Who thinks there will be a slump?

[Julia]

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.

+1. Agree with your comments explod, and, young-gun, that was a precise summary.
I agree with all you said.

 

[howmanyru]

There is already a slump, it may get worse. Most of us know how we all got into this mess, it's plastered all over the internet for all to see. Central banks, wastefull, incompetent governments, greedy human nature, blah, blah. In the past we had slumps, then got back on track, printed more money, expansion, consumption, etc. Is this time different? Heck yeah, not only economically, but people are waking up, changing their idea of what it means to be happy, healthy and so on. This shift in consciousness is huge and may be the main reason we may go down a different path in the future, perhaps a better balance and more sustainable future ahead ? One can only hope.

 

[sptrawler]

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

Well I think this is your best post.
Nobody has any idea, just use your common sense, there are some things that people can't do without.
There are companies that have outlets here but their main income is from Europe or the U.S and the Australian arm is secondry. These will be hit hard.
There are some companies that make things people can't do without, even if they wanted to.
My view fits with yours and I'm heading into retirement.LOL

 

[basilio]

I think that if/when the merde hits the fan keeping things simple and accessible will be the best chance of staying on top of the heap.

Having a simple house you own. Reducing costs by growing food and sharing resources.
I think that trying to keep complex, expensive lifestyles going and depending on financial advisors and institutions for the upkeep may be problematical.

 

[Bill M]

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?

If the XJO hits 0 and I don't get any dividends then all my other investments will still support me. I have a rental unit in a prime position in Sydney from which I drag a decent rent from. I also own a house which I live in now and have a yard from which I grow veggies from. Ripping up the lawn won't take long if I need to go there.

I do not have any loans on any of my investments, I own everything outright and my wife still works part time, we will not starve that's for sure and we don't need to pay rent. So my plan B worst case scenario is probably better that 90% of other Australians. I do not think the XJO will hit 0, I do not think the world will end, I do not think interest rates will hit 0 and the world will go on as always has.

 

[Bill M]

There are a lot people calling a depression of a magnitude like we have never seen before. But very few offer any ideas on what to do with your money.

Lets look at Mr and Mrs average Australian. Both are 60 y/o, no bills, kids gone and own a 3br home in the suburbs outright. Both want to retire and live a bit of a life before they get too old. They have 500K in super between them. Their plan is draw down super until 65 then get a government pension in conjunction with a super pension after that.

Where is this couple going to invest this 500K for the next 5 years to make ends meet? Before anyone just says gold, they still need to pay cash for all their living expenses. What should they invest in during this slump?

 

[Aussiejeff]

"Awww, don't be a Chump & think there'll be a $lump,
The Banker$ think there's room for a Mighty Xma$ [size=+2]BOOM!![/size]"

LOL

All Ords 5,000 by Xmas?

Cheap money for all!!!

Wheeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee....

 

[communique]

There are a lot people calling a depression of a magnitude like we have never seen before. But very few offer any ideas on what to do with your money.

Lets look at Mr and Mrs average Australian. Both are 60 y/o, no bills, kids gone and own a 3br home in the suburbs outright. Both want to retire and live a bit of a life before they get too old. They have 500K in super between them. Their plan is draw down super until 65 then get a government pension in conjunction with a super pension after that.

Where is this couple going to invest this 500K for the next 5 years to make ends meet? Before anyone just says gold, they still need to pay cash for all their living expenses. What should they invest in during this slump?

I think “slump” is understated. We are in unchartered waters. Some say the outcome will be anarchy, some say the printing presses will keep applying bandaids, some say that new currencies will replace existing. All the while it seems many are making a decent return on just trading at the moment (if you have the stomach for it) I would be protecting my capital at all costs. No one knows how Australian banks could be hit by failures in Europe because of the domino effect. I am told the derivatives market is huge and if the US goes down so do we. I am told that Credit Unions do not have the same exposure to risky investments that banks do, so maybe they are safer. I would say hard assets are always better in these circumstances. Finally, people will always need to eat, so I understand that investments in soft commodities are a wise choice. It is ironic that everything appears to be coming to a head in 2012. Maybe all the hype about the end of the Mayan calendar is true!

