# Risk



## Julia (25 January 2012)

As a result of some comments on another thread about how people perceived or failed to perceive risk, I'd be interested in members' attitude to risk.

One aspect I've been thinking about is whether appetite for risk is essentially a characteristic of personality?  e.g. is the person who will drive through a flooded creek, taking the gamble of not getting washed away, also likely to take a similarly cavalier attitude to risk where money is concerned?

Or is risk in financial matters very specific, in that someone could be quite conservative in their everyday lives, yet unable to correctly evaluate the level of risk in e.g. mortgaging the family home to buy into the share market, especially if the investor is retired or close to retirement.  We have seen examples of where this occurred and was followed by further gearing into the market via a margin loan on the shares purchased from the home loan.

I acknowledge that personally I'm risk averse and regard as my first priority always the protection and security of my existing assets, so perhaps my view that the above is an incredibly high risk strategy is coloured by my own bias.

What is your position on how much risk you are comfortable with?   Does this change with your circumstances, e.g. earning capacity and age/years to retirement?

As an adjunct to the above, the following is an extract from a post by doobsy (thank you, doobsy) which has some at least oblique connection.



> Borrowing - Australians still believe that banks are their friends and that debt is not a problem. Right or wrong we love bricks and mortar and believe it is safe. As the US, Spain etc are finding out, property is just another asset class that can have it's ups and downs. If a bank can see property prices heading south and I walk in wanting to borrow money to buy a property - is it their responsibility to tell me to come back in 6 months becuase prices will be cheaper and I won't have to borrow as much? Their first responsibility is to their shareholders to make money. #1. To not do so could get them sent to jail. Consumer protection is not their responsibility. The Govt has set rules on this and if they play by the rules then I don't see the drama. If they break the rules then watchout.






> A second part of this is borrowing for other purposes. How many people borrowed to invest in Gold Coast units or worse listened to a spruiker and pulled their super out to buy 2 units, or to start up a small restaurant business in Brisbane only to see GC units fall in value by 25% or Brisbane get flooded and have lost their capital. Where is their bailout?




I do not want to focus on the specifics of the above, rather the overall subject of how we perceive risk.


----------



## robusta (25 January 2012)

Good thread Julia. 

Many people IMO only see risk as a negative but when you think about it there is no reward without taking on some risk - the trick is to be adequately compensated for the risk taken.


----------



## Bill M (25 January 2012)

Risk is part of our everyday lives. From the moment I step out the door of my house I have to assess whether it will rain or not and whether I need to take an umbrella or not and as such I then have to risk assess everyday activities. Even to this day I still get that simple little thing wrong from time to time.

In my normal life outside of investing I take more risks than what I would for my investments. For example I have no fear in renting motorcycles in Asia and riding them around busy streets, mostly because I know I can do it well and I enjoy it. I love to travel the globe using very interesting modes of transport that can be life threatening.

On the other hand I am retired and I have to be careful how I manage my money, otherwise I might have to go back to work if I stuff that up. I would NEVER mortgage my house to try and make extra $$$ on top of what I have already (I have made a rule that that is a no go zone). Reason being is if I make a wrong decision I don't want to lose my house. 

Having said that I still take risks with my money all the time. I invest in stocks, hybrids and investment property only because if I didn't my money wouldn't grow and I wouldn't keep up with inflation. On the other hand, if I had enough capital to put it in the bank and just live off the interest and have it grow each year then I wouldn't risk my capital elsewhere. Or to simplify, if I had more than enough then I would not need to or want to invest in anything other than 100% Government Guaranteed term deposits or other similar safe investments.

Edit: I should add that when I was younger I had 2 investment properties which were mortgaged. I took on huge risk because I knew I could (financially with 2 jobs). At that time I had the ability to work my way out of difficulty if the situation should have arisen, it didn't. As a consequence on taking on that risk I am now retired, it was a good risk/decision at the time, cheers.


----------



## Tysonboss1 (25 January 2012)

robusta said:


> Good thread Julia.
> 
> Many people IMO only see risk as a negative but when you think about it there is no reward without taking on some risk - the trick is to be adequately compensated for the risk taken.




Thats one point that is often brought up by different people.

Risk vs Reward.

Depending on how that is interpretated, It may give the impression that very large risks are good so long as there is a chance of a very large return.

But in my opinion, If the risk is a complete loss of my life savings, then that chance of getting a really high return means nothing to me. The risk is simply to high no matter what the promised return is.

Another interpretation is that High returns must automatically be high risk, this again is not completely true just as high risk does not gurantee high returns.


----------



## Tysonboss1 (25 January 2012)

Bill M said:


> For example I have no fear in renting motorcycles in Asia and riding them around busy streets, mostly because I know I can do it well and I enjoy it. I love to travel the globe using very interesting modes of transport that can be life threatening.
> 
> .




No doubt, you probably hedge out some of those risks ( I hope) that would be to big to absorb by having some travel and medical insurance, and by hopefully wearing a helmet.

Your comments also spark the questions of knowledge and skill. 

No doubt your skill level when it comes to riding a motobike would mean you were taking less risk than I would be if I attempt the same thing following you down the road, So in my case a larger degree of conservatism and safty gear would be required.


----------



## Bill M (25 January 2012)

Tysonboss1 said:


> No doubt, you probably hedge out some of those risks ( I hope) that would be to big to absorb by having some travel and medical insurance, and by hopefully wearing a helmet.




Yeah I do both, plus I even have a license in one of the countries to make sure the insurance pays out just in case.


----------



## Garpal Gumnut (25 January 2012)

Julia said:


> As a result of some comments on another thread about how people perceived or failed to perceive risk, I'd be interested in members' attitude to risk.
> 
> One aspect I've been thinking about is whether appetite for risk is essentially a characteristic of personality?  e.g. is the person who will drive through a flooded creek, taking the gamble of not getting washed away, also likely to take a similarly cavalier attitude to risk where money is concerned?
> 
> ...




Thanks Julia,

I will enjoy this thread, good on you for starting it.

For the mathematically inclined, Laplace, the great French mathematician is a good person to google on the estimation of risk.

gg


----------



## Calliope (25 January 2012)

Risk is not taking out insurance.


----------



## tech/a (25 January 2012)

Risk is my favourite topic.

It will take me longer than I have time for to answer in depth so ill bullet point for my own case.

(1) Needs to be quantified before accepting.

(2) Needs to be controlled as best you can---dont take on risk you have no control over where possible. EG trusting your funds with someone else who makes the decisions.
Like a Building development.---if its YOUR building development then fine you can quantify risk. you cant quantify a third party---refer Storm thread.

(3) Understand your capacity to accept risk.

(4) Only take leveraged risk when the risk is basically zero. IE in the latest housing boom in 1996 to 2001 you could buy on 10% down and rent would cover all out goings and interest.---Leverage yourself as much as you can. Today totally different---the risks have changed.

(5) Can the Risk be negated---in time--if yes then negate the risk as soon as possible.
If not hold until the reward is no longer equal to the risk.---I've sold portfolio's in 2008
and properties in 2005 to now--deleting risk in the first instance and mitigating risk in the second instance.

(6) Not all risk is acceptable.

(7) Financially income streams can be the biggest mitigation of Risk. As Bill says continuous income is powerful.

(8) Always analyse risk where it will impact your life. Plan your strategy!!

(9) *If you take on a RISK and an OUTLIER event will wipe you out---the risk is too great.*


----------



## tech/a (25 January 2012)

Calliope said:


> Risk is not taking out insurance.




More to the point---reading the fine print---more again---understanding what the fine print is saying!

Did you know that if someone lights up your house in malice--Arson----chances are YOUR NOT COVERED---check your policy.


----------



## Wysiwyg (25 January 2012)

> e.g. is the person who will drive through a flooded creek, taking the gamble of not getting washed away, also likely to take a similarly cavalier attitude to risk where money is concerned?



