‘There’s greed and fear in everything’ – Darren Laudenbach

Tuesday, October 30th, 2018

‘When the stock markets crash, I buy’

‘That’s when most people get out.’

We’ve got to do the opposite of what’s intuitive to us but we can only do that with education.

Former financial planner Darren Laudenbach, with over 30-years’ experience in the industry revealed his investing strategy during a discussion on banks and interest rates.

Whenever there’s a stock market correction investors tend to become nervous.

Plunging share prices cause alarm bells to ring with brokers attempting to pacify clients to hold on to their investment portfolios until the financial turbulence blows over.

Banks and the Royal Commission

While most economists recognise corrections as a normal and necessary part of the financial cycle when stocks are over-bought, the tendency for media is to over-hype a correction by implying it could be something more sinister.

Banks have also come in for criticism. Fallout from the Royal Commission has caused an unpleasant odour as debris from the industry’s disreputable practices floated to the surface.

Meantime the Reserve Bank, with inflation under control, has maintained some stability leaving interest rates on hold at its record low level of 1.5 percent.

It’s a different story for the US with the Federal Reserve regularly raising interest rates on the back of the Trump-generated economy boom.

For Australians, no change to the cash rate hasn’t stopped some of the bigger banks here raising their mortgage rates. And not good for some property prices.  It’s reported values have fallen and were still falling at the top ends of the market in Melbourne and Sydney.

When Banks ‘do bad’

Darren Laudenbach from God’s Money Matters, a property and cash-flow expert, commented on the findings from the Banking Royal Commission.

“Clearly the banks have done the wrong thing,” Darren reported. “Although we sense that everyone’s been ripped off and we should stay clear of the banks…

….they do provide a very good service to the community but they should be called to account.

Darren hopes the pendulum doesn’t swing too far and make banking overly restrictive.

“With over 30-years in financial planning I’ve seen these things before. The regulators have come in and hammered the industry to the point of being detrimental to the community.”

When banks ‘do good’

That said, Darren Laudenbach has confidence in Australia’s banking industry saying they consistently do what’s right for most people.

“They provide an essential service to businesses, lending them money so they can employ more Australians.”

We mums and dads can go and borrow money and buy homes so on the whole they provide a very good service. But…..

“But it is one of these things with human behaviour. There’s greed and fear in everything and unfortunately there’s been too much greed and as a Christian I find that offensive,” Darren stressed.

“I think there has been some terrible things the banks have done and they are being held to account for that which is great.”

But there’s a catch

“The problem with that, it effects our ability to borrow money. Recently there has been a significant increase in the number of mortgages that have been rejected.”

“The banks have gone over the top with their compliance regime and people are finding it quite hard to borrow money at the moment,” Darren confirmed, before commenting on a bank having to give an account in court for its lending practices.

Darren said the case was thrown out.

Basically the court decided there was no evidence the bank’s lending practices caused anybody any issues.

“They were using the default rate as evidence that banks had been overstretching their customers. In other words, they’d been lending too much money to people.”

“If that was the case there would be high default rates as evidence people were not paying their mortgages because they’ve been lent too much beyond their means.”

“But the evidence simply isn’t there,” Darren confirmed.

Future currency values

The US rate increases have rippled through to Australia in the form of increases to our funding costs.

“We’ve seen the Australian dollar drop against the US dollar.”

“But what’s interesting, the Federal Reserve has said it wants to cap how far this goes,” Darren said.

“The very top (US interest rate) is about 2.75 to 3 percent”

But once they get to the top of that range we might see the Australian dollar strengthen again.

“The consequence is that our banks will hold off on any further increases that are not part of our Reserve Bank increases,” Darren said, adding the US Fed’s target is a good thing to understand.

When it comes down to the cost of funding, what the banks look at are the margins and decide which of two ways to fund those margins.

“There’s two ways to make more money. They can charge more for the interest on loans and give out less interest to create the margin on that process.”

“So if their funds needed for lending increase significantly, they can add a bit of that to the loans, Another way they can do that might be to give a little bit less on savings rates.”

Darren said that effects less Australians than those with mortgages.

learn to earn

“In other words the game they’re playing is to decide where they’re going to get the least amount of grief.”

“Unfortunately that means for those invested in cash, mainly retirees, they will suffer and that’s disappointing.”

Darren encouraged retirees invested in cash to become better educated about investments and have less in cash. In fact, becoming more financially savvy with regard to investments is the first requirement.

The fundamental I teach people is the first place to invest if you like is your vocational education. Learn to earn.

“Once you start earning then the second to invest in is your ability to understand financial matters. So you invest in your financial education,” Darren advised.

“And that’s why God’s Money Matters website is there. It’s got truckloads of information around money management.”

Education

“The next thing is to have some cash to invest in shares and property as investments,” said Darren, repeating again that the number 1 way to get rid of some of the stress is to get education.

“My own education from what I’ve looked at from the Bible and other sources, is that when the markets go down, if I’ve money to invest that’s when I invest.”

“Now what I’ve found in my experience, that’s when most people get out.”

We’ve got to do the opposite of what’s intuitive to us but we can only do that with education.

That’s number 1 for Darren. His first priority.

“We need to spend a little time working on managing the state of our flocks as it says in the Old Testament. We should know the state of our flocks.”

“The state of our flocks in today’s terminology  is; Where’s my money? What am I doing with it? And, am I making it work hard for me?”

If you would like to listen to the full audio interview click play below

Footnote

Darren Laudenbach  – Presenter, Speaker, Trainer, Author, Mentor, Coach, x-Financial Planner, Company Director, Shareholder – DipFP, AdvDipBus, Cert IV Financial Services (finance / mortgage broking), Cert IV Life Coaching

Growing up in a Christian home was definitely a blessing for Darren – he committed his life to Jesus in his mid-teens. Influenced by his dad’s 40 year career as a financial planner Darren entered this profession and in 2001 reached the highest level as a Certified Financial Planner.

Darren’s passion is to help Christian’s master their money – rather than being mastered by it. This has proven to lead households into a position of control of their finances and enjoy the peace of financial freedom. At the same time a good example is being set for children, friends and the community to emulate (salt & light).

Darren is a husband, a father of two daughters, is active in his local church as a Boys’ Brigade Officer, Former Church Treasurer & Board Member, and is involved with various community and youth projects.

godsmoneymatters.com

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