Yesterday marked the one-year anniversary of the rally. The Dow rose a piddly 11 points. Gold sold off $1.
This rally has gone on for so long most people think it is not a rally at all, but a new bull market. Worldwide, it has taken equities up some 73%...making it one of the greatest rallies ever.
What are we to think? Are we alone in thinking it's still a trap? What happened to the problems that led to the crisis of '07-'09?
If you don't think about it too much you might think everything is fine. Stocks are up. Business profits are up. GDP is up. Housing and unemployment seem to be stabilized. What's not to like?
The recovery is a done deal as far as most people see it. The rescue efforts, initiated by the feds, were a big success...or so they believe. It has been 12 months since the bottom...and the world still has not ended. Everything is back to normal...isn't it?
The problem in '07-'09 was that too many people owed too much money.
And what has happened to change that? The net level of indebtedness in the US has actually gone up since '07!
Huh? How's that? We're in a de-leveraging phase, aren't we?
Well...yes...but only in the private sector. The feds are still adding debt.
Let's look at the private sector first. There, we find unemployment still around 10%. Adult males in their prime working years, however, have fewer jobs than ever before. One figure we saw shows that only 4 out of 5 of them are working.
That is just the beginning of the problem for these fellows. They're getting fewer college degrees, compared to women, than ever before. They're earning less money too - again, compared to women. Fewer are the chief breadwinners in their households. And fewer are even in a household at all - more are alone.
Let's not get distracted by the suffering of the masculine part of the population...
..we're looking at what is going on in the broader economy. Is it healthy and growing? Or is the stock market just a honey trap...a bear market trap for the unwary investor?
The private sector is de-leveraging. Not only is the unemployment rate high, the typical family also lost a lot of money when its house went down in price. And since the typical householder is also in his 40s or 50s, he has to consider his retirement and how he's going to fund it.
Stocks? While they've bounced back nicely, the stock market is still well below its highs...and still in a losing position over the last ten years. A 73% gain sounds nice, but it would take a 100% gain to recover the losses of the '07-'09 bear market.
Houses? One out of four mortgaged houses is still underwater. In some new developments, the figure is as high as one out of two. And there is little likelihood that the owners will be high and dry anytime soon. People no longer expect to retire on the gains from their houses.
This leaves the middle-aged householder without much choice. He has to save money. Remember, the boom of the 2003-2007 period was caused by dis-saving. Now, a higher savings rate will mean less spending for many, many years. This is a fundamental and important change of direction for the economy. It will restrict business growth and restrain profit growth too.
So, is it possible to slough off the crisis and return to business as usual? Nope. Not possible. You can pretend that things are back to normal. You can act as if they are back to normal. You can invest as though they are back to normal. But you can also lose your money.
But they're not normal at all. They're different. The 1982 to 2007 period was...mostly...a boom time, caused by rapid increases in debt, asset prices, and consumer spending. The next period is...mostly...a bust time - when asset prices, private debt, and consumer spending go down.
Sooner or later, but probably sooner, the stock market will realize it. Our Crash Alert flag - tattered and faded - is still flying.
Until tomorrow,
Bill Bonner
for The Daily Reckoning Australia
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Related Articles:
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by Jim brown on 11 March 2010:
Is there any one out there that can help.I am nearing retirement and have my own DIY fund. All the financial advisers i have used have profited at my expense and they advise only for their own benefit. I therefore abandoned advisers and turned to my bank, alas, they to advised for their own benefit. I was then left with no choice but to go it alone and decided to invest in the stock market only to lose 20% over the last 2 years. Now i have reverted to term bank deposits, while waiting for things to settle. Can you suggest what someone in my position should invest in. I have been reading your column for some time and it would seem that in your opinion the stock market is about to crash again
Comment by Joe on 11 March 2010:
Late last year (as a regular reader of this site), there was a recommendation that investors should be piling their cash into Uranium miners. Specifically the article identified the following with their 12th Nov 2009 prices:
TOE 14c
AGS 63c
THX 44c
BMN 114c
EXT 818c
PNN 20c
UTO 13c
Today these are priced at:
TOE 12.5c down 1.5c
AGS 47c down 16c
THX 45c up 1c
BMN 47.5c down 66.5c
EXT 711c down 106c
PNN 18c down 2c
UTO 11.5c down 1.5c
Can DailyReckoning revisit this with a view to providing guidance on when I should pile my cash into these?
Comment by Ross on 11 March 2010:
Jim, there are cash at call rates available from Rabobank (AAA) that aren't too bad right now. Many might say don't lock your cash in too long and be at least AA rated.
Read widely but at the end it is your call. Look at the sectors on the ASX (you can use the 3 letter sector code on the ASX site and graph them for the past few years). Health and consumer staples were the run and hide sectors when fear beat risk. Banks that had lost half their value became it when govt said taxpayers would take all the risk away. Hot money from overseas makes resources stocks and banks.
Watch the macro economic discussion here, then finally pick something decent within a sector, if it is a security make sure it can access cash and that its borrowing is more long than short, if it is direct property or property related you need to determine either what part of the cycle we are in and most importantly if your income is secure.
You probably don't need to leverage your way in to any investment and for many conservative is best right now and maybe you have done just right.
Comment by Biker Pete on 11 March 2010:
We're in a very similar position, Jim. Our current mood is to sell off some property; keep some in Super (but switch from cash to ASX); and commit a significant sum into high-yield bank interest. To our disgust our son locked up a large sum with _WorstPac_ at 6.8%. That's earning him another full income, but he'll be hit with a large tax bill. Beyond your $48K tax-free allowance per couple once retired, tax _will_ be an issue... Crazy, when you think we can pull _double that_ tax-free through TTRs, now, on top of our salaries... and our realty returns... .
Agree with your comments on FAs and banks, but you'll find it's compulsory to seek financial advice. We'd advise you to do that, even if it's only to tick-that-applicable-box. We do nothing without first talking to our excellent accountant... .