Well I would not cross a flooded creek but I would go all in on what is a good prospective share. Reason being that if I crossed the creek I could get washed away and die whereas losing a wad of money on 'what was' a prospective share, is replaceable. 

There is certainly greater risk financially when other people are involved. When other people determine the outcome.


----------



## basilio (25 January 2012)

Good thread Julia.

I'm not sure how easy it is to accurately assess risk in many investment situations. In fact a strong case could be made that many of the most highly promoted investments have the most dangerous risks (and  often fail) and yet the stories told to investors to ally their fears are dishonest.

Some specific examples come to mind

1) The many investment  groups that promised people their money was going into bricks and morter first mortgage property investment when in fact it was holes in the ground speculation

2) Overpriced  interstate rental investments sold by property developers.

3) Most of the financial advice industry that takes its money from flogging the deals with the most commission as well as adding their own charges to the list.

I also find it a challenge to balance the risks of individual investment decisions against the overall economic background. For example a particular company might seem quite an exciting and potentially profitable investment. But if the overall economic situation becomes extremely unstable it's likely that even these will be severely affected.


----------



## Julia (25 January 2012)

Many thanks for interesting and thoughtful responses - much appreciated, folks.



Bill M said:


> In my normal life outside of investing I take more risks than what I would for my investments. For example I have no fear in renting motorcycles in Asia and riding them around busy streets, mostly because I know I can do it well and I enjoy it. I love to travel the globe using very interesting modes of transport that can be life threatening.
> 
> On the other hand I am retired and I have to be careful how I manage my money, otherwise I might have to go back to work if I stuff that up. I would NEVER mortgage my house to try and make extra $$$ on top of what I have already (I have made a rule that that is a no go zone). Reason being is if I make a wrong decision I don't want to lose my house.



OK, so you clearly distinguish between calculated physical risk and the potential risk of loss of your existing financial security.



> Having said that I still take risks with my money all the time. I invest in stocks, hybrids and investment property only because if I didn't my money wouldn't grow and I wouldn't keep up with inflation.



Here you're presumably investing capital deemed for that purpose rather than e.g. gearing existing assets to buy into stocks etc.



> On the other hand, if I had enough capital to put it in the bank and just live off the interest and have it grow each year then I wouldn't risk my capital elsewhere. Or to simplify, if I had more than enough then I would not need to or want to invest in anything other than 100% Government Guaranteed term deposits or other similar safe investments.
> 
> Edit: I should add that when I was younger I had 2 investment properties which were mortgaged. I took on huge risk because I knew I could (financially with 2 jobs). At that time I had the ability to work my way out of difficulty if the situation should have arisen, it didn't. As a consequence on taking on that risk I am now retired, it was a good risk/decision at the time, cheers.



So Bill, you've clearly outlined a differing capacity for risk at different times of your life e.g. the investment mortgages which you knew you could service at the time, whereas you'd probably be very unlikely to do that now.





tech/a said:


> Risk is my favourite topic.



Good.  Mine also.



> (3) Understand your capacity to accept risk.



This one is always interesting.  I suspect this is poorly understood by many.
It probably also needs to include the capacity to understand *the level of risk*.



> (9) *If you take on a RISK and an OUTLIER event will wipe you out---the risk is too great.*



Ah, I hoped someone would come up with this.



basilio said:


> 3) Most of the financial advice industry that takes its money from flogging the deals with the most commission as well as adding their own charges to the list.



True.  Do you think there will be any genuine improvement in this as a result of the changes to the industry currently proposed?



> I also find it a challenge to balance the risks of individual investment decisions against the overall economic background. For example a particular company might seem quite an exciting and potentially profitable investment. But if the overall economic situation becomes extremely unstable it's likely that even these will be severely affected.



I'd say the very fact that you're aware of the need to consider the wider environment suggests your decisions here will be pretty sound.


----------



## Bill M (25 January 2012)

Julia said:


> Here you're presumably investing capital deemed for that purpose rather than e.g. gearing existing assets to buy into stocks etc.




Correct, I don't borrow any money for anything anymore other than on my credit card which I pay off in full every Month.



> the investment mortgages which you knew you could service at the time, whereas you'd probably be very unlikely to do that now.




That's right, I just don't want to go back to work if things go wrong, so there is no way I would take on a mortgage at this time.


----------



## basilio (25 January 2012)

The topic of risk becomes murkier and murkier in my view. In my view I believe that much of our current economic and political system pointedly refuses to acknowledge quite clear risks because the consequences of having to face and deal with them are just too confronting.  And that happens on a personal level as well.

On the financial front I can't recall any other time our economic systems have faced such pressure from the volume of personal, corporate and national debt.  I saw an apt comment which pointed out that if a debt can't be paid it won't be paid. So when we see $15 trillion US  national debts and the rest of the world in similar situations (with regards to the size of their economies) it seems impossible to address the issue. And yet this unpayable debt is the cornerstone of our financial institutions, pensionfunds and nominal personal wealth.

So I fear we just close our eyes and ignore it.

I have similar concerns with the issue of Peak Oil and the decline of energy resources. The evidence is now in that oil reserves are depleting around the world and that there is simply not sufficient new discoveries to keep production rising or even static. (See International energy Agency 2011 report) The implications of an industrial world facing a terminal energy shortage are clear.  When energy supplies run down so does our whole system.  How do we "quantify" that risk ? How do we act on it personally and as a society ?  Or is it just too hard and too scary ?

It seems to me that many organizations and institutions are happier to develop risk strategies  for  the small stuff and won't touch the outliers. 

http://www.worldenergyoutlook.org/docs/weo2011/executive_summary.pdf


----------



## Glen48 (26 January 2012)

Wysiwyg said:


> Well I would not cross a flooded creek



 What if you had to say a medical emergency , risk is doing what you think you need to at the time, I have found do it and if it didn't work it is not your fault entirely because you were using all the information you have available at the time.


----------



## tech/a (26 January 2012)

Bill M said:


> Correct, I don't borrow any money for anything anymore other than on my credit card which I pay off in full every Month.
> 
> 
> 
> That's right, I just don't want to go back to work if things go wrong, so there is no way I would take on a mortgage at this time.




Bill
Through life you never considered creating passive income?

How do you cope with the erosion of inflation.
In 10 --- 15 yrs time the average wage will no longer be $71,000
More $120,000


----------



## odds-on (26 January 2012)

Good thread Julia. 

Risk is a complicated topic which can get a bit heavy at times. If I was to simplify risk analysis to the best of my ability then I think it should always be analysed in terms of two components:-

1.	Necessity. People do what is most necessary to them at any given moment. 
2.	Competence. Do the people involved in an activity know what they are doing?

Sometimes necessity means accepting increased risk, just as lower competence increases risk. This applies to investing, mountain climbing, Somalian pirates and so on.

Cheers 

Oddson


----------



## Smurf1976 (26 January 2012)

Glen48 said:


> What if you had to say a medical emergency , risk is doing what you think you need to at the time, I have found do it and if it didn't work it is not your fault entirely because you were using all the information you have available at the time.



Thus far in my life I have been faced with a few emergencies as have many, and it is truly amazing what you can / will actually do under such circumstances.

It might take half a day to clean up the yard normally and you might never consider jumping off the top of a ladder. But faced with an actual, real fire heading straight toward you then you find that half a day's work really can be done in 20 minutes of frantic running around. And if there really is an out of control truck heading toward you, well then you do just jump off the ladder and run. 

Under normal circumstances I would never consider doing either of those, but faced with an actual emergency priorities do change in an instant. The risk of a broken leg beats the certainty of being run over by a truck. The risk of exhaustion and a few cuts and scratches whilst frantically clearing the yard beats the certainty of the house burning to the ground. Etc.


----------



## Julia (26 January 2012)

odds-on said:


> Risk is a complicated topic which can get a bit heavy at times. If I was to simplify risk analysis to the best of my ability then I think it should always be analysed in terms of two components:-
> 
> 1.	Necessity. People do what is most necessary to them at any given moment.
> 2.	Competence. Do the people involved in an activity know what they are doing?
> ...



