between the Storm Financial modus operandi and that of the Somers' doctrine?
I have been close to Storm ie I have attended their introductory seminars, watched the Cassimatis' "castle-on-the-hill" being built
http://www.townsvillebulletin.com.au/article/2009/01/28/35411_hpnews.html
and driven past their, ever more grand (each year), headquarters. Did I mention that friends of mine are among the hundreds of "victims" selling their houses with absolutely nothing to look forward to but personal bankruptcy? I do not consider them stupid or greedy, just victims.
Bear with me: I will only have one shot at this post and if I miss I will be vilified again so I must be careful, even if more verbose than I would normally chose to be.
What are the similarities I talk about?
You start with the equity in whatever capital asset you own and borrow against it (nearly always the house you live in) and invest in an asset "which never goes down". ( The "doubles every seven years" thing isn't copyright!)
Whatever improvement in your circumstances, be that via cap gain or salary increase, you leverage that up 90% and borrow more.
Almost overnight you are rich!
After a few years you can lick the lolly. Storm clients had a "group-fest" tour of Europe. Individually you might buy a Beemer.
You can tell your mates the year you will retire, with an eerie degree of accuracy, how much you will have in your hip-kick and do so with a superior smile.
Regardless of the chaos around you, you have studied the funnymentals. You'll be right.... OK!
Making money is easy. Why do they make it sound difficult?
Maybe it is difficult. In the above scenario, if whatever index your investment was part of, was at 100 when you bought in and rose over "X (above 5)" years to 500, you would be showing nearly X10 profits (not X5). Now should it fall back to 100 you would be square, wouldn't you? Hell no! $1 "in" becomes a little less than $10 at peak but an 80% fall brings your bank back to $2. This is the tough bit: You increased your loan on the way up by many thousands. It means nowt whether the asset was shares or not, leverage works with the same indifference on the way as the way down.
So where are we now?
We are at the point when our bank realises that we own a house of cards, that there isn't a "greater fool" willing to pay 10% more for our asset than they would last year.
Our "excellent" cushy job has limits on how much good money we can throw after bad.
The wife says "The Beemer is mine, solve your problems, just don't bring me into it."*
You draw down on an LOC to meet a margin call.
Sme again next week.
How much buffer do you have anyway?
Have you ever had to sell to meet calls? I have. My major holding was only afforded a 40% LVR so I had to sell heaps to meet the call. "Safe" ain't what it seems..
This is the point when you realise that you have virtually nothing under your feet. You owe your soul to the company store! You all know the lyrics, and you are so far past that. Ya reckon! If you owe millions you are a slave of the banks as surely as the fourty-niners of old were to their creditors. Think about it. You are not borrowing, via the bank, your old auntie's savings. The Illuminati are your creditors. Your well-being is not their consideration. OK You don't believe in conspiracy theories and the Illuminati but my "spiel chucker" does!
What's the saying?: "Just because you are not paranoid doesn't mean your not being followed."
Feel free to disagree with the conspiracy theory, by all means, but if you have an open mind with a weekend to spare: Google it! It could change your life.
So Mannie Cassimatis had a great PPT presentation which "proved" you could not lose in stocks "in the long term". Stock, like property, never go down, for long! The weakness, of course was that he used the post depression years as the base. He assumed that the depression would never repeat. It is not a given that we are re-visiting the Great Depression but the devotees have already been blown out of the water. Clearly his computer models were no better than those of Bear Stearns. I hope no-one reading uses the the last 10 years' property prices as the trendline to base their investment strategies on!
In 10....20 years this will be little more than a "correction" in the charts, we are told. Maybe. Maybe not. While chartists and statisticians can ponder "corrections" you 'n' me can go broke.
So what's the point of this post? A bottle of red has passed on to wherever ordinary bottles go so I must regather my thoughts:
The gut-wrenching, heart-breaking stories from Storm are repeatable, and, in far greater numbers among those who chose to get rich with OPM in property. Only the needle has been changed to protect the record!
This is a simple post, not a doctoral thesis. ie it is not subject to endless edits. Let me know what you think about the basic phylosophy but please don't nit-pick.