Comment by Ned S on 12 March 2010:
Those experienced old tax accountants who lived through stagflation and have seen how every type of investment known to man and structured through all the various entity types in all sorts of changing family situations over many years (who AREN'T interested in peddling any investment products at all) and WILL get off their bums and go and look at businesses and investments first hand with a client, are very handy people to know. I got one about a decade ago. Hey, he isn't going to be dishing out any stock tips - But he's a real handy bloke to be able to chat to about anything. Where does one find them though? I lucked onto mine through a recommendation from a legal eagle. (He maybe though I deserved some sort of a break at the time? ...
)
Comment by Biker Pete on 12 March 2010:
I've known our accountant for fifty years, Ned. We've only been using his services for the last twenty or so. Our mistake was to also employ two different FAs during the last 25. What a waste of time and money! We let both go when we realised the missus knew far more... and, as Jim suggests, above, they were acting in _their_ own best interest, not ours. One of these clowns wanted $10K a year from us; the other spruiked tree plantations(!) New duty of disclosure laws on commissions quickly put an end to that con. I think the losses when that scheme fell apart here approached a billion dollars.
We're flying blind until the KHR is released/employed. I've an interim plan which Blondie has agreed to go along with until then... .
Comment by Steve on 12 March 2010:
Biker Pete:
Our current mood is to sell off some property...
Why is that Biker?
Comment by Christina on 12 March 2010:
As well as all our other investments, I think that a great investment is food like baked beans stashed away in the cupboard. The way I see it, when inflation hits, we will need food. When deflation hits, we will need food. When the whole global economy collapses, food is still number 1 on the list of what we need. So we may as well buy some food and stash it away now. Because when the whole economy goes belly up I can only imagine how long the lines at the shops will be to buy food, that's if they don't get looted by the panicking masses. No matter which way this thing goes, the only thing you REALLY need really is food. And water. Because really, the reason we all invest in anything is so that we can get profit to buy stuff like, you guessed it food, when times get tough.
Comment by prozak on 12 March 2010:
here is some advice for anyone who has or is pretending to have any mid to high level of assets or income.
You get tax planning from a law firm or lawyer or whatever they call themselves these days in australia.....
Or at the very least an accountant who has a barrister on tap.
Accountants are number crunchers they follow the rules... they do not know all the relevent legislation well enough to find the loopholes.
Here is the reason why.
There is one structure where the "advisor" gets 5% of ALL revenue passed through his set-up. Sounds expensive right?
This structure then pays in total 5% tax.
That makes the "take home" 90%! ( a bit more complex than your normal concept of take home)
And to add cream to the top all the book-keeping, reporting and accounting is done as part of the deal.
The barrister has a letter from the tax authorities stating that the scheme is a legal avoidance scheme is totally legit and there will be no further tax to pay.
The alternative is to see an accountant and if you are lucky pay 20-40% tax.
Comment by Stillgotshoeson on 12 March 2010:
@Comment by Steve on 12 March 2010:
Biker Pete:
Our current mood is to sell off some property...
Why is that Biker?
Well it is kind of obvious to me that the property that is in good locations, beach, lakeside, with good tenants paying a nice fortnightly rental and strong demand in the WA resource sector indicates that it is good time to be off loading said low geared high quality assets even though one has other assets/investment mix to support any short term drop.. yeah makes perfect sense....
Or the other option, maybe, have finally conceded that there may well be some sort of correction in the property market and one would be hedging their bets.. you know after looking at some companies that someone here has openly posted he has in his portfolio.. you know such as Westpac, Atlas Iron, Citigold and Goodman Group to name just a few that have all gone up significantly more than his property..
Comment by Biker Pete on 12 March 2010:
"Our current mood is to sell off some property..."
Diversification, Steve. I'm about to take a _shipload of Super._ Your view... and that of the bears, is that interest rates will rise to 10%.
Comment by Biker Pete on 12 March 2010:
Prozak: "You get tax planning from a law firm or lawyer or whatever they call themselves these days in australia....."
Gotta laugh. My accountant charges us $700 per year, Prozak Pete.
You're advising a fella who _digs up his own septic wells_ to pay a barrister(?) You really don't know how 'The Comfortable' get that way... or stay that way, do you?!~
And you're unlikely to... .
Comment by Biker Pete on 12 March 2010:
OK, let's see... who's next?
Shoes: "Our current mood is to sell off some property..."
I think I've answered that one, but the post that was 'knocked back' last night, before Steve's/your question was asked, is relevant. In that post I argued that when DRA was poised to push realty, it was probably time to get out!~
Your advice about shares seems well-meant... and I appreciate that.
My experience in the stock market between 1999-2006 was, at best, poor.
I made _pocket-money_. The only real win was iinet, during the Tech Wreck.
I lost _every cent of gain_ when a local company I'd researched well _failed_. What I hadn't studied was the composition of their board, despite having been warned about the key player, well-known to a colleague. My friend was right... .
What I learned from that experience was that (my) time spent on shares is unproductive. I now stick with what I know. I know I can save $25K on each project doing a lot of my own physical labour. That will not appeal to some here, who find it difficult to reconcile manual labour with intelligence, but i.) it keeps me fit; ii.) I pay no tax on that saving; iii.) After 40 years indoors, I enjoy sunshine, a sea-breeze and a certain anonymity I don't usually experience... .
Comment by Stillgotshoeson on 12 March 2010:
@Comment by Biker Pete on 12 March 2010:
"Our current mood is to sell off some property..."
Diversification, Steve. I'm about to take a _shipload of Super._ Your view... and that of the bears, is that interest rates will rise to 10%.
So now I am a little confused...
Comment by Biker Pete on 1 February 2010:
Australian Bureau of Statistics has some interesting stats, released today.
"The Australian house price index rose 5.2 per cent in the December quarter, the Australian Bureau of Statistics said today. This compares with an upwardly revised 4.4 per cent in the September quarter. In the year to December, the house price index rose 13.6 per cent."
But it's OK, Roy and Phil. Your investments are all doing better than that... and paying you a fortnightly dividend to cover the interest, providing an ongoing income as well. Right?
