# Securing your Financial Independance



## tech/a (21 October 2005)

This is a wide and varied topic.I have much to write here but I'm tied up this week with little time to write the lengthy discussion this topic deserves.

There are ways that people can make the very best of recourses they have to gain the maximum return on OPPORTUNITY.
Risk and Money Management are often talked about in the context of trading but hat about in line with our persuit of Financial independance?

Where do we go for guidance and advice?
My accountant who lectures in Tax Law and 2 friends who are Financial Planners---after 6 yrs are now bringing up the topic at social functions---prior to this I said very little and put up with rye smiles--knowing nods and tich tich as I ran various what if's past these "Experts".
My point here is that the "Experts" are in the same boat as you and I.
They may know the theory but just as in everyday life few are confident of their Risk and Money management structures to actually---

*Do something with an opportunity!*

I'm sure I'm not alone either with some of us who have planned and reaped the rewards---who KNOW---the steps to expand our ability to make the most of opportunity when it comes.To be able to put in place strategies that will limit risk and maximise return.
To us its simple as we have done it sometimes often and becomes second nature---to others its a mystery which alludes the Average person.

Not so I'm an average person.

*To kick things off Snake Asked what I meant by this on another thread.*

_*Snake.

I still see your topic as a tounge in cheek swipe at the Housing thread.

Anyway.
Whether it be Housing or Stocks the sooner people get themselves in a position that hiccups even big hiccups have little effect on their investments,the more comfortable and more successful they will be in 
Wealth Creation and Management.

When opportunities can be taken without stress from the participant there is no need to predict/theoriese or hypothosise.

When people can say --who cares if Property decreases 20% in 4 yrs and who Cares if the Stock Market corrects 50% in the next 4 yrs--then they have FULL control of their financial futures.
It can be done and some are doing it.

This should be everyones aim!*_

Firstly Property.
If I have enough gearing to be positivly geared and I have a passive income above that which I need to service all expenses--then interest rates and even declines in house value will have little effect.
Interest rates rise and fall even to extremes---as do housing prices.
Its the ability to identify/adapt and make use of opportunities that reap the returns and minimise the downside.

In Share Trading.
Same with Shares if your a long term holder then the benifit of a long term holding can and does ensure that in the long run even sharp falls have minimal impact on your overall financial position.
There are many stratagies to minimise negative impact---one is Trading profit only after holding for 12 mths.Lats say you traded CTX from $3.60---which we did with Techtrader.After 12 mths it was worth around $10.

You could have sold at a 6.50 profit and let the profits run.To lose all the profit CTX would have to be delisted.Now multiply this idea over say 20 holdings over a number of years. You would have a good portfolio of profit stocks in 3-5 yrs.Not long in the scheme of Financial Independance---is it?

Do you think market fluctuations---even crashes would have as much impact on you as those trading short term???----Always watching intently,the O/S markets--stressed to the MAX.

Snake I hope this makes the statement clearer.


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## Milk Man (21 October 2005)

*Re: Securing your Financial Independance.*

I have a tip although it may be wasted here as you should know it if you have the $$$ to invest in shares. 

*Do not borrow money for stuff that goes down in value unless the benefits far outweigh the costs.*

EG- Dont buy a brand new car. Maybe not even a newer second hand car. Optimal is older (5yrs plus) with low k's but a crappy colour. Look for white in particular. Watch the trading post for the same white car for about 6 weeks then go in for the kill. Re-sale wont be good but it wont matter because you will have saved enough money to invest (in some fashion). You could learn to spray-paint, change the colour and sell it at a profit! Even if youre a gumby, you could find a cheap spraypainter then off-load and still make a profit or get your money back after a couple of years.

There are some good points for business usage of brand new cars; leasing and such.

Read disclaimer below, idiot!


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## It's Snake Pliskin (22 October 2005)

I read Rich Dad Poor Dad and learned a lot.

Good debt not bad - that is: it makes money to pay for the borrowing and provides income. 

Negative gearing is crazy. Positive gearing allows you to steamroll your investments into bigger investments.

Don't work for money. Let money work for you.

Make money.


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## Happy (22 October 2005)

Negative gearing is not that bad.

I don’t like it, but providing you pay a lot of tax, does it really matter that process seemingly makes you poorer. 
If you have the capacity to lose some money and it has the potential to make more, it is not bad; I cannot fault it anyway.

Remember that many people give to charity money they would have to pay in tax, paying tax is not glamorous, but giving to charity is, so why not?


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## Julia (22 October 2005)

Snake Pliskin said:
			
		

> I read Rich Dad Poor Dad and learned a lot.
> 
> Good debt not bad - that is: it makes money to pay for the borrowing and provides income.
> 
> ...




Snake:

why is negative gearing necessarily bad?  I haven't borrowed any money for many years but at the time when I was earning a very high salary and paying megabucks in tax, negatively gearing an investment property made a great deal of sense to me.  It was at a time of high inflation, high interest rates, and high rents.  I tripled my money in less than two years.  It all depends on personal circumstances and timing in the macro-economic sense.

Julia


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## It's Snake Pliskin (23 October 2005)

Julia said:
			
		

> Snake:
> 
> why is negative gearing necessarily bad?  I haven't borrowed any money for many years but at the time when I was earning a very high salary and paying megabucks in tax, negatively gearing an investment property made a great deal of sense to me.  It was at a time of high inflation, high interest rates, and high rents.  I tripled my money in less than two years.  It all depends on personal circumstances and timing in the macro-economic sense.
> 
> Julia




Julia,

I am sorry but I won't be able to respond to your question because it may be construed as giving financial advice. All I can say is I don't see the sense in it. It's just my opinion and if you don't agree with it I won't be upset. Enjoy your day.

Snake


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## Julia (23 October 2005)

Snake Pliskin said:
			
		

> Julia,
> 
> I am sorry but I won't be able to respond to your question because it may be construed as giving financial advice. All I can say is I don't see the sense in it. It's just my opinion and if you don't agree with it I won't be upset. Enjoy your day.
> 
> Snake




Joe/Richkid:

Has it really come to this?  I'm in no way being critical of the running of ASF and in fact would be the first to want you to ensure no criticism can be levelled by ASIC, but if we can't have a rational discussion as above, then I tend to agree with the opinion of others who feel there's little point in posting anything other than "General Chat".

Really good points have been made earlier in this thread about the potential liability of esteemed members of our government and their comments which, in the light of this discussion, surely do represent "financial advice".

Are we all getting a bit over-sensitive here?

I'm attracted to ASF as a forum because its members post  intelligent and varied comments about many subjects, *including stocks contained in the ASX.* 

Julia


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## JetDollars (23 October 2005)

Financial Independance is base on planning, Act and Revise.

Write down what you want and how you are going to do it. Then set strategy and follow it.

I start with property investing. At this stage I achieved what I plan for. With property investing. I got one simple rule. Buy 1 negative gear property and buy 2 positive gear properties. This will off set each other. So you basically holding to three property without have to worry about repayment if there is no income from your wage.

Set aside some cash in the cash management trust for unforseen circumstance where you can access it instantly.

I hope one day I be able to achieve financial independance as I planned.


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## Joe Blow (23 October 2005)

Julia said:
			
		

> Joe/Richkid:
> 
> Has it really come to this?  I'm in no way being critical of the running of ASF and in fact would be the first to want you to ensure no criticism can be levelled by ASIC, but if we can't have a rational discussion as above, then I tend to agree with the opinion of others who feel there's little point in posting anything other than "General Chat".




Julia, there is nothing wrong with the free exchange of views and information and I think in all this discussion about government regulations we have lost sight of that one very important fact.

I DO think we all have to be careful not to say anything that can be construed as financial advice but to be honest it is not something I really see around here. I see very little ramping and even less (none actually) that could be construed as being deceptive in any way. I believe we have a very high standard of posting here at ASF.

Anyway, I am going through this issue with a fine tooth comb over the next couple of days and I'll start a thread mid-week about it, telling everyone what I think and the measures I will be taking to ensure ASF's complete compliance with the appropriate regulations.

We've got a good thing going here and I'm going to make sure it stays that way.


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## mit (24 October 2005)

Happy said:
			
		

> Negative gearing is not that bad.




For property it is all context and balance. I think that when negative gearing became popular people screwed it up and did it just for the deduction. Negative gearing simply means you can afford more property because you can write off some of the loss. But you are still left with a loss. The capital gains have to outweigh the out of pocket expenses for it to make sense. Also there is a servicability limit so you want the negative geared property to become positively geared as soon as possible.

Positive gearing is good as you don't get the servicability limit and is pushed hard by on "guru" in particular.  One of the problems is that the marjority of positively geared properties fall into one of the following buckets:

. Regional areas with little or no capital growth
. New Units/Townhouses with high deductables

With the first you have to look at the income and even though it might be positive is usually small. With the second the same problem applies but worse the value of the depreciation shrinks very fast so you "could" end up negative gearing on a depreciating property if the land value does not move.

This is NOT to say that with research people have not found positively geared properties with reasonable capital growth or have actually made a property positively geared with some work as plenty do.

Personally, I think that for the average investor it is easier to recognise a property with a small amount of negative gearing with good growth potential.

For me I use the positive gearing with shares to balance out negative gearing with properties.

MIT


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## tech/a (24 October 2005)

Im interested in peoples use of gearing and compounding.Your personal experience/s.
If you havent implemented their use how would you apply it/them and in what situation/s.


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## Knobby22 (24 October 2005)

I have used gearing to buy shares and a property (part owned with family members). Gearing allows diversification and if you are not too deeply geared then you will end up positively geared after a few years. It also magnifies your capital.

It is also useful to be able to access funds quickly if an opportunity arises and it is hard to have that in cash.

Gearing has less advantages now as my tax rate is down to 30% like 98% of the population and as interest rates may be rising I think it is a good time to reduce the loans. I have stopped borrowing except that if I decide to borrow I'll sell something to keep the gearing level the same. 

At present my shares are geared at 35% of their worth.


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## Milk Man (24 October 2005)

With property I look to positive gear for at least 10% interest. Put in extra cash and a negative gear becomes positive. Tech pointed this out to me a while ago. I was doing it but just with what the bank wanted with minimum money down.

Geared instruments such as CFDs, Forex, futures, will be my weapon of choice with the stockmarket. Banks are pretty narrow minded and have a hell of a lot of paperwork. My last deal saw a stack a foot high because there were 3 partners each with trust structures. As long as you can manage risk then i'd steer clear of them. See footer message, idiot!


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## It's Snake Pliskin (24 October 2005)

Julia said:
			
		

> Snake:
> 
> why is negative gearing necessarily bad?  I haven't borrowed any money for many years but at the time when I was earning a very high salary and paying megabucks in tax, negatively gearing an investment property made a great deal of sense to me.  It was at a time of high inflation, high interest rates, and high rents.  I tripled my money in less than two years.  It all depends on personal circumstances and timing in the macro-economic sense.
> 
> Julia




Julia,

From what I can see, negative gearing is not the best way to become financially independent. I do recognise that it can reduce your tax if you are employed though.

Read the following article for some information:
http://www.smh.com.au/articles/2003/11/30/1070127267462.html?from=storyrhs

Another good link and more extensive is:
http://www.propertyinvesting.com/strategies/negativegearing.html

I have 5 years experience in Real Estate property mangement and saw a great deal of my clients gearing negatively just to minimise tax. *They still had to work though. * 
A positively geared property is able to fund itself and the costs that go with it providng income. The cash flow aspect is what I like - it's positive. That is, it provides income. 

An article on positive gearing:

http://moneymanager.smh.com.au/articles/2003/08/13/1060588426540.html

Regards
Snake


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## Stan 101 (25 October 2005)

I'm quite happy to negitively gear a property, usually vacant land if I can a positive return in a set time frame. negitive gearing for the sake of only tax relief has never been in my plan, but to get a tax relief bonus on a negitive to positive transaction is a nice little cherry on top.

I run a margin on shares that sits at about 33% LRV. It just gives me a little more to play with. 

Personally, I believe this whole idea of not answering a question due to it being "interperated as advice" is a farce. Equality for equals. People have rights, as we keep hearing from the bleeding heart masses, but what I rarely see is people rallying for the ability for more responsibility. If you can't accept responsibility for your own actions, you should lose your rights to be involoved in those actions. Common sense is not so common.
I hope Joe's post will let sanity prevail.

