Storm Financial Group

DocK said:

I don't know that education will ever entirely protect everyone from being taken by scams, con-artists, the unethical etc, but my own personal losses would certainly have been less if I had the knowledge then that I have now. True, the model used by storm wasn't unique at all, but other investors did not suffer losses to the same extent due in many cases to better management by their advisers, and less predatory behaviour by their advisers/lenders combined.

Purely from my own perspective, I think a better financial education would have helped me in the following ways:

1. I would have been aware that I could very easily do for myself what storm charged me 7% to do, using either managed index funds via vanguard, or and index-based lic such as STW or Argo, Aust Found etc. Gearing optional, but easily arranged via a plethora of margin lenders.

2. I would have been aware of the cyclical nature of the sharemarket and been on the lookout for any black swans on the horizon. I may not have got out of the market as early as I should have, but I would have got out a lot earlier than I did. Much capital could have been preserved and put back to work in March/April, rather than the little I was left with.

3. I would have known what a stop-loss was, how they worked and why they can often save your hide!

4. I would have seen storm's operation and lack of managemet for what it was. I would not have been as gullible as I was.

5. I would have had the confidence to manage my own affairs, and possibly would have spread my capital between the sharemarket and property investment, instead of all in shares.

6. I doubt I would have been able to obtain the amount of debt from cba that I did if I were not affiliated with storm. This is irrelevant to the topic of education in a way, but had I known more before I went to the first storm seminar I would not have gone back for a second, hence less borrowing etc.

I agree that ASIC certainly need to be more proactive, rather than the reactive toothless tiger they appear to be at present. But I also feel that a better financial education would not only help people be better able to manage their own affairs with expert advice sought where necessary, but would more importantly enable them to see a lot of the money-grabbing schemes such as storms for what they are. Possibly more important yet, if more young people realised the importance of getting a good start on investing at an early age, there would be less desperate middle-aged folk worried about surviving on the pension for the vultures to prey on. If there has been anything positive for me to find in my situation, it is that my kids will be a hell of a lot better prepared than I was. I'll be doing everything I can to make sure they never make the same mistakes their parents did.

Click to expand...

DocK said:

Guilt is also something that is hard to shake. Guilt that we've deprived our children of the futures we'd planned for them, and the opportunities that they must now miss because we cannot afford them any longer. Guilt that we were too gullible/trusting/foolish/whatever to do more research ourselves. Guilt for being taken advantage of by storm/bank. Shame for being so easily conned. These feelings are fruitless in the end and will serve no useful purpose. The anger, if properly directed, might. It is an uphill battle to shake off the guilt, but is something that most ex-stormers must try to do if they are to move forward with their lives.

Click to expand...

DocK said:

1. I would have been aware that I could very easily do for myself what storm charged me 7% to do, using either managed index funds via vanguard, or and index-based lic such as STW or Argo, Aust Found etc. Gearing optional, but easily arranged via a plethora of margin lenders.

Click to expand...

cuttlefish said:

I've said this a few times in this thread and I don't direct this to you in particular, but to anyone coping with trauma - a really important aspect, after digesting and accepting your responsibilities in whole or part for the situation that unfolded- is also to forgive yourself.

Also, in terms of depriving your children of something - I'm not sure what age they are - but although this has taken away the opportunity to provide the financial gifts you may have been hoping to bestow on your children there is another opportunity to give them a gift by showing leadership in how you accept and cope with your own circumstances and related guilt and depression and strive forward nonetheless.

It will sound like a cliche - but many many children have parents that take little responsibility and provide little in the way of love, care, moral guidance or leadership - so being in a position to still being able to provide these things is incredibly important and in terms of a contribution to their lives will always far outweigh any financial contributions.

Click to expand...

DocK said:

My kids are just entering those horrid teenage years where they "expect" they should be able to have/do everything their mates have/do.

Click to expand...

Judd said:

All other aspects aside, probably a wonderful opportunity for them to learn the full impact of the phrase "And what part of NO don't you understand."

Click to expand...

Ironhalo said:

DocK, my mother said to me 'I put you through 12 years of private school, but there is no way I will be paying your HECS'.