And of course, rents will fall "if the rising interest rates keep the first home sheep and new (more cautious) real estate investors out of the market... " Right?
Roy" "..."...unless you are suufering from some mental illness..."
Yep, if you buy the line that house prices are falling... and rents will fall, that could be the problem. Pillman can probably help you there... .
Comment by Biker Pete on 14 February 2010:
Ross, I've always been impressed by the breadth and depth of your knowledge, so I'm not discounting anything you've said. Your suggestion that interest will rise in Australia once the brakes are off in the NH is very likely. We'd suggest August 2010 as a likely date. Nothing new there.
That may present some dramas to those whose first priority isn't the servicing of their housing loan(s)... .
We're not in that group. Super has been a great boon to us. It now covers _all_ our debt. Cash reserves are a bonus, meaning that if values fall, we'll actually be in a better position to expedite our ten-year-plan. Remember we've survived 17.5% interest rates, two plateaus and a dip... .
I'm not sure we could ride out the apocalypse, but we'll give it our best shot!!~
Comment by Biker Pete on 10 February 2010:
I've done the same. I'm backing WA property. _Fortnightly_ dividends.
Good luck!
and there is another post in here somewhere that you state you survived rates of 17.5%.. dips and plateaus'.. So you have had an investment portfolio of Cash, Super and Property all this time, ridden the highs and lows of interest rates to date, think fortnightly income from your rentals and a booming WA economy will keep you on the up and up.. Cash and a large Super balance to take advantage and or survive IF a correction was to occur.. your words.. and all of a sudden because of a few peoples posts in a forum that say they think interest rates might/will go 10% and you have suddenly thought to re-evaluate your self made multi million dollar property portfolio (implied) that you have accrued over time...
doesn't add up.... Unless of course you have actually been looking at the economic conditions pointed out by us "bears" in the forum and the DR itself and have thought to yourself.. they just might be right.. cause after all your grand posturing... that might be a little hard to admit..
Comment by Biker Pete on 12 March 2010:
Christina: "...the only thing you REALLY need really is food. And water... "
I agree. After _shelter_ come food, water, warmth. Our ten acres supply all that... and it has been our best investment. Four fireplaces, solar and more wood that we can consume in a lifetime provide warmth, hot water and cooking.
We probably achieved that goal too early in life to really appreciate it; but, as we age... and watch others' utility costs rise... we've come to realise our very good fortune... .
Comment by Biker Pete on 12 March 2010:
"..and all of a sudden because of a few peoples posts in a forum that say they think interest rates might/will go 10% and you have suddenly thought to re-evaluate your self made multi million dollar property portfolio (implied) that you have accrued over time..."
As I also mentioned once, Shoes, I married into a deeper gene pool. (That should be fairly obvious!~
) Watching our two sons achieve in their twenties, what took me two more decades, I'm learning fairly rapidly.
Remember, I'm 63. I'll spare you the gritty details of our current income, but I'm about to leave 'the accumulative phase'. Time to cash in some of the chips... . I figure I have three decades left. The last three were totally focused on wealth accumulation. To be fair, there was a lot of travel in there. But we've dedicated virtually _every other cent_ to investment, in preparing for a comfortable retirement. Time to commit more to cash, as interest rises! Just have to wait for the KHR
Comment by Ned S on 12 March 2010:
Lots of younger bloggers don't necessarily think in terms of retirement planning perhaps?
Comment by Biker Pete on 12 March 2010:
"Lots of younger bloggers don't necessarily think in terms of retirement planning perhaps?"
So it surprises me how much one of our kids already has in Super, Ned. Could be he's looked at our payout figure and thought: "Jeez, dad got _that_ one right!"
I can recommend the book "How to Retire Happy, Wild and Free" (Retirement Wisdom That You Won't Get from Your Financial Advisor (9781580085786): Ernie J. Zelinski.) Picked it up in Canada... and couldn't put it down. Brings that phase of our lives into real focus... .
Comment by Ned S on 12 March 2010:
The other one to consider is that some pressure is now starting to come on state and local governments to address housing affordability issues. (Certainly in QLD, VIC and NSW anyway.) With more higher density stuff clustered around transport nodes presumably being one end result. How that will affect the prices of traditional detached housing is a bit of a wildcard in the deck perhaps? And as such, not a bad thing to hedge against a little bit if one owns lots of traditional detached housing. Just depending where it is.
Plus the KHR is another wildcard in the deck.
Comment by Rob CA on 12 March 2010:
Interesting and positive comments about accountants in general.
I've been in practice as a CA for 30 years and have seen it all in terms of clients being drawn into schemes that invariably fail. Problem is for the vast majority of accountants is that we are not allowed as unlicensed investment advisors to give advice about specific investment products.
This means if, for example, a retired tax client asks us about a get-rich-quick scheme being touted by a "licensed" financial advisor which has all the hallmarks of being a rip-off or too risky for the profile of the client we cannot legally advise the client to not buy the particular product as we would be giving advice, even in the negative sense, about a specific investment product. If we say "don't invest in that product" to the client then they could tell their investment advisor that that "my accountant says not to invest in your product" which then leaves the accountant exposed to the investment advisor calling the ASIC and lodging a complaint about unlicensed investment advice being given by the accountant.
Now the hard part. How does an accountant reconcile their overall 'moral' duty of care to the their client with this potential calamity befalling their client. We try to get around it by talking about generalities as much as possible so that the client starts to be aware of the risks involved in schemes / products of that general nature.
Outside of the moral obligation to clients to help them avoid a financial disaster accountants also invariably end up being the ones left with the mess to clean up the taxation and emotional consequences of the client's financial loss caused by the licensed financial advisor who has more that likely pocketed a nice bag of fees and trails out of our client and has moved back to selling used cars, home loans, installing insulation or wherever the easy money might currently be.
