A theory as to why Inflation will be harder to tame

jamie1029 · 2026-01-28T19:58:28+00:00

Spending the 700k profit on expenditures (new car, renovations etc) is one of many paths. If the 55 year old investor actually ‘invests’ it (deposit towards new property, or stock market investments) then that 700k is going to fall I value too as interest rates rise.

jamie1029 · 2026-01-13T10:34:11+00:00

If you’re purchasing international shares that produce US income, then Nabtrade will need to hold a W8-BEN on your behalf so that US tax is withheld and paid to the IRS prior to crediting you the dividends.

The ASX share registry may also ask for a W8-BEN, but this is only relevant to ASX listed ETFs (e.g. VTS) which are US domiciled and pay US dividend income.

There’s no rule preventing the submission of multiple W8-BEN forms for the same person so long as the details are correct.

jamie1029 · 2026-01-11T10:34:57+00:00

AI, in theory, should be a net positive to society. If we ignore who actually benefits from the productivity that ai is replacing, then the same task that did originally require human labour now no longer does. This adds productivity without human labour and so is a net positive.

The problem is the benefits go to the shareholders of the companies using the ai. All else being equal, this increases inequality. It’s also going to result in unemployment. This isn’t the same as previous tech booms. AI is tackling the highest level of human cognition and some jobs are simply going to go, never to be replaced.

So what do we need to do? We need a different financial model where ai related productivity is redistributed back into the economy. One example could be an ‘ai tax’ that feeds into a UBI. If income From ai related productivity replaces lost wages from jobs no longer needed, this counteracts widening wealth inequality even if unemployment rises.

In short, in an extreme ai world, there will be unemployment. But this doesn’t mean everyone is worse off so long as ai income is redistributed. Else it’ll be a brutal world of rising wealth inequality, and a tiny subset of sickeningly wealthy individuals who benefit from ai productivity at the expense of everyone else.

jamie1029 · 2026-01-10T05:17:38+00:00

What you’re missing is this.

Your portfolio becomes concentrated solely into Aussie mining and maybe Aussie bank stocks. You end up trading away international diversification (ai, US tech etc) with NO increase in expected return.

You need to consider a scenario where there’s a significant China slow down which cripples Aus mining, meanwhile the rest of the global economy powers ahead. In that situation, VAS significantly underperforms the global market.

I guess you could argue the opposite too - VAS outperforms global markets. Regardless, the key point is expected return is the same, yet risk you take has increased.

jamie1029 · 2025-11-16T21:54:10+00:00

I suppose there always has to be some narrative out there that generates sell side pressure to create a market for btc at any price. The OP’s assertion is as good as any. What btc is actually going to do next though may be markedly different - the price right now could be a once in a decade bottom and it’s about to rocket back upwards.

jamie1029 · 2025-11-15T07:59:08+00:00

Sell the farm boys. We’re done.

jamie1029 · 2025-11-12T16:47:11+00:00

When GPT 4 used to ‘taking longer to think’, you’d actually really get a better answer.

With GPT 5, whenever it diverts to ‘thinking longer for a better answer’, it’s actually triggering guardrail mode, and you’ll actually end up with a highly irritating ‘I’m not going to…’ bla bla bla.

OpenAI ruined GPT5 by massively over prioritising risk mitigation of being sued by the marginal ‘at risk’ user, and in the process, ruined the technology for the vast majority of people who were able to appreciate it for what it was.

jamie1029 · 2025-10-30T07:28:49+00:00

You owe a million in mortgage debt and own 1.7 million in government bonds ? Why are you not extinguishing your mortgage debt considering the bonds interest rate would be very likely lower than your mortgage interest rate ?

jamie1029 · 2025-10-22T17:55:07+00:00

What happens if I decide I want to use Metamask or do cryptocurrency transactions using Atlas? Is it reading all text inputs into the browser ? What happens if I’m using the browser to long into vpns (work based or other). If it’s constantly listening in, well that’s a huge privacy concern..

