Dow drops 1,000pts. Good time for a Greek holiday
What is going on..?
If you follow the markets, you would have woken up to the shockwaves that happened on Wall Street last night.
The Dow Jones was down an amazing 1,000 points in early trading!
The biggest ever drop since the 1987 crash.
WOW!
The good news though is that it recovered and ended up 350 points down at the end of trading.
There are not many days in the financial calendar where you would call a 350 point drop in a day a “good day.”
However, after the shenanigans of the morning, you’ll probably agree with me that yes indeed, it ended strong (bit of an oximoron, but true).
Reason for the massive volatility?
The Greeks, The Spaniards and The Euro.
So what?
Well, there’s money to be made with volatility.
My thoughts, closely monitor the Greek banks, there is a massive buying opportunity right now. You could double or triple your money.
Nah, not interested in that?
Ok… Sell off the Spannish banks.
Heaps of profit in that.
Even that’s too hard?
Do some technical analysis on the Euro and sell that off when it break through a decent support level (Don’t know what that means? Education, my friend).
Still too hard?
Last one…
Go on a holiday to Europe.
The Aussie dollar is up about 29% against the Euro… Which drives your holiday dollar a lot further.
Yes, it is the best time to go to the Greek Islands, financially, that we’ve had for over a decade. I’m thinking about it.
But closer to home, we of course have had our own dramas over the last few days, ever since Rudd, Swan and Henry came up with a new tax blueprint.
The word “tax” for me hold no positive connotations. I always get nervous, even when they say that they’re going to lower tax.
What I found interesting about the new tax blueprint was the massive effect it had on the resources sector all this week.
$14,000,000,000.00 (14 billion dollars) was wiped off on Monday after Ruddy announced the super resources tax.
Imagine if someone came into your home and said, “We know you’re making a profit, and you’ve got a decent surplus… We’re going to increase your tax by 40% because you’ve been good at making profits.”
You wouldn’t stand for that, would you?
But that’s what they did with the resource companies, gone in there and said, “Makin’ too much money… Give us some.”
There’s another group of people who go around doing that, they’re called the mafia. For them it’s illegal, but if a government does it, it’s ok.
But you’re probably thinking, “Jon, they’re big companies, they can afford it, we should get a piece of the pie.”
You know what that’s called?
Communism.
Ok, a strong word. Maybe we should change that to modern day socialism.
Here’s how the resource tax works…
They give with one hand a little, and take with the other a lot.
Ruddy justified the tax by saying that the royalty tax will be removed and this new super-tax introduced.
It might on the surface sound like a fair swap, but here’s how it works out.
If you’re a start-up business, and you’re not making profit, the royalty tax hurts because you have to pay it either way.
So the government’s thinking is, “We can help the new businesses get off the ground, become more efficient, and when they start making money they’ll be able to pay us more in the long term.”
It sounds like it’s fair enough – don’t you think?
Help the small companies in the early stages and get paid lots more when projects come into full production and fruition.
But companies aren’t stupid. Their agenda is to maximise profits, minimise expenses and keep shareholders happy.
Tax is an expense… and a big one at that.
Big companies aren’t going to take this super-tax lightly, they’ll do whatever they can to hide profit, pay executives bigger fat salaries, move their focus to overseas projects where the returns on capital are higher and by and large, Australia becomes the laughing stock of the world as our smart resource businesses sell out.
So nobody wins.
I think the boys in Canberra, if they’re not careful will cook the goose that is laying the golden eggs.
Ruddy’s already doing a back-flip on the super resource tax, quickly trying to patch up the mess that he’s created, giving excuses already and suggesting that he wants to work with the mining companies to figure out the best possible solution.
After all, the new tax blueprint was only a suggestion. It still has to be signed off in parliament.
But Ruddy put himself in the corner, didn’t he?
After that announcement on Sunday night, surely he would have expected a sell-off the next day in the resource sector…
If he says he expected it, then he’s personally responsible for the billions of dollars that shareholders lost through the early part of this week. I’m talking about every day Australians who have invested in the recovery and put all their hard-earned money back to work after the dramas of 2008.
I’m not talking about the fat-cat executives, they’ll make money whichever way it goes.
