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Incorrect.
That stock could gap down past your stop, be placed in a trading halt, or have the exchange close.
jog on
duc
The Exceptional Wealth Accumulation Ideas and Thinking Thread
- Thread starter tech/a
- Start date
Incorrect.
That stock could gap down past your stop, be placed in a trading halt, or have the exchange close.
jog on
duc
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et al
The thread should try to deliver two outcomes:
*Identify macro-trends that offer potentially large rewards.
*Offer a methodology that minimises risk, allowing participation.
Wayne has already identified a couple of important points.
*Understand the macro-economic picture
*Understand that the subsequent results will likely be random
Assuming no knowledge of economics, simply monitor multiple markets that you could [if required] participate in, via LONG TERM CHARTS. As an example a hindsight look at Gold. A knowledge of economics will at least focus your research somewhat...but beware random outcomes, best keep an eye on as many markets that you can.
Now 30+ yrs is possibly not required, but certainly an appropriate timeframe would help, not less than 10yrs
In a real time example: http://leduc998.wordpress.com/2009/02/20/looks-like-another-commodity-stabilising/#respond
For the associated fundamental analysis, simply view under Oil on the blog.
The problem with real time analysis is that the opportunity never looks good at the point of lowest risk. It will [if going long] always be at the bottom of a scary decline. Second, confirmation of a mega-trend can only be established in hindsight, which is useless.
Thus, we move swiftly onto part two of the problem. Managing risk. Here, as I suppose previously, personal preferences, knowledge and bias plays a large part.
jog on
duc
The thread should try to deliver two outcomes:
*Identify macro-trends that offer potentially large rewards.
*Offer a methodology that minimises risk, allowing participation.
Wayne has already identified a couple of important points.
*Understand the macro-economic picture
*Understand that the subsequent results will likely be random
Assuming no knowledge of economics, simply monitor multiple markets that you could [if required] participate in, via LONG TERM CHARTS. As an example a hindsight look at Gold. A knowledge of economics will at least focus your research somewhat...but beware random outcomes, best keep an eye on as many markets that you can.
Now 30+ yrs is possibly not required, but certainly an appropriate timeframe would help, not less than 10yrs
In a real time example: http://leduc998.wordpress.com/2009/02/20/looks-like-another-commodity-stabilising/#respond
For the associated fundamental analysis, simply view under Oil on the blog.
The problem with real time analysis is that the opportunity never looks good at the point of lowest risk. It will [if going long] always be at the bottom of a scary decline. Second, confirmation of a mega-trend can only be established in hindsight, which is useless.
Thus, we move swiftly onto part two of the problem. Managing risk. Here, as I suppose previously, personal preferences, knowledge and bias plays a large part.
jog on
duc
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tech/a
No Ordinary Duck
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WHY
(1) Its not taught.
(2) You cant get a straight answer from an F/P or accountant or a salesman as they all have agenda's
(3) Our Kids need to know. You need to know.
(4) People make it more complicated than it is.
(5) We are fortunate enough to have this country as our home---opportunity abounds---take advantage of it--- many will never have the opportunity YOU do.
(1) Risk mitigation and possible elimination.
While its often not possible to eliminate risk we can all do better at mitigating it.
CONTROL
Controlling your investments is the single most efficient way of mitigating RISK I know of. You just need to read the Storm Financial Thread!
I have a number of simple rules this is top of the list.
If I cant control my investment to a large degree then I'm not in it. I have had friends and family who wish to join us (Princess) in investments---happy to help but NEVER invest.
So in the examples to follow I will show details of how I have mitigated risk and retained as much control as possible in the examples and how I would in other examples.
RISK CONTROL is the biggest factor in successful investing in my view.
(2) Leverage
I'm aware most equate leverage to increased RISK.This is just plain wrong.
Sure you CAN leverage and take on ridiculous risk---why wouldn't you use leverage if you could do so with NO MORE or far reduced RISK than a fully Personally cashed investment? In fact you can use it to totally eliminate risk,faster than you can using your own money.Other peoples money is cheap. Questions are how, when ,why. I hope to answer these questions in my own way with examples.
(3) Compounding
Then we all know the power of compounding growth---just do more of it.
(4) Time
Two things with time.
Allowing time to take its course and then answering the question of WHEN is the RIGHT time.
(5)Duplication
Buying one home and paying it off will at best make you feel all warm and fuzzy and place you in the river tracking inflation. Buying 2/3/4+ places you on top of the river with an out board motor.
EVERYTHING you ever invest in will do THIS
THIS is WHERE YOU START.
Like all charts click to expand
(1) Its not taught.