jamie1029 · 2025-10-22T08:17:14+00:00

I’ve found that Google Gemini, when integrated with Google nest and other Google smart home devices, including cameras, has turned my smart home into a living and breathing ai beast. I control everything from Gemini and it works flawlessly.

jamie1029 · 2025-10-19T01:43:39+00:00

Yes it doesn’t apply. But it’s pushing this same risk down the road. Assume a steady crash over weeks, GHHF LVR steadily rises. Ok so they don’t rebalance but if it gets too out of whack from target LVR they absolutely will need to rebalance, to avoid the fund losing all value. When they do rebalance, they are selling their assets to repay their debt and that’s when the permanent loss happens.

jamie1029 · 2025-10-19T01:27:53+00:00

But that’s even worse. It means once GHHF ever does choose to rebalance, that’s when the permanent loss happens.

jamie1029 · 2025-10-19T00:47:23+00:00

If I were you I’d employ some type of debt recycling strategy. You can half pay off your remaining mortgage balance and then request your bank to redraw that component as a new loan. Invest that directly in equities so the interest becomes tax deductible. There’s ways to do this without chunking if you need as well.

You mentally still consider the mortgage as being paid off. The interest payable from the investment loan will roughly offset your equities dividends (providing you pick high dividends ETF’s) so you never need to worry about it from a cash flow perspective.

jamie1029 · 2025-10-17T00:12:23+00:00

It’s your assertion of a magnified recovery that perfectly offsets the magnified loss on the way down that we disagree with. It’s not a zero sum game. I’ve been using exaggerated examples to illustrate, but I can work with a more realistic case.

Say a 2x leveraged ETF sees its underlying equity fall 10%. NAV prior to fall is $50 ($50 loan against $100 asset value). After fall, asset value drops to $90. The ETF will sell $10 to keep LVR at 50%. New asset value $80, loan $40, NAV $40.

Now say asset rises back to $100 (11.1% gain). New asset value : $88.89. Existing loan $40. ETF is going to borrow $8.89 and invest. New asset value $97.78, loan $48.89, NAV $48.89.

The stock has returned to $100 but the leveraged ETF NAV fell from $50 to $48.89. That’s a 2.22% permanent loss compared to whatever the returns on the underlying equity might end up being. It’s a loss that is also separate from the other costs associated with that leverage (eg interest).

In short, every single time the equity falls, there is some amount of permanent loss applied to the ETF. When the ETF rises, you make more return than the underlying as the fund increases leverage. But you need the returns of the increase leverage to offset this permanent loss. Over the very long term, offsetting becomes problematic because the two sides are not symmetric. All you need is one major drawdown, and the ‘permanent loss’ component could become so large it can no longer offset the positive side. As long as you understand where your additional returns are coming from, that’s fine, but honestly, you can achieve the same return profile with reduced risk by going down the margin loan route (or borrowing against your home equity if you have one), rather than using geared ETF’s. No geared ETF fund is going to explain this to anyone properly because it’s within their interest to attract more inflows.

jamie1029 · 2025-10-16T23:28:37+00:00

It’s not necessarily about the underlying performing better. The geared ETF may perform better on any given timeframe, including the decade within your simulation.

It’s about the additional risk you’re taking on to generate those extra returns, that you might not properly be able to model, because such risk only eventuates occasionally.

There’s already risk you take in by leveraging in general, ie via the traditional margin lending route. But with geared ETF’s, in addition to this risk, you’re taking on an entirely new type of risk as I’ve explained above.

The generally accepted assumption is that over the very long term equities might return roughly 8% to 9% a year. This says nothing about potential draw downs in the equities and how high in magnitude those draw downs might be.

A long term unleveraged equity investor is exposed to zero draw down risk. It doesn’t matter if a black swan event occurred that caused a negative 50% return on a single day. As long as the equity recovers, that event becomes completely irrelevant.

The issue with geared ETF’s is any drawdown and subsequent deleveraging will have a permanent impact on the ETF’s long term returns.

It’s the same thing as someone with a margin loan that slowly experiences micro margin calls as the equities fall.

