Everyday Aussies Losing Millions In Lost Opportunities…
Lookout! I'm not pulling any punches in this one!
…and NO I'm not going to talk about the budget…didn't even watch it.
What I want to tell you is far more important than that…and criminal. Causing thousand upon thousand of every day Aussies, million upon million in lost opportunities…
Now I'm a pretty patient guy. But someone sent me something over earlier in the week that got me really riled up.
I like to keep my finger on the pulse, so I'm subscribed to a lot of newsletters, and I read a lot of blogs.
And so this one comes across my desk late on Tuesday. I won't name names. Let's just call him Kiki Gold Cheerleader.
And Kiki's blog is a horrific tale of misery and woe. It makes Game of Thrones look like a back-to-back Puppy Special on the Disney Channel.
The global economy's run aground, major currencies are collapsing, government's have their heads in the sand, and now, to top it all off, the royals are breeding.
And property? Don't get Kiki started on property. It's the biggest bubble in history, and it's about to go bang. When it does, oh look out. It will total the economy and the aussie dollar won't be worth more than a couple of beans.
(Which, of course, means you should buy gold. Nevermind that there seems to be a bubble farting itself out in gold right now.)
Turn it up, Kiki.
Now, I don't mind if someone's a bit bearish. It takes all types to make up the Investment circus. And I'll also be the first to admit that these are challenging times, and there are some serious risks that we need to be conscious of.
But what really gets on my goat is how confident Kiki and the lot pretend to be. There's not an ounce of doubt in their minds. The economy's a write off, end of story.
Thing is though, that we've heard it all before.
Let me give you a few examples:
“The bubble has burst. Australian house prices have now fallen 6.1% from their peak, and have been falling for 21 months, which is the longest downturn in nominal prices ever recorded by the ABS.”
That was Steve Keen. When? Back in May 2012. We now know that May was around the time the market bottomed, and prices have increased pretty much every month since then.
He even sold his apartment in Surry hills in 2011, just to prove his point…the bottom of the market…what an idiot!
Sydney and especially Surry Hills is up 13%… good one stevo!!!
Guess we dodged a bullet there.
How about another one?
“Aussie house prices are 40 percent overvalued and will be one of the last major asset bubbles to burst.”
That was Jeremy Grantham, from CMO, with over $100 billion in funds under management. When? Back in 2009.
How about this?
“Australian homes are over-priced by 25 percent, making them the fourth-most expensive in the world. There are signs of a bubble emerging.”
That was the IMF back in 2008.
And then what about this:
“The Australian property market is definitely looking frothy. Australia's housing market has weakened. Home prices tumbled by an average of 8% in Sydney and by 13% in Melbourne in the first quarter. Anecdotal evidence suggests that the slide has continued since then, signalling that prices have farther to fall.”
That was the doyen of sensible – The Economist magazine. When?
June 2004.
I could go on. We've been hearing the same old story for years, from way back when – in the dark ages before the internet.
So for Kiki and the mob to say that it's going to pop, any day now, starts to sound a lot like the Chicken Little that cried wolf. I don't know actually know how they can keep a straight face, trotting out the same old lines year after year, when the facts keep proving them wrong.
The real tragedy though is for the people following their advice.
If you bail on a trade too early, particularly if you liquidate it into cash or hide your money in non-yielding assets like gold, the lost years of capital growth and yield can be huge, and a real crying shame.
In fact, in investing, knowing when to enter, and when to exit a market, is half the battle.
To show you what I mean, let's take a look a market that did see a serious correction – the Australian stock market.
Let's imagine it's early 2005. The market is a full two years in a long bull run. However, there's just been a couple of months of falls, and the doom-sayers are all coming out of the woodwork.
And let's say we've got two investors – Bev and Brian. Bev is on top of her game. She knows that there's always someone out there predicting that things are going to tank, so she holds her hand.
Brian, however, let's himself get spooked. He liquidates his stocks and puts some of it into term deposits, and some of it into gold. And he waits for the market to crash.
And in 2008, the market does crash. It starts recovering in 2009, and by mid-2009, is back at where it was when Brian hopped off, and so he jumps back on.
Now if Bev stayed in the game the whole time, you could argue that they've ended up in exactly the same spot.
But that's not true. While capital values are more or less the same, Brian has missed out on 5 years of yield and dividend growth. And if Bev was reinvesting her returns, her capital position is actually much stronger than Brian's.
And Bev also had three years where she could have timed a more successful exit. If she did bail at the right time, then she would have done massively better.
This is the art of investing. It's not child's play. And it's why a lot of people get burnt.
But stick with me. I've got a close eye on the triggers that might spark a collapse, and you can be sure I won't be caught with my pants down – and so neither will you.
But whatever you do, don't listen to Kiki and the team.
You don't ask the man selling tickets to the life-raft how well the ship is doing.
Lyn Hannie says
At 60 years of age my husband and I have a mortgage of $250,000 on a property valued at $700,000. After tax income is $35000 and I can’t bear the thought of moving. All our income goes into the mortgage; is there any other way we could do this?
Tom baxter says
Take in a lodger ..divide the house up..to create a separate living space..
