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What is luck ?How much will you give it to luck and to smartness in your success?
What is luck ?
I've had good 'luck' & bad 'luck'. I'm sure I've mentioned that in order for 'luck' to happen to you, you've got to try stuff.
A general strategy of mine is buying income streams that are 'good value', it's worked for me - it's impossible for me to say how much is luck & how much is smarts.
Some think the structure I use is smart - it's worked for me so far.
You'll have noticed that reducing risk has been a theme towards the latter part of the accumulation process. Reducing risk is essentially making me luckier, or more correctly, reducing the probability of bad luck. But it takes knowledge, analysis & experience of my situation to make those decisions to reduce the risks that I perceive.
Lots of the things that haven't happened for a several cycles have changed the investing landscape significantly. In November '07 it was hard to imagine that within 12 months -To paraphrase the former RBA governor 'Anyone who forecasted these events has been forecasting them for 10 years'. While it may not be especially hard to foresee some of these events it is hard to forecast when they will occur.
- Oil would hit US$40
- Inflation would be falling, with talk of deflationary spirals
- IRs would be down 33% (from 9% to 6%), and heading towards 4.5%
- Stock market would be down 53%
- LPTs down 75%
- Big banks down 50%+
- BHP down 50%
- A$ falling by 30% in 6 weeks
- China growth slowing significantly with commodities down 50%
- Several ASX200 companies would be bankrupt
- Runs on big banks (in UK)
Yeah right "unforseeable" my A$$. It ended up being less than a "few years" but they mostly have happened for same underlying reasons over the last few hundred years, why would it be different this time?18-08-2006, 01:58 AM
There will probably another run up for a few years until we see a real crash.
In the meantime business will get harder, profits will decrease, un-employement will rise, properties will be vacant, and you will sure see the dowside of the XPJ.
Nothing new really
26-08-2006, 06:08 PM
There is still too much liquidity imho for a prolonged recession, but that liquidity does'nt seem headed for the RE market, instead I would say it's going to the share market for the next 3-4 years.
If that liquidity ends, we may be in for a stock market crash, followed by a *real* recession for a few more years.
By then interest rates may be 12-13%, metro RE rental yields 9%, inflation 6%, un-employement 9%, petrol $2 ltr, bread & milk $5.
We will reminisce about the "good ol days" when we could borrow @ 6%, houses were affordable, petrol was $1 ltr, and credit was easy.
By that time the baby boomers will mostly be inactive (or in hell for their 60's sexual revolution) the economy will have slowed down, inflation & interest even higher, and 12% seemed a good rate.
Then ...when night seems darkest, morning begins...again.
Now back to enjoying the good life while I still can.
Now was it really that hard?03-08-2006, 04:25 AM
I see ahead a situation similar to the late 60's to late 70's.
Lots of start & stop, higher interest rates & inflation, and of course a recession.
I won't be selling my real estate though, I've been reducing my LVR for the last 3 yrs and will continue for the next 2-3 till until LVR is around 20-30%.
What I will be selling is all business interests I have as I think it will be challenging to run any type of business in 2-3 yrs time. Even worse for commercial RE imho.
Sell or not to sell really depends on the individual situation.
If you followed a highly geared (leapfrog) strategy for acquiring RE it may be wise to build a safety buffer and even sell some dog IP's (as willair pointed out) to add some floaters to your raft.
12-12-2004, 12:07 AM
As for predictions, there is still demand for property, which will hold up prices for a little longer. People are still hearing all the "boom" stories and want to jump on board. "I'm gettin into real estate investing" is still the talk of the backyard BBQ, and of course seminars, newsletters, radio & tv shows will still try to take the last wannabe investor's dollar.
When those dollars run out, and investors are borrowed to their eyeballs, is when then market slows and interest rates start rising. Then it will be interesting to see what happens.
Unless human nature has changed, and I have no reason to believe it has, those times will be back when RE's will struggle to find buyers, and owners won't be able to meet repayments, and interest rates will high enough for many not to be able to afford there IP's.
I've seen all before and I'm sure I'll see it again.
"damn - sold bhp at $10/share to fund an ip deposit (didn't see the resource boom coming)"
gotta love BHP...
I'm a member of another site that gives buy/sell/hold recommendations on shares...got the buy email sat $9.20 - and sell at $30 - wish i'd bought a hell of a lot more
Which share recommendation site are you using?
How has it performed? Cheers mate
I always enjoy re-reading your story Keith! thank-you
I had a re-read and found some figures there which today simply are not possible. It seems to me like your entry involved 'luck'!