Sure you could say: "Well then. Go get licensed!". Good idea but on top of the already burdensome tasks of keeping up with forever changing tax and superannuation law and rulings, handling Mr. Rudd's $900 cheques, keeping Centrelink happy etc there isn't enough time in the day for most accountants. Some firms are licensed but usually it is to sell one line of investment products for one provider and this means commission income fraught with danger to the goodwill of the practice if the investments turn sour.
Comment by Biker Pete on 12 March 2010:
"Plus the KHR is another wildcard in the deck."
You said it, Ned. For us, timing will be critical, possibly more-so than at any other time in our lives.
Comment by Biker Pete on 12 March 2010:
Rob: "...the licensed financial advisor who has more than likely pocketed a nice bag of fees and trails out of our client... "
Thanks for putting that into perspective, Rob. Until Duty of Disclosure laws came into practice, we knew _nothing_ of trailing commissions at all. That information, a real revelation, saved us literally hundreds of thousands.
Much more, had we taken the advice of two separate, independent FAs... .
Comment by Matto on 12 March 2010:
@Comment by Biker Pete on 12 March 2010:
"Our current mood is to sell off some property..."
i told you it was coming within a few weeks...
Comment by Biker Pete on 12 March 2010:
Months, if it happens, Matto. Depends on the KHR. First to go will be the larger homes, which are returning lower percentage gains. We're getting inquiries, _daily_. Pretty hard to resist a man with a cheque book, son.
Not a bad idea to take profits from time-to-time.
I may sell options-to-buy, post KHR / July 2010. That has paid off in the past... . One such deal, which the 'buyer' decided not to exercise, paid for four months in Europe... .
Comment by Ned S on 12 March 2010:
http://www.theaustralian.com.au/politics/ken-henry-tax-review-to-get-an-airing-as-pm-kevin-rudd-caves-in/story-e6frgczf-1225839789012
Comment by Biker Pete on 12 March 2010:
Thanks, Ned.
Hadn't heard the "Where's Henry?" catcalls... although I follow parliamentary debate with some interest... and oft-times, disgust... .
The closing line says a great deal: "...to evaluate that and present our initial response to those recommendations to us..." Without a strong initial response to the recommendations, Abbott's popularity might get another shot-in-the-arm(!)
The KHR may backfire on Labor... or, alternatively, see them romp back in, depending upon that 'initial response'. No wonder Rudd has kept it under wraps!
Comment by Stillgotshoeson on 12 March 2010:
RE: the australian KHR article..
"What we are doing is thoroughly evaluating this review from an independent tax committee chaired by Dr Henry," Mr Swan said.
"The responsible thing to do is to take our time to evaluate that and present our initial response to those recommendations to us."
In laymans terms.. What we the government hope to do is cherry pick the more popular options from the review and ignore the other options, how ever good they may be for the future of the country, so as not to get thrown out on our arses for implementing tough but yet well needed taxation reform...
Comment by Ned S on 12 March 2010:
A bit cynical Shoes - But undoubtedly realistic!
(Whatever other euphemisms PM Blah Blah may be remembered by history as, "Kev the Courageous" will not be one of them.)
Comment by Biker Pete on 12 March 2010:
"What we the government hope to do is cherry pick the more popular options from the review and ignore the other options, how ever good they may be for the future of the country, so as not to get thrown out on our arses for implementing tough but yet well needed taxation reform... "
Yeah, I know, I know... what's good for the country is to let it _all_ collapse... a thorough cleanout... crashed ASX, crashed property market, crashed Oz industry, high unemployment, ship everywhere, right? As one of Bill's disciples, I guess that's your script, Shoes. And you'll have a large number (of life's 'winners') agree with you. I wonder how many fully realise what impact that might have on your neighbours, your family and friends(?) Not really a consideration for _any_ of us here, of course.
We're immune from Big D Depressions, right?!~
Funnily enough, like Ned, I think you're right... .
That's probably the way it _will_ go... .
Comment by Ned S on 12 March 2010:
After having a panic over my cash in bank while Bush was trying to convince our retard mate Rudd that all was not well with the world (I was and still am about 60% Oz housing and 40% cash with no job), I had a look down the neck of that Great Deflationary Depression II thing Biker and reckoned it sucked!
Of course, Great Inflationary Global Depression I sounds like even less fun? So Yep, if our evil central bank mates can somehow or other avoid catastrophe, I won't be heartbroken.
Comment by Stillgotshoeson on 12 March 2010:
It is quite simple and obvious.. the KHR will have in it recommendations on tax reform that will/would be beneficial to the long term financial security of the country, those recommendations would/will be unpopular and have severe backlash to them so even though beneficial they will be dismissed to appease to the "popular" vote..
Comment by Ned S on 12 March 2010:
That's right Shoes - Took us a while to get the GST but it eventually happened - View the KHR and view your future!
IMO
Comment by Ned S on 12 March 2010:
I'm decades early is my guess ... But that said, the West is screwed - Possibly. Take your cashflow young Western man and buy some stuff the East wants ... Or will eventually want!
Comment by prozak on 13 March 2010:
"Gotta laugh. My accountant charges us $700 per year, Prozak Pete.
You're advising a fella who _digs up his own septic wells_ to pay a barrister(?) You really don't know how 'The Comfortable' get that way... or stay that way, do you?!"
Liar Pete.
I know. You do have to laugh.
I've never believed that you did generate enough income nor have enough assets to make anything other than the local ITP worthwhile for you.
Glad you finally admit it.
So perhaps now you can tone down the bragging.
--
The deal that I outlined above is only open to a certain level and type of client.... the barrister has to make some cash as well! and 5% of nothing is nothing...... in aussie terms .. unfortunately I think you would need at least 300k/year. Not loads of money but a bit out of reach for most people. For 300k you might get into a scheme that is being run for a group of unrelated people. Unfortunately that then increases the risk of the hole being closed. This sort of thing is not open to a PAYE employee.
I reiterate my advice. If you have money, even if you are just stating out in life and are income rich but assets poor - see a person who understands the legislation!
An accountant follows the rules and works WITHIN the legislation. All they can do is help you pay tax.
A barrister knows backwards ALL appropriate legislation, finds the holes and links them together. They help you AVOID tax.
