The Exceptional Wealth Accumulation Ideas and Thinking Thread

[tech/a]

Duc

I feel the pain.

When people who are in the "must be right" camp come to the stark realisation that you dont have to actually be right---just be ready---it can be terribly frustrating.

Knowledge according to tech/a seems to along the lines of don't think at all, just jump in with lots of leverage.

Duc.
Silly comment.

 

[wayneL]

Duc

I feel the pain.

When people who are in the "must be right" camp come to the stark realisation that you dont have to actually be right---just be ready---it can be terribly frustrating.

I sense a bit of survival bias in that statement. There are many many people who were ready, but wrong... and broke.

Never forget main point of that tedious bore Taleb - Don't be fooled by Randomness.

 

[tech/a]

Nothing wrong with being wrong.
I am often.
But placing yourself in a position of ruin--

 

[wayneL]

Nothing wrong with being wrong.
I am often.
But placing yourself in a position of ruin--

The thing is that information available is incomplete and/or skewed.

The general meme before last year was:

Property never goes down
Property doubles every 7 years
You can't lose with bricks and mortar
Demand outstrips supply so housing can't go down
The government will never let property crash.
etc etc

These myths are aggressively promoted by vested interests and promulgated by all and sundry at BBQs and dinner parties. It was a "no lose bet", backed up by social proof. Everybody was doing it, everybody was an expert, everybody thought they were making money.

Guys like me who cautioned that, based on valuation vectors, property was overpriced and should correct, were openly scoffed at and laughed at... social pariahs even. A freakin' heretic.

In conclusion, these people had no idea they were placing themselves in a position of ruin. Their premise was based on the wrong assumptions and wrong information, "eruditely" instructed by industry experts and boom benefactors.

Good strategy (property), and they were "ready", but wrong on timing, price and gearing. Incomplete and/or incorrect knowledge kills.

How much do we see this in the general business community? The official figures are 95% failure - eventually.

"Ready", by itself just doesn't cut the mustard. You have to be at least partly right and have a hedge against the wrong... just to survive.

 

[wayneL]

OK here's an example I alluded to before.

A friend of mine who developed large chunks of Sunnybank Hills & Browns Plains in Brisbane taught me this.

Find a property that could possibly be redeveloped. He knocks on their door and asks if they will sell and gets them to name a price.

He offers a higher price if they will sign a contract for sale, with the condition that the property is rezoned (with owners cooperation) and that the contract is tranferable, to settle at 12-24 months. He gives them a small cash (folding stuff) deposit of 1-3k.

What he has just created is a de facto OTM call option. If the property goes ITM by getting the rezoning, he either develops himself or sells the contract on if he doesn't want further risk.

Cash risk is limited to 1-3k... genius. Much smarter than the simultaneous call option/put option used by most developers.

But the whole thing is predicated on specialist knowledge. It's not rocket science, it's quite easy really, but you need knowledge of how the whole rezoning deal works and a working knowledge of contract law. Without the knowledge, it ain't possible.

But the hedge against getting it wrong, not able to get rezoning etc, makes the risk small change.

 

[kincella]

oh dear,
I have a friend, he just loves property as an investment....who knows how much he is worth...about 10 years ago he was valued at about 10 million...
I know he has been developing and using his tried and proven method extensively since then....
but you will never read about him in the media....he will never be seen in the BMW top 200...he shuns the spotlight, and all the big boys toys, what ever...

when you first meet him, without knowing anything about him...you may mistake him for a nobody, or even a moron...he is so low key....
and he plays at being 'the simple person'.......he loves driving the old beat up old ute around.....whenever he goes to an auction....
he hates the merc's, but drives the latest Lexus

if you are a friend or associate, that he has taken into his confidence....he will take you to only the best restaurants in Melb,...insist on only the best of everything for you.....
he loves taking 'the mickey' out of you....he loves playing games, he is deadly serious about his love of property, he will suss you out.....he admires smart people....
he has no real need for money.....he already has more than enough of it....he just likes doing what he does best...and he loves to outsmart...the so- called smarties....
he just cannot help himself...he is driven to what drives him...that is his knowledge of the property market, developing property..and his attitude to people.....
oh and he would never ever, say a bad word against you.....but you may be unlikely to ever hear from him again.....

 

[wayneL]

...and the point is?

 

[tech/a]

The thing is that information available is incomplete and/or skewed.

The general meme before last year was:

Property never goes down
Property doubles every 7 years
You can't lose with bricks and mortar
Demand outstrips supply so housing can't go down
The government will never let property crash.
etc etc

These myths are aggressively promoted by vested interests and promulgated by all and sundry at BBQs and dinner parties. It was a "no lose bet", backed up by social proof. Everybody was doing it, everybody was an expert, everybody thought they were making money.

Guys like me who cautioned that, based on valuation vectors, property was overpriced and should correct, were openly scoffed at and laughed at... social pariahs even. A freakin' heretic.