Firstly I dont see how property doubles every 5 years. this is a big ask. property normally doubles every 7-12 years. Average would be 7.2% PA growth which = double in 10 years.!
Second you locked rates for 5.95% for 5 years. This is certainly not possible. Even with the CFG rates didnt go that low for so long..!
So this in turn doesn't allow you to buy shares which are cash flow positive. Since your buying ASX200, the yield at present is 4.3%. Thats about 6% if you count the franking. So with todays variable rates, these shares would be at best cash flow neutral. But with another 1% interest rate rise expected, these will quickly turn negating...!
Luck or knowledge followed by action??So to me, you did in fact have some 'luck' on your side to time your entries well, and achieve your story in 5 years time....!
Also how do you find your $2mil property since your not working? Do the banks just keep on lending you $$$? With a job?....!
Your strategy does work, from what I can see, but I think it will take much longer than 5 years to achieve. As it seemed like you purchased bargin property and bargin shares!
so what would keith be doing now?
so basically keith is on the look out for opportunities and when the figures ad up, he takes advantage of them?
so what would keith be doing now? buying shares since they are cheap still, probably not buying property due to the large growth spirt over the last 12 months and raising rates which will probably dampen the mood?
Jason & Steve (and Rick) have given some excellent answers - thanks.I had a re-read and found some figures there which today simply are not possible. It seems to me like your entry involved 'luck'
To clarify, I think I said equity doubles every 5 yrs, not property. eg Cash deposit of $100K on a $400K house which doubles in 10 yrs, means that I get $500K equity in 10 yrs - a five fold increase. Being conservative, that's a doubling in equity every 5 yrs.Firstly I dont see how property doubles every 5 years. this is a big ask. property normally doubles every 7-12 years. Average would be 7.2% PA growth which = double in 10 years.
I agree not today, but I did fix ~80% at 6.19% for 5 yrs back in April 2009 - see Fix Now or Wait.Second you locked rates for 5.95% for 5 years. This is certainly not possible. Even with the CFG rates didnt go that low for so long.
I haven't bought the index for a while, though I have some AFI & ARG, and of course a few other stocks. I bought some more (although not enough) last year when they were cheap & some were c/f +ve - I think I posted about that above. And as Jason mentioned the earning cycle has turned up.So this in turn doesn't allow you to buy shares which are cash flow positive. Since your buying ASX200, the yield at present is 4.3%. Thats about 6% if you count the franking. So with todays variable rates, these shares would be at best cash flow neutral. But with another 1% interest rate rise expected, these will quickly turn negating.
Sure, I had good luck... I also had bad luck - I think I've explained about that above. My attitude was try stuff - if it works keep doing it, if it doesn't try something different. Is that luck ?, is it perseverance ? is it experience ? is it smart investing ? is it managing downside ? is it stacking the odds in your favour ? is it merely turning up ? You can call it whatever you like.So to me, you did in fact have some 'luck' on your side to time your entries well, and achieve your story in 5 years time.
I haven't asked them to recently. If you re-read (again) the strategy is to borrow against my shares (a margin loan) for extra living expenses. It takes about 6 mouse clicks & hitting exactly 5 keys on NetBank to transfer $$$ from the margin account to my personal account - no forms to fill in, no bankers to kow tow to. One of the major risks of LOE that I identified a long time ago, was banks not lending against res IP if you can't prove servicability - using a margin loan avoids that. When lending against IP gets easier, I'll draw down equity in the IPs and top up the margin loan and buy more IP or shares - it's cheaper & lower risk.Also how do you find your $2mil property since your not working? Do the banks just keep on lending you $$$?
Purchasing bargain property & bargain shares is all in the timing for me. I'm not much good at searching for bargains on the net, so I let the Rising Tide do the work for me. I'm a value investor, in a nutshell, I buy quality stuff that's cheap & offers a reasonable return, wait till it goes up, then draw down equity & repeat.Your strategy does work, from what I can see, but I think it will take much longer than 5 years to achieve. As it seemed like you purchased bargin property and bargin shares!
Yes. As opposed to a momentum investor, who only buys because everyone else is buying, and consequently prices are rising.so basically keith is on the look out for opportunities and when the figures ad up, he takes advantage of them?
He'd be just back from a long holiday... and wondering what to do next .so what would keith be doing now?
He was buying shares & fixing IRs last year, he continues to think that it's unlikely that the world is about to end, and that in the medium & long term sensible investing in good value shares & property will work out fine....buying shares since they are cheap still, probably not buying property due to the large growth spirt over the last 12 months and raising rates which will probably dampen the mood?
so what would keith be doing now?
He'd be just back from a long holiday. .