Who thinks there will be a slump?

[Glen48]

Depressions only come along every 70 -80 years so most have forgotten about them, Most know about boom/bust's and think this one will be this same but add 75 to 1930 we are due for the next one only the feds keep printing money and stopping it happening.
Read up to Tulip mania delete Tulip and insert House prices.
Same store.

 

[sptrawler]

If you have $500,000 invested and interest rates drop to 1 - 2% as in U.K, Europe and U.S, you start to eat the principle.
If the share price of a company drops to 20% of its current value, it will be a reflection of the companies earnings, therefore its dividends will drop with its earnings.
Having a rental property in a recession is o.k if the tenants keep their job and pay their rent.
There is no easy answer or fail safe way of protecting your capital. However there will be opportunity for those with cash.

 

[VSntchr]

I listened to an interesting discussion on ABC Radio last evening where one of the few people who accurately predicted and timed the GFC (he went totally to cash before it set in) and has also accurately forecast events since then, has suggested we could see the ASX go to 1000 points and that the bottom will not occur until around 2016.

He might be quite wrong. But his track record so far and his background experience suggests it's worth listening to what he says.

I watched and it was very interesting...thanks.

 

[Bill M]

Hello Bill

So you don't mind seeing your capital investment diminishing?

Short term no.

You don't consider it could be worthwhile to lock in your profits, sit aside in cash (8% available a couple of years ago), and buy back in after the falls?

If only! 8% has gone by the wayside a long time ago. I didn't act soon enough then and now it's down to 6% for 5 years.

I listened to an interesting discussion on ABC Radio last evening where one of the few people who accurately predicted and timed the GFC (he went totally to cash before it set in) and has also accurately forecast events since then, has suggested we could see the ASX go to 1000 points and that the bottom will not occur until around 2016.

Another predictor, I got one in my inbox now telling me he has never seen such unbelievable valuations in the ASX in his lifetime. They are all full of sh*t, no one knows which way the market is going to go really.

He might be quite wrong. But his track record so far and his background experience suggests it's worth listening to what he says.

Same goes to the guy in my inbox predicting the opposite.

I'm not at all trying to change your point of view. I just don't especially agree with it when opportunity cost is taken into consideration.

Opportunity cost? 6% in UBANK now and you must pay tax on it. Real Estate hmm we worked this out before 3 to 4% return after tax. But my stocks are returning 7% tax paid, why would I swap into worse investments at precisely the wrong time? I do not need the capital I have invested in stocks, I have cash aside for emergencies and the stocks are a life time plan.

If you have, say, $500,000 in capital investment, and that falls to less than half, is your dividend yield/franking actually going to make up the difference?

My dividends will never pay me $250,000 a year so the answer is no. But it isn't going to make a difference on my lifestyle as the dividends that I do get will still come in as they did during the recession of the early 90's and the crash of 2008 - 09. Short term capital loss is not something I dwell on or worry about. I buy when I see value, don't really care what others do. This has paid off for me in the past and most likely will pay off for me again. I am more prepared for GFC 2 than I was for GFC 1, the world will not end. BHP, WOW and CBA and many others will always be paying those dividend cheques (sorry direct deposits now) and that is why I am invested in the stockmarket, cheers.

 

[Bill M]

If you have $500,000 invested and interest rates drop to 1 - 2% as in U.K, Europe and U.S, you start to eat the principle.
If the share price of a company drops to 20% of its current value, it will be a reflection of the companies earnings, therefore its dividends will drop with its earnings.
Having a rental property in a recession is o.k if the tenants keep their job and pay their rent.
There is no easy answer or fail safe way of protecting your capital. However there will be opportunity for those with cash.

100% spot on ol mate. Just had some visitors from UK here. They said we were very lucky to get 6% for a 1 year term deposit. They said the best they could do was 2% in the UK, looks like capital eating time.

 

[Julia]

Short term no.

If only! 8% has gone by the wayside a long time ago. I didn't act soon enough then and now it's down to 6% for 5 years.