(2) You cant get a straight answer from an F/P or accountant or a salesman as they all have agenda's
(3) Our Kids need to know. You need to know.
(4) People make it more complicated than it is.
(5) We are fortunate enough to have this country as our home---opportunity abounds---take advantage of it--- many will never have the opportunity YOU do.
(1) Risk mitigation and possible elimination.
While its often not possible to eliminate risk we can all do better at mitigating it.
CONTROL
Controlling your investments is the single most efficient way of mitigating RISK I know of. You just need to read the Storm Financial Thread!
I have a number of simple rules this is top of the list.
If I cant control my investment to a large degree then I'm not in it. I have had friends and family who wish to join us (Princess) in investments---happy to help but NEVER invest.
So in the examples to follow I will show details of how I have mitigated risk and retained as much control as possible in the examples and how I would in other examples.
RISK CONTROL is the biggest factor in successful investing in my view.
(2) Leverage
I'm aware most equate leverage to increased RISK.This is just plain wrong.
Sure you CAN leverage and take on ridiculous risk---why wouldn't you use leverage if you could do so with NO MORE or far reduced RISK than a fully Personally cashed investment? In fact you can use it to totally eliminate risk,faster than you can using your own money.Other peoples money is cheap. Questions are how, when ,why. I hope to answer these questions in my own way with examples.
(3) Compounding
Then we all know the power of compounding growth---just do more of it.
(4) Time
Two things with time.
Allowing time to take its course and then answering the question of WHEN is the RIGHT time.
(5)Duplication
Buying one home and paying it off will at best make you feel all warm and fuzzy and place you in the river tracking inflation. Buying 2/3/4+ places you on top of the river with an out board motor.
EVERYTHING you ever invest in will do THIS
THIS is WHERE YOU START.
Like all charts click to expand
Attachments
Tech/a's chart
clearly demonstrates
That the MOST important thing we control
IS THE ENTRY
THIS is the TIMING ( The only form of time that matters )
And that all else
risk control/ use of leverage & duplication etc
FOLLOWS
It is not the other way around
HOW important is it to know the technical POSTION
As tech A said
just make your self available by
being in front of the right WAVES
at around the right time
Capture The large scale FORCED MOVES
The proper name for TECH/a's chart
is the "EVERYBODY should be Rich Chart"
WHY because SO many will always use that chart UPSIDE DOWN
Hence why their use of leverage & their willingness to duplicate
becomes so destructive
motorway
clearly demonstrates
That the MOST important thing we control
IS THE ENTRY
THIS is the TIMING ( The only form of time that matters )
And that all else
risk control/ use of leverage & duplication etc
FOLLOWS
It is not the other way around
HOW important is it to know the technical POSTION
As tech A said
just make your self available by
being in front of the right WAVES
at around the right time
Capture The large scale FORCED MOVES
The proper name for TECH/a's chart
is the "EVERYBODY should be Rich Chart"
WHY because SO many will always use that chart UPSIDE DOWNHence why their use of leverage & their willingness to duplicate
becomes so destructive
motorway
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motorway
The entry, defines your risk * your position size [leverage] Thus essentially they are one and the same. There should be zero confusion on this point.
The question that requires an answer is where to locate these potential opportunities. In the financial markets, you have to monitor as many markets as you can legitimately follow and trade.
It's no use following Wheat, if you can't gain exposure to Wheat.
tech/a chart is an interesting chart, in that it is possibly exactly the wrong chart to be looking at currently. It is the ASX from what, about 1982/1983 to the current.
Bubbles, which is illustrated clearly via the parabolic pattern, if you subscribe to technical analysis, would suggest a basing pattern, taking many years, within a fairly wide range. This is not the opportunity being sought. Leverage into a range-bound market will multiply your losses.
If that analysis is compared to a macro-economic analysis, that the weighting of the ASX is heavily resource and banking, early stage production, which overinvested based on a distortion of interest rates by Central Banks and a massive credit expansion via the banking sector, will not be leading a fast recovery.
It is this very fact however that makes the actual commodities an opportunity. Due to the requirement of a huge volume of voluntary saving, by which the natural rate of interest falls, driving capital expansion in early stages of production, the current PV of commodities may tend to rise, due to the continued efforts of Central Banks worldwide to expand credit in the face of a not yet high enough fall in the demand for consumer goods.
Thus the technical & fundamental analysis tend to support each other. Both are not necessary, you can get by on simply a technical basis, however, if you are looking for big wealth creating trends, you need a big picture chart.
