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The top of this cycle for ASX200, cash is king ?


kahuna1

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Hi Mark--et al

 

This sort of pure political sop below, about to be announced, will very likely push the whole US market up--nothing like some good old fashioned bank bashing, esoecially when orchestrated by your President.

 

Many are coming ot the opinion that at the next FOMC meeting on the 26/27 this month instead of putting forward firm proposals to wind back the stimuli--the FOMC may announce NEW stimulus packages since the labour situation isnt improving, and without a large and continuing rise in employment any remote possibility of stimuli withdrawal this year is well nigh impossible.

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Jan. 14 (Bloomberg) -- President Barack Obama will announce today his intention to impose a fee on some of the country's largest banks and financial institutions to help recoup taxpayer bailout money and trim the federal budget deficit.

 

Obama will outline his proposal to raise as much as $120 billion at just before noon local time at the White House, Obama's press secretary, Robert Gibbs, told reporters yesterday. Gibbs said the president's economic team has worked on a structure to prevent the levy from being passed onto consume

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I read that this morning and burst into laughter. How will the banks cover these fees? By gouging the taxpayer. Oh sure they won't be able to pass fees directly onto the consumer, but pass it on they will. After all banks, lead by GS, run the US administration.

 

Score: Banks 2, taxpayer nil.

 

Krumbs survival rule No.1: Don't stand between a banker and a buck.

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Obama will propose a new tax on Wall StreetÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s 50 big-time banks, insurers and traders who would be charged a ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Financial Crisis Responsibility FeeÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ of $1,500 for every million they borrow to discourage high-leveraged risk-taking. ItÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s designed to raise $90 billion over 10 years, the expected losses from the TARP.

 

This will just make US banks, insurers and traders uncompetitive. Most likely they will just setup branches offshore and do their borrowing/trading there to avoid the tax. - Unworkable!

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:biggrin: Krumbs, Good one!

WHen I read

the president's economic team has worked on a structure to prevent the levy from being passed onto consume
I had immediately the same thought: "Where do the poor banks get the money from?"

  • Director Bonuses - would just about cover it. Yeah, right :lol:
  • Shareholders dividends - that would make those guys really happy and create a buying frenzy on bank shares
Bring it on! It is a great and equitable idea. And that, dear reader, makes its chances of becoming political reality precisely zero.
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"One Big Bidder"--none other than the FED itself buying back its own paper??? Clip from London's FT (7 day chart enclosed)

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Auctions of US Treasury notes this week have attracted extremely strong buying from domestic institutional investors, fuelling speculation that "one big bidder" has decided to defy the conventional wisdom on Wall Street that US government debt is due for a fall.

 

The surprising demand for Treasury notes has come in the form of "direct bids", the term used for US institutional investors who bypass the so-called primary dealers that underwrite government bond sales.

post-20731-1263508551.gif

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According to this morning's Commsec Report (and other newsreports) the "tax" will be 0.15% and only hit some loans.

The revenue from those small amounts is currently estimated at $90 Billion over ten years.

 

Compared to the $$Trillions of damage, it's more like a slap with a limp lettuce leaf.

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Hilarious,

 

Seriously they are going to raise the cost to bankers over the next decade to raise 90 billion so the cost of TARP funding does not impact the consumer ?

 

90 billion.

 

Well on the other side of the planet the outcome of the debacle has caused the US official borrowings and debt to rise from 8 TRILLION at the start of 2006 ... to 12.28 TRILLION right now.

 

This is just the official debt number .... not the unpaid or unsaved Social Security requirements or the unfunded and unpaid government employees super contributions ... not the contingent liability to Medicaid and Medicare which are totally unfunded and not a cent ... not a single cent has been put aside for them in the last 4 years. At a minimum this added another 12 TRILLION to the underlying liabilities and contingent liabilities of the US government.

 

So headline just the debt so far has risen by 4.28 trillion ... and this measure is talking about getting 1/47th of it back ... well looking overall the big picture and real state of affairs ... 90 billion vs 16 TRILLION we are talking about 1/177 th of the cost right now and the actual grand total given the fact the US will still save zero for 2010 for these contingent liabilities in 2010 and run an official govt deficit of biblical proportions .... the feel good measure might at best be 1/250th of the cost ...

 

Insanity and bank bashing takes the lead yet again. Not saying they deserve or in this case dont deserve some of the blame. I do wonder the clear causes of the GFC and allowing credit to go mad and no respect for risk or punishment for mistakes or mismanagement or outright fraud ..... the world is a very funny place.

