Fiscal literacy and surviving the GFC

[nonrecourse]

Is it time to re-evaluate your finances?

On the front page of the saturday age the treasurer is saying the world financial system no longer is viable. Funny that isn't it. Have you heard that message from someone else for about a year now. Seems reality and doom and gloom have some common ground.

If your gearing is above 30% because you started in the last five years you have some difficult choices. Do you try and hang on and hope that because in the past residential property has not seen values drop 40-50% ?.

Do you sell your family home and put the excess against your investment properties because this way you pay no capital gains tax? Is your business or employment prospects a bit shakey or is there an opportunity for you to take on a second job to try and at least build a buffer you can use if the banks start demanding more security?

All difficult questions that only you can answer

 

[chilliaa]

On the front page of the saturday age the treasurer is saying the world financial system no longer is viable. Funny that isn't it. Have you heard that message from someone else for about a year now. Seems reality and doom and gloom have some common ground.

If your gearing is above 30% because you started in the last five years you have some difficult choices. Do you try and hang on and hope that because in the past residential property has not seen values drop 40-50% ?.Nope i am using this period of fear to expand, whilst everyone else is running for cover i am expanding. I am taking this opportunity to acquire cash flow postive assets that are being priced on fear of the unknown, in the future i will sell them back to Mr Market when he is more cheerful. Because i dont know when Mr Market will be in a cheerful mood again i am being compensated for my time with the positive cash flow.

Do you sell your family home and put the excess against your investment properties because this way you pay no capital gains tax? Is your business or employment prospects a bit shakey or is there an opportunity for you to take on a second job to try and at least build a buffer you can use if the banks start demanding more securityAll difficult questions that only you can answer

Nope my family home (apartment) is in a trust. I rent my family home from the trust and just like all my investments its also cash flow postive otherwise i would have rented from someone else and invested that capital elsewhere. True however i am increasing my savings rate further at this point in time, not because i am scared but because the investment opportunities havent been this good in 20 years. The opportunity cost of spending money on consumables has never been higher.


Just my opinion

 

[BayView]

On the front page of the saturday age the treasurer is saying the world financial system no longer is viable. Funny that isn't it. Have you heard that message from someone else for about a year now. Seems reality and doom and gloom have some common ground.

If your gearing is above 30% because you started in the last five years you have some difficult choices. Do you try and hang on and hope that because in the past residential property has not seen values drop 40-50% ?.

Do you sell your family home and put the excess against your investment properties because this way you pay no capital gains tax? Is your business or employment prospects a bit shakey or is there an opportunity for you to take on a second job to try and at least build a buffer you can use if the banks start demanding more security?

All difficult questions that only you can answer

Every significant financial decision my wife and I make involves a re-evaluation of our finances and how the decision will impact them.

It always comes back to the cashflow behind the change.

Because we are always mindful of things that might go wrong, each decision is based on safety and future cashflow/servicability.

We are always trying to be aggressive, but never reckless.

 

[Propertunity]

If your gearing is above 30% because you started in the last five years you have some difficult choices. Do you try and hang on and hope that because in the past residential property has not seen values drop 40-50% ?.

Do you sell your family home and put the excess against your investment properties because this way you pay no capital gains tax? Is your business or employment prospects a bit shakey or is there an opportunity for you to take on a second job to try and at least build a buffer you can use if the banks start demanding more security?

All difficult questions that only you can answer

All Q's that I will not bother to waste one mental parsec on I think. If banks start making margin calls on IP loans or PPOR loans, I think there will be 2 things:
1. More pressing things to be concerned about than just a few IPs
2. Hell to pay for the banks from K. Rudd who has essentially rescued them

 

[Chatto]

Here is the link to the black Swans' speach in London

http://www.alp.org.au/media/0309/mstres131.php

And as usual those who went to uni for 3 years to get a degree in simpicity took the quote that had the best impact and published that..

"This crisis began with rising delinquencies in the US sub-prime mortgage market infecting the collateralised debt obligations into which so many sub-prime assets had been aggregated. The CDOs became untradeable, their values impossible to ascertain. Eighteen months later the problem of these toxic assets is still with us - still weighing on fragile financial institutions which can't sell (or even sensibly value) the assets, and which must make increasing provision against the very real risk of losses. And with the downturn in economic activity, with the predictable impact on jobs, the stock of impaired conventional assets is rising daily.

In these circumstances the global financial system can't work, and the global economy can't work. It is as simple, as stark, as that. "

 

[nonrecourse]

All Q's that I will not bother to waste one mental parsec on I think. If banks start making margin calls on IP loans or PPOR loans, I think there will be 2 things:
1. More pressing things to be concerned about than just a few IPs
2. Hell to pay for the banks from K. Rudd who has essentially rescued them

Why am I not surprised that you wouldn't spend a parsec. I wouldn't go near an investment advisor or a real estate agent to advise me how to preserve my seed capital. They are there to sell me shares or property as that is their business. My business is to ensure that my internal rate of return knocks the socks off anything a spruiker can sell me.

