ASX 200 prediction

[Smurf1976]

If Wilson said the almighty crash was gonna happen in July 2007 then I’d listen. It’s common sense what goes up must eventually come down…but telling me exactly when it’s gonna come down…then and only then I’d be impressed.

In May 2002 I read a series of online articles which turned out to be somewhat life changing for me so far as finances and investing are concerned.

They were written by someone who claimed to have no financial qualifications. An American by the name of Richard (can't remember his surname).

Over a series of articles posted on his own website he went into considerable detail and pretty much nailed it in terms of what would later occur. That later occurrence is now commonly known as the Global Financial Crisis.

Mortgages, banks, car manufacturers - he hit the nail on the head about what would happen and named many of the companies that would ultimately go under. The only thing of significance he missed was the US government bailing out GM and Chrysler but apart from that he hit the bulls eye.

He made no attempt to predict the timing apart from pointing out the signs to look for which would be the warning that it was imminent. He was right there too.

Ever since that I've adopted that broad philosophy to my own investments. Don't aim to predict the timing of anything but do understand the "what" and do understand what events are likely to occur first. Then just pay attention to what's happening.

To that end I don't think we've seen the US stock market reach a major top yet in this cycle. No true mass euphoria seemed to be present, there were still those voices of worry. No proper oil shock. The Fed isn't done with tightening indeed they haven't really done much of it. The economy is still growing. And so on. The only real storm going on is a political one that'll probably resolve itself sooner or later. Once that's done, then we can go through the motions and get a proper market top with all the things usually involved with that. When I won't even try to predict.

For the ASX I don't have a prediction beyond noting that the same broad points apply with the added complication that rather a lot of the large cap stocks are in some way affected by politics. Banks, electricity, gas, coal mining, anything associated with the NBN, anyone paying out large franked dividends are all subject to a degree of political influence at present.

 

[trading_rookie]

I think you’re missing my point Smurf.

It’s near impossible to time, yet so easy to predict something will happen in the future.

If Richard with no economic/financial/market experience could see in 2002 what would happen 5 yrs later, then it's nothing short of ridiculous such a big deal is made when economic academics and professionals are credited with a future event they'd be warning for years.

 

[willy1111]

I would have thought the changes to negative gearing and CGT, would have greater ramifications. The changes to Div Imp, will just reduce the amount of retirees in the market. IMO
Having said that, the changes to CGT, will have an effect on share traders. How much of an effect, will be interesting to see.

I would have thought changes will have no impact on share traders as they don't get cgt discount anyway, they are treated on revenue account not capital https://www.ato.gov.au/General/Capi...ng-as-investor-or-share-trading-as-business-/

 

[willy1111]

In May 2002 I read a series of online articles which turned out to be somewhat life changing for me so far as finances and investing are concerned.

Some people reading stuff like that, it scares them into pulling their money out of the market completely...which may have meant missing out on the great bull run of 03 to 07.

I'm curious to hear hw you adjusted your finances and investments if you'd like to share.

Maybe a lot are more careful of leverage after 08, especially margin levels, too much margin can wipe one out.

 

[willy1111]

I can understand the thinking that a Labor Gov might worsen things, but drawing the link between changes to the Div Imp system and a Recession seems far fetched.
Spending and Production aren't likely to plummet due to Div Imp changes Ida thought.

I think maybe it is just one of the many ingredients contributing to a potential of lack of future growth.

Sydney and Melb prop prices peaked, US interest rates rising pushing up cost of funds to our banks causing them to push up rates, costs out of Royal Commission to banks meaning dividends may be cut or pay out ratios increased. US bull market 9yrs in, means much closer to the end than the start judging by previous length of bull runs in the past. Maybe we follow the US.

 

[trading_rookie]

I would have thought changes will have no impact on share traders as they don't get cgt discount anyway, they are treated on revenue account not capital

Unless of course said traders have a smsf full of long term securites and property.

 

[willy1111]

Unless of course said traders have a smsf full of long term securites and property.

SMSFs pay tax at 15% for assets sold less than 12mths and 10% for over 12 mths.

So they effectively get a 33% discount, a reduction to 25% would see the long term rate increase from 10% to 11.25%...I wouldn't think that would make much difference to their behavior.

I haven't heard any mention of CGT changes for smsfs being proposed.

 

[trading_rookie]

So they effectively get a 33% discount, a reduction to 25% would see the long term rate increase from 10% to 11.25%...I wouldn't think that would make much difference to their behavior

You don’t think a 33% discount now and a possible reduction to only 10% under the ALP wouldn’t make much of a difference to behaviour? I’d like to hear why you think that.

I haven't heard any mention of CGT changes for smsfs being proposed.

Maybe I’m jumping the gun, but I’m assuming a CGT reduction on shares and property in the real world and a CGT reduction on shares in the super world, will eventually lead to the same applying to property…after all Shorten is no fan of the SMSF.