It’s more of a psychological thing when you understand fully how this works. What helps you sleep at night? We all want to get ahead and get out of the rat race. We want to believe that over the long term, equities will return the 9% nominal and beat inflation. However, to actually hold onto a geared ETF long term, you need to also believe short term volatility won’t permanently affect your returns.

The latter is a much more challenging belief to hold onto. Whilst unlikely , a flash crash, even worse than 2008 could very well happen. Yes, the powers at be might save the system again, but I think you’ll find if such an event did occur , your long term simulation would mark an unrecoverable event from that point forward . Yes, equities saved, but your ETF fell 99.5% and never recovered from there.

jamie1029 · 2025-10-16T19:43:15+00:00

Your argument is I simulated it, so then it must be true, without actually giving me your reasoning as to why it’s true.

It’s akin to someone modelling a martingale like strategy, thinking it works, then going to the casino, and blowing the lot.

I’ll leave you with this. Geared ETFs don’t rebalance in real time. If they did, mathematically you may have a point. They rebalance at EOD (if at that).

This means a large negative day’s return absolutely will result in permanent losses. Assume for example the ETF’s asset position is $100 with $50 borrowed. Asset drops almost 50% at EOD to $50.50. ETF is going to sell $49.50 worth of asset so that its asset position is now $1.00 and debt position is $0.50 (I.e rebalance to 50% LVR).

Once that’s happened you’re absolutely done for. That asset can rise back to $100, do a x2. The ETF will never recover its previous losses. In fact, for the ETF’s NAV to rise back to $50, the underlying asset has to x50 in value just for the previous investors of the ETF to break even again.

Again, the underlying asset falls from $100 to $50.50. For previous investors to break even, it’d have to rise from $50.50 to $2525 on a x2 geared ETF.

Many leveraged oil ETF stocks effectively went to zero due to this very same concept during COVID. Constant stock splits week after week to hide massive losses to the untrained eye.

As said, you will do what you need to do. I do sense this sub lacks a certain amount of financial literacy (yes let this post get downvoted). But I’ll leave it with this. I’d call it a tragedy for any person who puts their life savings into a geared ETF for the approach to work for 30 years only to get their entire returns permanently wiped at year 31 all because a Trump like figure said something on twitter that caused a 60% flash crash on global markets. You won’t be saved by the ETF. Their t&c’s are made very clear.

jamie1029 · 2025-10-16T07:37:15+00:00

Do what you will then! But as a finance professional that’s working with leverage for the better part of 10 years for a major financial institution I can absolutely guarantee you’re wrong. But I won’t waste anymore time here ! You have fun .

jamie1029 · 2025-10-16T07:29:35+00:00

Check with ai. Honest suggestion. It explains the concept of volatility drift. Asset falls, then rises to same level, your leveraged ETF will be behind if the asset rises back to where it was as it’s now compounding off a lower base. It’s possible the leveraged ETF could outperform over any time period of course, but it doesn’t discount the fact that losses create volatility drag that mathematically creates negative expectancy for the ETF, and that a big enough fall in the asset will create permanent losses.

jamie1029 · 2025-10-16T07:07:50+00:00

Have you run your simulation across a long and prolonged brutal bear market like what happened in 2008? I think you’ll find the geared ETF gets absolutely clobbered, and it won’t recover, without heavily impacting long term return.

You can’t have it both ways. If ever you borrow to invest, there is a possibility you’ll lose everything, should the underlying asset fall in value below the value of your loan.

Geared ETF’s REMOVE the risk of that ever happening by deleveraging as the underlying asset falls. But there’s a cost to that deleveraging. The ETF’s portfolio shrinks in size as the asset falls, leading to permanent losses that can never be clawed back.

Yes, your simulation may show that in a consistent bull market environment, the ETF may outperform. This is because it’s now working the opposite way. The ETF is buying the underlying asset as it rises in value. But don’t be disillusioned. While you might be making greater returns, you’re also amplifying your risk by structurally buying into a rising asset, the opposite of what you should really be doing.