Regards,


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## Fleeta (25 October 2005)

tech/a said:
			
		

> Im interested in peoples use of gearing and compounding.Your personal experience/s.
> If you havent implemented their use how would you apply it/them and in what situation/s.




I can't afford to positively gear a property! Take a $250k property, getting rent of $200p/w, you would need to have nearly $100k in equity to positively gear wouldn't you?


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## It's Snake Pliskin (25 October 2005)

Stan 101 said:
			
		

> I'm quite happy to negitively gear a property, usually vacant land if I can a positive return in a set time frame. negitive gearing for the sake of only tax relief has never been in my plan, but to get a tax relief bonus on a negitive to positive transaction is a nice little cherry on top.
> 
> I run a margin on shares that sits at about 33% LRV. It just gives me a little more to play with.
> 
> ...




Sanguar,

I've sorted it out with Joe. If you think I shouldn't be here then vote me off. 
Common sense is not so common, nor are manners.


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## Julia (25 October 2005)

Snake Pliskin said:
			
		

> Julia,
> 
> From what I can see, negative gearing is not the best way to become financially independent. I do recognise that it can reduce your tax if you are employed though.
> 
> ...




Snake:

Thanks for the message.

I would never argue that negative gearing is a better alternative to positive gearing but Fleeta has provided the answer to this question.

At the time I did it, I had sufficient funds for a deposit on an investment property but certainly couldn't have bought it outright, so negatively geared it which helped to offset the very high tax I was paying at the time.

The two approaches are both perfectly valid depending on all the circumstances at the time.

Are you suggesting that if you couldn't afford to positively gear an investment property you wouldn't buy it at all?

Cheers
Julia


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## Stan 101 (25 October 2005)

Snake Pliskin said:
			
		

> Sanguar,
> 
> I've sorted it out with Joe. If you think I shouldn't be here then vote me off.
> Common sense is not so common, nor are manners.




Snake Pliskin, firstly my name is SANQUAR, 

And where did I refer to you? If you read my post the leaning was on the disability to speak one's mind. I attempt to show my manners to the best of my ability, therefore I won't go into how people's frail egos are damaged by generic postings.

Okay, I'll type this slowly. In a nutshell, I personally believe that if a person or persons comes to this forum and takes the "advice" from a posting, they should be responsible for their own actions if the "advice" was incorrect, wrong or just plain stupid. They should not cry to the nearest governing body demanding blood from the advice giver if they lose their life savings. Hence the common sense is not so common line. If they had common sense, they would have though through the investment. Which leads to the equality for equals. 
If a human being doesn't have the ability to see that taking financial advice from a forum without substanciating any claims, in MY OWN personal view, they should lose their rights to do so.

If you want me to dumb it down some more, please let me know. Actually, it's not that important, so forget I just wasted 2 minutes retyping this for you.

regards,


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## It's Snake Pliskin (25 October 2005)

Stan 101 said:
			
		

> Snake Pliskin, firstly my name is SANQUAR,
> 
> And where did I refer to you? If you read my post the leaning was on the disability to speak one's mind. I attempt to show my manners to the best of my ability, therefore I won't go into how people's frail egos are damaged by generic postings.
> 
> ...




Stan 101,

I'm sorry if I displeased you by spelling your name incorrectly - if it is a problem I am truly sorry.

I agree with your anlysis of people who may use information from forums. 

The way you worded your post was in my opinion directed at me


> Personally, I believe this whole idea of not answering a question due to it being "interperated as advice" is a farce.




I'm the only one who has written that in this thread; discern the connection can you?

Anyway, have a nice day and forget the whole thing.

Snake


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## It's Snake Pliskin (25 October 2005)

Julia said:
			
		

> Snake:
> 
> Thanks for the message.
> 
> ...




Julia,

Yes, Fleeta's post is a good example of why people do it. As I said I know a lot of people in the same situation. It is also representative of people who buy but can't afford.

For me, I would do what the mainstream are not doing and build up my capital by compounding, trading etc. and then buy an income producing property. I have the money to buy outright, but I need that money for trading too. So at this stage I'm compounding my capital until I can buy and trade and receive passive income from my investment property. 

I must note, I wouldn't buy for the appreciation alone, but would buy for the income it provides. So, timing and location are paramount; the cash flow aspect is what I like. 

This generally tends to be the way of the rich - though in Australia there is a propensity to gear negatively. I don't consider myself rich, but I do see their way of thinking. Buy what and when you can afford, and enjoy the cashflow.

Please note: I do see the benefits of negative gearing as stated by you.

Cheers
Snake


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## Julia (25 October 2005)

Snake Pliskin said:
			
		

> Julia,
> 
> Yes, Fleeta's post is a good example of why people do it. As I said I know a lot of people in the same situation. It is also representative of people who buy but can't afford.
> 
> ...




Snake,

Your point of view is clear and obviously to be respected.  I guess it's a matter of one's philosophy.  My question about your idea would relate to whether your capacity to save on the basis of compounding returns can keep up with the appreciation of property.

I realise your argument would be that prices are dropping at present (no evidence of that where I live!) and if that is the case then your stance makes sense.  Would you maintain the same philosophy if house prices started to show significant appreciation (which of course they will before long)?

All the best
Julia


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## It's Snake Pliskin (25 October 2005)

Julia said:
			
		

> Snake,
> 
> Your point of view is clear and obviously to be respected.  I guess it's a matter of one's philosophy.  My question about your idea would relate to whether your capacity to save on the basis of compounding returns can keep up with the appreciation of property.
> 
> ...




Julia,

Why did you give the thumb down? I thought you wanted good discussion / debate.


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## happytrader (28 October 2005)

Hi all

I just saw a preview for tonight on Channel 9's "A current affair" about a 22 year old woman making millions. Might be worth a watch.

Cheers 
Happytrader


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## Happy (28 October 2005)

I understood it as ‘turnover’ or ‘sales’ to that value, maybe I got it wrong.