In conclusion, these people had no idea they were placing themselves in a position of ruin. Their premise was based on the wrong assumptions and wrong information, "eruditely" instructed by industry experts and boom benefactors.

Good strategy (property), and they were "ready", but wrong on timing, price and gearing. Incomplete and/or incorrect knowledge kills.

How much do we see this in the general business community? The official figures are 95% failure - eventually.

"Ready", by itself just doesn't cut the mustard. You have to be at least partly right and have a hedge against the wrong... just to survive.

Frankly I'm not going to argue with you guys.
The evidence you present is overwhelming.
fortunately I live happily in my own little world which evidently doesnt obey those theories and predictions which have all been full filled.

But thats OK because your world does.
You continually make decisions which save you from the ruin those around you suffer.
OK for me too as in my world my decisions also save me from the ruin those around me suffer.

Win Win.

 

[brty]

Wayne,

The general meme before last year was:

Property never goes down
Property doubles every 7 years
You can't lose with bricks and mortar
Demand outstrips supply so housing can't go down
The government will never let property crash.

The thing is, that these general things (quite a few I agree with ), are not the type of knowledge needed for "Exceptional Wealth Accumulation".

How about these memes...

Property does not go down for long in an inflationary environment.
Average property (with land ie separate title) tends to rise 1%+ above the rate of inflation in cities with growing population over the medium term (in Australia).
Demand outstripping supply tends to reduce risk of falls in property prices.
Knowledge of specific areas and likely changes within these areas is more valuable than city wide 'median anything'.

Duc,

If you think markets/investment opportunities are random, your dreaming.
If you think markets/investment opportunities follow a normal distribution, your dreaming..
Back to the ivory tower you go..

brty

 

[Temjin]

Again, we should avoid discussing the "merits" of each person's strategy. I thought we have already agreed (at least in general) that it is rather pointless to do so.

Tech/A has already given examples that HIS strategy had worked and that he has the confident that it will continue to work despite not having 100% knowledge of what the future might bring. This is the risk that everybody has to take.

The end result is to just take action with what you got. If you ever wait to be "100% sure" first, then you will only be frozen by fear and the end result would be inaction.

I will continue to pursue my own strategy knowing that the assumptions I have made will never be 100% correct. The future is impossible to predict.

If my assumptions were incorrect, the best I can do is to adapt to the new reality. Of course, I also need to be fully aware of the risk of ruin in that the assumptions I previously made and the strategy I've taken wouldn't put myself to total financial ruin. That's like taking on low risk ideas.

And going back to this thread of "wealth creation ideas", I guess the merit of it would be that one could be exposed to ideas that they previously would regard as too risky, too impractical or just don't fit their perspective of "reality". The aim is to be open minded and at the very least, be ready to agree to disagree.

I've already said that investing in managed futures is one potential way to make exceptional wealth. Especially if you could pick the right winners. Anyone can disagree with me, but the fact remains that people HAVE become rich before this way and that itself is enough for anyone to really look into it more to see if it will work for you.

I will avoid properties not because I don't think it cannot be a vehicle for wealth generation, but rather it does not fit my own beliefs and personality, and that my current perspective of reality is focused on elsewhere. I'd rather focus on my own strength than venturing into something I'm unfamiliar with.

 

[moreld]

sensible words Temjin
Hopefully people can continue putting ideas out.

One of the saying that changed my direction over the last few years came from the CEO of a company I invest in. He said "Wealth is acquired by concentration and kept by diversification".

While that may not sound too earth shattering I believe it to be a powerful statement and one completely at odds to 95% of the investment communities' vested interest. Manged funds, index funds, investing newsletters et al, all push the diversification message as it is in their best interest. While I agree the majority of people would be best diversifying, that is simply because they are too lazy or distracted or not focused on financial wealth.

So the second general rule I'd like to put forward is concentration. Did we all agree Time was the first rule?

Concentrate on your circle of competence.
Concentrate your your cash into your best investment opportunities. Whether that be property, stocks, derivatives or further education.

1. Time
2. Concentration.

I'm sure I've missed other rules put forward. Can we collect them up as we go?

oh yeah

3. Leverage (that's another one most people love to hate)

do I hear four?

 

[moreld]

oh dear,
I have a friend, he just loves property as an investment....

kincella, how about an introduction. I live in Melbourne. I like to think I'm both smart and clever, at the least I'm certainly not a LOBBARD. I want to get knowledgeable in property on the chance that property becomes a cheap asset again.

and I absolutely love good food.

Is that being too forward? I skipped forum etiquette class.

 

[wayneL]

No comments on my post #245?

Here's another "maxim" I've heard repeated often:

"Sell to the classes, eat with the masses - Sell to the masses, eat with the classes."

OK we can all immediately think of examples where the opposite is true. But as a general principle... discuss?