And remember these words - Avoidance is legal. Evasion is not.
Comment by prozak on 13 March 2010:
one last point....
It is your DUTY as a living breathing human being to pay as little tax as legally possible.
AVOID hadinging your hard earned to the government. They will waste it!
Comment by prozak on 13 March 2010:
Shoes...
"and you have suddenly thought to re-evaluate your self made multi million dollar property portfolio (implied) that you have accrued over time... doesn't add up...."
Well its actually very simple. If your property portfolio only exists in your mind or on the monopoly board such whims are easily executed.
Comment by Biker Pete on 13 March 2010:
As I say, 'the icing on the gingerbread' is your complete ignorance of my situation. I've been deliberate in my refusal to elaborate our circumstances, including matters of taxation.
Your comment: "An accountant follows the rules and works WITHIN the legislation. All they can do is help you pay tax..." indicates your naivety, Prozak. Your belief that Australians with money must employ 'barristers' (or "whatever you call them"... your comment, BTW) to "AVOID tax" is further proof of your naivety, your lack of familiarity with Australian practice... and probably the fluoxetine talking. You know _nothing_ about Australian accountants or our taxation system... and you're negligent in advising Aussies in these matters.
The myths you continue to perpetuate started years ago, with your childish comments about realtors having to drive around in last years' models; one I called you on then. You have that typical Brit conception that people with a great deal of assets flaunt them publicly. That's the kind of egotism that has brought Britain to its knees, through double mortgages.
But go ahead, when you've got two rubles to rub together, hire yourself a barrister, Prozak Pete.
Comment by Biker Pete on 13 March 2010:
Prozak Pete: "AVOID hadinging your hard earned to the government. They will waste it!"
Can't let that one go by!
So, _how much tax_ did you pay during the last financial year, hotshot? Did you _pay_ tax?
Comment by prozak on 13 March 2010:
Liar Pete,
Good Morning! UP in the morning to post on here Pete?
Well Well aren't we wound up..... very amusing...
"As I say, 'the icing on the gingerbread' is your complete ignorance of my situation. I've been deliberate in my refusal to elaborate our circumstances, including matters of taxation"
Going all shy Liar Pete? You've never been so before. Short memory perhaps? You are getting on a bit after all. You said only the other day how much interest your son was earning. You have imp...lied on a few occassions that you have millions in property.
"(or "whatever you call them"... your comment, BTW)"
No Liar Pete your quote is not right. I said
".... lawyer or whatever they call themselves these days in australia"
But you've nevr let facts get in the way of your lies. I was referring to the idiocy of them changing what they called themselves a few years back.... solicitors, legal practitionors then to lawyers....
"The myths you continue to perpetuate started years ago, with your childish comments about realtors having to drive around in last years' models"
Never said anything of the sort. But keep lying.. you lie more when you are wound up...
And here is the last gem... coming from the most obnoxious braggart i have ever seen in my life...
"you have that typical Brit conception that people with a great deal of assets flaunt them publicly..."
No Liar Pete. The exact opposite which is why I have always pulled you up on your lying and bragging.
Have a good day. Now go dig some holes.
Comment by prozak on 13 March 2010:
Pete,
about 0630 there at present isn't it?
You truly must have your ticker working over time.
To answer your question.
I paid as much tax as I legally had to. I have a double benefit in the UK. I am resident but non domociled.
google it if you care to. you will see well enough what it means.
Comment by Biker Pete on 13 March 2010:
As I thought. You paid tax... .
"You truly must have your ticker working over time." You paid tax.
No 'barrister', chum(p)?
Good to see your SHOUTING has ceased. Reread your confused, disorganised post to see what other anxiety issues you're projecting, you classic prescription druggie.
Comment by Greg Atkinson on 13 March 2010:
Well I just popped back to have a quick look at what is happening on DR and it seems not much has changed
Gold is still being talked up, the housing discussion still drags on and it seems there is plenty of friendly banter between those making comments.
Anyway the rally is wearing a bull costume because the next bull market is already underway, that's what generally happens after bear markets...markets rally. I know it is hard for the doom crowd to accept but planet earth did not stop rotating. Get on plane, travel to Asia and you will see business deals are still being done, major projects kicked off the the middle class is still growing.
The global recovery is indeed on! http://www.shareswatch.com.au/blog/stockmarket/the-spasx-200-the-gold-price-bubble-and-the-global-recovery/
Comment by prozak on 13 March 2010:
Liar Pete,
Of course I paid tax. It is illegal not to. As I said above Avoidance is legal Evasion is not. There is no way possible I can live in the countries i wish to live and pay zero tax. Simply cannot be done. Even my non-dom status is a lot more complex these days.
But nice try Liar Pete.
Go have some breakfast pete. Happy to chat here with you as I'm just sitting up watching a film.....
Fancy getting up at 0630 to post on the DR.
tick tick tick boom!
Comment by Biker Pete on 13 March 2010:
"Get on a plane, travel to Asia and you will see business deals are still being done, major projects kicked off the the middle class is still growing."
Funny that, Greg. I was just thinking I should probably send young Ned a ticket, so he can spend a few days in our guest chalet, report back to the group and forever relegate our slimy POM mate to the septic tank of online history.
Yes, you were right about the ASX. At the moment we don't have a cent riding there, but our eldest is fairly committed. I sent him a couple of Ross's posts yesterday, but I think he's with you on this. I just don't know enough to know... . It's all go over here, too. Hard to see it slowing in Asia... .
Comment by Biker Pete on 13 March 2010:
Prozak Pete: "Go have some breakfast pete. Happy to chat here with you as I'm just sitting up watching a film..... Fancy getting up at 0630 to post on the DR."
I can picture you now, Prozak, sitting in your little squalid London bedsit, totally mesmerised by Alice in Wonderland, as you blog on DRA. Has to be DRA, of course. L-o-n-g ago Daily Reckoning UK cancelled your troll(ing) rights there.
Comment by prozak on 13 March 2010:
Liar Pete,
as ever the vivid imagination.....