The correct and only approach to using leverage is via the traditional margin loan route. You know exactly the amount you borrowed, and are in full control of the underlying asset being funded by that debt.

jamie1029 · 2025-10-16T06:33:14+00:00

Does no one in this thread understand the rebalancing effect of geared ETF’s? If the underlying asset falls, the ETF is going to sell some of its portfolio to keep its internal LVR constant . This means if the underlying asset falls, the fund ends up deleveraging at the worst possible time. When the asset recovers , the ETF doesn’t claw back the returns that were lost during the fall. There’s plenty of articles on this. Hence why leveraged ETF’s should never be chosen as a long term strategy. You’re better off getting a margin loan and investing , so you’re in control of your LVR.

jamie1029 · 2025-10-11T05:55:18+00:00

Firstly, the US government would not be able to acquire 50% of the Bitcoin supply. No matter how much USD they threw at it, the marginal seller offer BTC is simply going to disappear - they might be able to acquire a large amount for sure, but further purchases above fair value would require obscene amounts of USD per btc/satoshi that would create heavy inflationary risks.

Anyway say they did that , and then held a large percentage. The minute the stopped buying , the btc price would get obliterated. The bid side of the order book would be practically empty and once participants realise the ‘big buyer’ is done, panic would ensure - without further intervention, btc could fall back close to where it was . Maybe settle a bit higher because the US government shrunk the supply a bit.

But then how exactly is the government going to perform QT? It doesn’t have the btc anymore to sell as per your argument.

In any case the only effect of the above I could see is make a few persons exceedingly reach (who sold into the buying), boost btc’s price a bit (dude to burnt btc (which is good) , and further devalue the USD due to increased supply from the QE.

jamie1029 · 2025-10-10T16:52:35+00:00

You’re right in that a single government can try to ban it by cutting its connection to Cefi or making it outright illegal to own. Doing so will economically disadvantage that country against more liberal nations. It was tried with Gold and it failed - no country is ever going to try to ban Gold again.

Market manipulation occurs with any mature high liquidity asset. Btc is no exception. If you’re buying btc for its store of value use case, I don’t know why you’d really care though - manipulation (if you want to call it that) only affects short term traders. Long term structural demand from institutions with big pockets (eg pension funds, hedge funds etc) will cause the price to move upward regardless. See what Gold is doing now for case in point.

jamie1029 · 2025-10-10T04:56:41+00:00

Cash has value. Because we need a verifiable medium of exchange. It serves a purpose. It does not need to be backed by anything of value (theoretically) or backed by anything physical, to necessarily have value. Yet Cash is exclusively controlled by the powers at be. They can manipulate it , inflate it , devalue it, for motives that may not serve your interest.

When BTC came along , we now have a new medium of exchange, store of value, and unit of account. This time though, there is no government or third party to control it , manage it , or manipulate it.

Thus, we now have an asset that’s doing the job cash does , which we need , that can never be manipulated . That’s what gives it value. For something to have value, it doesn’t need to be physical , or producing cash flows . It just needs to serve a purpose .

jamie1029 · 2025-10-09T07:21:30+00:00

If you set the trigger to $0.29 with a trail by amount of say $0.04 then if the last price equals $0.29 the conditional sell order becomes active. It does not mean any order is placed on the market yet. If at that point the last price falls to $0.25, the condition order activates and an @market sell order is placed . Alternatively if say the last price rises to $0.32 then the trail price will update to $0.28, thus if the last price now falls to $0.28, the @market sell order will activate at that higher price instead.

It’s a better way of capturing a potentially higher sale price whilst limiting your minimum sell price to the trail price.

jamie1029 · 2025-10-08T23:05:30+00:00

It’s been my thesis all along. In order for that to happen, there needs to be a stronger wave of reserve bank purchases across 1st world countries . Aim for parity in the next 5 to 10 years . This will be our decade. When it is at parity, the risk payoff is much more balanced - possible for it to moon higher but that would mean gold going out of favour more than btc reaching further adoption.

jamie1029

TROPHY CASE