+1.



Smurf1976 said:


> Thus far in my life I have been faced with a few emergencies as have many, and it is truly amazing what you can / will actually do under such circumstances.
> 
> It might take half a day to clean up the yard normally and you might never consider jumping off the top of a ladder. But faced with an actual, real fire heading straight toward you then you find that half a day's work really can be done in 20 minutes of frantic running around. And if there really is an out of control truck heading toward you, well then you do just jump off the ladder and run.
> 
> Under normal circumstances I would never consider doing either of those, but faced with an actual emergency priorities do change in an instant. The risk of a broken leg beats the certainty of being run over by a truck. The risk of exhaustion and a few cuts and scratches whilst frantically clearing the yard beats the certainty of the house burning to the ground. Etc.






Glen48 said:


> What if you had to say a medical emergency , risk is doing what you think you need to at the time, I have found do it and if it didn't work it is not your fault entirely because you were using all the information you have available at the time.




OK, good point.  I should probably have excluded the need to take extraordinary risks in extraordinary situations.
We've seen good examples of the above in the World Trade Centre where people jumped rather than burned.

The flooded stream example was meant in the sense of plunging through rather than waiting a few hours for the water to recede.


----------



## Julia (26 January 2012)

basilio said:


> The topic of risk becomes murkier and murkier in my view. In my view I believe that much of our current economic and political system pointedly refuses to acknowledge quite clear risks because the consequences of having to face and deal with them are just too confronting.  And that happens on a personal level as well.



Agree, basilio.  The so called moral hazard of socialising debt and privatising profits has probably reduced the willingness of the average person to take full responsibility for their own situation.


----------



## Bill M (26 January 2012)

tech/a said:


> Bill
> Through life you never considered creating passive income?




Yes, I got it now. Correct me if I am wrong but I thought passive income was income that required you to do nothing. By that I mean, own shares and get income without having to look at the screens all day. Or have an investment property that is owned outright. One that has a managing agent who takes care of it and direct deposits the rent into your account each Month. I have this right now already.



> How do you cope with the erosion of inflation.
> In 10 --- 15 yrs time the average wage will no longer be $71,000
> More $120,000




Good question. When the GFC hit I took a hit, capital wise and dividend wise, for me it was slightly more of a hit than what I expected. In other words I dropped income and capital value. Before I go any further I must say I am not a trader, I don't know anything about it, I am a long term shares and dividend investor.

Since the GFC things have come up a bit and so have my dividends. Where I win is that I have little expenses, I simply save more of my income from investments than what I spend. Because of that I put more into shares, super and fixed interest as I go along when the price is right. Right now I am almost near GFC levels in terms of my net wealth and the sharemarket it still 40% off it's peak. Even if the sharemarket halved tomorrow I will still be ok and any surplus dividends or rent will be reinvested.


----------



## Calliope (26 January 2012)

One of the strictures which used to apply to people taking risks was the fear of being punished or social stigma if caught breaking the law.

Lawbreakers hardly consider the risk any more, whether it is drug taking, shoplifting, speeding, thuggery, graffiti, fare evasion, hooning etc

The reason is that the fear of being caught doesn't exist anymore and if you are the punishment is minuscule. Especially if you are a teenager.


----------



## Wysiwyg (26 January 2012)

Glen48 said:


> What if you had to say a medical emergency , risk is doing what you think you need to at the time, I have found do it and if it didn't work it is not your fault entirely because you were using all the information you have available at the time.



Reminds me of the example which was used during a confined space training course I sat. Two plumbers attended a problem in an underground pipe system where one climbed down a manhole in the road while the other looked out from above. The plumber climbing down fell from the ladder and his mate could see him at the floor motionless. Doing what he thought was the right thing to do at the time, he climbed down the ladder too. Both men died from methane asphyxiation.

Information is critical to me when assessing risk but in a life and death situation as you posed I admit it would be a difficult choice to make.


----------



## Eager (26 January 2012)

I guess I take more risks with my money than people who don’t buy shares – a colleague of mine likens it to betting on horses - but once invested, I tend to be fairly conservative, except I don't set stops. 

I have only ever borrowed once to buy shares. It was not a margin loan; instead it was a small investment home loan with annual interest paid in advance.  I invested in well credentialed stock that paid solid dividends which looked after about half of the required interest repayments. From that scenario, you can tell that I wasn’t prepared to stick my neck out with possible margin calls, but I was still prepared to borrow to buy shares. So, I minimised the risk. I did alright too. :  : 

I have never had an investment property. It is not the quality of the investment that has deterred me; it is the size of the investment. I prefer to invest comparatively small amounts in shares instead. The best piece of financial advice I have ever come across is to never invest in anything that you can’t afford to lose. Having said that, although the preservation of capital is important, once the money is spent on buying shares there is no point worrying about being behind. There is no law that says one must sell for a loss, and on the one occasion where a company I had shares in went belly up, I only lost a fraction of the value of my portfolio. I am also patient. Two of the 11 stocks in my portfolio are of the startup/speculative type; I am ahead on one but behind on the other. That does not worry me in the slightest. Most of my stocks are of companies that provide goods or services to the mining industry. To me that is less risky than investing in mining itself, especially if the company has some diversification to it.

Like some other members I have an online savings account with the institution that offers the highest interest at the moment. Is that risky? On the one hand it is a cash investment, and on the other there must be a reason for their offer which is generous compared to some.

But by far the biggest investment in dollar terms that I have at the moment apart from superannuation is the amount of money I have available in redraw on my home loan. I would rather leave it there than plough it all into any other sort of investment at the moment, but the last time I bought shares I did dip into it (since paid back from other means). That was risky, but I’m ahead with the shares I bought! 

I don’t know how, if at all, that correlates to risky behaviour in real life. Referring to *odds-on* on the previous page:



odds-on said:


> Risk is a complicated topic which can get a bit heavy at times. If I was to simplify risk analysis to the best of my ability then I think it should always be analysed in terms of two components:-
> 
> 1.	Necessity. People do what is most necessary to them at any given moment.
> 2.	Competence. Do the people involved in an activity know what they are doing?



When driving, I will not speed in town, but I will often set the cruise control slightly higher than the legal limit on a rural freeway, taking advantage of speedo error and police tolerance, to get to my destination quicker. There, I perceive the risk to be one of detection and fines rather than safety. But on an undulating and winding road, if I had been following a slow car until I had an opportunity to overtake, I will press the ‘pedal to the metal ‘until I am back in my lane. This minimises the amount of time I spend on the wrong side of the road, reducing risk, but the result is that I have probably momentarily sped up to 130 or more....is that momentarily risky in a quality car in good conditions or not?


----------



## basilio (27 January 2012)

Julia said:


> Agree, basilio.  The so called moral hazard of socialising debt and privatising profits has probably reduced the willingness of the average person to take full responsibility for their own situation.




I think that situation has really taken hold in the banking groups.  The main organisations that have taken advantage of socialising losses and taking the profits were the banks in the last GFC.

You could make a similar case when businesses demand taxpayers support and protection for their failing enterprises and then a few years later close up shop anyway.

On an individual level I guess some people would argue that almost any form of social security promotes moral hazard because people are unwilling to save the money necessary to  keep them afloat through unemployment, sickness or old age. Maybe ..


----------



## basilio (27 January 2012)

To put another spin on all of this..

_"If you are absolutely careful and consider all the situations that might occur almost nothing could go wrong in your life. But then very little would ever happen as well."_

When I travel interstate (fairly regularly)  I almost always invite backpackers to share the trips and driving. I have never meet these people before. I have almost no idea who or what they they will be like. On paper a seemingly risky proposition.

But I have never have a cause to worry and have meet many very interesting people.