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## Dan_ (28 October 2005)

here's where a lot of people get caught out with such ideas of being a "property millionaire". You want as much of the million (or all of it) to be in either growth or equity...anyone can become a "property millionaire" in debit, all you need is serviceability. and if u just scrape in and don't allow for such things as rate rises then..... :goodnight 

I'm currently working on being as "neutrally" geared as possible. For example offsetting investment income into a -ve geared property (to make it neutral). Then as the income increases I'll use my expanding equity to maintain the neutral balance (buying more investments)

Just my    (+1,-1)


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## happytrader (28 October 2005)

Dan_ said:
			
		

> here's where a lot of people get caught out with such ideas of being a "property millionaire". You want as much of the million (or all of it) to be in either growth or equity...anyone can become a "property millionaire" in debit, all you need is serviceability. and if u just scrape in and don't allow for such things as rate rises then..... :goodnight
> 
> I'm currently working on being as "neutrally" geared as possible. For example offsetting investment income into a -ve geared property (to make it neutral). Then as the income increases I'll use my expanding equity to maintain the neutral balance (buying more investments)
> 
> Just my    (+1,-1)




Yes I agree with what you are saying to a point. But the people who do get themselves in a sh*t are usually accidents waiting to happen.

1.  They've never developed a saving habit, because they  don't want to make cuts or work extra hours or anything else that going to help them save and get the investment off the ground.

2.  Don't do their due diligence and talk to the wrong people
3.  They dont really properly understand the concept or timeframe
4.  They dont cover their downside
5.  They dont know themselves or their risk profile
6.  Theyre impatient and often pay too much
7.  They reap before they sow

In effect they are not really taking responsibility for themselves. They're just fooling themselves and anyone else who believes them.

If however, the person has done everything they could have done, well, and unforeseen occurrances befall them, they should cut their losses and look for another opportunity and again do 'just so' resting assured knowing that they will eventually be successful imo.

I know stuff happens and but for the grace of God go I, but even the Bible tells us to first "count the cost"

These are merely my thoughts and are not to be take as financial advice or a recommendation.

Cheers
Happytrader


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## It's Snake Pliskin (30 October 2005)

Investing in yourself and your children are often overlooked when living a normal life. We work for money and fail to see the benefits of working to learn skills on the job. Short courses, seminars etc. can improve or broaden one's skill base and this can be passed on to your children and friends. 

Ask yourself: "Am I working for money, or to get myself to the next stage of life"? This is for everyone to work out.


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## Julia (30 October 2005)

Snake Pliskin said:
			
		

> Julia,
> 
> Why did you give the thumb down? I thought you wanted good discussion / debate.




Snake:

I've just caught up with this thread again.

Why do you say I gave the thumb down?

I don't think I did at all.  I simply stated my respect for your position, and asked if that position would remain the same in an appreciating housing market.

How is that giving you the thumb(s)? down?

Julia


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## Smurf1976 (30 October 2005)

There's a thumbs down icon next to your post. I think that is what is being referred to?


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## wayneL (30 October 2005)

Julia said:
			
		

> Snake:
> 
> I've just caught up with this thread again.
> 
> ...




Julia,

Somehow you are putting this thumbs down in your post (obviously inadvertently), as per screenshot below. This is what snake is refering to.

Cheers


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## It's Snake Pliskin (31 October 2005)

Julia said:
			
		

> Snake:
> 
> I've just caught up with this thread again.
> 
> ...




Julia,

It wasn't anything you said, but the little red thumbs down post icon in the top left corner; the same as your electrical advice post.

Thanks Wayne for highlighting that. I didn't see it until after I posted.


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## Julia (31 October 2005)

Well, that will teach me to use icons without looking at them properly!

I thought it was a nice big red question mark.

Apologies, all, especially to you Snake, for causing unnecessary confusion.

Julia


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## It's Snake Pliskin (31 October 2005)

Julia said:
			
		

> Well, that will teach me to use icons without looking at them properly!
> 
> I thought it was a nice big red question mark.
> 
> ...




Julia,

Look at the left hand corner and I have given your apology the thumbs up.

Snake


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## David123 (9 April 2006)

Hi, Just wanted to know if anyone out there personally knows someone living the the dream of financial independence? I personally dont know anyone.


cheers


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## macca (9 April 2006)

Hi David,

There are thousands of people in Australia living like that.

Most are self made, what's the secret?...................................................























You can only spend it once, but you can invest it over and over again


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## Julia (9 April 2006)

Don't think there's any "secret".
I guess with some there could be an element of luck, but for most it's a case of a lot of financial sacrifice in the early days, e.g. I decided to forgo the travel that most people regard as a necessity in favour of buying another investment property, chose to buy second hand clothes for a few years rather than designer stuff, etc.  Then eventually the stage is reached where money simply makes money, i.e. the more you can invest obviously the greater the results.  I've never used leverage and don't intend to.
For me this was the best way to go, but for others, they will prefer to have business class travel a couple of times a year to various parts of the world, others again will choose expensive clothes and entertainment etc..  It's simply a case of individual priorities.  

The other thing I guess I would add is that finally I have understood how to learn from my mistakes rather than just beat myself up over them.

Julia


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## NettAssets (9 April 2006)

Julia said:
			
		

> The other thing I guess I would add is that finally I have understood how to learn from my mistakes rather than just beat myself up over them.
> 
> Julia




Now ain't that the truth


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## professor_frink (10 April 2006)

Julia said:
			
		

> Don't think there's any "secret".
> I guess with some there could be an element of luck, but for most it's a case of a lot of financial sacrifice in the early days, e.g. I decided to forgo the travel that most people regard as a necessity in favour of buying another investment property, chose to buy second hand clothes for a few years rather than designer stuff, etc.
> Julia




Sounds like you and I would have a bit in common julia!! The only difference for me was the money I saved from not doing these things went into the stockmarket instead of a property.
When I was 19, I was the only person in my group of friends that didn't spend all  of my money on nice cars, clothes and holidays. I found out later that the majority of them thought I was a loser, because on the surface I didn't appear to be doing well- cheap car, cheap clothes, etc. most of those people aren't my friends anymore.Now at the age of 25, they are all starting to settle down and buy a house which means they are all working their butts of trying to keep their heads above water. On the other hand, I only have to work part time, and have the opportunity to do alot of the things that they did at 19 such as travelling, but I've got a capital base to come back to at the end of it.  For me, not doing all those things that everyone else did at that age was the best thing I have ever done.