As for relying on our pollies to "police the banks and do the right thing", I don't believe in fairy tales. An entire generation of retires have lost their seed capital because they believed the spruikers and pollies fairy tales

 

[Sunfish]

Is the heading: Fiscal literacy and surviving the GFC already outdated?

Maybe it should be Fiscal literacy and surviving the Greater Depression. John Williams of Shadowstats.com claims that the US is already in a depression. This guy studies official gov statistics and takes out the "spin".

I know everyone has a different definition of "depression".

 

[keithj]

As for relying on our pollies to "police the banks and do the right thing", I don't believe in fairy tales. An entire generation of retires have lost their seed capital because they believed the spruikers and pollies fairy tales

Who do you believe in NR ?

 

[nonrecourse]

Who do you believe in NR ?

I believe that as a society we shirk responsibility. That is why we are reaping the depression that has now arrived. I believe that life is what you make of it.

We all have clay feet. Every time I make a mistake I view the $ lost as part of a life time education bank deposit. Over the years I have made many mistakes/deposits. Most were because I believed that someone else was going to look out for me.

We live in the best counrty in the world and have been fortunate to live through the greatest financial boom the working and middle class of this country has ever experienced. Compared to the economic boom of the gold rush in Australia and subsequent Melbourne property boom and the following 1890's world depression; I think there are more similarities to that the 1930's depression.

So to answer your question Keith I believe in thinking, learning and sharing that knowledge to make my and my families life a rich and satisfying life.

 

[keithj]

.....

So to answer your question Keith I believe in thinking, learning and sharing that knowledge to make my and my families life a rich and satisfying life.

That didn't answer my question NR. The question was Who do you believe in ?

You obviously don't believe pollies, golliwogs, fiscal trogolytes (sic), spruikers, economists,....

 

[nonrecourse]

That didn't answer my question NR. The question was Who do you believe in ?

You obviously don't believe pollies, golliwogs, fiscal trogolytes (sic), spruikers, economists,....

Keith I have gone back and had a look at my exchanges with you over time and I can only conclude that your a typical aussie bully. Like most bullies your a coward, you reveal nothing about yourself but feed off of others, fair enough You have kicked sand in my face for the last time. You have just been shirtfronted.

 

[Sunfish]

So to answer your question Keith I believe in thinking, learning and sharing that knowledge to make my and my families life a rich and satisfying life.

It is our responsibility to ourselves, our family and friends to survive what life throws at us. I'm reluctant to get involved much now and would normally let this go through to the keeper but for two things:

A couple of recent posts had an air of fatalism about them, not obvious and I could be wrong. It looked as if they were saying "If the experts don't know, how can I?" and decided to hope rather than plan. I think there are things which can be done to assure financial survival, and thus success after the "dark winter".

The second thing is to lend a little support to NR who has done a good job of telling of the risks he sees ahead and how to be a survivor. He has been investing, successfully, for quite a while so doesn't deserve the hostility directed at him. He should have abandoned the forum ages ago and the fact that he hasn't tells me cares about people he has never met and is willing to treat them as "friends". You will note I included "friends" among those we should care about in my first sentence.

 

[keithj]

Keith I have gone back and had a look at my exchanges with you over time and I can only conclude that your a typical aussie bully. Like most bullies your a coward, you reveal nothing about yourself but feed off of others, fair enough You have kicked sand in my face for the last time. You have just been shirtfronted.

I'm sorry you feel that way NR. I make a deliberate effort to provide useful information in my posts. My general rule is - a post of mine must contain useful information or it must attempt to extract useful information from others - most of my exchanges with you fall into the latter category. It's a pity that you feel that questioning your views & attempting to debate them elicits this response from you.

I religiously avoid ambiguous statements, unbalanced & unsubstantiated forecasts, motherhood statements, vagueness, and wandering from the point of the thread or post. IMO wasting bandwidth & the time of 100's of readers is a cardinal sin in forumworld .

Maybe if you did debate, explain your logic, give references to your sources, rationalised your apparently contradictory outcomes, gave a sequence of events that leads to your conclusions then your extreme views wouldn't be questioned as much.

 

[chilliaa]

It is our responsibility to ourselves, our family and friends to survive what life throws at us. I'm reluctant to get involved much now and would normally let this go through to the keeper but for two things:

A couple of recent posts had an air of fatalism about them, not obvious and I could be wrong. It looked as if they were saying "If the experts don't know, how can I?" and decided to hope rather than plan. I think there are things which can be done to assure financial survival, and thus success after the "dark winter".

The second thing is to lend a little support to NR who has done a good job of telling of the risks he sees ahead and how to be a survivor. He has been investing, successfully, for quite a while so doesn't deserve the hostility directed at him. He should have abandoned the forum ages ago and the fact that he hasn't tells me cares about people he has never met and is willing to treat them as "friends". You will note I included "friends" among those we should care about in my first sentence.

Im sorry Sunfish i strongly disagree with you.
Firstly let me state publicly NR has some knowledge centres that are VERY valuable to this forum, namely his knowledge about trust structures, self managed superannuation accounts, commercial property, leases etc.

