Traders should shorten their time horizons.....

"Traders should shorten their time horizons" is part of the conclusions of this excellent essay on econimic cycles.

http://www.kitco.com/ind/Wiegand/dec202006.html

Like all such essays it is from the USA (Don't Aussies think?) but don't be smug! We have the same problems, with the only exception being that we are an resorce/energy exporter.

Think macro. Act micro. Be prepared.
 
I attempt to insure also. Trying to protect my property portfolio from major economic downturns or other events, I have paid a price that I think of as insurance by spreading my portfolio over many unrelated entities. All debt is carried in as few of these as possible.
The idea is to prevent a domino effect if worst comes.

While I may not live long enough to see a depression, I am human and like so many others may suffer business or relationship failure. If the worst came I know I have a number of properties, which are unencumbered, and in Trust, with which to build from again.

Doing business this way is more costly, my accountant and lawyer share more of my income, but it just feels better to me.

Time will tell if this form of self-insurance has been worth the cost.
I do sleep better now!
 
Hi RichardC - does this mean you are subscribing to the dooms day theories? From my perspective the good times have rolled on since before I was born (1970) and these theories have been around since I wore a grey shirt and shorts. thankfully I ploughed on regardless otherwise I would be penniless but well protected against a downturn!

I do like to read all the varying opinions but I reckon you could grab a bunch of other guys that argue equally strongly that things will roll on just as they always have.

I think that if we fall into a catastrophic economic meltdown it won't really matter what you are into or doing, the results will be similar for all of us
 
Hi Ausprop, I guess the point of reading views contrary to your own to become aware of risk you did not realise existed. Your impression is that since the 1970’s business has just rolled on and “these theories (depression, crash etc?) have been around” since then.

What has also happened in the world since then is that millions of investors have lost l their capital in massive market failures.

The commercial property crashes in the UK in the early 1970’s and USA around 1990, the house price crash in SE England in the early 1990’s, debacle of the USA housing market of the mid 1980’s (the savings and loan collapse) that lead to over 10000? Bank failures.
Closer to home 1990 in Queensland with 18% plus interest rates and an airline pilots strike. Great if you were looking to buy cheap property, not so hot if you or your tenant had lost their job.
I am a kiwi and remember farmers walking off their land in the mid to late 80’s.
Interest rates up to 26%, the most I paid personally was 21.3% first mortgage on 11% LVR!!!

These are just a few things plucked from my memory.

These are the good years you refer to.

These of course don’t include the share market crashes.
I lost half a million in 1987. How many houses would that buy back then?

Yes the world has gone on to richer and better times, albeit with a heavy loading of debt.

I survived finally, poorer but hopefully a little wiser. Most do, some don’t.

Some of the people who went down in these crashes never got their heads above economic water again. Some were crippled financially, emotionally, or at the extreme took their own lives. Many went on to greater wealth.

It is up to you if you wish to say “I think that if we fall into a catastrophic economic meltdown it won't really matter what you are into or doing, the results will be similar for all of us”

My investment business does not follow that reasoning. It has survived a few unexpected events and will no doubt survive a few more.

If you know what has happened in the past you can at least not walk into the same trap as others have.
 
I think that if we fall into a catastrophic economic meltdown it won't really matter what you are into or doing, the results will be similar for all of us
If you look at lessons from hyperinflation episodes then there are great fortunes made, the poor are still poor and the middle class get decimated. So it matters greatly what strategies you employ.
 
If you look at lessons from hyperinflation episodes then there are great fortunes made, the poor are still poor and the middle class get decimated. So it matters greatly what strategies you employ.

You said it well, Andrew.

The Argentinian crisis, which is so recent in my mind but probably before Ausprop's age of awareness, decimated their middle class, as did the Wienmar hyper-inflation in Germany and every other major upheval around the world. This is of no concern to the super-rich. If it were they would run their country differently. LOL

Sorry to be a bit long winded on this, but I must explain the generational gaps. Last month I posted that my baby was turning 40, which means I am of Ausprop's parent's generation. But Dad was 50 when I was born. This means that I am just one generation removed from that terrible, turbulent first half of the last century, while he is, most likely, three removed.