 

[tech/a]

Shorten is no fan of the SMSF

He doesn't have to be nor does any politician.

They have their over inflated Govt Pension for life.
They don't need to live by the rules we all have to.
Yet we pay for them!
Public servants--cr@p---self serving everyone of them.
Power and control.

It would be completely different if they had to abide by their laws/rules!

Sorry Rant off topic!

 

[jbocker]

Sorry Rant off topic!

Absolutely, NO need to apologise. But they are ultimately means tested aren't they?

 

[tech/a]

Not that I'm aware of.

They don't even pay tax like we do.
Yet they govern our laws that affect us
on TAX.

 

[trading_rookie]

He doesn't have to be nor does any politician.

They have their over inflated Govt Pension for life.
They don't need to live by the rules we all have to.
Yet we pay for them!
Public servants--cr@p---self serving everyone of them.
Power and control.

It would be completely different if they had to abide by their laws/rules!

Sorry Rant off topic!

I don’t know if its that simple Duck, after all you have to take a stance on policies you think the majority of the electorate will be in favour of, and there seems to be this overwhelming negative sentiment to anyone who worked hard on a modest salary and sacrificed to own something and then pay their way in retirement and now be viewed similarly to those born with a silver spoon in their hand. I don’t know why, but the ALP always seem to have it in for the middle-classs.

Shorten became an MP in 2007, the less favourable rule applies to him;

SUPERANNUATION:

MPs who entered Parliament before the 2004 election are required to pay 11.5 per cent of their salary into superannuation for up to 18 years and pay 5.75 per cent of their salary thereafter. On retirement they benefit from a generous nest egg based on their years of service. They can receive a lump sum or annual pension. Those who became MPs after the 2001 election must wait until age 55 to get the money.


MPs who were elected from the 2004 election onwards have a less generous scheme. The Government contributes 15.4 per cent of their gross salary into a super fund elected by the MP. Their super payout is based on the performance of the fund in the same way as most workers. Salary sacrifice is allowed.

Albanese I’m sure benefited from negative gearing - his last known acquisition in 2016 at $1.175m with rent at a modest $880 a week back then, which was another addition to his portfolio.

https://www.dailytelegraph.com.au/r...t/news-story/e229d9ebb31d72415de84a2ac6db1f5f

Yet had no problem appearing on Q&A a while ago to talk it up as a super-rich tax rout and why it should be eliminated.

 

[sptrawler]

I don’t know if its that simple Duck, after all you have to take a stance on policies you think the majority of the electorate will be in favour of, and there seems to be this overwhelming negative sentiment to anyone who worked hard on a modest salary and sacrificed to own something and then pay their way in retirement and now be viewed similarly to those born with a silver spoon in their hand. I don’t know why, but the ALP always seem to have it in for the middle-classs.

Shorten became an MP in 2007, the less favourable rule applies to him;

SUPERANNUATION:

MPs who entered Parliament before the 2004 election are required to pay 11.5 per cent of their salary into superannuation for up to 18 years and pay 5.75 per cent of their salary thereafter. On retirement they benefit from a generous nest egg based on their years of service. They can receive a lump sum or annual pension. Those who became MPs after the 2001 election must wait until age 55 to get the money.


MPs who were elected from the 2004 election onwards have a less generous scheme. The Government contributes 15.4 per cent of their gross salary into a super fund elected by the MP. Their super payout is based on the performance of the fund in the same way as most workers. Salary sacrifice is allowed.

Albanese I’m sure benefited from negative gearing - his last known acquisition in 2016 at $1.175m with rent at a modest $880 a week back then, which was another addition to his portfolio.

https://www.dailytelegraph.com.au/r...t/news-story/e229d9ebb31d72415de84a2ac6db1f5f

Yet had no problem appearing on Q&A a while ago to talk it up as a super-rich tax rout and why it should be eliminated.

Unlike the average wage earner, who is probably negative geared, I would expect politicians on their income to be positively geared.

https://www.businessinsider.com.au/...icians-own-a-staggering-524-properties-2017-4

https://www.abc.net.au/news/2017-04-20/australian-politician-property-ownership-details/8453782

 

[willy1111]

You don’t think a 33% discount now and a possible reduction to only 10% under the ALP wouldn’t make much of a difference to behaviour? I’d like to hear why you think that.

Maybe you have misunderstood, 33% is the cgt discount for SMSF's (50% for individuals)...10% is the effective rate of tax for an smsf after the discount.

Example. $100,000 capital gain...in smsf 67% is taxable = $67,000 taxable at 15% = $10,050 tax payable on capital gain...pretty much 10% of the gain.

If they make the cgt discount 25% rather than 33%, $75,000 taxable at 15% = $11,250 tax payable.

Difference is a little over $1,000 tax payable on a $100k gain...ergo I don't think it will impact behaviour in an smsf as you alluded to.