This of course doesn't even start to address risk, leverage, etc. We are still at the trying to identify the opportunity stage.
jog on
duc
The entry, defines your risk * your position size [leverage] Thus essentially they are one and the same. There should be zero confusion on this point.
The question that requires an answer is where to locate these potential opportunities. In the financial markets, you have to monitor as many markets as you can legitimately follow and trade.
It's no use following Wheat, if you can't gain exposure to Wheat.
tech/a chart is an interesting chart, in that it is possibly exactly the wrong chart to be looking at currently. It is the ASX from what, about 1982/1983 to the current.
Bubbles, which is illustrated clearly via the parabolic pattern, if you subscribe to technical analysis, would suggest a basing pattern, taking many years, within a fairly wide range. This is not the opportunity being sought. Leverage into a range-bound market will multiply your losses.
If that analysis is compared to a macro-economic analysis, that the weighting of the ASX is heavily resource and banking, early stage production, which overinvested based on a distortion of interest rates by Central Banks and a massive credit expansion via the banking sector, will not be leading a fast recovery.
It is this very fact however that makes the actual commodities an opportunity. Due to the requirement of a huge volume of voluntary saving, by which the natural rate of interest falls, driving capital expansion in early stages of production, the current PV of commodities may tend to rise, due to the continued efforts of Central Banks worldwide to expand credit in the face of a not yet high enough fall in the demand for consumer goods.
Thus the technical & fundamental analysis tend to support each other. Both are not necessary, you can get by on simply a technical basis, however, if you are looking for big wealth creating trends, you need a big picture chart.
This of course doesn't even start to address risk, leverage, etc. We are still at the trying to identify the opportunity stage.
jog on
duc
Gold is an obvious ( much talked ) about possibility
Energy too
Drill down here and imo you will find opportunity
Energy RELATIVE to the general market
consolidating for further out performance ?
Chart covers ~ 10years
What Gold ( index ) does here at support
will be interesting too...
Any accelleration maybe should be jumped on....
motorway
Energy too
Drill down here and imo you will find opportunity
Energy RELATIVE to the general market
consolidating for further out performance ?
Chart covers ~ 10years
What Gold ( index ) does here at support
will be interesting too...
Any accelleration maybe should be jumped on....
motorway
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motorway
With respect to energy I'm pretty much in agreement, although, possibly again a little late to the party? It will be difficult to enter and manage a position from these levels. When you state energy any particular part of the energy complex?
With respect to Gold, have we not rather missed the boat on this one? The Gold bull has been going for quite some time, and price appreciation. As such, does it really qualify? Or, are you advocating a SHORT position?
jog on
duc
With respect to energy I'm pretty much in agreement, although, possibly again a little late to the party? It will be difficult to enter and manage a position from these levels. When you state energy any particular part of the energy complex?
With respect to Gold, have we not rather missed the boat on this one? The Gold bull has been going for quite some time, and price appreciation. As such, does it really qualify? Or, are you advocating a SHORT position?
jog on
duc
Yes both have been themes already
But the thread is only new
Always should be mindful of how far above the cost of production
a commodity is ..
but there are always other considerations too
Esp with GOLD versus something like sugar or corn
Gold could easily go to $1500 (USD) or $500
There are other considerations when investing on the ASX as well
eg AUD..
hence
A look at these relative charts
It tends to suggest only a retracement in a bull market
hence this theme might have some way to go
Being relative charts -- the actual numbers do not mean much
But the relative strength and weakness
reveals how interest (Money ) is flowing into or out of the theme
relative to other opportunity
I would expect at least a test of the ( relative ) highs with Gold
and breakout to new ( relative ) highs with energy..
dyor
motorway
But the thread is only new
Always should be mindful of how far above the cost of production
a commodity is ..
but there are always other considerations too
Esp with GOLD versus something like sugar or corn
Gold could easily go to $1500 (USD) or $500
There are other considerations when investing on the ASX as well
eg AUD..
hence
A look at these relative charts
It tends to suggest only a retracement in a bull market
hence this theme might have some way to go
Being relative charts -- the actual numbers do not mean much
But the relative strength and weakness
reveals how interest (Money ) is flowing into or out of the theme
relative to other opportunity
I would expect at least a test of the ( relative ) highs with Gold
and breakout to new ( relative ) highs with energy..
dyor
motorway
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Sheesh, I hope not! I am short gold (for pure fundamental reasons and a shift in underlying sentiment I see coming into the picture). Sorry bugs.
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Is that because you feel the chilling winds of a deflationary spiral?
Just curious!!
G
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Are you saying sentiment is a fundamental?