But back to Ruddy’s dilemma.
If he says he didn’t expect it, then that highlights how stupid the government really is to expect otherwise.
Either way, it was poorly executed and presented.
Knowing how the government does stuff through its advisory channels, it would have all been arranged behind closed doors with very little consultation with the industry – and based on theories and spreadsheets.
There is a thing called reality which works a little bit different.
I wonder how many people who are close to this legislation bought put-options on BHP on Friday afternoon..?
Their friends and families would have made a killing.
In time though, we’ll see how dumb politicians really are when it comes to light that potentially related parties took advantage of this information.
It’s called insider trading and you go to jail for that. But maybe politicians don’t, not sure.
So why am I telling you all this?
Well, you have to get smart about investing and keep your finger on the pulse. No point blaming the governments as to the reason you are poor or not progressing, or not moving forward financially…
It’s your responsibility to manage your own money and take advantage of quirks like these in the market.
Lots of people would have made money on Monday, a lot of money.
Simply by following some basic stock market principles and understanding how to make money when the market goes down using either options, futures or cfd’s.
Also, there’s never been a more important time in Australian history to make sure that you don’t fall victim to these socialistic acts of the Government, to steal the wealth of its citizens under the pretence that they’re making it a better place for all to live.
So be warned. I think this is the first of many attempts by the government to fill up their coffers with money they don’t deserve.
Your job is to get smart, grow your wealth and protect it like a hawk.
That’s all for today.
Signed with Success,
Jon Giaan
Knowledge Source
P.S. I’m of no political persuasion. Freedom of speech and the freedom to create the lifestyle of your dreams is what I’m working towards. All governments interfere… Some more than others.
P.P.S. I’m sure we’ve got some die-hard followers who want to jump on the soap box and have a bit of a rant and rave… Go for your life my friends, comment below.
A small post script, having just looked back through the earlier posts. Firstly Al and V Maloney, forgive me for having overlooked, and therefore having not acknowledged your intelligent posts, and secondly has anybody really read what Leslie Patton has written? Organised global collapse? I would really like to see what kind of material Les feeds his paranoid conspiratorial delusions with. But then again, maybe I wouldn’t.
Wish I had bought those puts. I wonder how many pollies did?
MORE FALLOUT
~~~~~~~~~~~~~~
* Andrew Fraser and David Nason
* From: The Australian
* May 07, 2010 12:00AM
GAS producer Santos has joined the revolt by big mining against the Rudd government’s resources super-profits tax, DEFERRING for up to SIX MONTHS a decision on whether to build a $15 billion LNG export terminal …
Others – they are taking their iron-ore mining projects offshore to Africa … etc. you get the drift. At this rate, there will be no miners left in Oz by year end!!
If you are thinking of working in the mines or related jobs, don’t chuck in your old job yet …
I don’t think it was Jon’s intention to be negative, he is cautioning his readers to be alert to prevent or reduce the risk of financial hardship or loss. Remember that it was not that long ago that many people had their net worth savaged by the GFC.
Many investors especially boomers parked their savings in the share markets. These same investors don’t have the time-frame to be able to recoup their retirement savings. Even after the market’s rally from March 2009, it is still down from its high in 2007 and folks who bought (as many folks would do) at the peak would still not have recouped all their losses.
A super tax would directly impinge on shareholders – lower profits translate to lower dividends, not to mention lower share prices (lower capital gains). Again if investors are depending on stock market gains and dividends to top up their income/savings then a super tax is going to reduce this for sure.
Perhaps Jon is planning to find a stock or options expert to show us how to hedge / protect/ profit from the next bout of market roller-coaster rides as no doubt there will be given the massive legacies of the great GFC. It is not over yet! but we could turn this to our advantage … ‘be fearful when others are greedy, and greedy when others are fearful – Warren Buffett”.
Making profits is not the be-all and end-all, but it allows one many options – including the opportunity to donate funds and services to good causes – from cancer research to orphanges, etc. just like Warren Buffett, Bill Gates etc. not to mention being able to help those close to you.