I'm glad she didn't, considering how many kids drop out of first year uni, they are better off paying for it themselves when they are earning good money down the track....at least they have a reason not to fail uni that way!

Click to expand...

DocK said:

True, true, but I was kinda hoping that if I paid their way through uni I could forever remind them of my generosity when I'm an even older, crankier and more feeble-minded version of my current self, and guilt them into taking care of me in my old age

Click to expand...

Garpal Gumnut said:

There are a number of strands in this argument about happiness, greed, fear and remorse that apply to the topic of the Stormers, which perhaps may be better off in another thread, but as Storm Financial is a prime example of capitalism at it's worst a few points may be worth mentioning.


1. When the bull market was in full swing, not one Storm investor publically questioned the model, whether they are now SICAG members, former advisers or investors.

2. Many Storm investors made indecent profits through no skill of their own in the bulll market, but rather through a model which Manny charged 7% or more for , and at the time they felt justified in paying.

3. Many Storm investors were so taken by their unearned largesse that they went on overseas trips with Manny and Julie, to expensive destinations, and spent much money on vanity and show. They bragged of their "skill" in choosing such a model and tried to convince friends and family to join the circus. Many succeeded.

4. Blind Freddie could have predicted that the whole show could become undone one day, but greed kept the Stormers loyal to the model. They are not alone in this, many investors on this forum , myself included could have gone to cash much earlier than they did.

5. Fear crept in late last year, when Storm, the advisers, principals and Banks lost the plot during an unprecedented, at least in our lifetime, bearmarket.[/B]
6. As many humans do, when greed leads to fear, and wealth and happiness are replaced by penury another emotion sets in. Remorse. The Stormers are angry, at themselves, their advisers, and those who escaped their fate, and anyone who points out the reality of the poor choices they made.

7. From the Tulip bubble, to the railroad failures in the US, to the Great Depression, to Ponzi, Pyramid, Skase, Bond and Cassimaties, this will be repeated in the future. It is in our nature to be foolish about money and possessions.

8. It cannot be legislated away without great expense to investors, and it is the muppets who will bear most of the expense as independent investors will continue to do a Bradbury behind the braying mob, without the expense of advisers.

9. When it comes down to it all, it is only money. And many are too attached to money, equating it with happiness. Penury or poverty, the complete lack of housing, food, safe water, health and safety are much more prevalent in third world countries than they are in Australia.

They are my thoughts on it anyway.

So, it now remains to be seen how much can be clawed back from those with the biggest pockets, Banks, Insurances and the Cassimatises and Advisers.

But believe me, no matter how much legislation, it will happen again.


gg

Click to expand...

bunyip said:

Garpal

I agree with most of your points above.
However, I wonder why you claim in Point 5 that the 2008 bear market was unprecedented in our lifetime.
The magnitude of the plunge in the 1987 crash was similar to that which occurred in 2008.....both about 50%
However, the big difference between the two crashes was.....

2008 crash.....took 17 months from top to bottom (November 07 to March 09)
1987 crash....took less than 8 weeks from top to bottom (September 87 to November 87) and fell 25% in one day on 20/10/87

Severe though the 2008 crash was, it was mild compared to 1987 in terms of how fast the market fell.
2008 offered plenty of opportunities to make a timely exit from the market before it fell to portfolio-destroying levels. 1987 did not.

Cassamatis has repeatedly tried to hide behind the excuse that this bear was unprecedented. It's simply not correct.

Click to expand...

Harleyquin said:

Cassamatis has repeatedly tried to hide behind the excuse that this bear was unprecedented. It's simply not correct. Bunyip I firmly agree with this comment on Cassimatis and the entire storm team they had plenty of time to make sure we were protected. All finance people knew this was coming at the end of 07. They knew about the sub prime lending even earlier than that and if they had their finger on the pulse would have been able to forecast that this wouldn't do the world share market any favours. Storm adopted the policy of 'don't follow the herd' however they also adopted the policy of 'sell high buy low' and were borrowing huge sums as the market was dropping. It makes far more sense to me, an inexperienced investor, to sell off as the market was dropping, wait for the drop to bottom out and then jump back in. With a little bit of common sense of their part all of this could have been averted. I enjoyed reading your post too Dok and the six major points that you have raised thank you.

