[michaeltwParticipant@michaeltwJoin Date: 2010Post Count: 3]

May 12, 2011 - 10:01 am

Many years a go when I lived in the Wales UK, the government would adjust spending by simply putting up the percentage required to purchase vehicles, white goods etc. Example deposit required to purchase = 30%
We didn't have the Bank of England quite in the same position of authority as the RBA. While the RBA is independent of the government it is and can be influenced by government policy.
It seems a simple mechanism to introduce between the government and the RBA the ability to remove cash from the system thereby deflating demand and expenditure. Quit simply a "super2" whereby the treasurer can regulate the disposable income by manipulating this mechanism. For example instead of putting up interest rates (which is definately "in the square") the treasurer can initiate this when required, adjust the rate, use the funds to target activity to offset a declining domestic market. A good example of this would be to assist the first home buyer. Instead of issuing grants in the short term thereby creating a 24×7 impact on demand resulting in infationery house price rises, why not make this available via a minimum deposit  with optional top up by the individual will result in a variable purchase activity = 24x7x52. As a result the market will not see peaks in activity and the subsequent erosion of asset price by triggering of a peak demand cycle. The effect would be to detach the first home buyer from the short term market and spread it over 24x7x52. The other groundshift would be in that abandoning the current interest rate heavy handed, broad brush and archaic approach whereby our hard earned cash is "robbed" from us would be replaced by a system that would quarantine our money for our future benefit. That would be acccepted by the Australian people.
Just imagine, it would provide a greater level of home ownership,and create an asset that could be drawn down on in future years. We could be safer knowing that we had super and super2 which could be low risk investment. 

That was the theory, now the subjective. Having been around for a while and fortunate to experience the many events that have impacted on the political and financial climate, I just want to paint a little picture. The two speed economy will create deep financial and social division. Here we have the middle classes being hit by the senseless application of a financial dictatorship (Note for the RBA, the chickens will come home to roost). A division and seperation of wealth that will not be closed if at all, for years to come. An extreme sense of detachment from the wealth creation of the resources industry. Make no mistake, the inability our of our current, previous or future governments to secure wealth from the resources industry for the benefit of Australia can only lead to one thing, nationalisation of the industry as it moves closer to becoming a prime asset with massive impact on the population and security of the nation.  The shocking display of greed by the incumbant legion of mining executives when the return on investment spiralled beyond their belief due to unforeseen price rises (Twiggy I just don't believe you factored in the massive profit gains experienced by your company and others!) is just an example of the wealth division in action. My suggestion would be to remove the middleman and go straight to the buyer CHINA! afterall the mining industry isn't rocket science. Just try earning a quid in a competitive industry like manufacturing or farming (Do I see the commercial banks feeding off the less fortunate?).
Finally let me ask the question, during the great financial <moderator delete language> had the government not reacted quickly and decisively where do you think we would be today? Answer, probably in a mess like the US, UK, Greece, Portugal, Ireland, Spain, Iceland and the others. At least we had the opportunity to live and fight another day. I know what I would prefer. That's my pennies worth. Remember, we can't all be rich, but we can all be poor. Mike williams 12/5/11

[michaeltwParticipant@michaeltwJoin Date: 2010Post Count: 3]