Making profits is not a dirty word, you owe it to yourself and your loved ones to give it a best shot – just remember to give it back to those less fortunate than yourselves. Jon’s intention to better himself is commendable … if everyone can fund themselves through retirement there will not be a need for govt. financial assistance in old age … and therefore no burden/ drag on the economy from a burgeoning ageing sector!!
Great article Jon
Goodbye, I’m off to WA to stake out my square metre of iron!
Think again Jon. I could not disagree more with you.
This is the typical paranoid response from those who fear change and progress. The benefits of the super tax are more than obvious given what is going to be done with it and remember it is a super tax.
Look at BHP’ s dividends. How much lower can they be and BHP is not subject to a super tax yet. If shareholders think that super profits go towards higher dividends think again!
In the local paper this week in Alice Springs it tells us how only 5 mining companies out of God knows how many up this way have ever paid the Resource Levy. Mining companies have had it very good for a very long time. They are very good at taking what is not purely theirs to take, very good at hiding the money they have made taking it and terrible at putting back. Just driving from here to Perth WA one see how little environmental work they have done to recover the mess they make.
I find the whole of WA very sad. From the interior it’s the mining companies that have ripped off the land, then the farmers have made the land a salt pan, then every man and his dog thinks they are a property developer, selling off the coast line. And we wonder why there are droughts and severe fires where the weather prevails. Dah!
It’s not just about the money…its about custodianship of our land for the future. Stop being so shortsighted!
Why shouldn’t they pay tax. These are overseas owned companies, at lot of the profit goes over seas. Sure we are in debt but our economy is rolling along. Compare it to the UK, US, Europe or dare I say it Greece.
Politicians of any persuasion are an easy target.
When ever you invest you take a risk. Every body who invests should know that. Take responsibility for putting your money where you put it. Stand up and take responsibility for your life. Nothing is for certain.
Money comes and money goes. Don’t get angry about it. Enjoy it while you have it, let it go when it goes, and let it come when it does. Ultimately we are in control of only ourselves, and how we react to the situation. Money is not important, it is merely nice to have. Health, Family and love are important. Politicians can’t take any of those things away from you!
You invest you win…. sometimes…. other times you loose.
Keep it in perspective.
good comments.
Letting you know that
http://www.ozvotersonline.com.au
is running a online voting poll (aka a mini referendum for the interested)
right now on the
subject : 40% resource rent tax .
have your say and tell all those on your email address list about , also anybody else you come across. it is free to the user.
WOW!!! You are da man Jon. 100% hit the nail on the head. COMMUNISM VERSES CAPITALISM.
HAS ANYONE EVER SEEN THE EFFECTS OF COMMUNISM AND CAPITALISM APPLIED ON A POPULATION?
http://www.paulnoll.com/Korea/History/Korean-night.html
read it and weep. kevin rutt is a communist. I fear him.
.
To many communist here. wanting to tax our mining companies? what a joke. over seas owned? rubbish. remember we are awarded many hundreds of thousands of jobs thanks to the mining industries. they pay us massive wages and give us great wealth. they are making our country a country much talked about. bringing in more investments into the country. its about to get even bigger and better. oops. I forgot about RUTT. goodbye industry. Hello crappy industry. No more exploration and expansion in Australia. Lol. Thanks RUTT you IDIOT !!!
governments are inefficient and wasteful. very easily corrupted. government employees are lazy. they take long lunches. they arrive to work late. leave early. they can even sleep at work if they really want to. I know cause I work for the government., I have seen it personally. Waste is enormous. People just don’t respect publics money like they do there own. when they steal the private sectors money like they do with the super tax they essentially make us poorer. People are unable to see how they actually achieve this. But that’s just how it works. government provided wealth is really poverty for all. housing commission areas are poor for a reason, the government is supplying them. the aboriginals are very poor for a reason and that’s because the government provides virtually everything they need. they get cheap education. they get bigger social security benefits. they get rental subsidies. they are being robbed from any incentive to create and provide for them selves. a perfect example of how destructive socialism is to a society. Just look at communist Russia where the government provides everything for its people. EQUALS POVERTY FOR ALL. The more you adopt socialist systems the poorer we will be too.