 

Natural instinct is to blame someone because this mess was not created overnight and at this stage its pointless to lay blame or to try and metre out punishment. It is however time and high time to make some move to repair the damage before it topples the whole apple cart longer term. Sadly this step as one poster mentioned is at best a populist bank bashing exercise. Sadly given the real state of underlying affairs there needs to be some very painful changes made to the state of affairs and its unlikely any politician has the power or guts to effect this change. For the USA simply put very soon they need to take things off life support and slash government spending or they go broke. Conversely given the state of the official debt and the uncounted contingent liabilities they also need to RAISE taxes and raise them sharply. At best to avoid a not too distant clash where the USA is turned into something like one of the countries mixed up in the Asian financial crisis or the Latin American crisis along with slashing spending over 25% ... the MINIMUM they need to raise the tax base is about the same. So if the government is 15% of the economy and its about to have to change its spending and savings habits by 50% in the next few years .... it should be interesting any recovery beyond 2010. This added to a massive and I mean massive stimulus being given via interest rates at zero vs what should be a real interest rate being offered one that is above the 2% inflation rate .... with cash in the 3% or so range or more .... this vs the current state of affairs of zero cash rates ... just makes this current feel good move by the government over there even more absurd.

 

It was and is akin to making it illegal to short financial institutions over there during the GFC and making it illegal to short some which imploded 3 weeks latter made it even more absurd. At times like this its always blame someone ... traders ... the banks ... naughty exchange rate traders .... investment bankers ... sad reality is they are not in charge or shouldn't be in charge and if the USA had acted prior to 2006 and popped the obvious housing and credit bubble as it grew ... we wouldn't be having this discussion.

 

All an aside for 2010 as I mentioned and likely for 2011. The US economy is just too weak right now to raise taxes or even contemplate raising interest rates. So as such the two trains screaming towards each other on a single track remain there and my old joke about one train driver betting his assistant that the other train will swerve before they hit sadly remains intact. Of course they will not hit as the world did not end during the GFC ... but some radical once in a generation change needs to happen over the course of the next 5 years or so ...

 

Couldn't sleep last night and was mulling over my decision to go this route after being asked by a few friends why I am going this way as opposed to setting up a listed fund or running a fund. Well in effect taking on individually managed accounts is for all intents actually doing the very same but instead of having little or no contact with the investors its the opposite and getting to know them and being directly answerable to them as such. I dont remember seeing any apology ever for the calls of 2008 via the three largest fund managers and not suggesting anyone who became my client would be aggressive as I was. For me it was a once in a lifetime occurrence as I said time and time again having been around at the time something like 24 years as a full time trader the signs were sadly obvious as to where it went. There is always some fruitcake predicting the end of the world or the Dow crashes. In this case for the first time out of my 27 years it was me ... well not quite but the dot com mania was more of an effect on the highly tech laden S+P 500 in the USA. This now passed ... taking all of my cash out the market was an extreme move and only re-entering when the lions share of the damage had been done and only when it was clear we had bottomed going leveraged. All very risky and fine for me at my age and appreciation for risk as such. What kept me awake was the sad fact that in the end the very big fund mangers and even the smaller ones dont care about the individual. I suspect if I can once or twice a year and get clients to take 30% or so of their funds out of riskier stuff into cash and then await the periodic correction the results compared to the index will be interesting.

 

For larger clients with a lot of money under management actually having the ability to grant some call options over long positions again another option to reduce risk and increase the returns on the individuals investments.

 

I listened to one which i liked and despite actually loosing over 25% of our money the last few years I was and always remain amazed at how slick some are. When I added this to the fact the stock is trading at a further discount to the NTA of around 15% the investment stands at 65 cents vs 100 cents on issue and I am sure having followed the course of them and actually tried to change some of their investing ideas over the years ... the fact and bottom line for me as always is results driven and the bottom line. Its very nice to go gee a cat ate my homework or whatever but the proof always is in the pudding. Results and thats all that matters. Being down 35% after 4 years is not a good result. Being down despite the GFC the last two years for me ... is not a good result. I am bloody up ... why aren't they ?

 

Managing individual accounts comes down to financial advice and seeing where they are in life, their objectives and both short and long term goals. But the bottom line is paramount and something lost in todays finance world. Its very nice to charge you 2% to manage your funds as a bank does and in some cases demand an entry fee of 4% to enter the fund ... an absurdity in itself given the lack of care or attention to detail actually shown.

 

If someone was 35 and planning to retire in 20 plus years and well able to take risks vs returns and income right now the contrast between how their portfolio should be run is drastically different to what should be offered to someone approaching retirement and needing an income that hopefully grows a bit but pays a very effective after tax income for their retirement. In both cases despite the lack of need of an income for the 35 year old the bottom line is preservation of capital over anything else and the two objectives of people with differing needs and objectives is something which is not really catered for or covered by any impersonal institution. Basically its one shoe fits all and bugger the rest.

