Yes that is a very interesting piece of information maccka. Congratulations I think you have got one up on Solly. He is usually the first one onto the latest developments like that.
Anyway if this is correct I don't understand why the banks went ahead and lent people money to put into these funds if they weren't all above board.
I suppose they may just plead ignorance/not our responsibility etc. as they have done to a lot of things so far but I for one will watch this development with interest.
I hope the parliamentary inquiry follows this up.
Julia
You make an enormous amount of sense in this post, as you do in all your posts.
If I could just add one point to your comments about people who are near retirement........
Irrespective of whether people are near retirement or not, once they've made their pile and have more than enough wealth to enable them to live in comfort and security for the rest of their lives, it makes no sense at all to enter or remain in high risk investments such as heavy gearing into the stockmarket.
There are other avenues of investment that can offer security and significant income, and a level of capital growth that easily outstrips inflation.
It simply makes no sense for them to risk everything by taking wild gambles.
And of course I agree entirely but I'm sure you understand I was just using an extreme example to highlight my point about peoples differences. (Though its also true that plenty of people that achieved amazing things in this world were possibly considered in need of a psychologist by many of those around them - Columbus deliberately setting off to sail off the edge of the world, Einstein telling us that time could slow down or speed up etc.).Hmm. Well, I'd suggest such a person needs a psychologist more than they need a financial adviser.
Sorry that wasn't my intention - I genuinely believe it is not possible to reduce this down to a simple answer. If people have dreams that run beyond living comfortably and decide (for example) that instead they want to make enough to be able to fund mans first expedition to Jupiter, and that for their own reasons they want to risk everything they have for this venture I'm not going to begrudge them it - even if they do it 1 year before retirement.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 Apologize for taking you the wrong way Bunyip.... I guess I have just read to many posts now that say we were greedy, and if you knew the moajority of stormers situations it would not be a label given...
DocK said:Forgive me if I'm buying into other people's argument/discussion, but just wanted to raise the following:
The Locks probably only started with storm in 2005 with much, much less than the 8mill their portfolio was worth at the peak - and that was probably 8mill portfolio with a 6mill margin loan.
The heavy gearing that keeps getting referred to was the end result of mismanagement. The initial gearing, and indeed the level of gearing for the life of most of the investment, was possibly moderate, and only became ridiculously high due to mismanagement and inaction - if they'd been cashed out after a 20% fall in the market they would have had a substantial amount of their capital preserved.
Whether the investment was high risk or not seems to be an issue of much debate. Index funds are generally not seen as high risk, but putting all their capital into the one investment type (ie. shares) probably was.
I would bet my house (or the little equity in it I retain) that the Locks, and others like them, thought their investment/financial plan was doing anything but "risking everything by taking wild gambles". You have to realise that the whole scheme was sold to clients as a low-risk, safe method of building wealth over a long-term timeframe. Most realised that during bull markets there was more money to be made by active investment, but chose to take what was portrayed as a lower-risk more diversified index pathway. If anything, the "greedy" type would possibly not be attracted to storm as you'll often make far less in an index fund during the good times as other investments are capable of returning - with higher risk of course.
I know a lot of you are approaching this issue from the viewpoint of "how silly to take such a huge risk in your retirement years - how much would ever have been enough?, they must have been greedy", but I suspect the reality is that these people, and others like them, may have been very good at running chicken franchises or whatever they did to earn their money, but were quite clueless when it came to financial matters and believed what they were doing was anything but high-risk. I know that is difficult for some of you to understand, but I'll bet they started out with a very low level of debt which was slowly but surely ramped up over the years until it reached the point where a 20%, 30% and probably even a 40% fall in the value of their investment could be handled - just not the level that we were all faced with by being left in the market until the bitter end - or near enough to it.
I'm sure some of you are genuinely baffled at how retired people could have made the choices they did, and used any leverage at all, but you don't have the ability to look at the situation as if you were a financially "blank canvas" who had no reason not to believe their accountants/friends/bank/slick "education" seminars and trust that your investment and home were as safe as you were told they were - because you would have known better. Unfortunately for the Locks, and many like them, they simply didn't know better. Doesn't necessarily make them greedy or even foolish - they just trusted the wrong people and failed to look at other options.
Thank you for the apology.
May I respectfully suggest that from now on before you comment on somebody's post, you first read the post slowly and carefully to make sure you fully understand what they're saying.
That way, you can avoid making the sort of response that you need to apologise for.
As for the 'greedy' label, it's not one that I apply to the average Stormer of average means who was just trying to become self-sufficient in retirement.