I wouldn't discount high rates becoming available again if the suggested global credit squeeze happens. That 8% was only available for a very short time. You had to be looking at e.g. infochoice regularly.

Another predictor, I got one in my inbox now telling me he has never seen such unbelievable valuations in the ASX in his lifetime. They are all full of sh*t, no one knows which way the market is going to go really.

No, they don't. No one does. But if someone has accurately forecast events to date I'm prepared to listen to him.
Anyone who is currently predicting all will be just okey dokey has to be seriously off the planet imo.

Opportunity cost? 6% in UBANK now and you must pay tax on it. Real Estate hmm we worked this out before 3 to 4% return after tax. But my stocks are returning 7% tax paid, why would I swap into worse investments at precisely the wrong time? I do not need the capital I have invested in stocks, I have cash aside for emergencies and the stocks are a life time plan.

OK. If the knowledge that your capital investment is dropping all the time doesn't worry you, then the yield on many stocks is, I suppose, comforting.

100% spot on ol mate. Just had some visitors from UK here. They said we were very lucky to get 6% for a 1 year term deposit. They said the best they could do was 2% in the UK, looks like capital eating time.

You can't really compare any features of the UK economy with that of Australia.
Our interest rates are much higher for reasons that absolutely don't apply in the UK.

If China stops being Australia's lifeline, we'll quickly see falling rates here also.

Btw, Bill, if you move your super into an allocated pension as soon as you can, you'll remove that pesky consideration of paying tax.

All the best.
Julia

 

[sptrawler]

I only wish I had moved from shares to Rabo bank when they were giving 8%, some people did.LOL

 

[Bill M]

I listened to an interesting discussion on ABC Radio last evening where one of the few people who accurately predicted and timed the GFC (he went totally to cash before it set in) and has also accurately forecast events since then, has suggested we could see the ASX go to 1000 points and that the bottom will not occur until around 2016.

I don't listen to ABC radio so I don't know who you are talking about, would you mind telling me this persons name so I can follow up on his or her comments? It never hurts to hear another persons point of view, cheers.

 

[Julia]

I don't listen to ABC radio so I don't know who you are talking about, would you mind telling me this persons name so I can follow up on his or her comments? It never hurts to hear another persons point of view, cheers.

Here you go, Bill:
http://blogs.abc.net.au/queensland/...he-gfc.html?site=widebay&program=612_evenings

I'd not heard him before either but was quite impressed. Also found it worth following up on his mention of Robert Prechter: http://www.robertprechter.com/.

Another person Steve Austin has on his Evenings program regularly is Chris Leithner.
Again, always interesting and scathing about the events which have inevitably led up to the present global financial mess.

 

[young-gun]

Hey young-gun there are reasons for everything. I subscribe to many investment newsletters and broker reports. Roughly about 70% of these reports suggest the markets are going down and that Europe's and USA's debt problems will signal long term pain for eveybody. The other 30% are quite the opposite, some citing that this is the time to be buying Aussie stocks. P/E's and dividends have never been so good and that they are sustainable, they say.

For me as a lifetime investor (NOT TRADER) have been through a few booms and busts, this one is no different. I am of the firm belief that buying good companies that pay good dividends when everyone else is heading for the exit doors (or margin calls) is a good idea. I have bought quite a lot of double digit dividend paying companies lately and all I care about is how hard my cash will work for me. Right now I have a portfolio that pays me 7% dividends (mostly franked), why on earth would I sell that to get 6% in a bank account and then pay TAX? To me it would be a backward step and on any market dips like last week I tend to buy more stock and go long. I have have no interest in short term fluctuations it's the rest of my life and the income I need that matters. I hope that clarifys why some people are long. I might add if the market does crash to 3100 on the all ords (like the 70% suggest) then I will be buying like there is no tomorrow, to me it will be the second best chance in a lifetime, cheers.