 

My intention is not to set up a fund or a listed fund as such for the very simple reason is that they rarely ever trade at the real NTA of the underlying assets they hold. Basically investors once the subscribe to the fund and pay lets say $2- for the share no matter how well managed it is ... it usually trades at a discount to the money invested at a rate of 5-15% .... added to this its not tailored as I went into above for the clients needs .... and then added to this the massive infrastructure needed around the fund to report unit prices and complying with ASX and Corporations law along with ASIC which at best is a nightmare .... its not a good deal either way for anyone.

 

I am an honest guy and not interested at all in building an empire off the back of someone else's pain. Taking on individual clients I am sure will be a challenge but ... I know what sort of clients I want and those I dont. Simply put no interest in day trading or even short term trading unless extreme situations evolve and yes they happen as did on the way down the fact is entering the banks at one stage sub 4,500 on the ASX 200, basically dipping my toes ... there was a bounce of 20-25% in them within a week and in the meantime the situation clearly overseas from the USA and EU and UK was getting worse, not better and likely to drag us as it down into hell ... the clear course and only course handed a 20-25% profit in days when its almost 100% assured things got worse in coming weeks and months ... was to exit. I am of course talking about something I covered on this thread in Sept 2008 when for example NAB hit $18.60 and less than a week latter it was trading at $25.80. Other banks did similar things at the time ... and the bottom was not found for a few months till March 2009 for both the index at 3,073 for the ASX 200 and NAB bottom of $15.80 ish.

 

This aside my intention is to build a core portfolio of somewhere in the region of 25-40 ASX stocks and run a portfolio around this. Different clients will have different weightings for different stocks. Some in the latter and draw-down phases of their life will have less invested in direct stocks and more in cash or income producing securities or deposits. Not interested in penny dreadfuls and there will of course be a tiny portion for riskier stocks maybe 5% but frankly not interested in any penny dreadfuls even for the 5% which may be in riskier stocks. Overall the breakdown will go depending on where the actual client is ... what they expect and the eventual goal short medium and long term. Giving one on one service for a fee but not a large one vs the banks 2% plus ... keeps all the stocks in the clients name, all franking credits and tax deductions in the clients name .... capital gains offset against these franking credits to get the best outcome for the individual client and god forbid they give a bonus issue as some companies like my pet AQA does they end up with the clients account not in the general fund as is the case with a large fund manager ... for the client they get someone who keeps them updated and hopefully in the future avoids some of these periodic corrections we see along with not using a scatter gun to buy stocks as the big funds do but buying the best of the best.

 

Nothing is guaranteed other than my giving 100% to this and the client being in total control in the end of their investments and having intelligent ENTRY and EXIT advice along with detailed research and backing of one of the larger and better research houses in the country. For me I am excited and over the next 3 weeks will be doing exams for various licences and accreditation so not so much on SS. Once licenced I am not able to post in that capacity and whilst some alternatives have been suggested it might be a while if ever that I come back and either way it will be in a totally different form. Its nice to comment as a blogger and not giving advice but if your actually a licenced advisor its totally different. Hence my caveats after every post. Its serious because whilst most advisors are not worth a pinch of salt .... we are talking about in the end peoples savings and lives and quality of life via their savings into retirement .... something lost sadly somewhere between the larger institutions going gee sorry its the blame of the GFC or the slicker versions selling you get rich schemes.

 

For me I will do a final post outlining who I really am .... basically what I have been alluding to for years. This venture is something I am very excited about and going to devote the next 20 years of my life to either way. Not some get rich scheme but sensible and very shrewd investing backed up by someone with 27 years as basically a full time participant of the markets along with extensive overseas experience along with some interesting titles along the way. Its going to be if anything a get rich slow scheme and the objective is to beat the index by a decent margin over time. Beating it by 5% every year for the next 20 years means you will have 2.65 times MORE than you would have .... beating it by 10% over time for 20 years and you will have 6.72 times more than you would have. This is of course over and above the performance of the ASX 200 in the next 20 years which I suspect as it has done in the past 20 years will well outstrip the rate of inflation.

 

Enough of a ramble

 

take care

 

Mark

 

Anyhow will post a few things if and when they change in the meantime.

 

As per normal

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Morning Mark--what can I say when you mention CASH, or going to cash in uncertain times. One of the very strange things I have noticed over the 13 years Ive been involved in the "net"--is how everybody appears to believe they have to be invested at all times.

 

How many times did I hear last year from fellow retirees with their funds under management "Why didnt THEY see this coming" when I was boring the pants off the same retirees telling them about this coming subprime disaster, mind you they all thought I was off my rocker two years ago.

 

Any way--for one I sincerely hope yours of today isnt the actual penultimate post, what you have had to say is in reality of breath of fresh air, and your tallking about selling out and going to the shelter of cash in times of trouble is the ACE!

 

PS: This laughable "bank tax" is probably a precursor of many such announcements to come as the US fights its unwillable war--for Pete's sake is taxing every profitable entity to get back your stupid bailout "loans" the right way for a free market economy system to head?

 

"When In Doubt Stay Out"

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