Surely the bull market is going to end soon.. with pain..

The annoying thing for me is that, had it not been for the yanks and their ridiculous lending practices, the bull run could have continued for some years.
Most economies were in excellent shape, demand was increasing, consumption increasing with interest rates relatively low.

 

yes that would be the case, but it has already happened with the LPT sector. I emailed my friends late last year that I fear our market including LPT could come back to its longer support.

The angle of the support line magnifies the actual return over time to represent a percentage.. hence a larger number figure increase. So the line doesn't need to be linear. If you employe a linear scale, the end would eventually be going north, so I don't see how this would work.

Eventually the linear scale crashes, and come back down to start again, like it did in 1987 and like its doing now.

 

totally agree. its the yanks which are the threat to the world.. not saddam or bin laden

 

I was amazed when I went into my local Westpac today. Without asking I was told that if I was interested more money was now available for me to borrow at the same interest rate that I am currently paying on my investment property loan.
I'm currently building an investment property and told her that it was nowhere near finished yet.
She said that didn't matter!
I was astounded that they were trying to get me to borrow even more money.

 

at the right price, you can borrow any amounts of money!

 

3500 is a logical assumption considering that the dow will go down by at least another 2000 points
IMHO

 

I have learned to live with the fact that nothing goes up indefinitely
If it wasn't for the yanks it would have been someone else or another event.
If we waited a little longer it could have been peak oil, a war or something else. Company profits cannot be increasing forever either.
IMHO

 

ouch 3500! Thats about the lowest prediction I've heard. The ASX has dropped faster than the Dow already. Signs are looking good for a bounce tomorrow. We will see.

 

dow up 400!

bounce you dead cat! lol

 

we can't be dropping every day or we will end up with nothing.
0.5% a week drop is enough to bring the market down 25%
in a period of 12 months.

 

So all you guys, and I mean you, who are predicting massive falls yet to come...are you completely out of the market now? All sold up?

MJK

 

I've sold everything except 1 last November.

I couldn't sell those particular ones as they are from my employer
and it's in my agreement that I have to keep them for 2 years.

They have halved since the peak though

 

Well I sold about 50% of my holdings. Mainly because we are buying a PPOR and needed to fund 20% of the purchase. I am still holding 50% of my managed funds. Mostly Navra Aust retail (significant dolars too.)

I suspect if we were not buying the PPOR we would have held a lot more and lost a lot more. So things worked out well.

The big question is do you continue to hold what you have left.

I'd be interested to know if others are out completely, sold of alot or still in fully and holding?

MJK

 

Holding On

I'm holding and managing my margin loan and taking the paper loss on the chin. I was a trader about 10 years or so ago and found it too stressful. If I had of done the opposite of what I did I would have been OK. I now leave it for Steve and Co.

L.S.

 

I sold 65% of my Managed Fund Holdings a little over 12 months ago. Current Margin Ratio is about 52%. Paper loss is not troubling me. Timeframe is 5+ years.

I'll probably start to buy back in within the next few months. I don't think there is any need to rush though.

 

Nice call Alan,

I took all my end of Financial year distributions from all funds in cash with no reinvestment, so that was my first defensive step. Glad I did.

I have been progressively selling growth based funds ever since and am now only left with my income based fund. I suppose its a bit like a house. The value may go up and down but the rent keeps coming in.

I am wanting to buy back in when the sale of my old PPOR is settled and funds become available but sure want to make sure we've hit rock bottom before money goes back in.

Maybe I'll average back in over several months???

PS. Not many here seem to be prepared to disclose how far they are in or out. Or what defensive strategy is being employed.

MJK

 

FYI MJK, I don't feel comfortable doing this, and feel crap and ashamed typing this up, but I'll do it to help other people learn from my mistakes.

ATM, my account looks like:
Geared Loss (My own money + borrowed money) = $20K
Ungeared Loss (How much money I lose if if I sell everything and pay off my loan) = Around $12K

All my money is invested in managed funds with CFS, with money borrowed via ComSec. The above numbers will change until such time Comsec gets off its butt and does what I have told them to do.

Mistakes Made:
1. Getting a ML with Comsec. They are more like Comsuc. They are a pain in the butt to deal with
2. Reinvesting my distributions. I should have taken the dividends to better manage my cashflow or loan. In June and December 2007, I got over $12K in distributions
3. Borrowing to invest into more funds in November and December 2007. I should not have been too greedy and get too highly leveraged (was only 60% after making the investment in December)
4. Too highly geared. Should have kept my gearing at or below 50%, instead of 60%
5. In a way, buying a house. I just settled on a house in Feb 2008. While long term, I understand that buying a house will be worth it, in a way it could not have come a worser time as buying a house and paying it off has cost me most of my saved up cash and takes up most of my income. Therefore, I leaves me with little money to manage my ML. Plus, some people think I must be crazy for buying a property in Perth in this market and time.
6. Selling all my managed funds and repaying my ML. I am doing this to build a more diversified portfolio. When Comsuc gets their act together, I am selling all my managed funds and paying off my ML. I put point 6 here as I know I will regret this choice in 2-5-10 years time. I had money invested in 2000-2002, when my account fell by over 40%, but it had recovered and grown in leaps and bounds by 2007.

