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....
- and two, Japan never experienced any inflation after their "quantitative easing" programs in the 90s, infact they experienced further deflation after all the money they printed.
Regarding inflation ... I can see where you're all coming from, but there are arguments against too. What makes you so sure that we'll have massive inflation?
The only big reason why people think we're gonna have inflation is b/c the US is printing their bills.
However here's the thing;
- not every country in the world has zero interest rates and is printing ... it's an American phenomenon.
Yes you CAN do this.
And no its not gambling.
lets say I buy a 10c stock with a 1c risk.
It trades to 13c I raise the stop to 10.5c I now have NO RISK.
More later.
I'm aware most equate leverage to increased RISK.This is just plain wrong.
wow, i cant believe no one called you out on this;
you have 13c - SL ( 10.5 ) = 2.5c risk.
I'm moving to Hong Kong to earn Chinese Yuan before they pull their fingers out of the dyke and the flood gates break open.
What do people think about buying the Yuan ..... Will their currency be worth a lot more in 5 years time than it is today? I am tempted to use a bit of capital to but the Yuan now.
However, I bet the Yen strengthens with any strengthening of the Yuan.
I dont think the use of leverage in itself should change a system's dynamics
-ie, just magnify losses/gains; - allow greater exposure.[even diversification]
Ofcourse the availibility of leverage can lead to the creation on shorter term systems - which make smaller moves meaningful,
-which i think you were getting at;
just found tech/a's comment intriguing
Regarding inflation ... I can see where you're all coming from, but there are arguments against too. What makes you so sure that we'll have massive inflation?
The only big reason why people think we're gonna have inflation is b/c the US is printing their bills.
However here's the thing;
- not every country in the world has zero interest rates and is printing ... it's an American phenomenom. Aussie rates are at 3% ... and rba looking to increase if prices get out of hand.
- and two, Japan never experienced any inflation after their "quantitative easing" programs in the 90s, infact they experienced further deflation after all the money they printed.
you can bet on your gold but there's huge downside risk given how far it's run up.
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
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
tech/a
Everything you invest in is governed by Supply and Demand,and always on a micro and macro scale
For the moment, let's say I agree. How then will you analyse in relation to your example in Property [I assume residential]:
*Drivers of Supply
*Drivers of Demand
*In a micro/macro context.
The example you provide is not an analysis of supply/demand. It is simply an exposition of projected costs and revenues.jog on
duc
wow, i cant believe no one called you out on this;
you have 13c - SL ( 10.5 ) = 2.5c risk.
-saying you have NO RISK, in this circumstance is just a mind game you are playing with yourself.
wow, i cant believe no one called you out on this;
you have 13c - SL ( 10.5 ) = 2.5c risk.
-saying you have NO RISK, in this circumstance is just a mind game you are playing with yourself.
did you mean, the ratio of Reward:Risk remains the same,
eg 5:1 x2(leverage) = 5:1
---------
There was one just after his post. Not only is the profit at risk, there was an initial risk of 1c.
I didn't address leverage, but I also disagree with it. Increased leverage brings increased risk unless the amount risked remains static, but all that would serve is to magnify the movement with potential drawbacks.
Example, I trade 1 SPI contract risking 10 ticks. If I leverage to 5 contracts then my risk becomes 50 ticks. To maintain my initial level of risk I must drop down to risking 2 ticks per contract, for the initial 10 ticks of risk overall. I don't gain anything by using leverage (in fact it may hurt me, as the 10 ticks will probably outperform the 5x 2 ticks ), and I still leave myself open to the 'black swans' (such as stops not triggering, broker going down etc).
I believe leverage is really only used for two things:
1. To minimise the amount needed for a trade/account, allowing simultaneous trades or investments, to use otherwise unused funds.
2. To magnify movement, allowing a move of x size to become meaningful. Effectively boosting volatility artificially. E.g. I may usually trade 10 tick moves, but 200% leverage allows me to trade 5 tick moves for the same profit.
Risk is what you stand to lose on a trade.
If your s/l is in profit you can't lose any capital on the trade. You are risking open profit but that occurs in any trade.
If you open a position with a $100k account and risk 1% of your account you stand to lose $1000. if you make the stop loss even you stand to lose $0 of your capital, hence no risk.
No, he means Risk stays the same.
13c - SL 10.5c = 2.5c - what you stand to lose.
make a million $$ and lose it all... - and tell yourself you've lost nothing.
A stop at breakeven means a no risk trade, tell me how you are going to lose your capital. My 14 year old brother could probably even work that one out.
All trades risk open profit.
If you could get all trades to break even you'd be a squillionaire, because you're not risking any of your capital to trade.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?