If not, what fundamentals are you referring to?
jog on
duc
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motorway
Is that not a random outcome? Are you happy to trade random setups?
jog on
duc
Is that not a random outcome? Are you happy to trade random setups?
jog on
duc
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No, I am talking of sentiment relating to fundamentals.
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Ok.
So the fundamentals are deteriorating. In what way/respect? Or are we talking a 2'nd derivative type of thing?
Enzo, baby, switch-off the visual verification, GOOGLE still hates me!
jog on
duc
No , Just price levels with different probabilities,,
And in reference to the popular press sentiment
( Bit wary of the visibility of the Gold theme all the rationales )
Smaller scale chart 50 pt
Just focusing on the "correction" from the high
I note the actual shape of demand and supply
and where the volume is
Positions are being taken
A zone of expectations is here
Lows seem rejected
IF price accelerates from this "High Pressure" system
then
Low risk is as the train leaves the station..
Differences of opinion
build the stations and the destinations
Value itself is slippery
Too much of the expected "fundamentals" are just linear projections
motorway
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tech/a
No Ordinary Duck
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My aim is to show how (In a practical way) everyone can move away from conventional thinking and FEAR moving toward recognising and placing yourself in a position to take advantage of opportunity----before it becomes opportunity in HINDSITE.
By the application of
(1) Risk mitigation and Control.
(2) Leverage
(3) Compounding
(4) Time
(5) Duplication
Firstly Property (as my database is currently showing 2 bars on a chart!).
Everything you invest in is governed by Supply and Demand,and always on a micro and macro scale.
Its the macro scale we look to be in sync with.
In the 2 times I have caught the Macro scale once in property and once in trading,I had no idea they were coming.
I did know I had to be exposed to opportunity.
Yesterday
Its happened twice in my lifetime where purchasing a fully established home is far cheaper than purchasing a new home.
Where rent exceeds the repayments on the property holding costs.
Even on zero down.
Where demand way outstrips supply.
Where the balance is clearly out of whack.
We can achieve positive gearing today with 50% or more down but at times in your life you'll find Perfect conditions.
Clearly the less down to hold an investment at zero or very low cost the better the investment.
Whilst holding positively geared property I noticed blocks rising dramatically in price and getting smaller!
600 square meters had gone from $80k to $160k in my area.
Commercial Land was $35/ square meter so 4000 square meters was $140K
Clearly there was an in balance Domestic $260/square meter and Commercial $35 Again it was clear
a balance was to return.
Today.
Builders are screaming for work.
Project builders are being offered amazing deals on product.
In SA the average,average building cost was/is around $1000 to $1200 per square meter.
Today Project builders are offering $490 (Single story)-$660(Double story)/Square meter.
I look for corner blocks 1100 square meters or more for a 3 duplex development. 2 will work but you want to be very good.
Land with or without house in my area. Allow $270K
allow 3 Duplex development $92K each land value.
2 story 240 square meters $158K building cost.
45K each for other costs (holding Cost,Sub division,Landscaping) that's $295K each.
Selling for $395K at the low end and $495K at the top end in my area
Its a no brain er.
So looking at the opportunities.
No problems with control---no one else involved.
Risk
"Yesterday"
3 and 4 bed homes were 90-120k with rent of $220/week
Interest 6.5% so it wasn't hard to Positively gear.
By having a larger portfolio its possible to sell off the weaker performing properties
and invest back into those better performing. Exposure can be dramatically diminished.
Rents of course rise and the average is now $300-340/week.
Very large drops in the market price can be sustained as can considerable increases in
interest rates.
More importantly what about "TODAY!"?
I like 3 or more dwelling developments.
with 20% down initially finance isn't an issue.
270K less $50k initial outlay at say 6.5% for ease of calculation
gives an initial holding cost of $14,300 a year.
Other costs will amount to around 40K if your sub dividing.
Plus of course building costs.
I have standard designs from my builder ready for application.
I also have a performance clause with liquidated damages if not adhered to.
As soon as the approval is granted I place the development for sale.
I only want to sell 2 and I work on an option to purchase after 14 mths
to minimise capital gains tax. I'll keep 1.
Clearly you can see after 1 yr the holding costs and risk are almost zero.
I wont go through the exact figures but hope you see how to virtually
eliminate risk.
We can see pretty easily where we are in cycles.In property we are at in the down trend
stage with many areas in a consolidation stage. If my holding costs are negligible I know that at some
time in the future demand and inflation are going to affect my holdings.I want to have holdings
exposed to these influences WELL before they come into play.
So we can see that we utilize.
Risk mitigation
Leverage
Compounding
Duplication and
Time
By the application of
(1) Risk mitigation and Control.
(2) Leverage
(3) Compounding
(4) Time
(5) Duplication
Firstly Property (as my database is currently showing 2 bars on a chart!).
Everything you invest in is governed by Supply and Demand,and always on a micro and macro scale.
Its the macro scale we look to be in sync with.
In the 2 times I have caught the Macro scale once in property and once in trading,I had no idea they were coming.
I did know I had to be exposed to opportunity.
Yesterday
Its happened twice in my lifetime where purchasing a fully established home is far cheaper than purchasing a new home.
Where rent exceeds the repayments on the property holding costs.
Even on zero down.
Where demand way outstrips supply.
Where the balance is clearly out of whack.
We can achieve positive gearing today with 50% or more down but at times in your life you'll find Perfect conditions.
Clearly the less down to hold an investment at zero or very low cost the better the investment.
Whilst holding positively geared property I noticed blocks rising dramatically in price and getting smaller!
600 square meters had gone from $80k to $160k in my area.
Commercial Land was $35/ square meter so 4000 square meters was $140K
Clearly there was an in balance Domestic $260/square meter and Commercial $35 Again it was clear
a balance was to return.
Today.
Builders are screaming for work.
Project builders are being offered amazing deals on product.
In SA the average,average building cost was/is around $1000 to $1200 per square meter.
Today Project builders are offering $490 (Single story)-$660(Double story)/Square meter.
I look for corner blocks 1100 square meters or more for a 3 duplex development. 2 will work but you want to be very good.
Land with or without house in my area. Allow $270K
allow 3 Duplex development $92K each land value.
2 story 240 square meters $158K building cost.
45K each for other costs (holding Cost,Sub division,Landscaping) that's $295K each.
Selling for $395K at the low end and $495K at the top end in my area
Its a no brain er.
So looking at the opportunities.
No problems with control---no one else involved.
Risk
"Yesterday"
3 and 4 bed homes were 90-120k with rent of $220/week
Interest 6.5% so it wasn't hard to Positively gear.
By having a larger portfolio its possible to sell off the weaker performing properties
and invest back into those better performing. Exposure can be dramatically diminished.
Rents of course rise and the average is now $300-340/week.
Very large drops in the market price can be sustained as can considerable increases in
interest rates.
More importantly what about "TODAY!"?
I like 3 or more dwelling developments.
with 20% down initially finance isn't an issue.
270K less $50k initial outlay at say 6.5% for ease of calculation
gives an initial holding cost of $14,300 a year.
Other costs will amount to around 40K if your sub dividing.
Plus of course building costs.
I have standard designs from my builder ready for application.
I also have a performance clause with liquidated damages if not adhered to.
As soon as the approval is granted I place the development for sale.
I only want to sell 2 and I work on an option to purchase after 14 mths
to minimise capital gains tax. I'll keep 1.
Clearly you can see after 1 yr the holding costs and risk are almost zero.
I wont go through the exact figures but hope you see how to virtually
eliminate risk.
We can see pretty easily where we are in cycles.In property we are at in the down trend
stage with many areas in a consolidation stage. If my holding costs are negligible I know that at some
time in the future demand and inflation are going to affect my holdings.I want to have holdings
exposed to these influences WELL before they come into play.
So we can see that we utilize.
Risk mitigation
Leverage
Compounding
Duplication and
Time
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Expanding the timeline for the market that moves all else?, and considering the 3 states of existence for any entity (up/down/sideways?), then the probability of at least one state is remote, sideways likely, and further down possibility? Range bound with negative bias is not a time for leveraged buy and hold investing?
Tech/a's chart
clearly demonstrates
That the MOST important thing we control
IS THE ENTRY
THIS is the TIMING ( The only form of time that matters )
motorway
The biggest picture, with a couple of parabolic's thrown in - not an accumulation phase - yet?
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Not sure about that, as Governments have and are distorting the markets at the moment with stimulis, and qaunt & algo traders are distorting the equity markets? It's all about getting on the right gravy train or insider? As long as Big Kev keeps pumping then the freak show will continue. What happens when the music stops is where the big money will be made ie extreme wealth? Go short....
major problem with logarithmic chart
is it is useless over such a large move
to identify possible zone of accumulation
The half way point is invisible and becomes meaningless
You would think looking at your chart
That the only way was UP
ENTIRE HISTORY DOW CHART
full corrective move back to the HALFWAY point
With demand overcomming supply
ALSO the DOW is a very managed instrument
with constant additions and removals
WHO is talking HINDSIGHT ????
ENERGY ENERGY ENERGY !!!!
FORESIGHT FORESIGHT FORESIGHT
dyor
motorway
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