But as you mentioned about the experts not knowing with 100% certainty, well if the experts cant be sure then how can NR be sure about:
1) future $AU dollar down to the nearest cent
2) where the ASX is going to be by Oct 09
3) that medium priced australian residential property will fall by 40% in nominal terms.
4) etc etc

What gets my goat, and i think Keith feels the same way, is there are DIFFERENT ways to hedge against risk. Non-recourse feels there is only one way: a suitable asset structure and a reduction in gearing to 30%. Its either NR's way or the highway.

Now the problem is during times of economic worry, anyone who presents a more extreme view will be 'proved' right by the short term economic news and the media at large. But being right in the short term and being right over the course of an asset investment are two different things.

Its a bit like during the dot.com boom, anyone who tried to apply more moderate investment techniques during this period was 'proved' wrong by the continued spiral in dot.com shares. Its only after the dot.com boom crashed that those moderate investors were proved 'right'. Well this is just the reverse of the dot.com boom, eventually the market and the economy as a whole will correct itself.

And again for the record, just like i stated in the share threads back in early 2008, i wasnt smart enough to enter the resource market at its early bull market stages but im also not stupid enough to enter the resources market when its in its final stages of a bullish market.

Now in 2009, i wasnt smart enough to participate in bear market strategies such as short selling, using option writing strategies, but nor am i stupid enough to adopt a liquidation strategy just to get my LVR ratios to 30% when asset prices are already reflecting risk and when cashflows on investments are more positive than at any point in my 18 years of investment experience.

 

[chilliaa]

I'm sorry you feel that way NR. I make a deliberate effort to provide useful information in my posts. My general rule is - a post of mine must contain useful information or it must attempt to extract useful information from others - most of my exchanges with you fall into the latter category. It's a pity that you feel that questioning your views & attempting to debate them elicits this response from you.

I religiously avoid ambiguous statements, unbalanced & unsubstantiated forecasts, motherhood statements, vagueness, and wandering from the point of the thread or post. IMO wasting bandwidth & the time of 100's of readers is a cardinal sin in forumworld .

Maybe if you did debate, explain your logic, give references to your sources, rationalised your apparently contradictory outcomes, gave a sequence of events that leads to your conclusions then your extreme views wouldn't be questioned as much.

Dont worry about it Keith. Come back in 5 years and i am sure that many people will agree with your views by then. Its always difficult possessing a moderate view, when the market is either extremely bullish or bearish. Until the market soughts itself out, you will always be proved wrong by short term indicators.

 

[BoatBoy]

typical aussie bully

What is a Typical Aussie Bully? There is no google reference apart from yours.

http://www.google.com.au/search?hl=...t+is+a+typical+aussie+bully&btnG=Search&meta=

You have just been shirtfronted.

Shirtfronted? Another made up term?

http://www.google.com.au/search?hl=en&safe=off&rlz=1G1GGLQ_ENAU304&q=Shirtfronted&btnG=Search&meta=

Dave

 

[keithj]

Shirtfronted? Another made up term?

http://www.google.com.au/search?hl=en&safe=off&rlz=1G1GGLQ_ENAU304&q=Shirtfronted&btnG=Search&meta=

wiki says it's a neologism.

In psychiatry, the term neologism is used to describe the use of words that only have meaning to the person who uses them, independent of their common meaning. This is considered normal in children, but a symptom of thought disorder (indicative of a psychotic mental illness, such as schizophrenia) in adults.

 

[ffc1883_1996]

Chillia, I’m sorry to hear about your goat. Actually, you’re spot on – NR does his best work when he shares his knowledge and experience of trust structures

We’ve been around this cycle four or five times now. It starts with some dire predictions by NR which rest on an apparently flimsy base. The SS community debates the predictions. keithj enters an exchange with NR where he requests the supporting information which led to the dire predictions. Instead of providing the information or an apology for not having it, NR lets fly with a nasty post about keithj.

keithj is not a bully or a coward and he really is quite open about his investing strategies here on Somersoft. NR’s latest “spray” was quite bemusing.

 

[evand]

With the hundreds of posts NR has posted on the subject. If Keith hasn't worked out what he's on about by now he's not he's either stupid or BS'ing. And i don't think its the former. (but i've been wrong before)

He keeps asking why? why? where's your proof? Its bloody ridiculous.

He's just trying to discredit NR in any way he can. And i think he feels the best way is to keep asking these inane, non relevant questions. Inciting banal support here by some non thinking individuals. Remember guys, 'thinking' is not recycling other peoples opinions.

Is it fear of the unknown? Fear of being wrong? Fear of going under? What else could it be?

 

[eternit]

With the hundreds of posts NR has posted on the subject. If Keith hasn't worked out what he's on about by now he's not he's either stupid or BS'ing. And i don't think its the former. (but i've been wrong before)

I can have 100s of posts saying that everyone in Australia will die by 1st January 2010. If you dont believe what I am saying and ask for my reasoning behind that conclusion would that make you stupid or BS'ing?

He keeps asking why? why? where's your proof? Its bloody ridiculous.

Why is that ridiculous?

He's just trying to discredit NR in any way he can.

No he is not, he is asking NRs reasoning behind his conclusion, how will that discredit him?