DON’T TAX OUR INDUSTRIES.
yet some communist loving people on here just above me cant see this. they can only see the immediate benefits of RUTTS socialist methods. taxing the miners is a joke. what ever other reason they have to tax its a destructive idea.
wealth distribution is a communist idea and has never ever made us better off. EVER in 6000 yrs of economic history.
if you tax our industries we gain nothing but become worse off.
Jon you know how it really works mate. You rock mate.
TWO KOREAS.
The North is extremely poor and starving because it is 100% communist. The government provides all for its people. see how there is zero light coming from the country at night.
The south is a capitalist Korea country and is thriving thanks to its less involved government.
Look for your self.
http://www.paulnoll.com/Korea/History/Korean-night.html
Kevin Rudd is a communist/socialist. his ideas are going to destroy this country.
couldn’t agree more. Tax is legalized theft. It seems to me only some of us are “allowed” to get rich. Mr and Mrs Thong in suburbia (regardless of which flavour govt is in at the time) are just not able to get ahead. Someone somewhere is making more legislation or orchestrating more control over our earnings. I believe our hard graft gets the money it is our right to keep what we earn. We are amongst the highest taxed countries in the world. Rudd baby keep attacking the mining sector and we will ALL end up going to bed in the dark – thats if we are lucky enough to still have a bed, a car, a house, a hospital the list goes on.
Marilyn and Peter Aigner – Muehler
Humbug Scrub S.A.
Well Jon you seem to have touched a nerve. But I feel that the Gov’t is well practiced at insider trading, one only needs to look at Telstra to see that.
Unfortunately, we only have a two party system and therefore even when you loose you still end up in parliament. I don’t trust either party, remember JH he told us the GST was dead, then he brought it back to life in 2000. It was suposed to be simple yet it gets more complex each year, just like the rest of our simple tax system.
Give me a third alternative, but as soon as one comes on the horizon the Libs and Labs will gang up against them and squash them. Remember the Democrats and One Nation? Oh well that’s life in the lucky country.
So right, Rudd Swan and Co are useless. They have no idea on running an ecconomy. One question if the ETS is now finished untill 2013 what is Penny Wong doing at work till then?
What was the tax percentage before the proposed 40%?
Jon, that is the best analysis of the stupidity of this government that I have ever heard. When socialism seems to be tripping over into Communism then it is time for us all to have a good hard look at who it is we are entrusting the running of this country to. High time. Way over time!
Good on you….
“$20billion surplus to a $150 billion debt — not bad work for 2 1/2 years.”
And that is supposed to mean we are doing well, we havn’t been effected by the GFC like other countries, ?????????
Then the real estate market still going up, Why ???????
When my father bought his first block of land, he had to build our house himself because he could not afford a builder. Even so the house cost him more than 10 times the price of the land, that was the 50′s.
Now the average land portion of a dwelling makes up about 70% of the purchase price. Would you think that the miserly realise of avilable land might have had something to do with the massive increase in land value.
Also the local authorities having been incouraged to continually strive to increase the population of their areas, by telling us that they need to strive for higher density living. The companies building high rises and developers are the ones that benifit while the reat of us find our nieghbourhoods are turning into dull drab areas in the shadows of the concrete high rises.
The greedy are taking us all for a ride, they don’t don’t need to use Mafia tactics, they are conmen and the rest of us are just being conned.
How is life style going to improve for the ordinary working Joe who is mainly responsible for produceing the needs & wants for everyone, including the the CEO’s, Bankers, etc who collect the biggest salaries. without ever produceing anything.
The unemployed & pensioners are also unproductive and they get almost nothing. There are millions of unproductive workers, not that it is all their fault,
Our education system trains people to be good employees, not to be productive human beings. The bosses are able to achieve such high incomes because they make the financial decisions, and are able to leverage off the hard work of productive obedient employees.
We are returning to the past and quicker than we realise.
Are you looking forword to serfdom.
Hey guys, while i need money the same as you i am tired of listening to billionaire’s whinge about paying tax when they don’t ever. If you are registered as a corporation you only pay tax on what’s left after you invested your gross. Get it? The mining giants dont pay a thing for the actual oil/coal/metals they dredge up out of our country. They get it for free!!! and then they complain about the “costs” of getting it.So how come they’re all billionaire’s? None of these bastards are feeding and housing the disadvantaged struggling aussie’s!! And you talk about communism?? They are operating a Capitalist Communism system. Those at the financial big end get all the perks and all the control of the media, the oil,the law, the food,the water, the electricity….. Are you all so dumb as to believe the “old communism argument” Wake up. Ask yourself, ” Who’s got the control and the profits?” and that’s who’s controlling you. Our resources are supposed to belong to every australian. We have a right to free air,water,food and resources to help stay alive build a home and raise a family. The only shareholders are supposed to be people born in this country! Please wake up and start doing something for everyone,not just your greedy little self.
Oh by the way, what is “profit”??? Taking more than you give OR to put it another way “to take a profit you must give your customer LESS than they ACTUALLY PAID FOR!! Guy’s and gals WAKE UP !
Our pettiness as a nation will come back and bite us ….HARD!
Jon,
just read your article on the Rudd tax for the resource sector, most of the mineing companies are oversea onwned & what are they putting back to our ecconamy except for jobs dont you think the gov- should tax them hard?
CHALLENGES = OPPORTUNITIES
————————————————
Take a cue from overseas investors – ditch the Australian stockmarket!!
(And therefore the Australian economy!!)
Between the SR Tax (belting the miners) and the law-suits, not to mention the financial Mess from the West (whopping the big boys aka banks) … the writing is on the wall for Aussie!! No mining boom, no extra jobs, tighter and more expensive credit … FALLING VALUES in some housing suburbs (yep!! actually fallen!!!) – housing’s true story is not told, small businesses hurting, retailing – what retailing!! See Myer’s reduced earnings forecast!! Still subdued spending … this Super Tax is the Nail in the Coffin!! for the budding recovery of Australia; guess we had one too many, premature, interest-rate hikes … followed by reckless Tax ‘Changes’ …. KR should take a cue from NZ!!!
So go live and work in NZ!!! Lower tax (budget out today 20 May) !!! and no SRT on mining projects coming up!!! You will have surplus left after tax take to trip over to oz frequently for your weekend ozzie sojourns!! And you will find heaps of positive cashflow properties now …. until 2011. So NO get ready to BUY PROPERTIES IN NZ …. NOW!!!!!!!!!!
IF YOU THINK THAT THE MINERS WON’T AFFECT YOU …
———————————————————————————-
So why would miners and banks be the end all of Aussie economy??
Cos’ that’s what the Aussie economy basically consists of!!! Big 4 banks plus ….. miners!!! Knock them on the head and whaddya have?? A teetering market .. and along with it your teetering job, wealth, everything!!
There’s another spectre looming on the horizon that you should know about if not already … China is overheating and has to cool down!! There will be no big buyers for aussie resources when that happens. Get your seat belt on cos dem brakes could be coming up hard for the Aussie soon-to-be Ex-Ferrari !!
OZZIE MKTS GET HIT HARDER
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It’s extremely naive to think ozzie is going to be insulated from the rest of the world.
Just because it’s ‘escaped’ the last GFC by importing1/2 million immigrants to boost housing demand in 2008 (see how that number has now been drastically trimmed?!) … does not mean this can be repeated endlessly (no more dough for stimulus!!).
The aussie commodity-based economy is much more vulnerable and therefore more volatile and more extreme than many others. Just compare the performance with other markets over the last 18 months. The ozzie recovery is not to be taken for granted, and if you are going to look for mining jobs, don’t throw your old job away … just yet!!
TAKE A CUE
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Take a cue from these countries, Singapore (deep pocket), Malaysia (prosperous), Indonesia (rising star) … what do they have in common? … foreign investment incentivised by low tax rates and sensible economic policies that work.
There are many discussions around the issues of SRT and they are valid: ie. hasty, ill-thought out, shrouded by incomprehensibility, retrospectiveness, mulit-billion-dollar impact/ damage on proposed and existing projects … not to mention the bad timing!!
Time to consider diluting or removing SRT altogether before permanent damage ensues …. or join in the takeover of these Miners because they are looking real cheap right now!!
Would you be serious about exchanging hyperlinks?
just below, are some totally unrelated sites to ours, however, they are definitely worth checking out