Click to expand...

Monario said:

In reference to some of the past posts:

OK so this rockhampton couple had 8mill, some here are labelling them greedy for trying to gain more..Are you all telling me if you had 8Mill in the bank you would sit back stretch your legs, fold your arms behind your head, and say.. Hmmm thats enough.. Yawn, I think I will stop now... What a load of BS

Click to expand...

cuttlefish said:

Julia - its an interesting philosophical question and in trying to put together a response I ended up writing a short novel so I will attempt to keep it a bit more brief. To me people chase wealth for three primary reasons - security, freedom and power - and often the extent of each of these is limited only by the imagination and thus situations will vary from individual to individual.

For one individual security might be a comfortable home and a self sustaining income that provides for a comfortable lifestyle.

Click to expand...

Another person may not feel secure until they have a fortress with back to base security, a 24 hour armed body gaurd, a small plot of land that they can use for self subsistance in the event of a total collapse of the financial system, alternative safe havens in 5 different countries and a bomb shelter below their home.

Click to expand...

I agree that people can become obsessed - wealth can bring about its own challenges for people - both in terms of fear and greed as it can amplify both emotions - but I don't see that people that have accumulated wealth (wealth is such a relative term anyway - I doubt a New York or London resident with $3 million AUD would be considered particularly wealthy in that scenario) should be judged any differently in terms of the mistakes they may or may not have made in relation to Storm.

Click to expand...

The latest numbers from the Westpac-ASFA Retirement Standard show that for a couple aiming for a comfortable retirement an annual income of about $50,000 is needed, while a modest retirement requires about $27,000 a year.

Assuming that two 65-year-olds have a life expectancy of about 85, the couple will need retirement savings of at least $500,000 to fund a comfortable retirement. This assumes they owe nothing on their home.

Click to expand...

Julia said:

Sounds pretty reasonable to me.

Hmm. Well, I'd suggest such a person needs a psychologist more than they need a financial adviser.

I think you are avoiding the point I was making. You don't usually indulge in sophistry, Cuttlefish.
Let me try once again: Let's discard the example to which I was responding (as was Bunyip, and probably gg) of $8 million. Let's cut it right back to, say, $3 million.

If you were to avoid any risk and stick it in a bank deposit at a mere 5% it would earn $150,000 p.a. Considering much of our aged population lives on the government pension of around $15,000, isn't that $150,000 enough to provide a reasonable standard of living? Invest it in quality blue chip shares and it will likely earn double that without any additional risk of leverage.

So, Cuttlefish, let me ask the question another way: Is there not a level of capital where you feel you have enough without risking that capital, which you have worked for your entire lifeby borrowing against it to create even more?

I have never suggested that we shouldn't always have our money working for us, and leverage can be a really useful tool in the right circumstances.

But when it comes to placing at risk all that you have when you are close to retirement age for the sake of acquiring more than any reasonable person would need, then I think that is simply foolish.

Click to expand...

bunyip said:

No, that's not what I'm telling you, nor did I claim anything of the kind in my post about the Rockhampton couple.

So how about you stop misrepresenting what I said, and read my post again.

What I said was that wealthy people, rather than risking all their wealth by gearing heavily into the stockmarket, would be more prudent to invest at least some of their funds in growth assets like residential real estate.

I gave an example that showed how 5 million dollars of an 8 million dollar fortune could be safely and conservatively invested in growth assets to produce a yearly income of a quarter of a million dollars, and average yearly growth of half a million dollars, giving a total return of 15% a year.

I clearly stated my view that you'd be a fool not to try and make your money grow, rather than leave it in the bank where there's no capital growth and its value is eroded by inflation.

Click to expand...

maccka said:

This article from Stuart Washington of the Age makes for some very interesting reading.

Fresh suspicion of Storm

It will be very interesting to see where this line of investigation goes in the coming weeks.

cheers
maccka

Click to expand...