 

[ducati916]

Duc

I feel the pain.

When people who are in the "must be right" camp come to the stark realisation that you dont have to actually be right---just be ready---it can be terribly frustrating.
Duc.
Silly comment.

tech/a

It would seem that you still remain blissfully unaware of my argument.

We have so far from you:
*Claimed risk free trades in stocks that were no such thing
*macro/micro analysis for property, that is non-existent
*Superficial advice on numerous topics - "just jump in with lots of leverage

There probably are a few other lurking out there.

The point that is being made by a few on this thread is of the non-linear outcomes, thus by definition, risks and rewards on offer.

First off, you don't seem to understand non-liear outcomes. If that is so, there is zero chance for you to manage this. If you do understand it, then management is possible, although possibly a little counter-intuitive.

jog on
duc

 

[ducati916]

Frankly I'm not going to argue with you guys.
The evidence you present is overwhelming.
fortunately I live happily in my own little world which evidently doesnt obey those theories and predictions which have all been full filled.

But thats OK because your world does.
You continually make decisions which save you from the ruin those around you suffer.
OK for me too as in my world my decisions also save me from the ruin those around me suffer.

Win Win.

tech/a

Herein lies your difficulty. You start a thread that promises XYZ. It would seem that you have based your thread on your little patch of the world.

You have extrapolated your little patch as a generic. Unfortunately, your little patch might just be an outlier, which means that you will encounter resistance from those outside your little patch.

As you have no economic understanding, in a theoretical sense, either micro or macro, you cannot build a case, except in the most superficial throwawy terms, as to why the information you are trying to promulgate actually has any value or merit.

As statistics also seems a closed book to you, we enter a further fruitless round of discussion as the inevitable hackneyed idea of probabilities is mooted. Using an isolated example, viz. yourself, has absolutely zero causative or correlatory significance at all. Yet, you persist in putting forward your little homilies as if they did.

To put forward this thread as an example of how to do it is disingeneous if we are all required to relocate to Adelaide to join the fun, don't you think?

jog on
duc

 

[It's Snake Pliskin]

OK here's an example I alluded to before.

A friend of mine who developed large chunks of Sunnybank Hills & Browns Plains in Brisbane taught me this.

Find a property that could possibly be redeveloped. He knocks on their door and asks if they will sell and gets them to name a price.

He offers a higher price if they will sign a contract for sale, with the condition that the property is rezoned (with owners cooperation) and that the contract is tranferable, to settle at 12-24 months. He gives them a small cash (folding stuff) deposit of 1-3k.

What he has just created is a de facto OTM call option. If the property goes ITM by getting the rezoning, he either develops himself or sells the contract on if he doesn't want further risk.

Cash risk is limited to 1-3k... genius. Much smarter than the simultaneous call option/put option used by most developers.

But the whole thing is predicated on specialist knowledge. It's not rocket science, it's quite easy really, but you need knowledge of how the whole rezoning deal works and a working knowledge of contract law. Without the knowledge, it ain't possible.

But the hedge against getting it wrong, not able to get rezoning etc, makes the risk small change.

Interesting strategy there Wayne.

 

[ducati916]

Duc,

If you think markets/investment opportunities are random, your dreaming.
If you think markets/investment opportunities follow a normal distribution, your dreaming..
Back to the ivory tower you go..

brty

brty

Yes, I do believe that markets/investments are random. Essentially for the fact that the future is unknowable.

No, I don't believe they follow a normal distribution. Quite the opposite. Obviously you are confused.

jog on
duc

 

[nunthewiser]

fortunately I live happily in my own little world which evidently doesnt obey those theories and predictions which have all been full filled.

But thats OK because your world does.
You continually make decisions which save you from the ruin those around you suffer.
OK for me too as in my world my decisions also save me from the ruin those around me suffer.

Win Win.

i think one day we should meet

i like your style

yours sincerely


a nun

 

[nunthewiser]

brty

Yes, I do believe that markets/investments are random. Essentially for the fact that the future is unknowable.

No, I don't believe they follow a normal distribution. Quite the opposite. Obviously you are confused.

jog on
duc

you are wrong

the future as far as investment is concerned is as predictable and open as far as you let it be

now i dont profess to be a swami into the greast unknown but my line of thought will open a lot more doors than any one eyed view you seem to have aquired

 

[tech/a]

Duc/Wayne

Your both absolutely correct.

(1) My own situation is my own perception and reality.
(2) My financial future lives and dies by (1).

My message isn't about following what I do but.
Get a train.
Put it on some tracks
Add carriages to the train
Own as much of it as you can.
Let Leverage/Compounding and Time do the rest.

Don't be paralyzed with fear.
Don't be paralyzed by Analysis.
Don't be paralyzed by in decision.

Be creative and start building as soon as you can.
My own example is simply my own example.

I'll touch on MY reality of Trading/Train building next.