Own vs. owed

[Tyler Durden]

Sorry, it's late, so forgive me if I can't articulate my question with precision, but I wanted to get this out of my head before I forget it.

In general, do you think it is easier to become wealthy by owning assets, or being owed money?

I was thinking of banks and they seem to make humongus profits, not from owning assets, but from other people owing them money and paying interest on it.

 

[Glen48]

Banks make most of their money of fees and charges you have no control over, once you have your money it is much harder to hang on to it than making.

 

[im sparticus]

They also owe a little more than they Are owed (reserve requirements) collecting the spread between owe and owed

 

[Starcraftmazter]

Creating money out of thin air and lending it at interest, and re-lending other banks' money at higher interest when you exhaust your capital sure is profitable. This is not something mere mortals are legally able to do unfortunately.

The problem with being owned things is counterparty risk. US banks know this all too well, they all became insolvent and went bankrupt over it.

Following on from that, I would definitely prefer to own assets with no counterparty risk, rather than being owned anything or owning assets with counterparty risk.

They also owe a little more than they Are owed (reserve requirements) collecting the spread between owe and owed

Australia doesn't use the fractional reserve system of banking. Even in the US, banks are not really constrained by reserve ratio requirements.

 

[ENP]

I'm beginning to think the only way to get ahead wealth wise is to load up to your eye balls in debt and purchase property.

I see using your own money to buy shares and quite a slow way to build wealth. Because I'm only controlling the amount of money that I can save. e.g. I save 10k per year and invest in shares. They go up 20% and I make 2k.

I use my 10k to buy 50k worth of property. It goes up 4% and I make 2k.

What is more likely to happen, my shares going up 20% every year or property going up 4% a year?

However, the only way I see getting into property is to negative gear! I'm not a big fan of this, topping it up and hoping for the price to go up.

How can we win? I'm assuming Tyler is in his early 20's like myself.

 

[numbercruncher]

I'm beginning to think the only way to get ahead wealth wise is to load up to your eye balls in debt and purchase property.

Sigh .....


Way way back in the olden days before thou were born (2008) the people of that era were reminded of the consequences of such a pyramid scheme ....

 

[mazzatelli]

I'm beginning to think the only way to get ahead wealth wise is to load up to your eye balls in debt and purchase property.

imo the better way to wealth is improve skills in your trade/career/business or marry into wealth: and THEN investing wisely.

Alot of folks in general seem to think an ordinary paid job + investing = automatic wealth

 

[im sparticus]

Creating money out of thin air and lending it at interest, and re-lending other banks' money at higher interest when you exhaust your capital sure is profitable. This is not something mere mortals are legally able to do unfortunately.





Australia doesn't use the fractional reserve system of banking. Even in the US, banks are not really constrained by reserve ratio requirements.

fact: you cant lend money you dont have.

 

[tech/a]

I'm beginning to think the only way to get ahead wealth wise is to load up to your eye balls in debt and purchase property.

I see using your own money to buy shares and quite a slow way to build wealth. Because I'm only controlling the amount of money that I can save. e.g. I save 10k per year and invest in shares. They go up 20% and I make 2k.

I use my 10k to buy 50k worth of property. It goes up 4% and I make 2k.

What is more likely to happen, my shares going up 20% every year or property going up 4% a year?

However, the only way I see getting into property is to negative gear! I'm not a big fan of this, topping it up and hoping for the price to go up.

How can we win? I'm assuming Tyler is in his early 20's like myself.

Your right.
Problem is you have to get your timing right or you will lose the lot.

In my book there are 3 ways to accumulate more wealth than you
Need.Only a few % of people will ever achieve this.

#1 Your own business ( turning over more than $3 mill )
The deli,coffee shop,lawn round won't do it.
#2 Trading ( with enough capital to purchase a house / $ 200 to
$500 k minimum)
Loading up leverage with CFD's won't do it either.
#3 Property with at least 2 IP's.
Bank loans won't do it either.

A handful of cash like a lottery win won't guarantee longterm success either
Many lose the lot.
95% of businesses fail in the first 3 years
95% of traders fail
Property can fall or stay stagnant for years.

There is light at the end of the tunnel
It takes patience.
There are clear times to enter all of the wealth creating vehicles
Given the original posters age they will see many of these times.

You will need to learn how and what to identify and how the place yourself in the position to take advantage of the opportunity when it presents itself.

It's these OUTLIERS that will make your investments truly succeed.

 

[odds-on]

I'm beginning to think the only way to get ahead wealth wise is to load up to your eye balls in debt and purchase property.

I see using your own money to buy shares and quite a slow way to build wealth. Because I'm only controlling the amount of money that I can save. e.g. I save 10k per year and invest in shares. They go up 20% and I make 2k.

I use my 10k to buy 50k worth of property. It goes up 4% and I make 2k.