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## Rafa (10 April 2006)

you bought a house yet Prof? and have you made enough money from shares to buy one outright...

good point Julia re the learning from your mistakes...
my biggest mistake was not using stop losses... worked thru that one now..

still haven't worked out how to not get sentimentally attached to shares... currently I am in love with OXR!!!! gotta love the OX!!!


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## professor_frink (10 April 2006)

Rafa said:
			
		

> you bought a house yet Prof? and have you made enough money from shares to buy one outright...




na, no house yet rafa- got cheap accommodation for the moment and I don't see another housing boom coming in my area for awhile yet so there's no rush at this stage. Technically I have made enough to  buy one outright- it wouldn't be a great house and it would leave me with very little for my trading so I don't want to go down that path at this stage! 
In a couple of years when I go down to the pub and people start talking to me about how well the sharemarket is doing, I'll probably cash out and buy a house then


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## Rafa (10 April 2006)

haha nice one...

i'm turning 28 this year, and i've pretty much followed the same principle and the same plan, tho I did have a small business on the side providing IT services that made me about 60K, which i promptly blew on two overseas trips and a second hand 1999 323i..! (you gotta have fun sometime...    )

the only word of warning is that circumstances will dictate when you have to liquidate your shares to get a house... (i mean the girl friend / missus dictates.. hehe), 

thanks to the housing bubble, i barely had half of what i needed to buy a house outright, i had to selling some shares (zfx for $3.30   , BHP for $17   ) last year to fund half the house, and taking out a mortgage on the other half... ALAS!!!

oh well, with cash borrowed from my old man... i am back in the share market... hoping to make enough to pay off this mortgage...


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## Prospector (10 April 2006)

Julia said:
			
		

> Don't think there's any "secret".
> I guess with some there could be an element of luck, but for most it's a case of a lot of financial sacrifice in the early days........
> For me this was the best way to go, but for others, they will prefer to have business class travel a couple of times a year to various parts of the world, others again will choose expensive clothes and entertainment etc..  It's simply a case of individual priorities.
> 
> Julia





I do agree it is a case of different priorities.  I have a different scenario.  6 months after marrying I almost lost my partner due to the big 'C' - I was only 22 at the time!  So from then onwards we were deeply into experiences, because unlike our peer group, we had had a dreadful look at our own mortaility at a tender age!   So we travelled extensively overseas and had the family as soon as possible, and then went travelling with them (not business class unfortunately).  We still do.  We have so many memories of our travels that I wouldnt give up for the world, although a nice new BMW would be nice, or one of those convertible SAAB's    or diamonds : 

Maybe it has put us somewhat behind the eightball?  But wouldnt change a thing, well, except for the health issue of course, but maybe that too was karma because it led to where we are now.

In comparison with others, we dont have the flashy cars, dont have the mansion which our peers now enjoy, but also have no mortgage and have invested well.  We also invested in our children's education, including their HECS fees.  

We are both still around now, tottering towards a big birthday, and now saving madly for retirement in a few years, hoping for a big finish


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## professor_frink (10 April 2006)

Rafa said:
			
		

> the only word of warning is that circumstances will dictate when you have to liquidate your shares to get a house... (i mean the girl friend / missus dictates.. hehe),





The girlfriend is incredibly good with me- she understands where I'm coming from and is happy to wait awhile to buy- although if a frinky jnr was on the way she'd probably be pushing me then(current place not big enough for that)


			
				Rafa said:
			
		

> thanks to the housing bubble, i barely had half of what i needed to buy a house outright, i had to selling some shares (zfx for $3.30   , BHP for $17   ) last year to fund half the house, and taking out a mortgage on the other half... ALAS!!!




Here's one for ya- june 2003 my dad bought aristocrat at $0.99. he had some cashflow problems soon after and got rid of them for $2. Everytime I speak to him he asks me what price it is. And then promptly swears. ALOT  


			
				Rafa said:
			
		

> oh well, with cash borrowed from my old man... i am back in the share market... hoping to make enough to pay off this mortgage...




Hope it goes well for you mate


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## Julia (10 April 2006)

Prospector said:
			
		

> I do agree it is a case of different priorities.  I have a different scenario.  6 months after marrying I almost lost my partner due to the big 'C' - I was only 22 at the time!  So from then onwards we were deeply into experiences, because unlike our peer group, we had had a dreadful look at our own mortaility at a tender age!   So we travelled extensively overseas and had the family as soon as possible, and then went travelling with them (not business class unfortunately).  We still do.  We have so many memories of our travels that I wouldnt give up for the world, although a nice new BMW would be nice, or one of those convertible SAAB's    or diamonds :
> 
> Maybe it has put us somewhat behind the eightball?  But wouldnt change a thing, well, except for the health issue of course, but maybe that too was karma because it led to where we are now.
> 
> ...




Prospector:
So glad to hear that you are both in good heart and health these days.
That sort of medical crisis does have a profound effect on how we feel about pretty much everything.  Doesn't sound to me as though you're missing out on too much.  I expect, too, that the shared travel experiences will have had a "bonding" effect on all of you as a family.  (Sorry - that's a cliched word but I can't think of a suitable substitute right now.)

Sincerely hope you all continue with good health - it's simply fundamental to everything else in our lives.

Julia


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## Julia (10 April 2006)

Rafa said:
			
		

> haha nice one...
> 
> i'm turning 28 this year, and i've pretty much followed the same principle and the same plan, tho I did have a small business on the side providing IT services that made me about 60K, which i promptly blew on two overseas trips and a second hand 1999 323i..! (you gotta have fun sometime...    )
> 
> ...




Rafa

You are still young - you'll get to where you want.

How goes the  323i?  I've been looking at something similar or a second hand Mercedes, but then I get realistic and think about all the dog hair and doggie dribbles down the windows and feel it's a bit of an insult to a nice car.

Julia


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## Rafa (10 April 2006)

Julia said:
			
		

> Rafa
> 
> How goes the  323i?
> 
> Julia




its sheer driving pleasure... its a 2000 model, manual, 2.5L engine, 17" mags, etc, but you don't realise how good it is, till you go around a corner... handling is out of this world....

but don't feel bad for the car...., its a car...  your dog will love it... as will you...


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## tech/a (10 April 2006)

> Don't think there's any "secret".




*Julia*

(1) How about the power of *COMPOUNDING?*
(2) OR the power of *LEVERAGE?*
(3) OR the *80/20 Rule?*
(4) OR the *Education of RISK?*
(5) OR the *50/50/90 rule*
(6) OR The ability to *RECOGNISE OPPORTUNITY * a few *UNDERSTAND* how to take *ADVANTAGE* of the opportunity presented,even fewer *ACTUALLY DO SOMETHING*.How many see it all happen---like the last R/E boom and THIS current super bullish period and---lament---I wish I knew then what I do now!


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## Julia (10 April 2006)

tech/a said:
			
		

> *Julia*
> 
> (1) How about the power of *COMPOUNDING?*
> (2) OR the power of *LEVERAGE?*
> ...




Tech,

Fair enough, of course.  But I don't regard the above as "secrets".  "Secrets" to me implies some sort of alchemy or magic, or something which will eliminate the need for diligence, research, courage and discipline.  In other words, some sort of magic formula for getting rich but staying lazy.

Julia

PS
Whilst I understand the usefulness of leverage during the time you want to increase your wealth, I can recall your saying that your ultimate aim is passive investment.  Perhaps I've misunderstood, but I thought that implied not having the complication and possible risk of leverage?


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## Julia (11 April 2006)

The following is good common sense  (courtesy Whittaker McNaught Pty. Ltd.)



Pay yourself first
So many people receive their pay packet, and then hand a portion of their money to the supermarket, the garage, the department store and so on. In the end, they discover there's nothing left for themselves. Remember, you worked for it!


Apply the power of compound interest
Often people commence a savings program, and then quit after a few years because they think they're not making much headway. The idea behind compound interest is that each year you earn interest on the previous year's interest. Accordingly, your investment grows exponentially. Compound interest works, but it takes a little time to get started. The secret is, start now.


Don't put all your eggs in the one basket
Remember,not all investments perform well at the same time. A diversified portfolio with a balance of shares, property, cash, and fixed interest investments, will reduce volatility and smooth returns.


Understand the risk/return trade-off
A general rule of investment is, the greater the risk, the greater the potential return. Greater risk may not mean the total loss of capital, but merely the volatility of returns over the investment period. Therefore, if you are prepared to invest for the longer term, you should be prepared for some volatility in expectation of higher returns. Remember, there's no such thing as a free lunch!


Keep money aside for emergencies
You should always be careful that you have sufficient funds available to meet unforeseen circumstances. By doing so, you'll avoid being forced into selling an investment at the wrong time.


Don't invest solely for tax benefits
Around tax time every year there will be a host of investments offering 100% (or more) tax deductibility. Remember, an investment should be judged on its overall growth potential, not solely its tax deductibility. If you were to lose ten or twenty thousand dollars, that tax deductibility would offer you little consolation.


Don't try to time the market
Share traders are a lot like punters. They tend to overstate their winnings and understate their losses. If you are going to try and time the market (getting in and out at precisely the right moment), you are not investing - you are speculating. There's nothing inherently wrong with this, provided you speculate with money you can afford to lose. Serious investors who invest for the long-term understand that the secret is time, not timing.


Beware of guarantees
You may be confronted by a friend or family member who has been knocked back on a loan, and asks you to go guarantor for them. This means if they can't pay the loan, you have to. Remember, there is an old saying in legal circles, 'There are no secrets kept, nor guarantees not called up'.


Ensure you are insured
Insurance can cover everything from your life to your home and contents, your business, your car, and even your income. But remember, insurance should be bought, not sold, and should be tailored to your individual needs.


Pay off non-deductible debt first
Your aim should be to reduce non-deductible debt, such as home loans, car loans and credit card debts. Leave deductible loans until last, since the Government is footing part of this bill.


Julia 


 Back to Top


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## tech/a (11 April 2006)

> But I don't regard the above as "secrets".




Julia I would hardly call you "Ms Average".
However 90% of people wouldnt have a clue about any of the above,particularly practical useage.
Lack of understanding leads to Mystique and as such lack of implementation.
So to must the knowledge and use of them are "secrets" of the wealthy.



> Whilst I understand the usefulness of leverage during the time you want to increase your wealth, I can recall your saying that your ultimate aim is passive investment. Perhaps I've misunderstood, but I thought that implied not having the complication and possible risk of leverage?




If I/we/anyone was to reture at 55 there is a good chance we could survive till 85+.

Whats $1500/week going to be worth in 20 yrs time? 
To maintain the life style we have now what will be required then or even 10 yrs before then?

Rolling over a lump sum cash super fund just wont cut it---they are flat out out performing the market to increase return on investment.Stop paying into them and start drawing from them and Oooops not enough for 15/20/30 yrs.

Passive income MUST come from areas which grow with inflation and Market cycles.Gaining enough capital to hold longterm Capital investments of a value high enough to supply on going passive income while increasing your capital base and in turn your passive income,isnt possible in my veiw without the use of Leverage. Perhaps thats all encompassing and I should say--"*The use of other peoples Money"* Wealthy people use it everyday and every one I know are experts in useage.

Investing purely for income with no regard to capital growth--infact a cavelier "If my capital increases then thats just a bonus" type attitude (Not one you have but Ive seen others here who have) is apathy to its highest degree.

When you have enough from use of other peoples money (While your working and have an income which allows you to service the money) you can freehold Property,Stock, Business/s,Collectables and maintain your life style while increasing your capital to keep abreast of cost of living increases.


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## Prospector (11 April 2006)

tech/a said:
			
		

> Investing purely for income with no regard to capital growth--infact a cavelier "If my capital increases then thats just a bonus" type attitude (Not one you have but Ive seen others here who have) is apathy to its highest degree.
> 
> .




That's an interesting point Tech/a.  My accountant expressed concern that I had made many trades in my Super Fund.    My past experience with a broker was that the Fund had just sat on shares through the rough patches rather than evaluate them and trade them out.  So basically over time, not much increase in growth, but still received some dividends.  I prefer to lock in profits when it seems that indicators are pointing to sell (within reason).  Even if this triggers a CGT.  So is buying in and out of shares part of your Capital growth strategy? or do you sit tight and hope for a better long term outcome?


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## tech/a (11 April 2006)

> So is buying in and out of shares part of your Capital growth strategy? or do you sit tight and hope for a better long term outcome?




