Probably a good and very logical question, CanOz. Best I can say in response is that I only put money in what I understand and I've simply never been attracted to learning about gold, or gold stocks for that matter.Julia, at times your logic falls in the domain of those that also may hold physical gold, but yet i suspect that may not yet be the case. Why?
Cheers,
CanOz
I understand what you mean. One assumes one has already lost! This is not the case at all here. Over the past 15 months including losses due to share holdings I am not ahead nor behind.Cash appears the King when you've lost just about everything. Later new investors will arrive and so the cycle starts all over again.
I like to look at the cash is king maxim a little differently, ie "liquidity" is king.
Cash is never "locked" away in a term deposit, you can draw it down any time you like , you just lose some interest in the adjustment if you take it early.
Agree with your No. 1 rule, but the problem occurs when that capital is what you use to generate an income. If deposit rates fall to 2%, that being equivalent to inflation, then you're effectively not receiving an income.I always thought that the number one rule in ANY portfolio was to protect ones CAPITAL .......... if that means sitting on current term deposit larfable rates and waiting for a bit more safety out there so be it ......
And is made worse by the interest being received is taxable.Agree with your No. 1 rule, but the problem occurs when that capital is what you use to generate an income. If deposit rates fall to 2%, that being equivalent to inflation, then you're effectively not receiving an income.
Agree with your No. 1 rule, but the problem occurs when that capital is what you use to generate an income. If deposit rates fall to 2%, that being equivalent to inflation, then you're effectively not receiving an income.
I am utterly tired of seeing this Buffet quote repeated ad nauseam.
It assumes that people presently holding cash intend to do this for the long term (....."a terrible long term asset").
If a lot more people had gone to cash a year or so ago, then there would a hell of a lot less misery and griping now.
Having Cash in a CMT that rolls over each month is to me indicative that you haven't made a decision and will reinvest when you feel comfortable with it and identify opportunities... which is considerably different to putting your cash in a 3 or 5 year fixed term deposit. to my mind that was what WB was on about...
Warren Buffet 16/10/08:
Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”
I don't see the potential capital loss as the only available option.yep totally agree re income .BUT does that validate sitting on a potential capital loss to collect the divies etc ?
tis one of those chicken and the egg kind of scenarious .
I don't see the potential capital loss as the only available option.
And will not buy anything for the dividends. These may well be cut if this mess gets nasty enough, as has already happened with some companies.
I've been doing some short term trades with BHP which moves in sufficiently large amounts to make it worthwhile. Somewhat of a departure from my previous longer term holds, but if I can generate a 10% gain on each trade using $100K each time, then that's OK.
And if the world falls over, then BHP is big enough to come back when it rights itself again.
The quote says "cash is a terrible long term asset"I don't take that quote as meaning that at all. Having Cash in a CMT that rolls over each month is to me indicative that you haven't made a decision and will reinvest when you feel comfortable with it and identify opportunities... which is considerably different to putting your cash in a 3 or 5 year fixed term deposit... to my mind that was what WB was on about... you obviously see it differently ?
No, it's absolutely not just those who used inappropriate levels of leverage.Of course but those in misery are those who used inappropriate levels of leveraging or poorly thought through strategies.
Well no, perhaps not. But did you consider locking in your profits when WBC was way higher than it is at present?No way in hell did I even consider selling my WBC shares that I bought for $3 or my $18 BHP shares for example, the Dividend return on the WBC shares can't even come close to being matched by any term deposit.
so you'd be able to utilise the T.R.A.P. option and save on tax?My "strategy" is to accumulate enough shares for an excellent dividend stream for retirement (I am semi retired at the moment),
Fair enough. Why bother going to any trouble to make more money than you need.I receive more in dividends then many people make as a wage and I still earn much more as a salary then I need to live from year to year, so I accumulate cash, then buy when I am comfortable, it's pretty boring to most people.
OK. I don't have any argument with what you're saying.ah ha but now we talking a different matter from what was first discussed , BUT you STILL are in cash ...just trading the short term moves for a hopeful faveourable outcome .i also trade for an income . my point previously was why would one flee from cash to investment in current climates and the fact that cash has outperformed MOST stock market investments since that buffet paragraph first started doing the rounds.
I wouldn't do it with some penny stock. Using e.g. BHP is essentially similar to having a long term hold but just making some profit in the meantime.also are you saying that if your trade is not favourable ie goes up that you are willing to ride it out no matter how long rather than lose a portion of your capital as a stoploss ?if so, that will quickly put a stop to your " income " from trading as it will be parked up in the stocks until they come back to profibility/break even
So if falling interest rates mean that cash of itself is no longer king for now, then we need to consider alternatives.
Using e.g. BHP is essentially similar to having a long term hold but just making some profit in the meantime.
And yes, I'd hold until there was a profit. The yield of 3.2% with 100% franking is probably better than cash deposit rates will be in a month or so.
So no stop loss!
BHP:
75 billion in assets
36 billion in Liabilities
Earnings per share of 9.4%
P/E of 10
(BHP the market darling?)
12 month high of $50- and is $30- now. (Is it a warning that BHP was $30 in 2007?)
Isn't BHP just like the example I gave above as an alternative to cash?
The question is:
Is CASH King while the mass’s carry heavy debts?
Maybe I've just lost the plot.
Now let's have a reality check here: I don't think anyone would be buying BHP for its dividend at about 3%. I merely made mention of it in comparison to what deposit rates are likely to be very shortly.No you havent lost the Plot , i do not think much of julia's above plan either .as as she quoted earlier divies DO get cut etc etc .
Another reality check: I'm doing this with a very small proportion of my capital, such that I'd be entirely happy to keep in BHP for the next couple of decades. Most of it will remain unprofitably tucked away in the bank.No stoploss whilst trading in THIS arena currently could see ones capital tied up for an awfully long time
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