Philippe says
Dear Ms Lyn Hannie,
Everything is relative. If I were you, I would “bear the thought of moving”, downscale, then continue living debt-free and enjoy life. Say for example that in a few years one of you (or both) is diagnosed as terminally ill but that you are also given the ability to come back to this time (now). Would you then still see the “bearing of the thought of moving” as such an “insurmountable” burden?
I am not saying that it is trivial, but with a bit of research, advice and planning you can easily re-organise your affairs and considerably increase your quality of life by spending “on you” what is rightfully yours. Isn’t that a much more appealing proposition than making the bank richer at your expense all your life and then one day… well, die like anybody else.
Make the decision, get the train (and the good times) rolling and start planning a holiday. You’ll never look back.
Just trying to help…
Philippe (IMO)
Paul says
Im with Phillpe well said I agree 100% its time to stop feeding the banks & start looking after number one.
Paul S
judy browning says
yes Lynn, catch the train & have some fun !
John Skipper says
hi Lynne, we’re in a similar position to you except I’m 54 and up till now have been working along paying down a mortgage about the same size as yours ($240,000), on an $800,000 beautiful home. Never had any serious health issues until now, have been diagnosed with Motor Neurone. Wish that we had lived in a lesser home, holidayed more and spent more money on us. Unfortunately I can’t hit the rewind button. At what point do you intend enjoy your life?
Anthony C says
Great blog Gian so very true! Hope people listen!
Terry says
Your argument makes no sense! Lets assume in Mid 2005 Brian sold out of shares and purchased $100000 worth of gold. In June 2005 Gold price was roughly US$425/oz or around A$550/oz (exchange rate was around 77.5c at that time) so Brian would have got around 182 ozs of gold for his money. By mid 2009 when the shares were back to where they were in 2005 the Gold price was around US$940/oz or around A$1175 (around 80c exchange rate) so his 182 ozs of gold would have been worth roughly $214000.
So Bev who was “on top of her game” made no capital gain at all in that time but probably picked up a few thousand a year in dividends whilst poor silly Brian more than doubled his money. Hmm – maybe gold isn’t quite so silly after all.
If you carry it forward to today then Bev has probably picked up about 10% since mid 2009 on the shares. Even after the recent “crash” Brians gold is now worth A$1400 per oz or $254000
Kerrie says
50/50 hindsight is a wonderful thing…story would be different if gold had fallen not risen over this period. Also gold has no cash flow unless you can sell a bit. Diversification to me is the name of the game. Yep a bit of gold, shares. property, bonds, cash.
I too are about to hit the big 60. I also have mortgages over my property investments a real NO NO I believe from various so called experts if one is retired. Every day I hear other retirees complain about falling interest rates and the effect on their standard of living. However because the sharemarket has been rising and interest rates falling I can now rebalance things and pay down my property loans so when interest rates go back up I will have a lower balance owing and higher rents coming in. I guess I now have a growing investment portfolio that more than meets my needs in retirement.
So I guess I only winge because it is fashionable to do so.
julie says
I am 47 and seem to be doing nothing else but paying off the banks for the various loans I have taken out. Call me crazy but I am now in the process of obtaining another loan. I am in a rat trap and can’t seem to get myself out. Will I ever enjoy my life?
aloy says
Gian!
Thanks for this opportunity to put our views. Life is to enjoy. Plan sensibly but do not fall into trap. Greedy is good when you are young and full of life. Anything, anytime may happen. This is life. No one can predict this. Do what you think is correct. I am 64 and still working. I know one day something might crop up and I will be in hospital. Can we stop this?. Enjoy while you can. I am still on investing and paying the greedy bank. But they are supporting you. Am I greedy? May be…. But we are human beings… Take all your worries as enjoyment, life will be fantastic. I have been in hospital for brain surgery 10 years ago. Anything can happen to me. But we both are enjoying and travelling while paying the greedy banks who are helping us. So do not give up. We are all going to die one day. Enjoy your life.
Aloy.
George Chm says
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Grace says
Hi Lyn,
You should probably see a financial strategist to help you come up with a plan that’s suitable for you.You are in a great position that most people to be earning more than you are at the moment.
If I was in your shoes, I would sell the property and rent in the area you love for a while. With the 500,000 gain from the sale, I would start a business and start investing in property deals that boost income. After doing this for one year, you will hopefully have enough income/profit from your business to borrow from the bank. If this is done properly, you will be able to invest in a lot of cash flow properties that will give you more or less guaranteed income from month to month. Then you can really live!!
I suggest you attend the free 1 day bootcamp that Dymphna Boholt (through Knowledge Source) will organise in June. She gives wholesome advice on how to strategise and build wealth using real estate.
Grace says
Julie, same as above. Please go to Dymphna’s bootcamp in June, its free.
She will show you how to turn bad debt (that is not tax deductible) into good debt (that is tax deductible). She will also show you which debts to start paying off first to gain financial freedom quickly. She also talks about tax effective strategies (she was an accountant).
Using her strategies (I’m her student), I’ve paid off my car loan. I now use my credit card to reduce my bank interest not to pay the bank interest. I’ve also learnt how to get more income from my investment properties so that they are actually earning me money and also how to protect all my investments. The lessons have been endless…