Cash is king

[see_change]

Care of Commsec market update

In economic data released today, ABS figures show that Australian households have experienced the biggest annual slide in financial wealth for 20 years. Net financial assets (assets less liabilities) of households fell by 16.1pct over the past year, the biggest annual decline in records extending back to 1988. However it is clear Australians have responded to the global financial crisis by putting their money in the bank with the value of currency and deposits rising by $70 billion in the June quarter to a record $1.3 trillion. CommSec Chief Economist Craig James said of the data “Clearly, cash is king .....(and) the sharp slide in wealth levels over the past year will ensure that consumers remain extremely wary about making major new purchases or taking on more debt.”

Cliff

 

[Maverik]

What will the banks do with that extra money??

 

[boomtown]

Lend it to consumers.

 

[Mr. Fabulous]

Lend it to intelligent investors.

Fixed that for you there, boomtown.

Mark

 

[WinstonWolfe]

CommSec Chief Economist Craig James said of the data “Clearly, cash is king .....(and) the sharp slide in wealth levels over the past year will ensure that consumers remain extremely wary about making major new purchases or taking on more debt.”

Cliff

the net wealth decline was more likely the whipping taken by stocks ....esp XFJ down 28%...and the softening of property prices.

the 5% qtrly cash increase could have been funds rebalancing to cash, with the continuing flogging of the markets...and less new loan repayments.

the original figures are here but I get lost in them.

 

[BayView]

Care of Commsec market update

In economic data released today, ABS figures show that Australian households have experienced the biggest annual slide in financial wealth for 20 years. Net financial assets (assets less liabilities) of households fell by 16.1pct over the past year, the biggest annual decline in records extending back to 1988. However it is clear Australians have responded to the global financial crisis by putting their money in the bank with the value of currency and deposits rising by $70 billion in the June quarter to a record $1.3 trillion. CommSec Chief Economist Craig James said of the data “Clearly, cash is king .....(and) the sharp slide in wealth levels over the past year will ensure that consumers remain extremely wary about making major new purchases or taking on more debt.”

Cliff

Just another sweeping statement made.

It just means that everyone is like a pack of Penguins on the foreshore at Phillip Island trying to come home after fishing all day.

They all stand there looking up the beach, waiting for one to be brave enough to start walking home.

Then, one gets spooked, turns and runs back into the waves, and the rest all bolt back in behind it.

Many investors have been spooked and have bolted into cash.

Just because everyone is in cash doesn't mean it is KING. It just means it is what everyone who is scared is doing.

What he also should have said is "bailing-out is king".

We all know that the bottom of any market when everyone is scared to act is the best time to go shopping.

And the "sharp slide in wealth" is testament to the fact that most mum and pop investors are only in the share market, only in mutual funds and/or super, maybe a few direct shares, don't know what they are doing generally, have borrowed to buy shares and are hoping for the big cap gain over time and have just been slaughtered.

So, are you going to be a penguin on the beach, or get ready to go shopping?

 

[topcropper]

So, are you going to be a penguin on the beach, or get ready to go shopping?

I just can't believe you just said that to see change...

If you go back through the ages you will find that he has timed everything to perfection. The fact that he has been quiet for so long, and now appears Just as the dung is about to hit the cooling device is typical of his style.

Remember, that there were plenty of tech share experts in 1999 and Sydney property experts in 2003.

See ya's.




ps. And the reduction in wealth is not all to do with shares. Open your eyes up a bit.

 

[see_change]

Hi TC

Hows things going ?

Bayview . I'm ready to go shopping . I have cash available.

Been in cash for a while and considering my equity has gone up in recent times ( for various factors ) I'm happy with that decision.

Cliff

 

[Dazz]

Craig James said of the data “Clearly, cash is king .....(and) the sharp slide in wealth levels over the past year will ensure that consumers remain extremely wary about making major new purchases or taking on more debt.”

This statement bears no resemblance to anything we are doing.

 

[topcropper]

Hi TC

Hows things going ?

Howdy seech.

Have you been following my TC's farm thread? It probably all appears rosey. We are heading for an above average crop.

However I am worried. If grain prices drop another $50 a tonne, and urea prices jump another 15%, I'm out of profitability. Something has got to give.

All I can consol myself with is that I know that myself, and the rest of my neighbours are as efficient as any other farmer in the world. If we can't make a profit, then neither can anyone else, and that means production will come off. If production comes off, then guess what happens then?

And I just thank my lucky stars for the wonderfull season last year that put us out of debt completely.



Nice to see you getting excited again. I think you need to get rid of the 'apprentice' bit from your sig.

See ya's.

 

[sash]

I am of the opinion that shares have pretty much bottomed. This has been demonstrated by sudden falls of say 10-15% a couple of times tjhe last few months followed by recovering to their support prices levels. For example Westpac fell as low as high eighteen dollars but recovered to its support level of high 23s to low 24s.

I am not convinced by property bottomed out as the time taken for the interest rates to take affect is about 6-12 months. In particular Western Sydney where mortagagee possessions are still trending up....the only difference is the banks are holding the properties rather than selling at any cost as per a few months ago!

Additionally, with all the negativity and job losses people are tighening their belts...I see this on a day to day basis. Guess what...the last thing people will want is to make a large purchase like housing. I know you are going to say this is the bottom....not quite as this takes time to translate into slower sales. The funny things is that this time around the middle to higher end suburbs are the ones to take the plastering.

Look forward to some comments based on what I have said!

Having said that I am still looking for those bargains....they are around just take time.

Cheers
Sash

Then, one gets spooked, turns and runs back into the waves, and the rest all bolt back in behind it.

Many investors have been spooked and have bolted into cash.

