LOE Model

[Kinnon Bell]

Yeah, it's weird, and this is the only forum it does it with. I go to the search tab up the top and and if I try searching for anything that's more than one word IE stops working, the whole screen goes white and goes into "not responding" mode, every time without fail. I can't use another browser either because I'm at work and technically can't change anything to my computer set up. But, problem now solved

 

[Bill.L]

Hi D Money,

According to the above source, the average long term (109 year) return of the australian stock market is 7.48% excluding dividends and 12.42% including them.

This is just marketing cr@p. It does not exist in the real world. To see real world performance have a look at the LICs on the market like AFI, ARG, and MLT. These are diversified listed funds, with professional money managers and very low fees. Their performance has been way below the accumulation index (the one you quote) over the last 10 years.

The indexes are constantly changed and the numbers given for it do not reflect the cost of selling the losers(the ones dropped out of the index) and buying the inclusions into the index.

Did you know that if your Great grandfather had bought $10,000 of every stock on the DJIA on the 1/1/1900 and the certificates had been handed down through the generations to you, your fortune would be worth precisely nothing. All those stocks, including the companies that took over some of those stocks went bankrupt over the years.

Stockmarket indexes are lies to suck in the gullible who see the lovely long term performance.

bye

 

[JamesGG]

Did you know that if your Great grandfather had bought $10,000 of every stock on the DJIA on the 1/1/1900 and the certificates had been handed down through the generations to you, your fortune would be worth precisely nothing. All those stocks, including the companies that took over some of those stocks went bankrupt over the years.

In fairness, there were only twelve companies on the DJIA in 1900.

And I do stand to be corrected, but, I'm pretty sure that General Electric was one of them.


Edit: Found this website which shows what made up the DJIA over the years. In 1900, there was:
American Cotton Oil
American Steel & Wire
American Sugar (eventually became Amstar Holdings)
Continental Tobacco
Federal Steel
General Electric
National Lead
Pacific Mail Steamship
Peoples Gas (absorbed Chicago Gas in 1897)
Tennessee Coal & Iron
U.S. Leather preferred
U.S. Rubber

 

[JIT]

Hi D Money,



This is just marketing cr@p. It does not exist in the real world. To see real world performance have a look at the LICs on the market like AFI, ARG, and MLT. These are diversified listed funds, with professional money managers and very low fees. Their performance has been way below the accumulation index (the one you quote) over the last 10 years.

The indexes are constantly changed and the numbers given for it do not reflect the cost of selling the losers(the ones dropped out of the index) and buying the inclusions into the index.

Did you know that if your Great grandfather had bought $10,000 of every stock on the DJIA on the 1/1/1900 and the certificates had been handed down through the generations to you, your fortune would be worth precisely nothing. All those stocks, including the companies that took over some of those stocks went bankrupt over the years.

Stockmarket indexes are lies to suck in the gullible who see the lovely long term performance.

bye

Hi Bill,

I don't quite follow, here is ARG's performance over the last 10 years:

http://www.argoinvestments.com.au/investInfo.php?id=3&chart=1

10.7% pa for ARG vs 7.6% pa for the index, plus ARG is after-tax and after-costs, with mainly fully franked dividends, the index isn't...

AFI:

http://www.afi.com.au/Investment-performance.aspx

11.4% vs 7%

MLT:

http://www.milton.com.au/?totalreturns&do=frame&ref=pdf/totalreturns/MLTTSR30June10.pdf

10.7% vs 7.1%

These LICs haven't been around for 109 years, so I'm not sure that comparing their 10 year returns to the 109 year returns above is relevant?

 

[Gordon Farkus]

Did you know that if your Great grandfather had bought $10,000 of every stock on the DJIA on the 1/1/1900 and the certificates had been handed down through the generations to you, your fortune would be worth precisely nothing. All those stocks, including the companies that took over some of those stocks went bankrupt over the years.