my boss is of the same opinion. he has seen the booms and the busts. he bought in dirt cheap and is watching dividends roll in. but the fact is this is not your ordinary bust. this is going to be the biggest collapse of a bubble the world has ever seen. a bust that will see companies here in australia go under along with your capital and dividends.

if it plays out how i believe, your dividend payments will most likely become non existent as companies round up every dollar just to stay afloat. now it may be extreme, but the fact is its a very real possibilty, and i think to not have a 'plan B' in place for such an event is insane.(not to say u dont have one bill). the fact is yourself, like most other investors, must have a breaking point? u cant tell me that xjo hits 2000 and your still rosey?

this bust IS different. it's the mother of all bubbles rolled into one. every time the economy has tried to deflate governments stimulate, reserve banks lower interest rates and hey presto we bounce back reasonably quickly, because for some reason they honestly believe its possible to grow all the time, non stop, decade in decade out. in doing this they have never truly allowed the economy to do what it has so so desperately needed. we are currently staring down the barrel of 75+ years of economic and market manipulation, coupled with greed and a SH!TLOAD of debt, but it appears enough is enough, theres no coming back now. we'll probably just get printed into hyper-inflation.

 

[explod]

Young gun, that says it all.

agree, we are in for a financial winter never witnessed before.

 

[Ves]

So, for you two extremist bears, what are you going to do if you get this one wrong? Surely, there's an opportunity cost for that side of the ledger too.

And what if you are correct - and hyperinflation occurs, what is your plan? Wouldn't your cash be worthless?

 

[sptrawler]

my boss is of the same opinion. he has seen the booms and the busts. he bought in dirt cheap and is watching dividends roll in. but the fact is this is not your ordinary bust. this is going to be the biggest collapse of a bubble the world has ever seen. a bust that will see companies here in australia go under along with your capital and dividends.

if it plays out how i believe, your dividend payments will most likely become non existent as companies round up every dollar just to stay afloat. now it may be extreme, but the fact is its a very real possibilty, and i think to not have a 'plan B' in place for such an event is insane.(not to say u dont have one bill). the fact is yourself, like most other investors, must have a breaking point? u cant tell me that xjo hits 2000 and your still rosey?

this bust IS different. it's the mother of all bubbles rolled into one. every time the economy has tried to deflate governments stimulate, reserve banks lower interest rates and hey presto we bounce back reasonably quickly, because for some reason they honestly believe its possible to grow all the time, non stop, decade in decade out. in doing this they have never truly allowed the economy to do what it has so so desperately needed. we are currently staring down the barrel of 75+ years of economic and market manipulation, coupled with greed and a SH!TLOAD of debt, but it appears enough is enough, theres no coming back now. we'll probably just get printed into hyper-inflation.

So what do you suggest, leave it as cash? If you have hyper inflation as you say, your money devalues hyper quickly aswell.

 

[explod]

So, for you two extremist bears, what are you going to do if you get this one wrong? Surely, there's an opportunity cost for that side of the ledger too.

And what if you are correct - and hyperinflation occurs, what is your plan? Wouldn't your cash be worthless?

Well I do not think it is extremist to observe that we have too many mouths to feed, overall resources are diminishing and most productivity increases (and there is little of that) requires less manual labour.

How can anyone really plan well for what is starting to happen. I am as worried as anyone else. Sure I have the vegie patch and other strategies in place but if we get to a certain point, as we are seeing, with the growing number of countries having huge riots and mobs out of control then I will be stomped on like everyone else.

Is it extremist to merely point out what is going on?

 

[Ves]

Is it extremist to merely point out what is going on?

Of course not, that's probably hyperbole on my behalf. However, talking about chart levels of 1000-2000 on the major indices is extremist in my book.

History is cyclical, capitalism will not last forever. However, society as we know it is more likely to end with a whimper rather than a major bang. That is not so say that the financial system cannot collapse with a massive thud, but it will take more than just that alone. Ages and the empires within them have long-winded transition periods.