----------



## Gringotts Bank (27 January 2012)

basilio said:


> To put another spin on all of this..
> 
> _"If you are absolutely careful and consider all the situations that might occur almost nothing could go wrong in your life. But then very little would ever happen as well."_




I like this.  Risk taking brings uncertainty into your life.  Uncertainty is good.  Not being able to know or even predict an outcome, also very good.     Staying in the world of the known means you never grow.  Getting the heart racing means you're pushing yourself.


----------



## Tysonboss1 (27 January 2012)

Thought I would share this video,

It's an enjoyable documentary on risk.

This is part 1, to continue with the other parts search youtube " birth of speculater part 2"


----------



## Wysiwyg (27 January 2012)

Gringotts Bank said:


> Uncertainty is good.  Not being able to know or even predict an outcome, also very good.



That would be the fine line between stupidity and brilliance.


----------



## howardbandy (27 January 2012)

Greetings --

Risk tolerance is personal and subjective.  When related to trading, risk is related to profit potential, system health, and position size.  

I discuss one method of coordinating those on my blog and in my latest book.  You can read much of it on the blog site -- for example this article:
http://www.blueowlpress.com/WordPress/articles/why-traders-stop-trading/

There are several chapters of my book, Modeling Trading System Performance, that can be read online or downloaded.
http://www.modelingtradingsystemperformance.com/book.html

Thanks,
Howard


----------



## Smurf1976 (27 January 2012)

basilio said:


> _"If you are absolutely careful and consider all the situations that might occur almost nothing could go wrong in your life. But then very little would ever happen as well."_



It comes down to potential _consequences_.

If I buy the wrong brand of canned fish then not much is likely to go wrong so there's no reason to spend much time contemplating it.

At the other extreme, there are massive consequences when it comes to things like careers, contracts etc so there's good reason to think carefully before making a decision. 

I have recently had the opportunity to get what would seem to be a "good" job that is clearly a step up from my present role. However, after careful consideration I decided not to take it because (1) I would not enjoy the work as much and (2) there seems to be a very much higher risk of the job becoming redundant in the current economic climate (3) the difference in pay is not sufficient to justify the above two points. In other words, the reward does not match the increased risk.

Careers, contracts etc you need to worry about due to potential consequences. In contrast, whether or not to go to Movie World whilst on a Gold Coast holiday doesn't need evaluation - just go there, worst case you've wasted a few $ if you don't like it.


----------



## Glen48 (27 January 2012)

Unless you get mugged on the way and the metal bracing fails and you fall out of the Big dipper get out of hospital and find your car  stripped  so you go to Starbucks for a  coffee and some one jams their foot on the accelerator instead of the brake and goes straight to your table so you can only plan so much much is beyond your control.


----------



## Julia (27 January 2012)

Smurf1976 said:


> It comes down to potential _consequences_.



Thank you, Smurf.   This is what was the fundamental prompt for my starting the thread.   It has seemed to me that some people - before taking on risk - fail to say to themselves "what could go wrong and if it did, how would I deal with that consequence?"   So they take the risk, not having thought this through, and when it all falls apart they claim no fault.


----------



## basilio (28 January 2012)

I think the fundamental problem in the "risk vs reward " discussion with regard to financial investments is the sophistication and self interest of the financial services sector. (BTW 'sophistication means clever lying bastxxxxs)

I think with the sole exception of  bank backed term deposits every other financial investment is attempting to gain punters attention with promises of security, certainty and high relative returns. Unfortunately our broad collective experience also tells us that the seemingly most trustworthy and respected institutions ie insurances companies,  banks and superannuation companies with their respective financial advisors result in the poorest returns with the highest costs. Anyway that is my indirect experience having seen the returns of friends who have invested in these products.

And having seen the way these products are structured and sold I think it is beyond most peoples capacity to effectively analyse either the story or the likely consequences.

So if investing with the biggest and seemingly safest  names in the business is a poor choice how well can punters assess other investments ? I think one really has to go out on a limb and somehow disregard the alleged experience and integrity of the AMPs. MLCS and big banks and make sense of smaller direct investments.

Something else worth considering. Many older school investors stuck to buying properties for rent and hopefully capital gain. It was tangible and directly accessible. Unlike investments in property trusts or through property spruikers one had a clear line of sight to the end product. In times when yields were around 5% it all made sense. Perhaps not now when  property prices are so high in relation to yields.


----------



## Bill M (28 January 2012)

basilio said:


> And having seen the way these products are structured and sold I think it is beyond most peoples capacity to effectively analyse either the story or the likely consequences.




That's right basillo. In the last 5 years or so we have seen many companies go bust right here in Australia. They were the ones offering "safe and secure" investments. Some pensioners put in their life savings just so they could squeeze an extra 2 % out of their investment. The companies went bust and they were ruined, now they have to live on the basic government pension.

The point I am trying to make is that as soon as things start getting better another company with high promises will come along and take in another group of vulnerable clueless pensioners.

Right now there is a company called firstmac advertising interest rates of 7.8% for investors. For that extra 1.8% interest all of your capital would be at risk again. Again, someone new and clueless can get sucked in. 

What they should do is put in big bold capital letters a message on the front page of their website saying "This investment is not guaranteed by the Australian Government cash deposit scheme, you could lose all or part of your capital." *But they don't do this, why?* We know the answer, they would get far less people take it on.  Would I touch it? No way, too much risk for a cash investment.



> Something else worth considering. Many older school investors stuck to buying properties for rent and hopefully capital gain. It was tangible and directly accessible. Unlike investments in property trusts or through property spruikers one had a clear line of sight to the end product.




That's exactly right too. What happens is (as we all know) that a company may be sailing along just fine and then one lazy Friday afternoon (usually after the market closes) they make an announcement to the ASX. The announcement is left field and something that was not expected or ever hinted about. On Monday the share price halves, you've lost 50% of your capital in a day. This is way beyond your control as there was no information available until after the last previous days closing.

This is why I have an investment property too. No one can BS me about anything, it is mine, I can touch it, rent it and even if the worst recession hit I will always get something out of it, even if I have to reduce the rent somewhat or use it as a holiday home for myself.


----------



## Tysonboss1 (28 January 2012)

The Largest threat comes from the things you don't understand and don't know about.

Like the German Back packers who pitch tent next to crocodile infested water and go down to the waters edge to wash their face in the morning.

Alot of people simply don't understand the risks that are lurking right in front of them.

In todays society we are all expected to be investors, Even if it is just your super fund you have to keep track of. But the topic of sound investment priciples is not even touched on in our schools or talked about in general.


----------



## notting (28 January 2012)

Tysonboss1 said:


> In todays society we are all expected to be investors, Even if it is just your super fund you have to keep track of. But the topic of sound investment priciples is not even touched on in our schools or talked about in general.



Apart from reading writing and arithmetic what is taught at schools is so pathetic it's a joke.

We should be taught about, perfect computer management, Logic ie how to analyse and identify - advertising - scamming - political spin, and how to research a topic live rather than memorise outdated garbage for an exam, how to eat well, exercise and empathise. 
There should also be taught secular ethics so we are educated to understand that being good to people and animals isn't for the sake of some Grand Poobar in the sky but is useful to and benefits ones own self estime, well being, happiness and is society as a whole a self and social win win.
Not learn some outdated tripe about geography, polotics, biology, the Fricken Eurika Stokade -crap etc.


----------



## Smurf1976 (28 January 2012)

One thing about real world emergencies is that they almost always involve an element of surprise. Even if it is understood that some risk exists, something comes out of nowhere and that ends up being the direct cause of the disaster.

For example, take the 2001 terrorist attacks in the US. Some may have foreseen that a terrorist attack could occur in the US at some point based on political views etc. But I seriously doubt that anyone had really considered that hijacking a plane and flying it straight into a very tall building was a likely means of attack. Those seeking to prevent terrorism would have been spending their time looking for bombs etc not worrying about people learning to fly planes. The underlying issue was foreseen, but the exact cause was not.

The same tends to be true of most things which go horribly wrong. That some danger exists is understood, but the exact sequence of events is not foreseen and thus takes just about everyone by surprise.