Somewhere in between. The method (One of 3) which I use is well documented on Reefcap. Its certainly not a short term trading methodology.
One designed for long term holding but not buy and Hold. The average hold is around a year but have some trades now 3 yrs old.
But they have increased 200-400% I actually dont hope for a better longterm outcome I EXPECT it as the methodlogy has been tested over 20000 potrfolios and returns a positive expectancy.
This has been reflected in realtime trading.
The other 2 methods are similar but with slightly different inputs.
Same stocks are held in each but not all.

My diversification is such (Not purely in stock) that a 25% collapse would equate to around a 3% dent Nett Worth. Or put another way a 3% drawdown on Total nett worth.

I still do some discretionary short term trades as its fun and it constantly reminds me how dumb I can be!! This is not part of my capital growth planning. The trading not the DUMB part!!!!


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## bullmarket (11 April 2006)

Hi tech/a 

Interesting point you make :



> Investing purely for income with no regard to capital growth--infact a cavelier "If my capital increases then thats just a bonus" type attitude (Not one you have but Ive seen others here who have) is apathy to its highest degree.




I haven't seen anyone post in here that they have no regard for capital growth, but then I don't spend as much time in chatrooms as you do   

But anyway, I would generally agree with you in the case where someone's investment capital was just managing to generate sufficient income to accomodate their living expenses and lifestyle.

I don't see having income as a number 1 priority in the case where the investment capital is comfortably generating more than sufficient income and especially if the dividends, distributions, interest or whatever generally increase by at least the inflation rate.

In my case, being retired now, income is my first priority and capital growth second. Sure, 10-20 years ago capital growth was my first priority as well as it would be with most people, but not nowdays.

As I said in another thread, how one generates their required return boils down to lifestyle, objectives (which change as you get older) and risk tolerances 

As long as the quarterly/half yearly distributions keep coming in mrs bullmarket is happy and if mrs bullmarket is happy then I am happy  and in the very unlikely worst case scenario where the markets 'blow up' then we have the assets we have in mrs bullmarket's name which are more growth than income orientated to fall back on.

cheers

bullmarket


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## Julia (11 April 2006)

tech/a said:
			
		

> Julia I would hardly call you "Ms Average".
> However 90% of people wouldnt have a clue about any of the above,particularly practical useage.
> Lack of understanding leads to Mystique and as such lack of implementation.
> So to must the knowledge and use of them are "secrets" of the wealthy.
> ...




Tech

Other than a different attitude towards leverage, we share the same approach.
I think that, as often happens in the forum type situation which is different to an ordinary conversation, it's interpretation/meanings/semantics which can cause some confusion.  
My intention would never be to have my funds invested in, say, just bank deposits where there is no growth, even if the income appeared adequate to fund my living expenses.  Nor would I be happy with it in essentially income producing shares, e.g. high yield property and infrastructure trusts that offer little growth.  *It has to keep growing to cover the very points you make of increasing longevity, inflation etc.* 

You are right to differentiate into the middle ground between trading and the traditional buy and hold.  This is what suits me too, as you know.  I have a few shares which would almost qualify for the Buffet quote "buy shares you will never want to sell" but most fall into the category of medium term hold with the proviso that if they "start to go bad" then they are gone.  If there is one thing in particular I have learned - and possibly this from you - it is not to hold on to losing stocks even if it means just exiting temporarily.

Prospector:  you seem to have the same view more or less?

Julia


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## Prospector (11 April 2006)

Julia said:
			
		

> If there is one thing in particular I have learned - and possibly this from you - it is not to hold on to losing stocks even if it means just exiting temporarily.
> 
> Prospector:  you seem to have the same view more or less?
> 
> Julia





Yes, I do but my accountant thinks you should buy and hold :swear: and to some extent undermines my confidence!  You would think by now I would know better......

I have certainly got some shares in my Super that I have had for many years - the WOW's, ARG (that shows my SA origins) ANZ AGL etc etc.  But I have done some major 'trading' with PDN and BTA this fy which was fun and overall made some wonderful profit, but it did result in a number of buys and sells!  That is what the accountant can't cope with, not the profit but the number of trades - but it is also probably why he is still working flat out at his age!  Sometimes I have sold too early, but getting that balance between greed and profit taking is very delicate sometimes!


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## tech/a (11 April 2006)

> Yes, I do but my accountant thinks you should buy and hold  and to some extent undermines my confidence! You would think by now I would know better......




This is sound advice in a bullmarket and over the last x years the ORDS has been in a Bullmarket. I certaintly believe that this is not going to change unless the US starts bombing small countries.

Simply ask him what risk measures he would place. A blank look and severe Mumbling indicates SMSF being your best RISK choice.


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## Julia (11 April 2006)

tech/a said:
			
		

> This is sound advice in a bullmarket and over the last x years the ORDS has been in a Bullmarket. I certaintly believe that this is not going to change unless the US starts bombing small countries.
> 
> Simply ask him what risk measures he would place. A blank look and severe Mumbling indicates SMSF being your best RISK choice.




Tech

Can you just clarify your above comment that "this is sound advice in a bull market...."
 Do you mean the accountant's suggestion of buy and hold?

Julia


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## Duckman#72 (11 April 2006)

Prospector said:
			
		

> Yes, I do but my accountant thinks you should buy and hold :swear: and to some extent undermines my confidence!  You would think by now I would know better......




Hi Prospector

Take it as a compliment. In general people are too defensive with their super funds - taking a sit and hold strategy. Particularly if the members of the fund are young. You can afford to be more aggressive and growth oriented. 

In defense of your accountant - the majority of people that he sees that trade and trade successfully would be very much in the minority. Your accountant is probably concerned that you will be another to lose capital.

It is very easy for someone to argue against the merits of trading in the current market - look at BHP. Someone that trades would have made a nice gain if they bought in at $16 last year and then sold at $23 a few months later. The trader is only ahead of the "sit and holder" if they then took the proceeds and made more than what BHP has continued to make.

Regards
Duckman


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## Prospector (11 April 2006)

Duckman#72 said:
			
		

> It is very easy for someone to argue against the merits of trading in the current market - look at BHP. Someone that trades would have made a nice gain if they bought in at $16 last year and then sold at $23 a few months later. The trader is only ahead of the "sit and holder" if they then took the proceeds and made more than what BHP has continued to make.
> 
> Regards
> Duckman




That is an excellent comment!  And I have to admit that has happened with me!  I must get better at/revisit my sell signals and trading plan.  I guess if my super only had blue chips then I could sit back a bit.  But I do have (am 'allowed' up to 10% according to the trust document) some spec stuff and these are the ones I tend to trade.  And these have done well with minimum cost.  But I am so concerned about protecting any profit that I am reactive too!