Now what was the last piece in your empire??... oh yes... You landed on those blue ones..... bought mayfair and passed go....
Tell us again how many you've got again?
A whole set yet or are you still going around the board?
aww go on Liar pete. Tell us again how much cash your son has sitting around and oops just duh plain forgot to plan for it..... what a brainiac he must be.....
Comment by prozak on 13 March 2010:
oops sorry.. must apologise... you're proud of your brainiac son as he achieved in his twenties what took you decades...
yeah.. like that was a challenge.....
Not very hard to do better than the old man who digs the odd hole and has to boost his ego by lying about his wealth on a websit now is it Liar Pete?
Comment by Biker Pete on 13 March 2010:
More from Prozak in Wonderland... . Don't get so caught up in the plot, son. Too many of those blue ones and you'll do yourself a nasty injury.
Sounds like you have a _great_ social life... a young bloke like you... .
I imagine you're just as charming in the flesh as you are online.
(Shudderrrr.... .)
Comment by prozak on 13 March 2010:
Liar Pete,
aww c'mon you can do better than that.
You've got almost 30 years on me. Surely you're not beaten already.
You're getting boring now Pete....
c'mon tell me again how you are so much more wealthy than I'll ever be and how you go on your little bike on trips to all the blue oyster bars around the world....
Comment by Biker Pete on 13 March 2010:
Look into your psyche, Prozak. I think "Shudderrrr" probably says it all...
Comment by prozak on 13 March 2010:
Liar Pete,
Yes everyone here has found you to be a remarkable and nice gentleman!
So truthful about your assets and no gaps or holes in anything you've ever said.
I'll leave you now little peter.
Perhaps if you have the whole weekend to stew over it you might come up with something worth reading.... or indeed you can start unwiding all your lies on here...... or just maybe call your son and apologise to him.... I dare say he'll appreciate it finally.
Comment by Biker Pete on 13 March 2010:
"Shudderrrr" says it all.
Run, Prozak, run...
Comment by Steve on 13 March 2010:
So if you are going to sell up Biker does that mean you think prices are at their peak and will start to come down
Because if you thought they were going to keep going up surely you wouldn't sell them for a bit longer yet right?
Comment by Biker Pete on 13 March 2010:
Well, it all depends, Steve. 'Sell-up' hardly describes the interim plan... to hedge our bets by selling options into the next financial year. To be frank, the Ken Henry Review is the Joker-in-the-Pack. For SFRs, it may be that _second_ Black Swan event which knocks many right out of the tree... the first being the 54.5% hit to their Super. We were very _lucky_ to avoid that.
Prices here are really high right now... we try to sell high and buy low.
While divesting ourselves of property has had to be a very gradual process, with the current limit on how much CG one can roll into Super every three years, this unknown aspect of the KHR is a major concern. Is it better to sell off a few before that reasonably generous limit ($900K) is reduced, as we expect it will be... (?) We may be calling this wrong, as the NZ situation... no CGT... demonstrates... .
But, as several here have pointed out, why create a tax problem by lodging cash-in-the-bank(?) We may decide instead to go with the original plan... placing ALL Super into offsets, which are tax-free. That way we pay no interest whatsoever, but still keep all the other write-offs... and all the rent.
Nice to have a few options, anyway... .
Comment by Pete on 13 March 2010:
Fraudster Pete is certainly digging a hole this time Prozak!
You'd think that even if he was as good at this stuff as he says he is that he'd have a SMSF at the very least.
So that same fella who has been encouraging people who can least afford it to get into property, is now bailing out? "Buy property! It's a no-lose proposition! BTW, I have some for sale...". Haha, hypocrite.
Comment by Steve on 13 March 2010:
"Prices here are really high right now... we try to sell high and buy low."
Umm, really???
I thought it wasn't all that long ago you said to me something along the lines of
Australian property is good value, and that the USA/UK marekts are not??
Despite the income to median price statistics
Hmm you seem to be changing your tune a bit biker, quite quickly actually.
"the Ken Henry Review is the Joker-in-the-Pack."
Yes because we all know very well what it says in it, something along the lines of removing the tax fraud ponzi scheme called Negative gearing to allow for a much fairer system for hard working Australians like myself who just want a fair go.
You are getting out at the right time biker I will give you that, you may just get out before the last "greater fool" makes his mark.
Comment by Stillgotshoeson on 14 March 2010:
"Yes because we all know very well what it says in it, something along the lines of removing the tax fraud ponzi scheme called Negative gearing to allow for a much fairer system for hard working Australians like myself who just want a fair go."
Whilst the recommendation for the negative gearing removal will be in the KHR, I doubt any political party would implement that recommendation...
Comment by Biker Pete on 14 March 2010:
I see you've morphed back into your Pete persona, Prozak. Mumbling to yourself again, I see...
"So that same fella who has been encouraging people who can least afford it to get into property, is now bailing out?"
As I've stated many times previously, I'm happy for you to continue to rent: "It's our bread-and-butter."
I thought that by now you'd be sufficiently recovered to respond in your darker voice. (What dark, dank corner of the empire are you from, BTW, if London smells like paradise?~
Comment by Biker Pete on 14 March 2010:
Shoes: "Whilst the recommendation for the negative gearing removal will be in the KHR..."
We doubt it. More likely they'll implement a tax claim for all mortgages. Many, many more votes in it. The result will probably be the same.
I see the _One-Star Fairy_ is hard at work again, while the Toothy Fairy is pretending he has flitted off to Wonderland, or Neverland, or whichever Fantasyland the pills take him... .
Comment by Joe on 14 March 2010:
Biker Pete clearly has an ego the size of a dead man's prostate.
He feeds so much information into the ether to support his bragging he leaves cracks and school child could walk through in a debate.
I recommend he start his own blog, like Andrew Bolts'.
There in he can malign at will and claim all he likes with ability to limit criticism and debate to make himself appear as fiscally astute and intelligent as is ego deludes himself into believing.
I note from the daily reckoning crew, there appears no addressing of post 2 and previous recommendations they have made.