My overall investment plan is:
1. To invest in, what I consider to be, the three pillars of wealth - property, shares, and super
2. As I am not much of a stock picker, and it does not really interest me that much (besides how the overall market is going), I am happy to and use managed funds as a vehicle to invest in the share market
3. I would like to have 6 investment properties, generating a total of $1000/week. I assume that the occupancy rate of the properties will be 66%, and return $250/week in rent, so (250/week*6 houses)*4/6 houses rented = $1000/week
4. Every dollar I have in property, I want a dollar invested in managed funds and super.
5. Retire asap. I will retire when my investment income equals my salary, indexed with inflation. With my calcs, I assume inflation=4%/year. Maybe a bit high, but I am happy with that. Based on 5% return on investment, by the time I reach 65, I will need assets = $4.5 million, which would mean $1.5million invested in property / managed funds / super
6. Even in retirement, I still plan on continually investing a portion of my distributions and rental income (10%-20%)
7. I am happy with 10$ investment returns, made up of 5% growth, 5% income

My plan for the immediate future:
1. Once sold, I will invest the money I have left over from my ML account into a multisector based indexed managed fund. While it may not be everyones cup of tea, I plan on investing in Vanguards LifeStrategy Balanced fund. Reasons being, not too volatile, good returns (been averaging 10% since inception), cheap fees. Another reason is because I do not need to rebalance it, the multisector fund does it by itself.
2. I will not be reinvesting distributions, I'll be taking the cash
3. I do not know if I want to get a ML to futher increase my investment account, but if I do, I will not go with Comsuc and I will keep my gearing to 40-50%

Worst experience about the last few months happened in January this year. I went on holidays, and had a really good day trip planned. The night before, I heard that the sharemarket had fallen by the biggest amount in x years. I did not get much sleep that night. Next morning, found out the all ords fell by 7%. Made me feel sick, and made it hard for me to really enjoy my trip 100%. The other thing is I want to be able to go to sleep at night in a relaxed manner, something I have not been able to do since the falls have been happening. I tend to go to bed very late, late enough to know if I will be waking up to hearing if the aus market is going to go up or down today.

If anyone has any tips and suggestions, then I am more than happy to hear them and take them on board.

And finally, I should say that I believe in investing in the 4 pillars of wealth, the 4th being myself.

 

"If anyone has any tips and suggestions, then I am more than happy to hear them and take them on board."


Not having defined your stop loss/exit strategy is the equivalent of jumping out of an aeroplane without a parachute because you heard that people occasionally survive falls from 4000m.
I said before, you will NOT survive in the market without this most basic of techniques.

 

I know what you mean and I'm sure there is a very large bias (even on this Site) towards us taking credit for when things are going right and not being as vocal when things are heading South. Also, I usually don't discuss $$$'s in detail. Part of this site is about education though and most of us are probably experiencing some wonderful 'educational' experiences of late while many are also feeling they have made some stupid mistakes.

Yes I sold some Units at what would now appear to be good prices. I sold some Units at about $1.11 which are now $0.90 and others for $1.01 which are now about $.80. I sold at the time because of a combination of perceived risks, not all of which were right. I got some things right, I got some things wrong. When I sold, I sold at a slight loss from purchase price and I didn't feel good about that at the time either.

With regards to your losses, if it makes you feel any better, IF I had to sell my currently held Managed Funds right now I would probably show a loss of over $100,000. Feel better? Now, there's some detail but I'm feeling relatively fine. No, it's not the medication or alcohol!

Tropo posted some interesting figures on historical 'crashes'. Average fall was about 40% I believe. Most of the time I want to be able to handle a 40% fall without losing too much sleep. For me that generally means keeping my Margin Loan at or below 50%. Some times I will let this go a bit, but NOT when the market is at historical highs and a 35-45% fall is not out of the question.

I like the Navra Model of an Income Fund and Growth from Property or other sources. I have no reason to expect my Navra Holdings will not at least continue to pay for themselves so CASHFLOW is available.

When the Market is moving around like this at present I find it really interesting but not fearful. I've made some correct and some incorrect decisions but if my investment portfolio has me living in fear then I'm really doing something wrong that needs immediate attention.

Hang in there mate. If we all watch this process very carefully and examine our own personal situations, we should come out of this as much smarter, more experienced investors.........and that can only be a good thing.

 

Hi Guys,

Tropo is right, define your stop loss strategy early and then execute it!

Learning, if it makes you feel any better, I sold out on Black Tuesday after that 7% drop and locked in losses of $200K. Yes, that's right, $200K! My equity position was only $300K with a margin loan of $500K. So, a 25% drop from the peak knocked $200K off my $800K position. I recovered only $100K of my equity. What's more the equity was actually a LOC so was really a loan against my PPOR. Now I have a $200K loan and am paying $1500pm in interest on debt that owns air!! Try sucking that in and see what it feels like.

Big lesson for me is not to be swayed by group think. I called the risks late last year and was considering exiting my position but was swayed by all the perma-bulls and their bigger for longer arguments. My mistake and my loss as a result.

Anyway, I'm 100% out of the market for now and have burnt all my powder so getting back in isn't on the cards anymore really. I'm locking down my cashflow position by refinancing all my loans to a fixed rate and getting a Section 221D form done with the tax department to improve my monthly cash flow. Without the 221D I don't earn enough salaried income to put food on the table and cover my interest bill. I still have loans of $1.1M but now service these out of my salaried income and rent of $550pw on my IP.

If they define housing stress as more than 30% of your income servicing your mortgages then I'm at double housing stress. i.e. Over 60% of my income goes to servicing my mortgages now. In fact 100% of my salaried income now services debts and I live off the $550pw rent. Better hope my tennant doesn't move out or I'll be living on bread and water.

Put it in perspective guys, you could have been in MY position!

All good, I'll get over it and back in shape soon enough. But have learnt a valuable lesson from this experience.

Cheers,
Michael.