How many people thought there would be a nuclear meltdown in Japan as a direct consequence of an earthquake / tsunami? Everyone knew that a tsunami could occur and everyone knows that without cooling a nuclear plant can melt down. But pretty obviously the exact sequence of events either wasn't foreseen or was considered so unlikely that nobody took action to address it. It's those things, the unlikely and "impossible" ones, that tend to cause major disasters...

So far as investing is concerned, the same principles apply. There is always something which can go wrong that you won't have foreseen and/or won't have dealt with. There is no such thing as zero risk.


----------



## basilio (28 January 2012)

Smurf makes a very pertinent point regarding the knock on effects of particular events.

I think this is far more important now because  

1) Everything is so interconnected
2) Modern business  techniques have emphasized just in time  practices which mean that any hold up will cause immediate problems
3) Modern business practice (again) has reduced the amount of redundancy and thus resilience in our economic systems.

In that context it's interesting to look at GFC 1 it's consequences and where we now stand. When the first Global Financial Crisis  hit there was real fear of a complete meltdown of our financial systems. We had bank runs and the threat of further runs. (no one has yet demonstrated how our current economic systems would operate if there was a systemic banking crisis).

In a swift united  effort all the major economies threw trllions of dollars at the banks to keep the system operational. We breathed a sigh of relief when we seemed to dodge the bullet.

Three years later it is now countries not banks that are threatening to drown and there appears no plausible way to keep the  current financial systems operating.

This has to be the biggest risk we face but what can be done on an individual level ? So what steps are governments preparing to cope with a disorderly default ?  And should we be told about these steps to keep up public confidence ?


----------



## Julia (28 January 2012)

Smurf1976 said:


> So far as investing is concerned, the same principles apply. There is always something which can go wrong that you won't have foreseen and/or won't have dealt with. There is no such thing as zero risk.



Completely agree.  Which makes it even more important to avoid the obvious risks.



basilio said:


> Smurf makes a very pertinent point regarding the knock on effects of particular events.
> 
> I think this is far more important now because
> 
> ...



Yes, all relevant points.



> In a swift united  effort all the major economies threw trllions of dollars at the banks to keep the system operational. We breathed a sigh of relief when we seemed to dodge the bullet.



basilio, could you perhaps be a bit more specific about how you see the above in terms of Australia?   As I understand what happened here, yes the government offered the guarantee, for which the banks paid significant fees.



> Three years later it is now countries not banks that are threatening to drown and there appears no plausible way to keep the  current financial systems operating.



So do you think it would have been more useful in the longer term to let more banks/institutions fail during GFC1?



> This has to be the biggest risk we face but what can be done on an individual level ? So what steps are governments preparing to cope with a disorderly default ?  And should we be told about these steps to keep up public confidence ?



All good questions.  Let's hope there is some planning in place.


----------



## Smurf1976 (28 January 2012)

basilio said:


> 2) Modern business  techniques have emphasized just in time  practices which mean that any hold up will cause immediate problems
> 3) Modern business practice (again) has reduced the amount of redundancy and thus resilience in our economic systems.



I used to lament the fact that the energy industry now operates with far less margin for things to go wrong before the lights go out than it used to. It concerned me somewhat about the economic damage which would result from a major failure.

It was then pointed out to me by a consultant that this situation was not unique to energy but has in fact occurred across the entire economy with very few exceptions.

20 years ago if there was trouble with a plane or at a power station then it was no big deal since the major airlines had spare planes and the utilities had 20% spare capacity to cope with such things. But these days, there is very little to spare in any industry and once things go wrong it all falls apart rather quickly. Hence things like the public transport nightmares that result from a single train breaking down etc. There just isn't any resilience in that or any other system these days.

Just because your local council survives a financial crash doesn't mean they will actually be collecting the rubbish if that happens to be outsourced to someone else who went broke and the council has long since sold its own trucks. Just because Woolworths survived doesn't mean they'll have much on the shelves to sell you if the transport companies went broke. Or if their mechanics, fuel suppliers, tyre suppliers or anyone else up the chain went broke. Or if it was the farmers. Or whoever makes bottles and cans. Or...

Looking at my own job, if a few suppliers fall over then I'll be out of work real quick even though I'm employed in an essential industry. No supplies = we can't maintain equipment no matter how important it is. It's not like in the past when we could, and did, manufacture most things in house.

The physical world is just as interconnected as the financial world these days. If something big enough falls over, a lot of others will follow.


----------



## prawn_86 (28 January 2012)

Smurf1976 said:


> The physical world is just as interconnected as the financial world these days. If something big enough falls over, a lot of others will follow.




Yes a lot is preached about the benefits of 'just in time' logistics, but very little is ever mentioned about the risks if things do not run smoothly (or if it is not just a once of glitch/problem in the supply line)


----------



## basilio (29 January 2012)

I'm glad that Smurf was able to verify what I have observed indirectly with regard to the dangerously insecure situation of almost all  business operations. The most sobering point is realising that even quite large organisations  can be crippled if a significant parts supplier falls over.

With regard to Australia's financial position. As far as I can see  I don't think our government had to really bail out the banks. The loan guarantee was sufficient and as Julia pointed out was actually paid for by the banks. The one off stimulus packages at least kept confidence and the economy going during a very scary time.  As a result we didn't suffer the business collapses and unemployment rises that occurred overseas. The increase in national debt is currently handleable BUT you wouldn't want to see another financial shock occur (and isn't that what we are facing ?)   I think it would be far harder  this time to throw another $100b at the economy to keep it going.

Where to from here ? I just can't see how Australia won't be quickly affected by a financial crisis in Europe or America.  Collapse of overseas banking systems would feed through our banks instantly and I think will destroy confidence in the banks. If that happens a bank run would be very likely and be catastrophic. So what next ?

1) The government must as an absolute priority ensure that the capacity of the banking system to pay bills, hold funds  and keep society operational is 100% guaranteed. This would be regardless of failures in investment areas. 

2) Somehow there needs to be an overhaul of our financial system to
      a) Reduce the amount of  gambling that is now the mainstay of investment banks
      b) Separate the  essential service components of banks from the investment sector.
      c) Work out a practical way to deal with the current debts that doesn't crush our economies for decades to come.
I can't see how the financial system itself can address these problems. They are too conflicted and self interested. 

3)  The issue of lack of resilience in all our systems has to be addressed.  On personal levels it may come down to meeting our own needs at home or closer to home. On organisational levels it might mean similar projects as well as identifying back up suppliers of essential services and reversing  the just in time strategies we currently have. And perhaps we have to  go back to simpler products and operations that can be more easily maintained in difficult situations rather than technically  superior but more complex products. 

Any thoughts ?


----------



## pixel (29 January 2012)

Bill M said:


> On the other hand, if I had enough capital to put it in the bank and  just live off the interest and have it grow each year then I wouldn't  risk my capital elsewhere. Or to simplify, if I had more than enough  then I would not need to or want to invest in anything other than 100%  Government Guaranteed term deposits or other similar safe investments.



 I've only come across this thread this morning.
FWIW, Bill summed up my own approach:

I took a big risk leaving a well-paid job and working for myself as a full-time trader.
To a certain extent I kept the risk at a bearable level when I resigned still young enough to return into a salaried job, should the proverbial "hell break loose". Luckily, it didn't.
Meanwhile, that drop-back is no longer an option; but there's no longer a need for it either.

Those of you, who have read some of my trade-related posts, will know how I keep an eye on each trade and won't open a position without a Plan B. Doesn't mean I never had to "write-off" a position, but that is inevitable when one includes penny stocks in one's portfolio. In some cases, Plan B consists of "I risk 100% of a small investment, but I also see the potential for a multi-bagger."

For as long as I enjoy what I'm doing, and feel mentally fit enough to remain successful, I intend to keep trading. But, like BillM, I am not driven to accrue wealth for its own sake. If my capital had the decimal point further to the right, I'd probably put it in the bank and live off the interest. No idea though what I'd then do with all my spare time. It might drive me nuts and Mrs P to despair - and that's a risk I won't take lightly either. 