My Dad fought in the trenches in France during the Great War, became a widower/parent when his wife died in child-berth and then survived the depression and WWII. The crazy B even tried to join up again!

So if you ask me if sh!t can happen again, my answer would be "It's overdue." A few good years, or decades, don't indicate the suspension of history.

BTW, Jim Rogers (retired rich in his early 30's) was a keen student of history.
 
looks like I need to research some more. having done nicely from recent booms I am keen to protect the fruits of hard work. I assumed the only hedge from a melt down was buying gold... even then what you could buy with that is doubtful. if there are valid strategies that dont strangle your wealth in an ultraconservative noose then I need to look for them.

presumably low gearing and a spread of structures feature highly here? I certainly wouldnt want cash in a high inflation environment, shares would be worthless, gold arguably handy, property... inflation would drive it higher but no one could afford it - presumbaly it crashes? how on earth do you protect yourself from a global depression? or even better - profit from it?

also JAL I recall most of the events you refer to but dont really attribute them as to any really serious melt down. the 87 crash for example was harsh but it recovered. it's not as if the currency was decimated right? I bought my first investment property at the height of the high interest rates and didn't think twice about it. held it for 13 years for virtually no real capital gain and then it tripled about 3 or so years after that!!
 
There are many things that could go wrong with our world. Economics is but one.

I believe the older you get and the more you have experienced, the more you look for insurance in whatever form to lock in the gains you have made in life.

It is not being negative, and no reason not to keep doing your business, job or investing as long as you live if you enjoy it.

If what ever nasty happened in the world next week and you controlled two unencumbered properties fire walled from your other investments, does it matter what they are worth or who can afford to rent them in the short term?
Just do the best you can and when the economic smoke clears you still have two properties.

The crashes I remembered in my post were but the first that came to mind. Of course there were many others as there are some happening in other parts of the world tonight.

For us in Australia and New Zealand they may be academic but to the people involved they are very real. Just as the people who lost their retirement savings, businesses, and homes in some of our recent financial collapses it’s a very real problem.

It does not have to be a worldwide or country problem to affect us.
But the protections you can build in as your investments grow can help against many potential problems.

When you look at a stock market index and say well it recovered after 1987 remember that in some indices the stocks that went to zero are written out and the index recalculated anew as if that company had never existed.
It gives new investors a much more comfortable feeling.

Farms here I know that sold for half a million twenty-five years ago, dropped to half that within a few years, are now valued at around three million. Which is great except some were forced to sell when times were hard.

All problems happen at the margin. Most people get through, at least in counties like ours.

Don’t stay at the margin too long. I have no problem with taking on business / investing risk but there is no need to be playing double or nothing for many years.
Once you have made some, put a bit away. Another variation of pay yourself first.

Whatever happens or does not happen we can’t stop it. Just try to do our best and be ready to recognise opportunity when it comes along and not be someone else’s opportunity!!!
 
.....If the worst came I know I have a number of properties, which are unencumbered, and in Trust, with which to build from again....

Doing business this way is more costly, my accountant and lawyer share more of my income, but it just feels better to me.

JAL, thank you for verbalising exactly how and why we operate in much the same manner. Richard C, I agree with you that age and stage of life makes a huge difference to one's investment perspective. I think there is a time when even good debt needs to be discharged, if just for the fact that one can't be bothered with it anymore. Each to his own, but for us knowing that our relatively comfortable lifestyle will continue after retirement age (touch wood!) and knowing that we are pretty well "insured" against economic downturn etc is suffice. I have no desire to be hugely wealthy, more so when observing my 90 year old mother giving away as many things and as much money as she can because she doesn't want it anymore. I can't help thinking that there is something obscene about the greed that often comes with success and find talk about what one is worth just plain embarrassing.

Cheers
 
i just hope nothing nasty happens for at least the next 3-4 years. until then i won't be in a position to consolidate anything or make escape plans...
 
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