Not even close to being true. Wikipedia lists the initial 12 as:

General Electric
American Cotton Oil Company, a predecessor company to Bestfoods, now part of Unilever.
American Sugar Company, became Domino Sugar in 1900, now Domino Foods, Inc.
American Tobacco Company, broken up in a 1911 antitrust action.
Chicago Gas Company, bought by Peoples Gas Light in 1897, now an operating subsidiary of Integrys Energy Group.
Distilling & Cattle Feeding Company, now Millennium Chemicals, formerly a division of LyondellBasell, the latter of which is now in Chapter 11 bankruptcy.
Laclede Gas Company, still in operation as the Laclede Group, Inc., removed from the Dow Jones Industrial Average in 1899.
National Lead Company, now NL Industries, removed from the Dow Jones Industrial Average in 1916.
North American Company, an electric utility holding company, broken up by the U.S. Securities and Exchange Commission (SEC) in 1946.
Tennessee Coal, Iron and Railroad Company in Birmingham, Alabama, bought by U.S. Steel in 1907.
U.S. Leather Company, dissolved in 1952.
United States Rubber Company, changed its name to Uniroyal in 1961, merged with private B.F. Goodrich in 1986, bought by Michelin in 1990.

I'd say even with the ones that did go bankrupt your great-grandfather would've made truckloads overall. Eg. investments of $10,000 in 1900 (massive amounts then) in what would become parts of Unilever and Michelin would be extraordinary amounts today.

 

[Mr. Fabulous]

I go to the search tab up the top and and if I try searching for anything that's more than one word IE stops working,

See, there's your problem. Firstly, you're using the Search on the site, which is garbage. Secondly, you're using IE, which is worse than garbage.

I suggest switching to Firefox and as tess suggested, use Google.

 

[Kinnon Bell]

See, there's your problem. Firstly, you're using the Search on the site, which is garbage. Secondly, you're using IE, which is worse than garbage.

I suggest switching to Firefox and as tess suggested, use Google.

Google and I have become even better friends now I have learnt this and as I mentioned earlier....

I can't use another browser either because I'm at work and technically can't change anything to my computer set up.

 

[Dazz]

.....so the boss ain't gettin' real good value then outta ya.....

 

[Kinnon Bell]

.....so the boss ain't gettin' real good value then outta ya.....

I'm providing the service that I'm being paid for.

I work inbound customer service at a call centre. I take on average 8 calls a day that last between 3-10 mins each. So as long as I'm ready to take a call when it comes in the boss/company doesn't care what I do with the rest of my time.

So that's a major bonus for me and my PI studies.

 

[Intrinsic_Value]

This thread is so funny.

So let me just summarise,
property has shown good rolling 10 year periods for several decades, so its worthy of being used to funnel some form of LOE strategy at current prices.

Living off income strategy with ungeared shares is more dangerous than LOE on geared residential property, on the basis of the last 10 years of data in the USA, and 40 years of data in Japan. Or because one might be naive enough to put all their money in a single share and its 'not there tomorrow'.

LOE on a geared share portfolio is doublely dangerous (actually this i agree with).

Forget index funds, either be an active trader or investor in shares or stay out of shares as an investment class all together.

People never seem to learn, they nearly ALWAYS justify their decisions based on the recent past.

And thats why

Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference

 

[Bill.L]

Hi all,

IV,

And I do stand to be corrected, but, I'm pretty sure that General Electric was one of them.

GE was in the original DOW index but was dropped out in 1898, it was re-instated a few years later, but was not in the index on 1/1/1900.( see later in post ) Though it is interesting that James's data still has it there. This tells me that the history is a little murky on it, will have to check my source again..

September 1898 - U.S. Rubber substituted for General Electric in the industrials.

http://www.cftech.com/BrainBank/FINANCE/DowJonesAvgsHist.html

Gordon, not the original 12, the ones in the index 1/1/1900. Components of the index change all the time, which was my point. To be 'equal' with the index you have to buy and sell shares all the time.

Rechecking, it does indeed look like GE was in and out of the index a few times and was in on 1/1/1900, therefore just by keeping them in the family you would do alright.

i

n what would become parts of Unilever and Michelin would be extraordinary amounts today.

except for the fact that ..

In 1985, Uniroyal was taken private by its management and the New York investment firm of Clayton & Dubilier

and...

In 1928, the Dow-Jones Industrial average expanded to 30 stocks for the first time, but by then U.S. Rubber Company was no longer listed among them.

JIT,

Those figures do indeed look good, yet they are not the 12.48% claimed by D Money even though we had one of the largest booms in history during that 10 year period. Interestingly the accumulation index returned either 7% or 7.1% or 7.6% pa over the 10 year period, I wonder which one it really was??

Also ARG state....

These are compound growth rates and are compared with the ASX All Ordinaries Index.

Then show a table with one column titled..