 

[disarray]

Lets look at Mr and Mrs average Australian. Both are 60 y/o, no bills, kids gone and own a 3br home in the suburbs outright. Both want to retire and live a bit of a life before they get too old. They have 500K in super between them. Their plan is draw down super until 65 then get a government pension in conjunction with a super pension after that.

are you for real? retire at 60? spend on lifestyle for 5 years then go for a pension handout? i don't really want to beat the whole "selfish baby boomer" dead horse, but gtfo with that attitude.

 

[Bill M]

are you for real? retire at 60? spend on lifestyle for 5 years then go for a pension handout? i don't really want to beat the whole "selfish baby boomer" dead horse, but gtfo with that attitude.

They are only getting what they are entitled to nothing more nothing less. This is a common strategy Financial Advisors suggest for older couples. Maybe take up your argument with the government and the Financial Planners Association, your comment doesn't answer my question.

 

[Smurf1976]

A tad off topic but something I've noticed about complex technical systems is that it all falls apart very quickly when the right sequence of events occurs.

Cascade failure is what we call it - one thing happens which puts more pressure on everything else. Then something else gives out, putting even more pressure on the rest. Then another one goes, quickly followed by everything else as it all buckles under the sudden strain placed upon it. That's how it goes with engineering (particularly the electricity grid) and I see no reason why the same principle wouldn't apply in a much broader sense to the whole of society.

We are watching the Euro disintigrate before our eyes right now. Decades in the making and yet it all comes unstuck rather quickly. It was much the same with the demise of the USSR, fall of the Berlin Wall and other such historical events. Once one thing gives, the rest comes down pretty quickly. No matter how strong the engineering, political or societal structure may seem, it all falls apart alarmingly fast once things get going.

Closer to home we are seeing the virtual disintegration of public hospitals here in Tasmania. Disintegration to the point that I wouldn't count on even emergency patients actually being treated before much longer simply because there will be no wards, nurses, doctors etc still there to treat them (ambulance ramping is already quite common and the cuts will only make things worse...). Politics and the disgrace of it all aside, it's another example of just how quickly things fall apart in a supposedly wealthy society.

Now consider a scenario where some organisation of real importance can't get credit or otherwise can't continue normal operations. Credible examples are things like national, state or local governments, utlities (public or privately owned), important companies (eg coles, woolworths, the oil companies, airlines, communications companies etc).

What happens if you wake up in a week's time and hear that someone like Caltex, Telstra or Qantas (randomly chosen "household name" companies for example only) is effectively out of business becuase they can't access credit or other forms of finance that they need to continue normal operations? And what happens if governments can't or won't bail them out because they also can't afford to? Then what? Life starts to fall apart pretty fast once you lose fuel, communications or transport services in a big way. Even if it's just your local bus company, it's still going to have a pretty big impact on life for many people.

The inherent nature of major crises seems to be that all seems well on the surface until suddenly it isn't. The way things are going, I wouldn't rule out a scenario where something major suddenly just happens due to finances. Things like airlines being physically grounded because they (or an important supplier) has financial issues etc. How you'd prepare for that I really don't know, but I would think it is at least a possibilty to occur given the overall circumstances at the moment.

 

[disarray]

i agree with what you say smurf. it wouldn't be so bad if regulation and compliance wasn't so completely onerous, because a collapse of the sort you mention would be fertile ground for a bunch of competition to quickly spring up. unfortunately to start any business or perform any service you have to jump through dozens of regulatory hoops and reach deep into your wallet for the privilege.

 

[Smurf1976]

If we do end up in an outright depression then it's going to affect everyone in some way. Even if you have $1 billion, it's not going to be much use if you can't exchange it for goods and services.

Examples...

You own a jet ski and can afford to keep it and fuel it. But do you wish to advertise your wealth by using or transporting it in public view whilst millions are in economic misery? Anyone who has money under such circumstances would be wise to keep very, very quiet about it.

And then there's things like big events, music festivals for example. Things like Soundwave or any other large festival depend on scale to be viable. You have dozens of bands and tonnes of equipment to bring from overseas and then shuffle between 5 Australian cities. The whole concept just doesn't work wihout scale. Even if you have money and can afford to go, there will be no event to go to simply because not enough other people could afford to go so as to make it viable. Your money won't buy at any price something that it can very easily buy fairly cheaply today.