 

[explod]

Of course not, that's probably hyperbole on my behalf. However, talking about chart levels of 1000-2000 on the major indices is extremist in my book.

History is cyclical, capitalism will not last forever. However, society as we know it is more likely to end with a whimper rather than a major bang. That is not so say that the financial system cannot collapse with a massive thud, but it will take more than just that alone. Ages and the empires within them have long-winded transition periods.

Agree up to a point, but in a lot of those days the world moved at the speed of a horse/bullock drawn cart, though in the Great depression we had the phone and morse code.

Today billions of dollars can be moved in a millisecond and companies and enterprises are movind in or out of profit nearly as fast.

On the TV news tonight they say that American Airlines filed for bankruptcy, but they add for them it will still be business as usual, why?

because they have merely defaulted on thier debts, the PIGGS will, as with the US, if it has not in effect done so already.

Most observers are saying the Euro is gone and that China too is in trouble. Sure once there was the Roman Empire which took a thousand years to collapse.

Today it is most of the planet and the deterioration only goes back about 50 years. The outlook is so bleak in my eyes that I do not know anymore how to encompass it all into words.

Young-gun said it all pretty well.

 

[Ves]

A fundamental change in society (or at least one that I am thinking of) needs to be caused by a change in morality. On the surface it looks like this is changing, but I would argue that it has evolved slowly from the late 18th Century onwards. The pace in which the world moves (in financial and technological terms) has indeed sped up, but these are all based on the principle of "individuality" and "progress." Regression has sped up, I agree, but it will take more than a financial slump to kick out morality systems that are now centuries old. The gigantic collapse (if it even happens) will only prompt the need for change; not put it in place.

 

[robz7777]

Agree up to a point, but in a lot of those days the world moved at the speed of a horse/bullock drawn cart, though in the Great depression we had the phone and morse code.

Today billions of dollars can be moved in a millisecond and companies and enterprises are movind in or out of profit nearly as fast.

Most observers are saying the Euro is gone and that China too is in trouble. Sure once there was the Roman Empire which took a thousand years to collapse.

Roman Empire 27 BC - 1453 AD
British Empire 1497 - 1914/1965
US Dominance - 1945 - Now?
China - Now? or Ever?

The rise and fall of empires is certainly speeding. The recurring theme seems to be leaders spreading themselves too thin and sticking their fingers in too many pies.
If and when the Chinese become the dominant power on the planet they may be wise to keep to themselves!!

 

[young-gun]

So, for you two extremist bears, what are you going to do if you get this one wrong? Surely, there's an opportunity cost for that side of the ledger too.

And what if you are correct - and hyperinflation occurs, what is your plan? Wouldn't your cash be worthless?

I don't have a plan because I'm not sure what to do.. But I would say Buy gold. I guarantee u if the fed even has one more round of qe the price will take off. But I also think that if economies are allowed to deflate then gold and silver will come down.

I also believe that of all nations Australia will come out the best( not that that will be great) fingers crossed they see the errors of the US and don't print? Are we even allowed to?

All I know is I sold up all my stocks at 4800, but being young it wasn't as if it was 100k.

In conclusion, I have no frigin idea how to prepare for such events that may unfold, and that worries me.

Or maybe everything will be fine.

Ps if I am wrong then so be it, I would rather walk away not having made any money than having lost my small amount of cash. My view would probably change if I was heading into retirement

 

[young-gun]

Well I do not think it is extremist to observe that we have too many mouths to feed, overall resources are diminishing and most productivity increases (and there is little of that) requires less manual labour.

How can anyone really plan well for what is starting to happen. I am as worried as anyone else. Sure I have the vegie patch and other strategies in place but if we get to a certain point, as we are seeing, with the growing number of countries having huge riots and mobs out of control then I will be stomped on like everyone else.

Is it extremist to merely point out what is going on?

Haha explod this may sound ridiculous but would u believe I have even googled how to survive a depression.. Number 1 rule seems to be - get a gun