February 17, 2011 - 11:48 am

I'm of the same opinion as Steve. Of course the market could go backwards or crash. However the likelyhood of it happening is a difficult thing to determine. My own view is that there should be some consolidation in your portfolio. Unless you have access to sufficeint cash or cash flows, the chances are a correction could impact on you. Being forced into a position will cause panic selling, that is the problem.
Having said that if you have a position of strength financially and can sustain that for a period of time, at the least you will hold on to your assets, at best there will be buying opportunites. Otherwise you will lose.
Unforunately the media tends to grab a headline that highlights negative sentiment, when things are a little depressed, so too the experts that fall over themselves predicting doom. Treat the market with respect and understand that unless you are fortunate, going against the herd (trend?) could bankrupt you. If I was to call the market now it would be to hold and/or moving to a defensive position, we personally are very low geared. take it for what it's worth.
Reading the media lately we in the West were subjected to the head lines "Perth property prices slump etc" the reality was that there was a -2% move during 2010. What is more interesting is that during the last quarter, the rate of change was significant. There is a chance that 2011 could see a 6 to 8% drop. Having said that four of the five properties in our portfolio were above my long term trend of +6%, returning  11.6, 12.5, 12.5, 24.4% . One property returning 3.3%, this property in the Dec qtr was -1.8%, the rest are on target to achieve 2010 gains.
We bought the hi-gain property in May 2009, the GFC was in full swing ,there were 4 other buyers, our first and only offer was 4% higher than asking price, So there are opportunities in the current market. I would suggest many investors are not in a position to capitalise on opportunities. The few will grow their wealth significantly, for the rest if they consolidate and prepare, the next positive period of growth will be an opportunity. This is not the time to bet on the market. If the purchase of your next property doesn't stack up, then pay off some debt because you are doing the best you can at the time.
Remember. We can't all be rich, but we can all be poor.
I'm sure you have all read Steve's book. Pick it up, read it again and stress test your portfolio. There is no absolute prediction that will satisfy all investment portfolios. If you have properties that are likely to fluctaute in value significantly in a negative trend then be prepared to go defensive. Your properties could be middle ground in which case hold and see, if your properties are in the positive growth area, be prepared to act on good buying opportunities.
External Factors:
I've been around long enough to experience trends, gold price, oil, jobs, food shortages. Don't mention China, I've travelled that road in my mind countless times. Just think, if the chinese economy goes into a tail spin, ask yourself how many chinese will be in the unemployment queue? You can bet they will be in front of you looking for jobs. The worst case scenario is the longest unemployment queue in history. This phase in world development cannot be halted. A major correction in the wealth of the chinese middle class will impact on us all. It is their gain in wealth that is funding the market. Don't bet on the US supporting the transition of wealth from the west to the east either, something has to give, china will move to democracy or the US will corrupt the market. The game has changed and there are some shocking outcomes. Having said that, I woudln't give quids to be on another planet, it may be a complicated world we see emerging, but hell it is going to be exciting!
Domestic Factors:
I like the banks and the goverment, they are so predictable. We seem to forget both institutions depend on cash flow, OURS!
Currently they are spooking us and we are spooking them. They need us, we are cash flow opportunities for them, stamp duty, bank fees, taxes they need the cash flow more than we do. Just look how they worry about deficits or profits. The banks can't continue with a depressed market, I bet they and the government are working their little fingers to the bone calculating the next move. I'll take a bet sooner than later they will have to release the pressure. New building is in a hold pattern. Investment is slow(other than the resources). Retail is heading for a dive. So expect some change in the budget, it can't be a lame budget, there will be change, superannuation being used for house purchase, a short period where negative gearing will be reduced to perhaps 50% of your tax rate. Remember that the problem is that all the players have been in the market, at the same time, first home buyers, second home buyers, investors. The property markey has been synchronised by policy, taxes etc. you can' t give money to the first home buyers and then expect not to have a surge in investment and prices . The link at least for a period has to be broken. Have you noticed that block prices are on hold or going backwards or being subsidised by giveaways? By impacting on the turnover of blocks (interset rates=less demand) there is in fact a pool of blocks building, the government could quite easily introduce a withholding tax on blocks that have gone through the approval process but are artificially held from the market to inflate prices. 
I know that there are some contradicting influences and complicated relationships out there in the market, but sometimes it pays to brain storm. How else would you even begin to think you (I?) know it all? 
Remember. We can't all be rich, but we can all be poor.

[michaeltwParticipant@michaeltwJoin Date: 2010Post Count: 3]

February 17, 2010 - 12:25 pm

Just a little feedback. I'm 62. My wife is retired. Our income is 60k. Our income never exceeded 90k. We have 5 properties. Just 7 years ago we had 1 property and a 30k mortgage. Then I discovered that the banks would lend us money….until then my assumption was that because retirement age was 65 my loan repayment would be 25/7 x average mortgage repayment, that is 3.57 x average monthly payment (because my expectation was that the loan would have to be repaid by age 65). I concluded that I could not afford the payments.
Today the properties are valued at 2.25mil, our netwealth has increased to +1mil.
I don't intend analyzing your position as there are two many variables. However I'd just love to have your income…..
What does old age bring? a time line that stretches back through all those events that have impacted on "now". Some observations.
1) You are not an investor unless you have 2 properties, if you want to live in a better home you are a homeowner.
2) Now is the time, the events of the last 18 months just confirm that the time between highs and lows can occur at different frequencies, choosing the right time isn't that important, choosing the right property is. 
3) Always buy more properties than less because the land content of the valuation of the properties is where the capital gain exists.
4) More properties will insulate you against adverse trends, more properties, more income, more capital gain. (remember Monopoly?)
5) Have confidence in your own ability, with the sort of income you are on, you are a smart person.
6) Buying one property will not make you bankrupt (unless your lifestyle leaves no cash at the end of the month!).
7) Get out there this weekend, with the information in the book you have purchased, there is enough content for you to made a decision. Buy one property and learn from the experience.
Always arrange for a line of credit to cover those events that will test you, unemployment, illness. Buying time is very important.
Just a few "add ons"
I have very little in super, I don't like super. One day in the future when you are ready to retire, 65?70?80??? this is what will have to happen, on that day you will need the global economy to be in good health, the stock market on a high, your super hasn't been eroded by government legislation, the thieves haven't taken their cut with the fees and all the planets have to be in alignment……..make no mistake everyone needs to have a parallel investment strategy.
Finally I won't be crying because my super has disappeared, when my wife retired we bought a new Triumph Bonneville motorcycle and a new caravan…..smart move because today I would have had to put in an extra 20k to buy the same items.
I live in Perth..are you going to the seminar??