Just because everyone is in cash doesn't mean it is KING. It just means it is what everyone who is scared is doing.

What he also should have said is "bailing-out is king".

We all know that the bottom of any market when everyone is scared to act is the best time to go shopping.

And the "sharp slide in wealth" is testament to the fact that most mum and pop investors are only in the share market, only in mutual funds and/or super, maybe a few direct shares, don't know what they are doing generally, have borrowed to buy shares and are hoping for the big cap gain over time and have just been slaughtered.

So, are you going to be a penguin on the beach, or get ready to go shopping?

 

[see_change]

Historically the upper and lower ends suffer the most and middle band is considered the least volotile. A down turn was considered a good time to trade up to a nicer home.

I'm not sure about the top end suffereing the most. Anecdotally I'm hearing the top end is travelling ok.

I don't know whether now is a good time to buy. I suspect it is . I'm looking around for buys , which I havn't done for a while.

Cliff

 

[BayView]

I just can't believe you just said that to see change...

If you go back through the ages you will find that he has timed everything to perfection. The fact that he has been quiet for so long, and now appears Just as the dung is about to hit the cooling device is typical of his style.

Remember, that there were plenty of tech share experts in 1999 and Sydney property experts in 2003.

See ya's.

ps. And the reduction in wealth is not all to do with shares. Open your eyes up a bit.

Since when is Seachange the oracle that we must all listen to and obey?

It was not directed specifically at S.C anyway, T.C - more a general question as to everyone's mindset. If he is about to go shopping, then good. He has the right mindset in my book, and I'll probably listen to what he has to say.

But if this is the case, then why would he be posting about cash being king? Instead, he should be saying; "well, everyone keeps saying that cash is king, but I don't agree with it - I'm going shopping".

I'm questioning the mindset that cash is king - who says it is? I certainly don't. He bought it up, I'm giving my opinion to the contrary.

We all know there is safety in cash, but this is only going to be helpful to investors who are not sophisticated enough to be able to invest when the markets are bad and still make money.

It's going to save them from being pounded.

To say that cash is better than anything else is very general and only applies to unsophisticated investors.

I do agree though; for the average Joe, cash is where they should park their funds.

As for the nett wealth not being all to do with shares, what else would it be to do with?

Most people are only in their PPoR and have some super. A few have shares as well, and a smaller group again have one or more legitimate IP (not a holiday house). Very few are business owners.

So other than their own house, most people's investments are directly linked to the share market, and this has had the biggest tanking in Aus of late.

Most of these home owning people are in a negative equity position anyway when you add up their Harvey Norman loan, their car loan, their credit card debt and their house loan, so any drop in a house price is not going to damage them much more; they have no wealth to begin with. And as I've said in other threads; my equity has continued to go up this year, and surely I'm not that lucky or smart that I can dodge the falling house prices totally. It means that the house prices are not falling like a stone as is reported.

The tech experts of 1999 and the housing experts of 2003 were not experts; they were penguins who followed the rest of the flock, except instead of running scared, they just jumped on the bandwagon in the hope of a quick fortune with the other penguins.

Saying cash is king because everyone is doing it is just another bandwagon; it's the penguins running back into the sea.

If you have faith in your knowledge and ability, stay in the market.

 

[steveadl]

I don't think Marc was directing the comments at Cliff, more at Craig James' statement that 'cash is king.'

Cash certainly isn't king in my book.

PS Love the penguin analogy Marc, rings very true.

 

[topcropper]

We all know there is safety in cash, but this is only going to be helpful to investors who are not sophisticated enough to be able to invest when the markets are bad and still make money.

.

I don't believe in cash as an investment either, just like yourself.
Easy to look back in hindsight though and say it's been the best place for the last 6 months.

See ya's.

 

[willair]

Since when is Seachange the oracle that we must all listen to and obey?
So other than their own house, most people's investments are directly linked to the share market, and this has had the biggest tanking in Aus of late.

\
BayView,I have been wondering when SeeChange would start posting again and from the posts he made a few years back,on Rocky-Logan-Central his timing was 99% accurate so once he buy in the numbers he did last time as i guess he will,then i hope he tells everyone the location,maybe have a read back a few years on S-C and his style of investing,i just wish i had known he walked away from the ASX when he did,his timing there was also spot on,a lot better then mine but you live and learn,not having a go at you in any way,but for myself reading S-C always seems to put a different clarity in the Somersoft Mix..
willair..

 

[Peter Parker]

I'm questioning the mindset that cash is king - who says it is?

My understanding of the expression 'cash is king' is that in hard times when people are forced to sell it is the person with the cash who wins since they can buy good quality assets that are only cheap (or even on the market) because of the circumstances of the vendor.

Hence I see no inconsistency between someone saying 'cash is king' and then going to buy bargain shares & property (with cash). It may be more to do with being able to act when opportunities arise rather than the merit of cash as an investment in itself.

Peter

 

[see_change]

My understanding of the expression 'cash is king' is that in hard times when people are forced to sell it is the person with the cash who wins since they can buy good quality assets that are only cheap (or even on the market) because of the circumstances of the vendor.

Hence I see no inconsistency between someone saying 'cash is king' and then going to buy bargain shares & property (with cash). It may be more to do with being able to act when opportunities arise rather than the merit of cash as an investment in itself.

Peter

That's the way I look at it and that's what someone like Michael Croft has done in the last few cycles.

Cliff

 

[crc_error]

So, are you going to be a penguin on the beach, or get ready to go shopping?

I have been shopping all week.. just like Warren Buffett!

Next week I'm buying more!! bring on the specials!!

Anyone who is waiting for the market to recover is a fool.. why get in when prices go up?

 

[boomtown]

And here I was thinking that Cash was Queen.