All Ord. Acc. Index

Also their performance in the last 7 years has not been too flash, nor the last 5 nor the last 3....

bye

 

[landlubber]

Not much foot traffic on this road ...

Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference

I don't know that the road diverged. If you build your porfolio with (mainly) capital city IPs which exhibit pretty strong CG, and hence you end up with a total shed-load of equity... it sort of follows. But, whatever, LOE is certainly "a road less travelled" as I see it.
LL

 

[Intrinsic_Value]

Hi all,




Also their performance in the last 7 years has not been too flash, nor the last 5 nor the last 3....

bye

and whats the value now compared to 7 years ago, 5 years ago and 3 years ago.

This is why its so important to know whether one is speculating or investing.

To many people think they are investing by using price movements, when in actual fact they are speculating.
Now what happens when investors 'invest' through speculation:
they become sheep for the slaughter house.

 

[Bill.L]

Hi all,

IV,

and whats the value now compared to 7 years ago, 5 years ago and 3 years ago.

It depends on your definition of 'value'. I've asked you before to define it as you see it, could you please give your definition??

This is why its so important to know whether one is speculating or investing.

You can only speculate on stocks, unless you own such a large proportion of the company that you have a say in what happens, where the company spends it's money.

Whether you trade on fundamental criteria or technical criteria is irrelevant to the fact that you are still speculating on the correct decisions of others, especially the directors.

To many people think they are investing by using price movements, when in actual fact they are speculating.

Too many people think they are investing by using value judgements when in fact they are speculating. Think Timbercorp and Great Southern here when their claimed 'net assets' were 10 times the size of the valuation of the whole company, just before they went bust.

Now what happens when investors 'invest' through speculation:
they become sheep for the slaughter house.

I agree 100%.

bye

 

[Intrinsic_Value]

Hi all,

IV,


It depends on your definition of 'value'. I've asked you before to define it as you see it, could you please give your definition??

bye

Easy in theory:
value is to purchase something below its 'worth'.
But then we get into the more complicated issue of perceived 'worth' vs actual 'worth'. Actual worth can only be calculated with 100% certainty with the benefit of harry hindsight.

Which is why i like to buy with a margin of safety, this provides a buffer between perceived 'worth' and actual 'worth'.

 

[intrigued]

Hi D Money,

Did you know that if your Great grandfather had bought $10,000 of every stock on the DJIA on the 1/1/1900 and the certificates had been handed down through the generations to you, your fortune would be worth precisely nothing. All those stocks, including the companies that took over some of those stocks went bankrupt over the years.

Stockmarket indexes are lies to suck in the gullible who see the lovely long term performance.

bye

Don't let the facts get in the way of a good story

No one told "Anne Scheiber"

 

[D.T.]

So its been a couple of years, anyone doing this now that wasnt during this thread's days?

By 'this', I mean utilising a LOE model.

 

[geoffw]

So its been a couple of years, anyone doing this now that wasnt during this thread's days?

By 'this', I mean utilising a LOE model.

It's much harder to do. Low doc loans are increasingly difficult to get- and income from annuities is treated with increasing caution by the banks (broker's advice as of last Friday).

I've got 75% equity and a good passive income. However my lending is at its limit with the one bank, and the passive income, from vendor finance, is ignored by the banks. I've got a substantial amount sitting in an offset account which I could use for income but not in a way which the banks would recognise as income. I could buy one house with that amount but not the property I am looking at.

So an LoE using models from several years ago utilising equity won't work for me any more.

 

[landlubber]

Just sittin' here boss .....

Just for the record... we're still in the land of LOE. But we're "morphing" into other income streams. Now 61 and 6 years LOE - the pension phase of our SMSF would seem to offer as good, if not better, benefits taxation wise as LOE. So we're liquidating some IPs and making cash contributions (of our % equity) to our SMSF( which we can do from age 60 -65 ...it's a window of opportunity for buzzards in our age group.) After many years of tenants and agents and their BS and repairs we're quite warming to shares with 8 -10% grossed up dividends and no rates, no repairs, no damaged properties, no insurance etc etc etc. Beer still in the re-fridge. Smoke still goes up the chimney. And as long as my grand-kids give me big-hugs ... all is good. Peace to all. LL

 

[Dazz]

After many years of tenants and agents and their BS and repairs we're quite warming to shares with 8 -10% grossed up dividends and no rates, no repairs, no damaged properties, no insurance etc etc etc.

Amen to that brother. Have a good retirement - ditch the properties.