Trouble is, I remember Poseidon, and obviously the dotcom, and the 80's crash and how that happened before anyone could react - ie overnight.  And the fact that people are starting to revisit those times, well....


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## tech/a (11 April 2006)

Julia said:
			
		

> Tech
> 
> Can you just clarify your above comment that "this is sound advice in a bull market...."
> Do you mean the accountant's suggestion of buy and hold?
> ...





Julia.

Follow the trend.


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## crackaton (11 April 2006)

Prospector said:
			
		

> That is an excellent comment!  And I have to admit that has happened with me!  I must get better at/revisit my sell signals and trading plan.  I guess if my super only had blue chips then I could sit back a bit.  But I do have (am 'allowed' up to 10% according to the trust document) some spec stuff and these are the ones I tend to trade.  And these have done well with minimum cost.  But I am so concerned about protecting any profit that I am reactive too!
> 
> Trouble is, I remember Poseidon, and obviously the dotcom, and the 80's crash and how that happened before anyone could react - ie overnight.  And the fact that people are starting to revisit those times, well....




It will certainly happen again, but I think we are in what some term phase three and only very early, so still a few bucks to be made before the inevitable happens.


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## tech/a (11 April 2006)

crackaton said:
			
		

> so still a few bucks to be made before the inevitable happens.




Crackton

What is so inevitable and why is it inevitable?

I've not yet seen an arguement that dismisses possible un precedented growth,the likes we have never seen and wont see again.

Massive economic growth for years to come with never to be seen again demand from emerging economies,China,Indonesia,India.
Western economies particularly Australia as small as we are can and will enjoy incredible demand not only in rescources but in many other specialist areas. Infrastructure demands are massive,Project managers are commanding $250K US for 6 mth contracts.


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## wayneL (11 April 2006)

tech/a said:
			
		

> Crackton
> 
> What is so inevitable and why is it inevitable?
> 
> ...




Here's a view on that:



			
				Dr Bubb on another forum said:
			
		

> (here are my notes on this excellent broadcast):
> http://netcastdaily.com/broadcast/fsn2006-0318-2.mp3
> 
> Really gets going At 14mins:
> ...


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## tech/a (11 April 2006)

Wayne.

I have quite a few friends in the US.
Some have substantial property holdings.
All have 30 yr loans at fixed 1.5%---thats right fixed 30 yrs 1.5% God Bless America.

The wealth in the US makes AUS wealth look super sick.
The poor in the US make our poor look like kings.This real estate catastrophie is frankly seen by those I know in the US as a myth.When I was there the demand was so high they were building complete subdivisions (1000+ houses) in Florida and then just selling the whole division at the one time.1-2% long term lock down loans.

So lets look at the US $ falling.
AUS$ rises.
More buying power,more to pay off debt which incidently can be paid off with rescource income in a very short time.
Aust will soon get out of step with the US.

We are in an enviable position.
The US is still growing infact its inflating hence interest rate rises which are still less than ours.

Time will tell but in the meantime I really think hoarding your hard earned maybe a silly thing to do at this time.We may not know how long the golden road may stretch but why get off it when there are blue skies over head.

Youll never reach your goals if you never travel the road.
Often the only fear is fear itself.


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## wayneL (11 April 2006)

tech/a said:
			
		

> Wayne.
> 
> I have quite a few friends in the US.
> Some have substantial property holdings.
> ...




Well people have to have a view and trade or invest to that view. Being a bear, doesn't mean sitting on hands, as us bears have said time and again. And as mentioned before, Bears are Bulls, but in stuff like gold, oil, uranium, green energy etc etc. Bears are not averse to taking a bull trend (unless silly), but being able to liquidate...quickly IS important to a bear. Last year I made most of my money being short. This year I have scarceley taken a short, but I'm still a bear.

If you listen to the audio, folks do believe things are good in the US ATM. But listen to the deeper issues. For instance, without the enourmous increase in credit, the depression would have already started. This trend MUST end at some stage, it HAS to. 

Cash ain't King, liquidity is  

Just my AUD$0.02  (worth even less than USD$0.02   )

Cheers


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## wayneL (12 April 2006)

http://news.morningstar.com/news/DJ/M04/D11/200604110907DOWJONESDJONLINE000369.html?Cat=TopDJStories



> WASHINGTON (Dow Jones) -- After several years of low interest rates and ample liquidity, storm clouds are developing over global financial markets, according to a new report from the *International Monetary Fund.*...........


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## tech/a (12 April 2006)

From the Article mentioned



> "However, any [stock] market correction is unlikely to be very significant given that market valuations, measured by price-earnings ratios, are currently around their long-term averages in most countries -- meaning, they are not as stretched as they were in 2000 and therefore less vulnerable to a "bursting of the bubble."
> 
> According to IMF estimates, a slowdown of U.S. home price appreciation from 10% last year to zero would reduce personal consumption by around 0.5-1 percentage point.
> 
> ...





Wayne I see this as a Far cry from the articles about after Desert storm.
Then there were huge scares about the massive cost to the US.

The Bear came out growled a bit,and is now thinking about hybernation.

The above is a long way from DEPRESSION.

Anyway eaven bulls can turn to bears given the right conditions.

Just as an aside there is a big difference between slowing of housing Sales and rising interest rates and demand for housing.


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## wayneL (13 April 2006)

We shall see. But apart from what we have, which is in the UK and not for sale, all else will be liquidatible assets.


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## markrmau (13 April 2006)

Wayne, this time it is different.


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## wayneL (13 April 2006)

markrmau said:
			
		

> Wayne, this time it is different.




hehe


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## wayneL (13 April 2006)

heheheheheh


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## wayneL (13 April 2006)

:-X


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## ghotib (14 April 2006)

Well there's one comfort Wayne. Our dollar coin is more like a paver than a rug, and you can't sweep things under, or pile much up on, a paver, let alone pull it out from under anyone's feet. 

Ghoti


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