As regards global financial threats, I take a rather sanguine (stoic?) approach:
No matter how irrational I "know" all those international eggspurts are, I am one in 7 Billion; my chances of winning every Powerball jackpot are far greater than the odds of being able to influence the Fed or ECB, let alone governments of Greece or Italy. So I enjoy the ability to spend money while I can; I try to keep a safe balance of funds that will get me through a 1930's style crisis. But I rely on my ability to find a Plan B based on the particulars when they're known. No use fretting about what may be if...


----------



## basilio (29 January 2012)

> As regards global financial threats, I take a rather sanguine (stoic?) approach:
> No matter how irrational I "know" all those international eggspurts are, I am one in 7 Billion; my chances of winning every Powerball jackpot are far greater than the odds of being able to influence the Fed or ECB, let alone governments of Greece or Italy. So I enjoy the ability to spend money while I can; I try to keep a safe balance of funds that will get me through a 1930's style crisis. But I rely on my ability to find a Plan B based on the particulars when they're known. No use fretting about what may be if...




Well put Pixel.


----------



## Smurf1976 (29 January 2012)

basilio said:


> I'm glad that Smurf was able to verify what I have observed indirectly with regard to the dangerously insecure situation of almost all  business operations.



A real example that I know about (yes it's energy related...  ).

In the past there would be 20% or more spare capacity to cope with things going wrong. In addition there was backup fuel (oil) on hand at gas-fired power plants in case the gas supply was interrupted (since nobody stores gas on site due to the hassles of doing so in large enough quantity to be useful). In addition, there were contracts with the oil companies to access fuel stored by them also, and to get tankers on the road at short notice hauling it to the power station etc if it became necessary to do so.

What happens now? Well instead of all that there are simply contracts with other power generators, often in another state, to cover the financial risk to the owner that the plant is unable to operate for some reason. Much of the risk in Victoria is underwritten by two generators based interstate, one in NSW and one in Tas.

Just one problem... On a hot day Victoria already needs supply from Tas and NSW, with the direct source of that generation being the very same generating companies who are underwriting risk for Victorian rivals. That supply is needed in order to keep the lights on, since Victoria does not have sufficient capacity within the state's borders to do so even if everything works perfectly.

So what about those contracts? Well if interstate generators need to physically deliver due to a disruption of production at a Victorian plant then they can and will do so. But the energy they supply will be the very same electricity they could have already supplied anyway, the availability of which is factored into planning. The only difference being that it is being supplied to meet a contract rather than being sold into the spot market. 

So on paper, interstate generators have fulfilled their obligations with respect to supplying backup power during a plant outage in Vic and the owners of that plant in Vic have met their own contractual obligations to retailers by on-selling the energy supplied by interstate rivals. 

But what about the physical supply of electricity in Vic? Well that falls in a heap simply because no amount of "on paper" contracting can actually deliver physical supply that would not already have been available. NSW and Tas already supply peak energy into Vic, all the contracts do is provide financial certainty for them and (financial) insurance for Victorian generators. They don't address the physical lack of production because some plant in Vic broke down, ran out of gas etc since their supply is needed anyway.

So what we've done is to swap physical means of maximising reliability, things like having some spare capacity and backing up the gas supply to gas-fired plants with fuel oil etc, to a situation where there is much less spare capacity and less backup fuel available (and some new plants don't have any at all - zero).

So if the Longford gas plant, that's the one that was crippled by disaster in 1998, goes offline then there goes the output of the gas-fired power stations in Vic once they burn through the few hours worth of oil they have on hand, and then find that (not surprisingly) the oil companies haven't kept more on hand because they are not contracted to do so. On paper it's fine, they are financially covered by hedging contracts, but that doesn't stop the lights literally going out if it happens to be a hot day.

It gets even worse. I won't say too much, but suffice to say that someone's worked out that having water in storage isn't a good idea and that it's better to sell the water for cash, since cash earns (or saves) interest whereas water sitting in a dam doesn't. Just wait until the next drought...

It comes down to financialisation of the energy (and every other) industry. In other words, it's OK if it physically falls in a heap as long as there's a hedge contract to cover it. That's a bit like taking out the fire sprinklers in a building on the basis that insurance has made them redundant in a financial sense. True perhaps, but an insurance payout doesn't make a new building appear overnight, now does it?

On a related note, I'm told that there is only 3 weeks' worth of diesel held in storage in Australia. That won't last long if someone starts a war or a refinery blows up in a big way, now will it? Commonsense tells me that this is high risk, especially as we are becoming increasingly reliant on imports of both crude oil and refined products as demand increases and local production (both crude and refined) declines. Contemplate for a moment how we would function, even briefly without diesel? No trucks. No farm machinery. Non-electric trains at a standstill. Mining industry shut down. Etc. And yet apparently (so I'm told) we've got very little of the stuff in storage in case of problems.

If this is how it works these days with things like electricity and diesel fuel, then I'd be surprised if any other important industry had much of a buffer in case of disruption.


----------



## Eager (30 January 2012)

Smurf1976 said:


> If this is how it works these days with things like electricity and diesel fuel, then I'd be surprised if any other important industry had much of a buffer in case of disruption.



Just on that - diesel shortages caused by peak usage by the farm sector are not new, and reinforce your post.
http://www.heraldsun.com.au/news/vi...ng-truck-drivers/story-e6frf7kx-1225795172539


----------



## SJG1974 (1 February 2012)

This is a great thread, with some really interesting perspectives.  Good stuff.

My own personal attitude to investment risk is fairly simple and has so far (touch wood) enabled me to avoid any catastrophes…

•	Do my own research…don’t just believe what a product salesman or an advertisement tells me….verify that independently.  Too much advice is conflicted.

•	Don’t simply chase past returns (just because something did well in the past does not mean it will continue to do so).

•	Understand how the investment is supposed to make me money (obviously I won’t invest if I don’t think I can make money, but if I don’t understand how it can make me money, then I will steer clear).

•	Understand what can go wrong, assess the likelihood of the worst case scenario occurring, and how much I can potentially lose (for example I have never borrowed to invest in anything other than my home- I don’t like the idea of potentially losing more than 100% of my investment).

•	Weigh up the potential for gains versus the potential for loss and decide whether the risk is worth the reward (and typically the higher the risk, the smaller my investment).

•	Monitor my investments.

•	And importantly, diversify (I think diversification almost became a dirty word pre the GFC when shares were delivering great returns each year, but the GFC has shown how important that old chestnut continues to be).

I think an additional rider is to treat your money with the respect it deserves and take an active interest (and understanding) in what you are investing in…we see too many people claim they haven’t got the time or inclination to manage their own money, so hand it over to someone else.  A recipe for disaster in my opinion.

Whats more important…watching the Biggest Loser, or reviewing your investments?  I think some people have their priorities wrong, to their own detriment.


----------



## basilio (5 February 2012)

> If this is how it works these days with things like electricity and diesel fuel, then I'd be surprised if any other important industry had much of a buffer in case of disruption.  Smurf 1976




Apparently there is some serious rethinking in business about the effects of natural disasters on just in time production. The Japanese Tsunami and the floods in Thailand have had critical effects on many businesses. Good overview in the following story


> *The global supply chain: So very fragile
> *
> 
> 
> ...




http://tech.fortune.cnn.com/2011/12/12/supply-chain-distasters-disruptions/?iid=SF_F_Lead
.


----------



## So_Cynical (12 February 2012)

Risk taking behaviour is closely linked to "comfort zones" ~ certain individuals are more comfortable with some risks when compared to other risks, often due to confidence learned thru experience of assessing particular types of risk and successfully dealing with them.

For example an individual can to taught how to accurately asses the risk of driving a vehicle across a flooded road and then correctly drive a vehicle thru flood water after making an assessment that it is indeed possible to do so safely...after you do this a few times it just gets easier and easier.

The above can be applied to pretty much anything.


