Today, I get the chance to respond to some of the fantastic letters you’ve sent over the past couple weeks.

To those of you who have sent in questions or comments, thank you! I’ve enjoyed reading them and have learned a thing or two about the unique Kiwi market.

I try to address the questions in Money Morning New Zealand if I can.

And if you’ve been disappointed that you haven’t received a reply, I apologise. Due to regulations from the Financial Markets Authority, I have to be very careful when replying personally…as it could be construed as ‘personal advice’.

Everything we publish is what’s called ‘general advice’…meaning we can’t take your personal situation into consideration, even if we wanted to.

That being said, I’ve been thoroughly entertained and enlightened by the personal emails you’ve sent me…

Today, we’ll highlight a few of my favourites…

‘God came down and said: You, you and you, you shall be born as the landlords. Just sit on your backside and do nothing, you’ll end up filthy rich and take advantage of all the have nots.

‘You lot, you’ll be the have nots. Just sit on your backside, buy video games, V8 Holdens on HP, never bother cooking, just keep KFC in business and generally spend every penny you can get hold of, and bleat how lucky the others were to have been chosen by God to be born as landlords.

‘You see, it is just a matter of pot luck whether you get born a landlord or a have not.’

—PA (A landlord)

I always appreciate a good tongue-in-cheek comment…nearly as much as V8 engines and KFC. Thank you, PA.

Yes, I’ve railed on landlords occasionally. Perhaps too much. The fact is, landlords have made strategic investments with their capital to allow for today’s rental market. It’s a free-market move that I think we’d all copy if we had the chance.

At the same time, with it being a landlord’s market, renters have very little power in the transaction. They need a place to live. Renting could be their only option. That’s not a problem. It only becomes a problem if landlords leverage that power to do something potentially unethical.

I believe wildly inflated letting fees could fit that bill. So would be refusing to fix issues in one’s property.

‘High house values are mainly a product of today’s low interest rates. The young person of the 70s had to overcome plenty of obstacles and be self-disciplined to buy a house. The obstacles included interest rates, availability of money, and the high cost of basic living such as costs of car purchase, car maintenance, whitewear, groceries were just a few things which were incredibly expensive and have reduced significantly. A set of tyres and a car battery cost about what they do today’s money. Then in the 80s we had runaway interest rates, which caused severe difficulty. I’m not sure we had it tougher, but I don’t recall many being as entitled as today.’

—DH

DH, you’re on the money. Every generation has its own struggles and obstacles on the journey to prosperity. And I truly believe this generation has it better than any other time in human history.

At the same time, there are certain aspects of the Kiwi dream that have actually reversed course. Homes, for example, have become far more expensive…not only in dollars but also in terms of how many hours you need to work to buy one.

Regarding entitlement, I believe you’re right. Today’s generation is relatively entitled…demanding much and offering little. But where does that come from? Perhaps it’s the growing popularity of entitlement-based systems like socialism? [openx slug=inpost]

‘Your views of the markets are thoughtful and personal.

‘You think the FAANGs are over-priced, therefore F&P with a P/E of 39 must be too?

‘We are in a completely new tech world and talking about reverting to the mean is not valid, I think.

‘If you want low P/Es then stick to Aussie banks and the likes of Spark.’

—DR

As we’ve revealed, many of the big-name stocks out there have unreal P/E ratios (Which is a way of measuring the price of a stock compared to its value). Netflix at 146. Amazon at 136. Twitter at 87. Alphabet at 47.

Some, like DR, believe that this is simply the new normal…a part of the ‘new tech world’. He could be right. In fact, most analysts would agree.

However, I believe it’s a sign of where we are on the business cycle. People over-invest into stocks. The price crashes. It stabilises. It surpasses its previous high.

Super-inflated P/E ratios are indicative of over-investment…bordering on speculation. It could work itself out without any sort of hard landing…or it could come down, crashing and burning. Hard to tell….

‘When I receive money from ATMs in NZ, I usually get paid in $50 and 
$20 bills. I think that over the past few years I have received more
$50s than previously.

‘You seem to approve of a cashless society but leaves savers more 
vulnerable to the imposition of negative interest rates during a
financial crisis, which would concern me.’

—MS

Good thought, MS. I, too, have noticed an increase in fifties…which makes sense given the RBNZ’s unusual high-quantity issuance of the bill. I do believe this is part of an international trend towards cashless societies.

I apologise for being unclear — I do NOT approve of cashless societies. I believe it ushers in an unwarranted level of control, by the state, over our finances. Cash offers us complete and anonymous power over our wealth. That is something I believe is critical to successful free society.

At the same time, I rarely use cash. In fact, I panic whenever I check out somewhere that doesn’t accept cards. But if NIRP — negative interest rates — were to happen where I live, I would want the option of moving into cash if I wanted.

Thank you all for your thoughtful comments and questions.

Keep them coming in. If you want to reach me, email me directly at [email protected]

Best,

Taylor Kee
Editor, Money Morning New Zealand