What is more likely to happen, my shares going up 20% every year or property going up 4% a year?

However, the only way I see getting into property is to negative gear! I'm not a big fan of this, topping it up and hoping for the price to go up.

How can we win? I'm assuming Tyler is in his early 20's like myself.

I recommend a book called Free Capital by Guy Thomas as I found that it put wealth creation into perspective for me. Before the inevitable FA vs TA vs Property investment discussion begins, some of the investors used a combination of approaches over the years. The book has got great reviews from UK investments websites and a some of the millionaires in the book are prolific posters on a UK forum.

http://guythomas.org.uk/blog/

Motley Fool Au also had an article about it.

http://www.fool.com.au/2012/05/investing/12-insights-for-my-path-to-a-million/

Also recommend the following classic. Read about his early years and his capital allocation decisions when he was 20-35 years old.

http://www.amazon.com/Buffett-The-Making-American-Capitalist/dp/0385484917

 

[waimate01]

I'm beginning to think the only way to get ahead wealth wise is to load up to your eye balls in debt and purchase property.

Here's a case study of some guys I have lunch with once a month:

- three of them started their own separate businesses, worked their arses off for ten years, coasted for another five years making really good profits, sold the business for a shedload of money and retired early to lead a life of leisure which includes travelling the world business class several times a year and staying in really nice places.

- two of them always worked for the man, worked diligently, lived well but modestly, didn't get involved in debt beyond PPOR and maybe one IP, ensured income exceeded expenses and invested the excess conservatively and wisely. They both retired and lead a life of leisure travelling the world business class several times a year and staying in really nice places

- a couple ensured their lifestyle always matched their income (ie, equalled), borrowed heavily to invest, are past minimum retirement age and are still saddled in debt, never fly business and don't come to lunch because it's all too depressing

- others are work in progress

The conclusion is that there's more than one path to meet your destination, but the paths have certain things in common - live within your means and don't over-borrow!!

Countries ditto.

 

[burglar]

... place yourself in the position to take advantage of the opportunity when it presents itself.. ..

Exactly!!
If you want to catch a bus, stand at a bus stop!

 

[Starcraftmazter]

fact: you cant lend money you dont have.

Fact: You don't know how the banking system works. Any banking system.

 

[im sparticus]

Fact: You don't know how the banking system works. Any banking system.

fact: you dont have two cents to your name and your sore as hell about it!

Care to eloborate, here is a hint if they could create money out of thin air and lend it they would profit not only the total interest but the principal aswell.

Guess they never explained that on youtube

 

[Starcraftmazter]

Care to eloborate, here is a hint if they could create money out of thin air and lend it they would profit not only the total interest but the principal aswell.

When a loan is paid back, the principle is destroyed just as it was created. Seriously, I can't believe you believe the crap you write - banks only lend money from deposits?? Really?

Logically speaking, who the hell has enough money deposited into banks to allow every single sector of the economy to be in so much debt? Come on.

They also owe a little more than they Are owed (reserve requirements) collecting the spread between owe and owed

Maybe you'd like to explain how banks have a net asset position then? Seriously, why even talk about these things if you have no idea.

 

[im sparticus]

When a loan is paid back, the principle is destroyed just as it was created. Seriously, I can't believe you believe the crap you write - banks only lend money from deposits?? Really?

Logically speaking, who the hell has enough money deposited into banks to allow every single sector of the economy to be in so much debt? Come on.



Maybe you'd like to explain how banks have a net asset position then? Seriously, why even talk about these things if you have no idea.

Next question how is it destroyed?

 

[im sparticus]

When a loan is paid back, the principle is destroyed just as it was created.

Just wanted to post again for everyone to enjoy your a fun toy to play with scm.

 

[im sparticus]

Creating money out of thin air and lending it at interest, and re-lending other banks' money at higher interest when you exhaust your capital


s.

and for those of us who were wondering how the capital was being created.

 

[Starcraftmazter]

Next question how is it destroyed?

By a laser beam? What the hell kind of question is that seriously?

Do you think banks actually put deposits into some sort of a pool of money out of which they lend out? Seriously? FFS.

Go and learn something, then come back and try to not look stupid.
http://video.google.com/videoplay?docid=-2550156453790090544

and for those of us who were wondering how the capital was being created.

Capital given from parent bank
Shareholder investment
Retained earnings

 

[newanimal]

Go and learn something, then come back and try to not look stupid.
http://video.google.com/videoplay?docid=-2550156453790090544

There's been a lot of information out there on this subject for some time. This vid by Paul Grignon is one of the best i've seen IMO. It's comprehensive enough yet concise enough not to alienate low-attention spanners. Imagine....a group of powerful elite secretly getting together and making plans... ha ha ha...what a loony idea.
I dunno, maybe the incredulous deserve what they get.:sheep: