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?
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.