Sure, there are some in here who have thrown the 'greedy' tag around loosely. But I'm not one of them.
However, I don't retreat one inch from my view that greed is a factor when people who are already wealthy take crazy gambles such as risking their entire wealth by gearing heavily into a reckless plunge on the stockmarket.
Bunyip, you are so right about the wealthy taking great risks when if fact they all ready have more than they need to retire. Now the want to blame every one but them self, then we have the plain old I AM JUST GREEDY.
No matter what, or when the fat lady sings, GREED is what most of the trouble that has happened with the storm mob, you was all coned by a slick sales man, you wont get any thing back, end of story for you. Now the new story is the lawyers will make a killing on this, they are getting all geared up for the final kill.So, 'wealth' is defined as 'more than they need to retire', how about a nice car they can't afford?, a nicer home? more travel? a better life for their children?
Is that 'greed'? Is accepting a low risk investment with a better return an act of greed?
What is 'wealthy'? there are millions of people on the face of this earth who would think someone on the dole in Australia is wealthy.
I would think if it turns out that the losses in storm were attributable to negligence or breach of law by an entity or entities outside the control of investors, then I'd guess the 'greed' argument will just evaporate like water on the burning sands.
So, what's the point of bringing up the 'greed' argument before the fat lady sings?
Thanks, Maccka. I'd just read this in the SMH. Very damning indeed and the fact that Manny has 'declined to comment' would indicate he has no defence on this.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
Cuttlefish, I entirely agree with your points above.The simple answer is for me personally I will always endeavour to invest a healthy portion of my wealth in a way that I consider to be very low risk.
The complexity comes when we start to look at how the risk of different assets changes over time. I've been very heavily geared into property at one stage yet considered it low risk because all of the properties were positively geared, and I was comfortable with the economic stability of the location they were in. (yet they were 100% borrowed against).
Until the government agreed to guarantee bank deposits last year I was very averse to the idea of having all funds in a bank account and considered that to potentially be high risk - and in my view at the time it was high risk - if the government hadn't come in and guaranteed bank deposits then the possibility of banking failures was real.
Sure. But what we were debating was rather why one would need to engage in any risk if already able to meet all one's needs and wants.There are periods of time when sectors of the stock market present a very low risk investment opportunity and heavy gearing into the stock market could be done in a way that is relatively low risk.
Sure. But what we were debating was rather why one would need to engage in any risk if already able to meet all one's needs and wants.
Probably something it's difficult to agree about.
gg, Mr Clothier wore a suit and tie today, do you still think it's more appropriate for EC to wear a tie when he returns to the stand ?
I believe that Mr Clothier gave an interesting explanation of the interaction between CFS and CGI regarding the selling down of the Storm badged funds.
This will also be an interesting transcript....
That's an objective and generous remark, Monario. Appreciate it.I would just like to take this opportunity to say that, while I do not agree with statements that Stormers were a greedy bunch, I do agree with what Bunyip, CuttleFish, and Julia etc have had to say...
I wonder if there has been some misinterpretation of this along the way?What gets my Goat is the Generalisation of the Greedy label some have applied, and i would also like to again apologize for the misinterpretation in my readings of some comments...
Sorry if I'm being obtuse, but what is RGP?For those interested, my portfolio along with others in my family had conservative gearing levels to begin with, and was something I held a close eye over and was continually concerned with. My demise came when my FP convinced me to take out a loan and stop my RGP, for the life of me I could not understand this when I was doing it, but I did seek alternate advice, in the end I was convined to do it.
Well, that's a great step forward, isn't it? Really good to hear this.I can see my mistakes, and now from what I have learnt I feel I could run similar investments, much safer and with total comtrol over my own money. I also understand much better what it means to have a balanced portfolio, something I spoke regularly about with my FP and he assured me this was.
Well hopefully all this will eventually come out publicly.The biggest mistake I made was trusting my FP, to whom I was paying good money to manage my fund, and all along the way I was fed continual lines of "we wont leave you behind" " we will not shirk our responsibilities to you" I even have an email stating that they have a fund for these situations that they can draw on and when things pick up we can pay them back!!! I also know of a few people who recieved such help.
I don't think you should confuse naive and too trusting with 'stupid'.I feel really stupid for what I have done, but i dont feel Greedy, perhaps over optimistic..
Sounds like a great decision. All the best.In closing, I will never use FP's in this manner again, my investments will be mine, and I will always ensure 100% contraol remains with me....
Sorry if I'm being obtuse, but what is RGP?
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