 

[trading_rookie]

Unlike the average wage earner, who is probably negative geared, I would expect politicians on their income to be positively geared.

@sptrawler , you’re probably right, but going by the link you provided the smart ones use family members to apply the -ve gearing.

Former treasurer Joe Hockey’s wife owned a house she bought for $320,000 in 1997, which her husband used when in town. It sold last year for $1.5 million. During his time in parliament, it’s estimated that Hockey claimed around $184,000 in travel allowances over 18 years to stay there.

The ATO handed down a ruling saying MPs renting in Canberra from a spouse or family member are allowed to essentially negatively gear the property and claim income tax deductions on a range of costs, including mortgage interest, rates and power, on a second property. Even better, it’s capital gains tax free when sold.



Difference is a little over $1,000 tax payable on a $100k gain...ergo I don't think it will impact behaviour in an smsf as you alluded to.

@willy1111 what if the impact was $14,160? Would that impact investor behavior?

Using the Hockeys investment property as an example, the gain is $1.18m

67% taxable on $1.18m = $790,000 x 15% = $118,590

75% taxable on $1.18m = $885,000 x 15% = $132.750

The difference then between a 33% and 25% discount is quite substantial considering you have to pay off the mortgage for an investment, which I’m sure you know is more than a regular one. Insurance, up-keep, maintenance, rates, utilities…list goes on.

And that’s just the property, what about compliance, and auditing costs, etc for the SMSF itself?

If you decide to sell the property within the SMSF you’ll be $14,600 worse off. That’s a lot of money, I’m sure you’ll agree.

 

[willy1111]

If you decide to sell the property within the SMSF you’ll be $14,600 worse off. That’s a lot of money, I’m sure you’ll agree.

In isolation...yes...but

To realise a one off $1.2M gain...it is pocket change...hence I don't think it would impact behaviour within an smsf one bit.

The more likely action is that they wait until the smsf is in pension phase and possibly pay $0 tax.

The proposed change to the CGT will have much bigger impact on investments in personal name. The $1.2m gain, currently only $600k gets taxed at marginal rate, under Labours proposal $900k would be taxed at marginal rate = $141k more in tax...thats where the big difference is!

But people will still invest in property and shares as the historical total returns are better than cash/fixed intetest.

We just pay more tax...you don't see wage earners knocking back pay increases as they have to pay more tax...although you do see some knocking back overtime.

Don't get me wrong...I'm completely against increasing taxes. I don't want to give the muppets in Canberra anymore dollars than I legally have to to misuse and misspend.

 

[MarketMatters]

Yes the difference between 33% and 25% is substantial however it needs to be relevant to the taxed entity. Apply different individual MTR and your outcome is 'substantially' different.

Low income earner may benefit by holding property in their own name vs superannuation on a CGT triggered event;

High income earner on top MTR will benefit by the lower rate imposed by the superannuation system on a CGT triggered event.

Nil income earner (Pension phase in superannuation) benefits by having no taxable income assessed on any CGT event. WINNER.

Depends on which camp you fall into. However more times than not most people don't care of the net effect as they embrace the magnitude of how much they made! Seriously how many people do you hear gloat I made a NET XX% return?

 

[IFocus]

I remember listening years ago to a successful property investor and he hammered the point that any investment had to stand on its own legs neg gearing was just an added benefit never the reason to invest.

I am a fence sitter on neg gearing plenty of reasons to scrap and it will have to go one day but easy to mess up if done badly.

 

[Darc Knight]

I remember listening years ago to a successful property investor and he hammered the point that any investment had to stand on its own legs neg gearing was just an added benefit never the reason to invest.

I am a fence sitter on neg gearing plenty of reasons to scrap and it will have to go one day but easy to mess up if done badly.

One of Noel Whittaker's "Golden Rules of Wealth" is never invest for tax reasons: " Always judge an investment on its merits– any tax benefits should be regarded as the cream on the cake."

https://www.noelwhittaker.com.au/resources/free-downloads/the-20-commandments-of-wealth/

 

[luutzu]

One of Noel Whittaker's "Golden Rules of Wealth" is never invest for tax reasons: " Always judge an investment on its merits– any tax benefits should be regarded as the cream on the cake."

https://www.noelwhittaker.com.au/resources/free-downloads/the-20-commandments-of-wealth/

I think that that's generally is true. Way too many people taking on investment [properties, say] for the tax benefit, hoping to gain on the capital gains later.

That might work out well enough during good/normal economic growth with your stable/high income. When the tide turn, lost that job or the law changes, investment that doesn't pay for itself tend not to end well.

BUT I've read about Rupert Murdoch and he built his empire on crap load of debt, tax benefits etc.

His strategy, and it's not always about the tax gain, it's also about political power and influence... but what he does over and over is to buy businesses that's making a loss, use that loss to offset against his other profitable businesses. Hence, paying little to no tax while expanding the empire.

Came close to going broke a few times... but then that's where political influence comes to the rescue.