And even simple things such as (given it's now December) Chirstmas light displays on private residences. Even if someone can afford the cost, nobody's likely to be advertising their relative wealth by spending on something clearly non-essential and highly visible. You won't be packing the kids in the car and cruising the streets at night looking at fairy lights whilst waiting for Santa no matter how much money you have to spare.

And so on. I could list probably thousands of examples but you get my point. You may well have money and you may well end up eating but that would be pretty much it. Many of the nice things, the non-essentials, would disappear regardless of your personal ability to afford them. And if you can't (or won't due to wanting to keep wealth hidden) actually exchange your money for goods and services then I'd argue that it's basically worthless anyway.

Unless you are mega rich and can afford your own planes, golf course, concert or whatever else you want then you're not likely to be able to buy your way out of the effects of a depression simply becuase you happen to have a few $ million sitting somewhere. At best, the money will reduce the pain but it won't remove it entirely.

 

[young-gun]

Well I think this is your best post.
Nobody has any idea, just use your common sense, there are some things that people can't do without.
There are companies that have outlets here but their main income is from Europe or the U.S and the Australian arm is secondry. These will be hit hard.
There are some companies that make things people can't do without, even if they wanted to.
My view fits with yours and I'm heading into retirement.LOL

first of all, i'd like to think i've had at least one other good post of my 100+...

secondly, even if i was to seek out such companies, i cant imagine their growth is exactly gonna be gang busters.

im gonna batten down the hatches, save as much as i can, and hope that i dont end up wiring buildings for a loaf of bread and a can of spaghetti.

perhaps buying stocks in maggi(2 minute noodles) is the answer?

ive mentioned before we're starting up a business due to open mid december...great timing.... lets hope someone has some disposable income in the coming years

 

[sptrawler]

There are a lot people calling a depression of a magnitude like we have never seen before. But very few offer any ideas on what to do with your money.

Lets look at Mr and Mrs average Australian. Both are 60 y/o, no bills, kids gone and own a 3br home in the suburbs outright. Both want to retire and live a bit of a life before they get too old. They have 500K in super between them. Their plan is draw down super until 65 then get a government pension in conjunction with a super pension after that.

Where is this couple going to invest this 500K for the next 5 years to make ends meet? Before anyone just says gold, they still need to pay cash for all their living expenses. What should they invest in during this slump?

This is only my take on this and I'm not qualified in any way. This is not advice, just my opinion.
The couple start their own super fund through a low cost online provider. Most will set it up for $0 but just check around and ask questions, eg ongoing cost.
As they are over 50 they can put $250,00 in each. At the moment they can get 5.7% term deposit and draw 3% allocated pension tax free earnings and pensions.Wait for the opportunity to buy bank shares when they crash.
They could just put the money in a joint account, $250,000 each @ 5.7% approx $13,000 each, which with the low income tax offset should mean that's tax free also(with no super costs). Then buy bank shares when they tank.
The only benefit I can see with the super is, if and when you buy shares and if you have a capital gain, it is tax free.
Anyway the main criterea is not to lose the principal too quickly. But $500,000 isn't a lot of money in this climate.
The other thing to check is, if the money is put in super, is it possible to claim job search, as you would obviously be looking for work as you travel around Aus.

 

[Bill M]

Excellent post sptrawler, sounds like a good plan to me. It's all about when the buying should be done isn't it? cheers.....

 

[Julia]

The only benefit I can see with the super is, if and when you buy shares and if you have a capital gain, it is tax free.

Assuming the SF has been moved into pension phase. If it's still in accumulation phase it is not tax free.

 

[sptrawler]

Assuming the SF has been moved into pension phase. If it's still in accumulation phase it is not tax free.

Good point Julia, I did say drawing a 3% pension.

 

[Julia]

Good point Julia, I did say drawing a 3% pension.

So you did, sp. Sorry. I should read more thoroughly.

 

[sptrawler]

Excellent post sptrawler, sounds like a good plan to me. It's all about when the buying should be done isn't it? cheers.....

Bill empty your inbox!!!!!!