Interest Rates

This is one curious difference between Canada and Australia. In Canada, the preference is often given to using fixed-term, fixed-rate interest rates on home loans, where-as in Australia the preference is to use variable rates. Banks in both countries seem to offer various incentives for the respective preferred interest model, either being a good reason for the preference, or a business decision in response to the preference. For example, in Canada several banks will offer an adjusted-fixed rate loan that will decrease as the variable rate drops, but won't increase until the term is over. This is favourable in the sense that you don't get a feeling of being ripped off if interest rates start dropping after you've "locked in" for 5 years. In Australia, the options favour keeping your loans on variable rate. For instance most banks will offer a package that includes a discount off the variable rate, and features such as offset accounts.

Offset accounts: If you're the kind of person that can squirrel away money, offset accounts are absolutely awesome. They are fully liquid accounts that are linked to your mortgage. Every $ you have in this account on the given day is considered in the interest calculation on your loan. It is like if you put all of your savings against the loan and were to redraw from the loan, except without any of the hassle. You can use the funds in the offset account as normal. The account itself earns no interest (then again what liquid account does these days) but it's effective interest is your loan interest rate, which remains equally effective as interest rates climb. What this effectively means is that if your mortgage rate is 6.5% p.a. the money in your offset account is effectively earning you 6.5% p.a. "tax free". Can you find a liquid bank account anywhere that can beat that?! Fortunately the ATO doesn't tax interest savings. Depending on your income level you would need to find a rate of 8.45% to 9.5% p.a. to earn equivalent taxable interest.

I personally keep a spreadsheet of all transactions made against our accounts and the loan so I can keep track of how much interest we are paying each month, and how much cash we are saving. This is made much easier because we put most of our daily expenses on a credit card and pay off the balance each month. (Leaving extra cash in our offset account until the end of the month.) The package we have that includes a rate discount and offset account, plus a few other perks, costs us $350/year. The offset account and rate discount save us over $10,000 a year. (A no brainer.)

Recent hot-topics with the Mrs. that always seem to pop up as interest rates rise include whether we should fix a portion of our loan or not. There was a steep drop-off in interest rates due to the GFC, and now interest rates are climbing back up. At first I was a bit concerned, but then I did the math, and modified my spreadsheet to verify the numbers to prove that it is far more likely to cost you money than it would save you money.

Best-case scenario: I went back and applied a locked-in fixed interest rate the day before rates started to climb. Granted in reality you can only *guess* when rates will go up, and how fast they will go up, but for this test I used best case actuals. Fixed interest rates for 1 year are lower than the variable, but still 0.3-0.35% higher than our discounted rate. That means you're looking for at least 2 rate rises before you start saving back the extra intrest you start paying as soon as you lock in. The rates get significantly higher if you want to opt into locking for longer periods. The major catches to consider here are that any discount and savings from offset accounts you have only apply to the *variable* portion of your loan. The first rate rise after the GFC occurred roughly 7 months ago, so I locked in the day before. After about 3 months the interest savings recovered the extra cost, and after 7 months I would have saved $300. I'd estimate that after the year we would have saved about $500.

Sounds ok? Ah, but hind-sight is 20/20. There's no way I could have known rates were going to go up when they did, and when they will go up again. So adjusting the model I locked the interest rate just 2 months prior to the rate rise. Lets say the reserve bank is considering a rise next week. Maybe it goes up, maybe not... Got to lock in because banks will start raising fixed rates before the reserve bank makes a decision if the banks think the cash rate is going up. We lock in, rates don't go up, but they start climbing 2 months later. Now the numbers change dramatically. Those two months we are paying at least $3 a day more in interest, after 7 months of rate climbs we still haven't recovered this back in interest savings, and after a year we'll be back on variable or locking in at a higher fixed rate. Fixed rates are *NOT* a mechanism to try and save money, they are a mechanism to ensure people can maintain a consistent budget over a period of time.

Locking in interest rates in Australia in an attempt to save money leaves you with a mentality of hoping rates go *up* to prove you hadn't wasted that money... That just sounds stupid. :)

Bond

This one left me feeling a bit ambivelant. The next Bond movie has been suspended indefinitely due to the financial troubles of MGM Studios. (http://www.watoday.com.au/entertainment/movies/james-bond-film-suspended-amid-mgm-woes-20100421-ss68.html)

After being thoroughly, and utterly disappointed and disgusted by what was done with Bond under Pierce Brosnan, I was very skeptical about whether to bother watching the latest installments starring an Australian of all people, Daniel Craig. Not to slam Brosnan, he's a decent actor and I believe he could have been capable of playing a very good James Bond, if only they would have hired a decent writer that perhaps READ earlier James Bond or watch Moore & Connery in action. Bond is fantasy, but in the sense of fantastic suspension of disbelief. The movies Brosnan was involved in were pathetically written, and most suffered from "you can't freaking be serious that anything like this is remotely possible." It left me scarred, so much so that it was over a YEAR after Casino Royale was released that I bothered to rent it.

Casino Royale
Ultimately I was fairly relieved by this movie. At least up until the end. Craig was a very interesting choice for the role. Bond has always been suave, and used his quick wits, charm, the arrogance of his opponents, and the right gadget to get out of a tight situation. Craig is more like a neothanderal, solving problems with a big rock or a hefty shoulder through a wall. But his character is no idiot, he plays the part of an agent that you can drop right into the thick of a situation and know he's got at least half a chance of completing the mission and getting out alive. The bulk of the movie was quite well done up until the end bits where it started to fall apart around the edges. Actually I'd say that they started to peel off scenes from Thunderball, well, actually "Thud! Ahh!! My Balls!". If there's one thing I don't really like to see in movies is Deus Ex Machina. This is where some miracle happens near the end of a play (or movie) to save the hero. Unfortunately they resorted to the Deus Ex ending, saving Bond from an inescapable situation. Ah well, it was only a minor stain on the movie over all.

Quantum of Solace
This is a movie that ultimately should never have been made. I think in hind-sight it foretold of the difficulties that MGM was having with the franchise. The start of the movie was fantastic, considering how it was probably the first Bond movie with any sort of continuality written in. (The interrogation of Mr. White.) The plot twist with the secret organization unknown by MI6 and the like was a good twist and played out very nicely, but for an organization that they hadn't even caught a whiff of before the interrogation, they sure were too easy to figure out and infiltrate making it a real downer. The real disappointment in this movie is how the overall quality of the movie continually degrades; it actually visibly rots as the movie goes on. By the end you'd think you were watching some B-grade film. I was ready to shut the movie off when they prepared to storm the fuel-cell hotel out in the middle of nowhere, where negotiations between a corrupt general planning to coupe his government, and the evil organization member posing as a environmental group, setting up to double-cross the general was taking place. I think the only thing burning down faster than that stupid hotel was MGMs bankroll.

Quantum of Solace to me said that during the last film MGM was running out of money so the production quality of the film was continually getting dropped. It is a bit odd that it seemed to happen so linearly from beginning to end seeing as movie scenes are typically shot out of order depending on locations, actor availability, etc. Still it made some money, delayed the inevitable, and MGM gambled once again. It will probably be a good thing if "Bond 23" never sees the light of day because I'm sure it will probably show signs of rot no more than 15 minutes in.