I read that original report last year with interest and was planning accumulative trades. Glad I didn't do so in the intervening period, but I still suspect the main theme of their report is sound.
I would appreciate more guidance from a 'future' investment perspective.
Comment by Stillgotshoeson on 14 March 2010:
Comment by Biker Pete on 11 March 2010:
We're in a very similar position, Jim. Our current mood is to sell off some property; keep some in Super (but switch from cash to ASX);
I am selling down some of the stocks I purchased in December 2008 through to March 2009 that I think will now not appreciate much prior to the correction and are likely to devalue during the correction.. ie: I am looking to "cash up" again in readiness for better buying opportunities that I feel confident are coming.. I see less upside in the ASX than downside... MIGHT go 5500 but I am fairly confident it is going sub 3000 on the correction.. No one can time the market exact, I can only make my decisions based on the information available, and that information indicates to me that we are about to head backwards.. If I had a crystal ball that told me the exact date I would be laughing... alas I do not so I will plan for it now..
Comment by Greg Atkinson on 14 March 2010:
Personally I don't see the market getting down near 3000 again. The ASX All Ords/ASX 200 are already trading at recession like levels. Remember the market is sitting way below the 2007 high so the damage has already been done. At this stage I am sticking my guesstimate that the market will be around 5500 in Sept 2010 as I wrote back in Sept 2009 (see: http://www.shareswatch.com.au/blog/stockmarket/australian-stocks-house-prices-the-economy-in-september-2010/)
But I reckon a correction across say the miners is probably a good chance once China puts the brakes on their economy a touch more.
But then again...who really knows hey? If any of us could predict the market with any accuracy we wouldn't be writing here
Comment by Justin on 14 March 2010:
An article on ZeroHedge this morning makes me think a outright devaluation is more likely than not.
Here's a newspaper headline from a time when Abbott & Costello were 'In Hollywood'.
GOLD SHARES IN LONDON
LONDON, Thursday. - Australian gold mines shared in the boom that swept the Stock Exchange following devaluation.
and also
BRITISH METALS RISE SHARPLY
LONDON, Thursday. - Increased selling prices for copper, lead & zinc have been announced by the British Ministry of Supply.
Comment by Stillgotshoeson on 14 March 2010:
Comment by Greg Atkinson on 14 March 2010:
"Personally I don't see the market getting down near 3000 again.
But I reckon a correction across say the miners is probably a good chance once China puts the brakes on their economy a touch more. "
The miners and the banks are 1/2 the market.. if the Miners correct due to China so to will the financials.. When the miners and financials correct other sectors will suffer as people sell off to preserve profits and pay down debt..
The current "growth" has been built on stimulus, government debts, and speculation. No real sustainable growth has been achieved through all this global spending.. the "growth" has been a house of cards and the wind is blowing. Stimulus is being withdrawn, debt is getting more expensive, people are still overwhelmed by debt, global unemployment has had virtually nil improvement.. I see the problems as being worse now than they were originally at the start of the GFC and believe new lows will be tested because of this..
Sept 2010 may well see the ASX still at 5000 or even 5500 like you think, March next year could well see it at 2400 too.... as you said
"
"But then again...who really knows hey? If any of us could predict the market with any accuracy we wouldn't be writing here
We can only go on our interpretation of the information available, I interpret the available information as being bad....
Comment by Ross on 14 March 2010:
I agree with shoes here.
I have since early 08 avoided being directly bearish AUD until recently. UUCP calls were USD against a forex basket. I prefered any AUD play to be indirect by going long stocks with a forex earning base. I am changing those forex views. Look at the AUD-EUR since early 09, AUD's have been made from USD funny money leveraged carry and are suseptible on commodity demand. I am on my last sell trade opening tommorrow at market on iron ore. Back to energy and infrastructure services and ag but doing more on the former of those starting with tax losses but may also take profit.
Comment by Anon on 14 March 2010:
Market wont go to 3,000. But watch ppl get slaughtered on the next correction. Returns have been too easy and alot of newbes are entering the market. This is the "show me" year for the economy and so far she looks flat chested. Rudd has more clevage.
I have no idea where I am going with this....so I will stop.
If you think this is advice seek a medical professional immediately.
This is not advice just banter - go see a financial adviser for info/decisions/advice etc.
Comment by Stillgotshoeson on 14 March 2010:
Comment by Anon on 14 March 2010:
If you think this is advice seek a medical professional immediately.
This is not advice just banter - go see a financial adviser for info/decisions/advice etc.
Yep.. have to agree, one should not come here for financial advice.. this is a forum where people read about peoples OPINIONS on various economic issues.. gold, banks, shares, property, debt, growth etc and some even post replies to these OPINIONS on where these economic issues are heading and the impact they may have and why they believe what they do.. but good lordy... DO NOT MISTAKE THIS FORUM as FINANCIAL ADVICE..
Comment by Biker Pete on 14 March 2010:
'Joe'" "...an ego the size of a dead man's prostate."
Hey, Joe... where ya goin' with that prostate in your hand? Sounds like a difficult profession... undertaker, I guess(?) Don't get too OC about your prostate, son... more die _with_ it than of it... .
Anon: "If you think this is advice seek a medical professional immediately." Isn't working for our mate in London. I'd be demanding a refund!~
Seriously, despite Greg's doubts on this matter, it _was_ DRA's warnings which saw us switch our Super from ASX to cash. We're one full house ahead because we put two-and-two together and VOIP-ed Perth to make that change. Greg is right when he says that "... anyone who claims they saw the stockmarket crash coming would have fully committed and made millions and millions of dollars... ." We _made_ nothing when fear turned to action... but we saved plenty. Going back in again later around 3200, we got out too early, at 3700 (you were right again, Greg) but again, we were 'lucky'... and this second move _made_ us money.
I'm a little more optimistic about the posts here. Push an investor pretty hard and you'll uncover the full gamut of possibilities demonstrating the possible flaws in your approach. Have to confess I've learned a great deal here, sometimes from those totally, utterly opposed to my views... .