* I have great respect for women. I speak of a "scenario" only
I have been close to Storm ie I have attended their introductory seminars, watched the Cassimatis' "castle-on-the-hill" being built
http://www.townsvillebulletin.com.au/article/2009/01/28/35411_hpnews.html
and driven past their, ever more grand (each year), headquarters. Did I mention that friends of mine are among the hundreds of "victims" selling their houses with absolutely nothing to look forward to but personal bankruptcy? I do not consider them stupid or greedy, just victims.
Bear with me: I will only have one shot at this post and if I miss I will be vilified again so I must be careful, even if more verbose than I would normally chose to be.
What are the similarities I talk about?
You start with the equity in whatever capital asset you own and borrow against it (nearly always the house you live in) and invest in an asset "which never goes down". ( The "doubles every seven years" thing isn't copyright!)
Whatever improvement in your circumstances, be that via cap gain or salary increase, you leverage that up 90% and borrow more.
Almost overnight you are rich!
After a few years you can lick the lolly. Storm clients had a "group-fest" tour of Europe. Individually you might buy a Beemer.
You can tell your mates the year you will retire, with an eerie degree of accuracy, how much you will have in your hip-kick and do so with a superior smile.
Regardless of the chaos around you, you have studied the funnymentals. You'll be right.... OK!
Making money is easy. Why do they make it sound difficult?
Maybe it is difficult. In the above scenario, if whatever index your investment was part of, was at 100 when you bought in and rose over "X (above 5)" years to 500, you would be showing nearly X10 profits (not X5). Now should it fall back to 100 you would be square, wouldn't you? Hell no! $1 "in" becomes a little less than $10 at peak but an 80% fall brings your bank back to $2. This is the tough bit: You increased your loan on the way up by many thousands. It means nowt whether the asset was shares or not, leverage works with the same indifference on the way as the way down.
So where are we now?
We are at the point when our bank realises that we own a house of cards, that there isn't a "greater fool" willing to pay 10% more for our asset than they would last year.
Our "excellent" cushy job has limits on how much good money we can throw after bad.
The wife says "The Beemer is mine, solve your problems, just don't bring me into it."*
You draw down on an LOC to meet a margin call.
Sme again next week.
How much buffer do you have anyway?
Have you ever had to sell to meet calls? I have. My major holding was only afforded a 40% LVR so I had to sell heaps to meet the call. "Safe" ain't what it seems..
This is the point when you realise that you have virtually nothing under your feet. You owe your soul to the company store! You all know the lyrics, and you are so far past that. Ya reckon! If you owe millions you are a slave of the banks as surely as the fourty-niners of old were to their creditors. Think about it. You are not borrowing, via the bank, your old auntie's savings. The Illuminati are your creditors. Your well-being is not their consideration. OK You don't believe in conspiracy theories and the Illuminati but my "spiel chucker" does!
What's the saying?: "Just because you are not paranoid doesn't mean your not being followed."
Feel free to disagree with the conspiracy theory, by all means, but if you have an open mind with a weekend to spare: Google it! It could change your life.
So Mannie Cassimatis had a great PPT presentation which "proved" you could not lose in stocks "in the long term". Stock, like property, never go down, for long! The weakness, of course was that he used the post depression years as the base. He assumed that the depression would never repeat. It is not a given that we are re-visiting the Great Depression but the devotees have already been blown out of the water. Clearly his computer models were no better than those of Bear Stearns. I hope no-one reading uses the the last 10 years' property prices as the trendline to base their investment strategies on!
In 10....20 years this will be little more than a "correction" in the charts, we are told. Maybe. Maybe not. While chartists and statisticians can ponder "corrections" you 'n' me can go broke.
So what's the point of this post? A bottle of red has passed on to wherever ordinary bottles go so I must regather my thoughts:
The gut-wrenching, heart-breaking stories from Storm are repeatable, and, in far greater numbers among those who chose to get rich with OPM in property. Only the needle has been changed to protect the record!
This is a simple post, not a doctoral thesis. ie it is not subject to endless edits. Let me know what you think about the basic phylosophy but please don't nit-pick.
* I have great respect for women. I speak of a "scenario" only