----------



## Wysiwyg (13 February 2012)

So_Cynical said:


> For example an individual can to taught how to accurately asses the risk of driving a vehicle across a flooded road and then correctly drive a vehicle thru flood water *after* *making an assessment* that it is indeed possible to do so safely...after you do this a few times it just gets easier and easier.



And that is how people die. The risk doesn't disappear after an assessment, it is still there. How anyone could assess the road surface and flow rate across the flooding section is a job for superman.


----------



## Wysiwyg (13 February 2012)

Since risk is ever present, risk control is the method.


----------



## So_Cynical (13 February 2012)

Wysiwyg said:


> And that is how people die. The risk doesn't disappear after an assessment, it is still there. How anyone could assess the road surface and flow rate across the flooding section is a job for superman.




Ok so your not comfortable with your ability to asses the risk of a flooded roadway crossing, so for you a flooded road = extreme risk do not cross....a person that is familiar with that particular section of road and with experience of other flooded roadway crossings may come up with a totally different assessment than you.

--------------------------

It occurred to me today that sometimes people take on one type of risk in order to avoid another type of risk...like say some of the storm victims may have taken on market risk in order to avoid the risk of not having enough money to guarantee a comfortable retirement, they were offered a comfortable way of making extra money and jumped at the chance.


----------



## Wysiwyg (13 February 2012)

So_Cynical said:


> Ok so your not comfortable with your ability to asses the risk of a flooded roadway crossing, so for you a flooded road = extreme risk do not cross....a person that is familiar with that particular section of road and with experience of other flooded roadway crossings may come up with a totally different assessment than you.



Would the outcome differ relative to assessment? 

I would only cross if I had a tank.


----------



## So_Cynical (13 February 2012)

Wysiwyg said:


> Would the outcome differ relative to assessment?




It shouldn't "all things being equal" but that's my point...all things are not equal, a person with experience and knowledge may well come up with a more realistic and thus positive assessment...and go about the crossing with skill and confidence and thus achieve a different outcome to another driver with less experience etc.

--------------

I did a 4WD course years ago and vividly remember driving slowly toward a small vertical rock wall, i told my instructor that there was no way i could drive over that wall, he told me i could, explained how to do it and to my amazement he was right.


----------



## Judd (14 February 2012)

Some may be interested in reading "The Book of Risk" by Dan Borge (not to be confused with "The Book of Risks" by Larry Laudan which is an interesting read in itself - as are Shakespeare, Milton, Keats, Longfellow, Donne, Auden and a host of others, if you please bunyip; it's not all about money.)

Anyway, the Borge tome has some fascination concepts regarding risks.  While printed in 2001 it is readily available in paper form or Kindle (yuck in my view but then I regret the passing of button up boots and quills.)


----------



## NewOrder (14 February 2012)

I am very conservative with my investments because I if I lose money I will have to leave the house and go to work 9-5 *shudder*.

I ride my bike like a complete idiot because it is fun and I enjoy taking risks like that. I have been riding with the brakes functioning at only 10% until my friend forced me to let him fix them. Although as I get older I take fewer personal risks, the body does not bounce back like it used to.

There is something very backwards in this think I guess but I just don't care. I would rather participate in some mildly risky behaviours to get a small thrill than to risk my money and have to be tied to the mundane life of working hard for the next 20 years.


----------



## Julia (14 February 2012)

NewOrder said:


> I am very conservative with my investments because I if I lose money I will have to leave the house and go to work 9-5 *shudder*.
> 
> I ride my bike like a complete idiot because it is fun and I enjoy taking risks like that. I have been riding with the brakes functioning at only 10% until my friend forced me to let him fix them. Although as I get older I take fewer personal risks, the body does not bounce back like it used to.
> 
> There is something very backwards in this think I guess but I just don't care. I would rather participate in some mildly risky behaviours to get a small thrill than to risk my money and have to be tied to the mundane life of working hard for the next 20 years.



+1.   I completely agree with your thoughts, particularly with respect to not risking your home, necessitating a return to the grind of work.


----------



## Klogg (14 February 2012)

Julia said:


> +1.   I completely agree with your thoughts, particularly with respect to not risking your home, necessitating a return to the grind of work.




I wish I had the luxury of staying at home and not working! Then again, I am only 25, so I might be able to catch-up in time


----------



## noirua (2 May 2018)

You can stay here for 50c a night:


----------



## timer (5 June 2018)

Warning ….Please Read
Remember all the scamming related to Share Express..well they have gone but have been reinvented under different names but with the same financial backer..Olive Financial Markets....please read the following which I have taken from another article...

*Surfers Paradise*: The Gold Coast is a hotspot for financial scams in Australia.
*Ricarmo Pty Ltd* is an "Authorised Representative", or if you like, it is legally registered to provide financial advice, though it's Financial Services Guide provided by a company called Olive Financial Markets Pty Ltd of 87-97 Liverpool Street, Sydney www.ricarmo.com.au/wp-content/themes/ricarmo/pdf/OliveFinancialMarketsFSGOctober2017.pdf
*Olive Financial Markets Pty Ltd* www.olivefinancialmarkets.com.au/contact-us/ has other Authorised Representatives who are Gold Coast based managed superannuation advisors, including:
*Camori Pty Ltd* https://camoriinvestments.com.au (see home page footer for it's Authorised Representative number). Although Camori operates out of the Gold Coast, it gives it's address as identical to that of Olive Financial Markets Pty Ltd in Sydney.
*Paradise Financial Group* also operates out of the Gold Coast but gives the same street number address http://www.paradisefinancial.com.au/#5 as Olive Financial Markets Pty Ltd in Sydney.
*Sharescope* http://www.sharescope.com.au owned and run by *Markets Pty Ltd* is another business which uses Olive Financial Markets Pty Ltd's Financial Services License (if you check the Australian Financial Services License number that they give against the ASIC register). Interestingly, they are at No. 89 Liverpool Street but in an identical Suite Number. Oh! No. 87 and No. 89 are the same building, so it's actually the exact same office as the others despite the different street number! Tricky!
Ricarmo Pty Ltd gives its address as
The Gateway, Ground Floor,
50 Appel Street,
Surfers Paradise, QLD, 4217
It so happens that ASIC raided three businesses at this address (see next item for how we know this) a month ago, as part of an investigation into investment fraud: (www.afr.com/brand/rear-window/asic-sends-police-to-almost-raid-channel-seven-20170920-gylewt – Paywall, but you should get one look for free; or www.goldcoastbulletin.com.au/business/detectives-raid-surfers-paradise-businesses/news-story/6bd9fa317c8a2ca34b0b6e20bfbdd5e3)
Only two of the three businesses are named in the stories _viz_. Camori Investments and Paradise Financial Group. The third business is unknown, but if you check the White Pages for Channel 7 (bear with me!), you'll see that Channel 7 is in the same building as Ricarmo. Now, if you've been reading carefully, you'll remember that the AFR story in the previous item says that the Camori/Paradice Financial raid was on Channel 7's Gold Coast building. So, it does look likely that Ricarmo is that mysterious third company that was raided in that office. To sum up, Ricarmo is an Authorised Representative of Olive Financial, which in turn, shares an office and a building with the two raided companies back in Sydney, as, it appears, does Ricarmo share with them their raided operational office on the Gold Coast. So many coincidences!
You'll also find negative reviews for a number of the companies above on the web if you Google them. All in all, with so many risk factors, maybe it's worth waiting until ASIC puts out an all clear before giving them your hard earned cash!


----------



## basilio (19 October 2021)

What does risk look like world wide ?  This graph was produced at the start of 2021









						Visualized: A Global Risk Assessment of 2021 And Beyond
					

Which risks are top of mind in 2021? We visualize the World Economic Forum's risk assessment for top global risks by impact and livelihood.




					www.visualcapitalist.com


----------



## Dona Ferentes (2 March 2022)

basilio said:


> What does risk look like world wide ?  This graph was produced at the start of 2021



_and now it's 2022 and I bet the relativities have changed_.


