Navra Legal Action

[topcropper]

Topcropper your comments on PE in 87, not being as knowledgable in the market as you are, was there a comparison in 2008? If 87 had warning signs did 08 as well (in your opinion)? Navra claimed to have done well in 87, however 08 was a very different outcome for him and his clients.

Mark

Bit hard to compare the two periods. 1987 had huge interest rates and inflation. You could get 12% and higher in term deposits in 1987. So this ment that share dividend yields also needed to be much higher than today for shares to be a sensible investment. [Why would you take a 4% dividend yield with risk if you could get 12% for a term deposit, no risk?] But dividend yields weren't high. Share average PE ratios were over 20, so obviously, dividend yields were low. Perhaps PE ratios were not much higher than in 2008, but considering the interest rates, they were astronomical!

[this also ment that housing rental yields needed to be higher, and they were. Property prices subsequently went through the roof in the next few years].

Navra claimed he made a motsa from the 87 share crash. Whatever. He was running a business that needed to show he was an expert. So he said what he needed to say. Maybe he did? It was probably good luck knowing what we do now. He made two huge fundamental and basic mistakes in 08. The agri tax dodge rorts, and his funds going to cash near the bottom of the GFC and failing to get back in when the rise started.

As they say, when the tide goes out you see who has no pants on.


See ya's.

 

[see_change]

It's a bit ironic that the aspect of Steve's approach that generated the most controversy , the Living on Equity aspect , wasn't the aspect that seems to have generated the pain.

It doesn't seem that long ago , but it is now over ten years since the LOE debate was raging . Out of interest I dug out a post that I did outlining my concerns after attending one of Steve's Seminar's .

I do remember reading about the agri business proposal and at the time , i thought , given the terrible history of agri businesses in Australia , it would further undermine his credibility , but it seems that it only did that for people who were already unconvinced and not with his true believers.

While I know the constant bringing up of Steve is frustrating for those involved , I think it is important to do that as a reminder of what can go wrong. At the time there wasn't just one or two people raising concerns , but many high profile members of the forum who expressed their concerns .

This should raise a red flag in the future.

Cliff

 

[Sim]

It's a bit ironic that the aspect of Steve's approach that generated the most controversy , the Living on Equity aspect , wasn't the aspect that seems to have generated the pain

Actually, I think if you consider the strategies put in place by NFS - many of them were aiming for a goal of LOE, but very few people got close to that goal before being wiped out financially by the fallout from the GFC.

So in some ways, it _was_ LOE that caused the pain - not directly, but the risks taken to try and get there.

It's unfortunate that we didn't get a chance to see a reasonable number of people reach the goal of LOE and then see how they managed through the downturn (and quiet years in the property market that followed later) - that would have given us a better perspective on how the strategy works (assuming enough of them were still around to talk about it objectively).

 

[MTR]

SC
Thanks for the link, very interesting.

This is one of Nava's predications that went pear shaped -

3) While Steve points out that Technical Analysis doesn't predict the future , in the way he sets up his system , he in a sense , is making predictions about the future.

He is predicting that the way the banking and tax system is currently structured will stay essentially the same , so people will still be able to use the same financial structures and ploys in twenty years time that they can use now.

The LOE model will be very difficult to implement today, as bank policy has changed, gone are the days of easy money, lo doc/no doc

I know some on SS still advocate/promote this strategy, however I have yet to meet anyone or know of anyone who has retired from their day job and LOE, that speaks volumes IMO. The snowball effect of compounding debt is pretty damn scary.

MTR

 

[Sim]

3) While Steve points out that Technical Analysis doesn't predict the future , in the way he sets up his system , he in a sense , is making predictions about the future.

Further to this - his share trading system made certain assumptions about how far the market was ever likely to fall - which was another prediction.

Similarly, the gearing strategies used for his clients assumed that they would be able to weather any significant market downturn - another prediction.

The problem was that you can't predict a market that fell as far for as long as the one we had did ... and you need strategies to deal with that potential - which I didn't really see.

This is one of the reasons I am really not a fan of structured products and complex borrowing arrangements which are not easily unwound when the proverbial hits the proverbial - too many people were caught with structures that did not provide them with the flexibility to deal with the new reality of a set of assumptions which turned out to be completely invalid.

 

[MTR]

Sim

I don't know the ins and outs of what Navra was promoting, however from what you have posted I am assuming that in the main his clients carried a lot of debt and were highly leveraged.

If this is the case any investor is walking in dangerous territory because as you said no one can predict when a market will fall and if there is no back up plan.... and you LVR is 80-90%... oops

There were also many other so called gurus promoting LOE including an accountant, once again using sophisticated structures and investors in debt up to their eyeballs, this guy wrote a book, cant remember his name?? Anyway, his long gone, I am sure most of his clients are also long gone, no money in the kitty.

 

[redwing]

While I know the constant bringing up of Steve is frustrating for those involved , I think it is important to do that as a reminder of what can go wrong. At the time there wasn't just one or two people raising concerns , but many high profile members of the forum who expressed their concerns .

This should raise a red flag in the future.

Cliff

Agreed, it's always good to review with the benefit of hindsight and to look at lessons learned, there were advocates, detractors, investors and even employees posting here and some great threads

 

[Mark C]

Complex borrowing and investing structures are very difficult to unwind, from my experience during the GFC I had over $30m in loans from 8 different financial institutions. My God! What a year that was!

It will probably take another 5 years or so to fully unwind some of the structure I got myself into back then.

Some of the structures the NFS clients got into where more complex and as we see from GS still unwinding.

The lessons learned for me are keep it reassembly simple, nothing can make you sleep better at night than having reliable cash-flow. The more simple the structure the more chance of reaching your gaols.