Comment by Stillgotshoeson on 14 March 2010:
Comment by Biker Pete on 14 March 2010:
"Have to confess I've learned a great deal here, sometimes from those totally, utterly opposed to my views... .
"
If everyone was in agreement with you you would have no need to question..
We learn by asking questions.. of our selves and others...
Comment by Biker Pete on 15 March 2010:
Shoes: "We learn by asking questions.. of our selves and others... "
Couldn't agree more, Shoes. Thinking online has its downside, though!~
Comment by Firebug on 15 March 2010:
Have to say that I used to believe the stock market will crash back to around 3000, but I am not sure about this any more.
On one hand, China appears to be a bubble that will burst soon, so the miners may struggle. The floppy real estate market may also put banks under pressure. One the other hand, stock market can act as hedging against inflation, so the market may well rise back to above the 2007 peak in couple of years' time.
As people have pointed out, this is not a forum for stock tips, though you may figure out the rough direction of the market based on the commentaries. Even if the forum gives stock trading tips, you'll still have different plans based on your own investment strategies and time frame.
Comment by Firebug on 15 March 2010:
Something else I have to add, that no matter what the paper economy is doing, e.g. the stock market. The real economy is not doing well and probably won't be for a long time.
Our left-leaning socialist approach in being a welfare state can be a millstone dragging real economy growth. A danger of being a democracy is that vote-buying pollies can do real damage too...
Remember, nobody grows rich by spending more than he earns. The West is spending itself broke.
Comment by Biker Pete on 15 March 2010:
Offset accounts look like a better proposition every day:
http://www.watoday.com.au/business/savers-sorrow-term-deposit-rates-fall-despite-rba-hikes-20100315-q77e.html
Comment by Anon on 15 March 2010:
There was a mispricing on their term deposits...the banks are correcting their error
I think they just got huge competitive momentum to capture more retail funds and just got irrational on pricing.
Comment by Greg Atkinson on 15 March 2010:
Yes it is good to consider everyone's views, that is how we avoid developing a groupthink type mentality. We also need to remember that China does not equal Asia. There are other big economies in Asia besides China and even if the Chinese economy slows, there are plenty people in other Asian countries who are just as keen to move up the ladder and acquire a whole range of consumer goods. (Indonesia & India for example)
As for Oz, well life might be good for our miners etc. but this does not mean all will be good for the nation. I am not sure for example that we are getting a very good deal for the resources we sell off as I wrote in this blog a while back. http://www.shareswatch.com.au/blog/opinion/lng-billions-is-australia-getting-a-good-deal-gorgon-project/
In any case we sell coking coal and buy back cars, planes, trucks, air conditioners & mining equipment etc. So we end up paying for the higher commodities prices anyway.
Comment by Biker Pete on 15 March 2010:
Greg: "...we end up paying for the higher commodities prices anyway."
Buying dishwashers and an air conditioner in town Sunday, I queried what effect the higher Oz is having / might have on prices of whitegoods, LED TVs, etc... and found a knowledgeable store manager who claimed trying to time purchases is a little like playing the sharemarket. We've watched the large AC units we buy drop around $600 each, since we started buying them. Seems to definitely be deflation in the household goods department.
Car prices? I'm not sure. Prices up or down?
Comment by Biker Pete on 15 March 2010:
And Chinese exports? Interesting US spin here:
http://www.nytimes.com/2010/03/15/business/global/15yuan.html?th&emc=th
Comment by Ross on 15 March 2010:
# anon, the term deposits went up to that level on sentiment, and they are retracting on sentiment. Neither is the more rational.
What is rational is that our bank's foreign funding & risk pricing is decided in the US on their rules. We have bet the country on continued access to US originated funding creationism. Our banks are still not borrowing saved pennies from people assessing risk in any traditional manner. They are borrowing from those that create funds fraudently and make the cycle, they then play extend and pretend until the cycle ends in socialisation. We have bet Australia on the ability of those same creationists to launch another cycle without a reckoning of the past cycle with unchecked taxpayer future liabilities (no debt ceiling ^no off balance sheet liability ceiling).
Another "Greenspan put" styled denial of the cycle is imagined, Bernanke helicopter money to make it happens. It has either worked (liabilities be damned) or it hasn't.
What this relies upon is that no other state in the world has the either the ability or the inclination to place the call upon the US. Chinese and Japanese have no inclination to play the call upon us locally either by refusing to trade USD paper for resources in a process where we earn nominal income and even trade off future earnings by way of resources equities for a USD paper wash that ends in our local real estate sink hole (with the liability to 3 year funders being eventually be socialised to sovereign debt after our export income gets stabilised into a real money for unprocessed rocks trade basis). In 2 years they are banking on having got a bargain and they don't have real estate as collateral but rather iron ore equity stakes and mountains of it already pumped into overbuilt infrastructure or that still hanging around in stockpile mountains.
So if the financialised economy can retain its place of hegemony your comment may be smart to a point but you ignore muni level taxes. If the financialised trickle down economy doesn't create discretionary spending on fashionable but unnecessary goods and services in the real US economy, then your opinion is worthless. It is too big for newly capitalised industrials to create a new US economy no matter the exchange rate.
Comment by Biker Pete on 15 March 2010:
Ross: "...they don't have real estate as collateral but rather iron ore equity stakes and mountains of it already pumped into overbuilt infrastructure or that still hanging around in stockpile mountains."
An interesting perspective I've never considered previously, Ross.
But surely the possession of title (possession being 9/10 of the law) provides a high level of security to banks(?) Without handing the bank(s) the title(s), borrowers have zero possibility of finance. If banks were 'banking' on future resource sales alone, why would title (and other assurances) even be required? The answer may be, of course, that the banksters want it all... .
Have to say that, as a medium-term planner, when I consider 2 - 3 year plans against China's rumoured 100-year-plans, 'excess' stockpiling doesn't appear to necessarily be a negative. We've watched Aussie miners successfully stockpile WA metals through low periods here. Sometimes it has really paid off... !~