there to advise and navigate the environment with professional care.

From the team at AMCO, we wish you and your family good health, peace of mind and prosperity in the year ahead.

 

Merry Christmas.

Danny D. Mazevski
Chartered Tax & Financial Adviser
FIPA CTA FTMA MBA (Un.NSW/SYD) Dip.FS JP

 

Any advice in this document is of a general nature only and has not been tailored to your personal circumstances.
Please seek personal financial and or tax advice prior to acting on this information

Financial Planning Message – December 20242025-01-07T16:20:03+11:00