1. Last Wednesday, a few hours before Russian tanks began rolling into Ukraine, alarms went off inside Microsoft’s Threat Intelligence Centre, warning of a never-before-seen piece of “wiper” malware that appeared aimed at the country’s government ministries and financial institutions.

Within three hours, Microsoft threw itself into the middle of a ground war in Europe — from 5,500 miles away. The threat centre, north of Seattle, had been on high alert, and it quickly picked apart the malware, named it “FoxBlade” and notified Ukraine’s top cyberdefence authority. Within three hours, Microsoft’s virus detection systems had been updated to block the code, which erases — “wipes” — data on computers in a network.

2. Koda Capital is in full mea culpa mode after a private note urged clients to fill their boots with “disproportionately oversold” Russian stocks, which the firm argued are “well-placed to cope with current and likely future sanctions”. Cue outrage.

Setting aside the moral implications of a wealth manager pointing its nearest and dearest into an underweight war thematic, there’s the minor issue of its general advisability.

Major asset managers all over the world are yanking their capital from Russian investments and index providers are axing them from emerging market benchmarks.


> “*The Russian market is effectively closed,*” Dimitris Melas, chairman of MSCI’s index policy committee, told the _Financial Times_ on Tuesday. “It _*is now uninvestable.*_”












						Koda Capital’s crazy Russia bet
					

Introducing Koda’s Russian fund manager of choice, Prosperity Capital.




					www.afr.com
				




_.................. I hope their Risk Disclosure bit at the back of their documents is thorough. "Hello, Shine Lawyers?"_


----------



## Garpal Gumnut (2 March 2022)

Dona Ferentes said:


> _and now it's 2022 and I bet the relativities have changed_.
> 
> 
> 1. Last Wednesday, a few hours before Russian tanks began rolling into Ukraine, alarms went off inside Microsoft’s Threat Intelligence Centre, warning of a never-before-seen piece of “wiper” malware that appeared aimed at the country’s government ministries and financial institutions.
> ...



Thanks @Dona Ferentes .

I was thinking similarly when reading the AFR this morning. 

Having been involved in many risk/benefit analyses in life it was always easier to make a benefit analysis. 

Le cygne noir always lurked for risk. 

Ask the little old lady sitting on the bench outside Coles is as good a risk analysis as you will get atm and much cheaper. 

gg


----------



## Garpal Gumnut (20 March 2022)

I see nothing but Risk atm. starting with Europe.

Europe :
               War
               Refugees
               Oil
               Food
               Industrial Production
               Supply chain
               Climate/Weather
               Covid resurgence 

USA     :
             Political instability
             Stagflation
              Supply chain
             Taiwan/South Korea Protection/War
             Social conflict as in  Rich/Poor  Black/Other  Religious Right/Modernity
             Further China disagreements, not war (yet).
             Covid resurgence

Asia.     :
              China hegemony
              China market for our exports
              N Korea 
              China/India mini-wars
              Refugee crisis ( Rohyngia, India internal, India Kashmir, )

South America : Don't know much about them. Political foment. Rich/Poor. 

Africa                 : Don't know much about them. Political foment. Rich/Poor.

Australia/NZ/Pacific  :  China hegemony, 
                                         Iron/Coal exports, 
                                         Poor political leadership. 
                                         Corruption of Politicians. 
                                         Global risk to products of our quarry, 
                                         Climate change. 

I liquidated my Trading Portfolio in to Cash last week. 

I'll have a look at the ASX stocks in my SMSF at 11.30 am tomorrow when all the madmen have done their bit with downsies and upsies and make some decisions. 

I certainly won't be buying. 

gg


----------



## frugal.rock (20 March 2022)

Garpal Gumnut said:


> I certainly won't be buying.



I did a bit of buying on Friday... fwiw.

Most of what you mentioned is priced in... said with trader tongue in cheek, unless things take a turn for even worse in Europe. 
Hopefully not, for  everyone's sake.


----------



## Garpal Gumnut (20 March 2022)

frugal.rock said:


> I did a bit of buying on Friday... fwiw.
> 
> Most of what you mentioned is priced in... said with trader tongue in cheek, unless things take a turn for even worse in Europe.
> Hopefully not, for  everyone's sake.



A reasonable point.

Although the inputs in to decision making are changing much more rapidly. 

I've got a bad feeling atm. 

It's just the Vibe. The Constitution. Mabo. 

I just thought I'd throw in my 2c worth and get a discussion going on Global Market Risk. 

gg


----------



## moXJO (21 March 2022)

I was interested in a few Chinese stocks the other day that have all run up now. Just a bit worried the US will sanction China if they supply the Russians.


----------



## moXJO (21 March 2022)

Another thing coming up is the Russian debt obligation. I think they paid in the region of 180million just recently and have a $630million coming up. I think they said they were paying in rules but the interest has to be US $. 

So it potentially has a default smell to it


----------



## Garpal Gumnut (21 March 2022)

moXJO said:


> Another thing coming up is the Russian debt obligation. I think they paid in the region of 180million just recently and have a $630million coming up. I think they said they were paying in rules but the interest has to be US $.
> 
> So it potentially has a default smell to it



Inflation is what the big guys tell us will cause a panic rather than a billion or so in defaults. 

I'm watching but still inclined to stay in the market. 

gg


----------



## Country Lad (21 March 2022)

moXJO said:


> So it potentially has a default smell to it



Russia of course has plenty of gold bullion.



*BUT, - *not much good to them if they can't use it

_And like oil, Russia holds some of the world's largest reserves of gold — some 2,300 tons of it, worth nearly $140 billion.__
The huge reserves of the precious metal were built up over the past decade and a half, and were intended to be a sort of economic insurance policy for the country.
But as with oil, sanctions are making it incredibly difficult for Russia to actually realize the value of its holdings.
"This is why they bought their gold, it was for a situation just like this," Cork University Business School lecturer Fergal O'Connor told Bloomberg. "But if no one will trade it with you, it doesn't matter."
Last week, London's gold marketplace — the most important center in the world for bullion — banned all bars from Russian refineries, effectively shutting it out of the global trade.
The US Senate followed that move with a new bill that would prohibit US citizens from making any transaction that involves Russian gold.
 "Russia's massive gold supply is one of the few remaining assets that Putin can use to keep his country's economy from falling even further," Maine Sen. Angus King said in a statement. "By sanctioning these reserves, we will further isolate Russia from the world's economy and increase the difficulty of Putin's increasingly-costly military campaign."_


----------



## Garpal Gumnut (21 March 2022)

Country Lad said:


> Russia of course has plenty of gold bullion.
> 
> View attachment 139296
> 
> ...



Russia may be forced to swap or use Gold contracts to maintain their armaments and economy, both of which Putin has shredded.

Mr. Market seems to have priced this in. And is still doing so. 

Gold may fall back to support at $USD1750 to $USD1800.




gg


----------



## Dona Ferentes (22 March 2022)

Garpal Gumnut said:


> I see nothing but Risk atm. starting with Europe.
> 
> Europe :
> War
> ...



I think the big risk at present is the bifurcation of global systems into what is conveniently if perhaps misleadingly called:
1. The 'Rule of Law' nations, usually liberal democracies
2. The autocracies that can verge on kleptocracies.

The first tend to be more effective and efficient, forming alliances and with a basis of trust oiling the cogs.

Gnawing away as risks in 1) are the actions of some, often the self appointed 'entitled ones' resorting to _lawfare_ and other coercive actions.


----------



## divs4ever (22 March 2022)

Country Lad said:


> Russia of course has plenty of gold bullion.
> 
> View attachment 139296
> 
> ...



 Chinese and Indians LOVE gold they will even risk long prison sentences to smuggle it in , and those two nations alone are about one-third of the global population 

gold will be fine 

 those bits of paper ( promises of things that might be )  might have the problems


----------



## noirua (3 August 2022)




----------



## noirua (3 August 2022)




----------