Mark C

 

[redwing]

Remember Peter Spann and Macquarie Bank and their Capital Guaranteed products back around these times also

 

[see_change]

SC

I know some on SS still advocate/promote this strategy, however I have yet to meet anyone or know of anyone who has retired from their day job and LOE, that speaks volumes IMO. The snowball effect of compounding debt is pretty damn scary.

MTR

I think rixter and Keith have done ok ,but neither followed steve . They both listened to him, and used elements but came up with their own systems that they were comfortable with .

I would imagine Simon and Julie have also done well , though it's been a while since they've posted . They used cash bonds in the early stage to help with serviceability . They were buying up in Frenchs Forrest many years ago and if they avoided any GFC or Navra issues will be doing very well now .

I don't know if they'd retire even if they could . If you have the drive to do what they've done , you are unlikely to sit back and relax and do nothing .

Sim , Geoff , have you heard heard how they're going .?

My observation is that those who start looking at LOE , effectively end up LOR . That's what we're aiming to do , though on the way we have used equity from sales to boost our lifestyle .

Cliff

 

[Rixter]

There were also many other so called gurus promoting LOE including an accountant, once again using sophisticated structures and investors in debt up to their eyeballs, this guy wrote a book, cant remember his name??.

You maybe thinking of accountants, Dale GG and/or Tony Melvin / Ed Chan.

 

[Rixter]

It's a bit ironic that the aspect of Steve's approach that generated the most controversy , the Living on Equity aspect , wasn't the aspect that seems to have generated the pain.

It doesn't seem that long ago , but it is now over ten years since the LOE debate was raging . Out of interest I dug out a post that I did outlining my concerns after attending one of Steve's Seminar's .

I do remember reading about the agri business proposal and at the time , i thought , given the terrible history of agri businesses in Australia , it would further undermine his credibility , but it seems that it only did that for people who were already unconvinced and not with his true believers.

While I know the constant bringing up of Steve is frustrating for those involved , I think it is important to do that as a reminder of what can go wrong. At the time there wasn't just one or two people raising concerns , but many high profile members of the forum who expressed their concerns .

This should raise a red flag in the future.

Cliff

Cliff, thanks for posting that Thread link..... it is a gold blast from the past. Always good to read again.

 

[MTR]

You maybe thinking of accountants, Dale GG and/or Tony Melvin / Ed Chan.

That's it, Ed Chan

Wonder what he is now doing

 

[keithj]

I think rixter and Keith have done ok ,but neither followed steve . They both listened to him, and used elements but came up with their own systems that they were comfortable with .

Brings back memories of the good old days when every 2nd thread was about LOE....

Living off Equity - a reality check was the most memorable one for me. A while after the thread was closed Steve Navra requested that some of his posts be deleted. Some of us (inc see_change) had reservations about his strategy.... it's worth a trip down memory lane for some of the old-timers......

 

[see_change]

That's it, Ed Chan

Wonder what he is now doing

He lives in a very nice house in Turramurra last I saw . His son went to the same school as my youngest and for a while they were friends . He runs an accountancy practice on the north shore and I think he's doing ok . I wasn't specifically aware of him promoting LOE , but I didn't read his book so I'm not sure . I do know they had development groups that they'd organise , though never went that way ourselves as I didn't see the need .

Cliff

 

[MTR]

......or they go back to work part-time etc. to supplement income, from these couple of examples it tells me that LOE is flawed, the idea was to give away the day job.

I think Landlubber is one SS member who started LOE for a number of years and then tweaked it and has ended up living off rents and share dividends, and I am pretty sure he had around 25 properties but sold perhaps half to reduce debt, so I expect a very healthy asset base.

Healthy asset base required because you are increasing debt and at the mercy of cycles and no one can predict this, if the asset base is not large enough you will be back at work before you know it or worse lose the lot. I know someone who tried LOE and had to sell all his IPs including primary residence because the asset base IMO was not large enough in terms of equity/value and the down turn property cycle and (after GFC) went on for 7 years, no growth, while increasing debt, compounding debt is a killer, its debt on steroids.

All to their own, if investors are happy to load up with debt and see how it all pans out in 10 years time that's up to them but I certainly hope they have a good size asset base with low LVR.

I think using equity to boost lifestyle something worth considering, especially if the debt can be managed, perfect.

 

[Rixter]

Brings back memories of the good old days when every 2nd thread was about LOE....

Living off Equity - a reality check was the most memorable one for me. A while after the thread was closed Steve Navra requested that some of his posts be deleted. Some of us (inc see_change) had reservations about his strategy.... it's worth a trip down memory lane for some of the old-timers......

Keith, thanks for posting the link - another Gold blast from the past.

 

[MTR]

He lives in a very nice house in Turramurra last I saw . His son went to the same school as my youngest and for a while they were friends . He runs an accountancy practice on the north shore and I think he's doing ok . I wasn't specifically aware of him promoting LOE , but I didn't read his book so I'm not sure . I do know they had development groups that they'd organise , though never went that way ourselves as I didn't see the need .

Cliff

I happen to know a Perth investor who contributed to his book, and is now bankrupt. She was following his model, Michael Y, Navra.

To be fair I am not blaming this guy, she was following his concept in terms of using banks money and high LVR, where she went wrong was placing all her eggs in one basket and of course high LVR. This particular market went from boom to bust pretty much overnight. In these heady days investors considered debt a sign of great success

 

[Rixter]

In these heady days investors considered debt a sign of great success

Some things havent changed today.

Just pick up any copy of YIP or API for their so called investor 'success' stories.

 

[redwing]

Landlubber has also posted here re: LOE