Cash is King Long live the King

I remember a story when i was a child of two kids . One said "my dad is rich he has over a Million dollars in the bank" ,then the other child infuriated said "well that is nothing my dad is richer he owes the bank more than that". The school yard egos have come to play in the investment strategies of the last 16 years. During my life sold Amway not because it was a great way to make money or was a great product which it was but because of the free business training. I did this in my twenties after my picture framing shops shops had closed for the day, some times working the model till midnight every day . Remember my shops traded seven days a week and till 9pm Thursdays and Fridays. So no wonder i no longer want to work so hard and have so few friends that are not in the business world. One of the goals was freedom which you did not really get with network marketing as you spent most of your spare time recruiting. What freedom is is the ability to do what you want when you want and i don't exclude work as i quite enjoy it a lot, most of the time. Now how long would you last without an income as might be likely in a major down turn. Well that will tell you how much democracy and freedom you have, a week , a month, a year or more. A guy on a park bench might be better off than you as he is used to sleeping out and this type of middle class homelessness has already started to the tune of 90,000 per month in the USA with people sleeping in their cars. This i have seen is very stressful for them as they are not accustomed to it. I to understand this stress of being well off then having nothing to speak of , it seems to be a repeated pattern i have taken on from my family back ground. You see my father was an entrepreneur from early like me and he taught me that cash was King. I remember in my twenties a friend of mine Ian Hewitt was arrested at midnight for non payment of his fuel account on the pretext he was going to skip the state. A corrupt police officer owned the service station he had his account. The only one that had the cash to bail him out was my father , his parents were quite happy to leave him there till the banks opened the next day ,this was before Atm's. I have always believed in having cash for a crisis or that bargain you can buy on the spot, my dad too and he has done thousands of bargain deals over his life time. Just showing the cash will generally seal the deal at your price. Your money could be safer in a deposit box at the bank than in the banks accounts. You might not get interest but i have never made a deal with cash that i could not get a 10% discount from an owner operator which is better than any bank interest i ever got.

My dad is Rich as he is wise but his wealth comes from Love as he visits my mothers ashes on the estuary on his birthday. Everything he ever created was for the love of his family and friends.

NEW STOCK MARKET TERMS

CEO --Chief Embezzlement Officer.

CFO -- Corporate Fraud Officer

BULL MARKET -- A random market movement causing an investor to
mistake himself for a financial genius.

BEAR MARKET -- A 6 to 18 month period when the kids get no
allowance, the wife gets no jewelry, and the husband gets no sex.

VALUE INVESTING -- The art of buying low and selling lower.

P/E RATIO -- The percentage of investors wetting their pants
as the market keeps crashing.

BROKER -- What my broker has made me.

STANDARD & POOR -- Your life in a nutshell.

STOCK ANALYST -- Idiot who just downgraded your stock.

STOCK SPLIT -- When your ex-wife and her lawyer split your
assets equally between themselves.

FINANCIAL PLANNER -- A guy whose phone has been disconnected.

MARKET CORRECTION -- The day after you buy stocks.

CASH FLOW-- The movement your money makes as it disappears
down the toilet.

YAHOO -- What you yell after selling it to some poor sucker
for $240 per share.

WINDOWS -- What you jump out of when you're the sucker who
bought Yahoo @ $240 per share.

INSTITUTIONAL INVESTOR -- Past year investor who's now locked
up in a nuthouse.

PROFIT -- An archaic word no longer in use.

Placing your money under the bed won't help you now!

Placing your money under the bed won't help you now, you should have done it before when this lady did as then the banks would have had less to lend recklessly . I have been asked by friends and my brother if they should put the funds they have in the bank into gold. Well i think gold will go up in value to $1200 US dollars an ounce by January 22nd simple because of supply and demand for a safe place to park funds. With President Obama installed on this date it should stabilize the money supply as this alone will bring confidence. Gold may well fall before then as the betting on the race firms in his favor. Now putting your money into gold will help you with a 25% increase in value but it will take money out of the cash flow of the world economy which we need the most just now. During the last financial crisis of this magnitude gold jewelery was sold to get income and because it was transportable between regions and a recognized stable currency. This is because in our distant past money or coins were actually minted with gold and it is in our genetic memory. Now as gold has no extensive use in the production of necessities accept computers and even that you can't eat. Then if the crisis gets worst gold may have the same value as manure although manure has its practical uses in fertilizers and methane production as used in China for their lighting and cooking in over a million homes.
I would not recommend you invest in gold as it only takes dollars out of the system, instead i would recommend you spend on things that will reduce your long term energy costs . I bought a solar hot water system a little over a month ago which was $4376 less government subsidies of $2426 so costing me a total of $1950. After receiving my first energy bill it has saved me 30% off or $60.65 for the month. This is $727 per year or 37% return on my money per year.Then with many solar hot water systems lasting more than 30 years especially with energy costs expected to increase by 70% within a couple of years according to state politicians . Electricity is already subsidized by state governments and that won't last forever. You will notice on the stock markets that the utility index's are holding their own. So this should dollar for dollar be a better investment than gold. This investment provided work for a plumber and his apprentice for half a day as well as an electrician and his apprentice for 2 hours. Now that is what will keep the world going round. Then don't stop there the government is offering huge rebates if you add solar power to your house. You can also buy very economical diesel cars now and build your own bio fuel plant converting local vegetable oil waste to run your car. This information freely available on the net. For 10,000 dollars or so you can convert most cars to run on batteries with a 100 kilometer range so with the right investment you can be self reliant and alleviate future energy costs.
There are a couple of other things to remember in this type of investment when compared to other investments is firstly you are guaranteed returns as you are the consumer. It's not like you will change brands or switch from a company you might have invested in. Secondly for ever dollar you reduce your expenditure by is more than if you had earned that dollar from an investment. That is you don't have to pay tax on it like other investment earnings and the money you would have had to earned to pay your electricity or gas bills would have had to have tax paid on it. What is more there is a cost to actually going out to make those dollars to pay the bills.

My prediction for the end of this market melt down is based on Dividend Yields

The difference between an investor and a speculator is an investor is interested in increasing their assets and getting a dividend . An asset is something that brings a positive revenue stream but the speculator is not worried if it cost them negative income as long as they think there purchase price will go up . There is no correlation to the income of the asset as long as they think someone else will want it more and pay more. When reality in the market sets in the speculators get burnt and the investors come back.
When the big 4 banks all have yields over 10% for the next financial year 2010 and Price to earning ratios of between 5 and 7 will be when we see the bottom of the stock markets here in Australia . We may then see some real blue sky as i feel we are on the verge of an economic bonanza with our dollar falling. We are more than well place to weather the economic storm hitting world markets
At present dividend yields are historically at 7.7% and PE's are around 10 so in my calculations prices should fall a further 25% to achieve these goals so that is Commonwealth bank at around $30 NAB at $16 as they have been traditionally adventurous with day traders and sub prime exposures . ANZ to $12 and Westpac to $17 as it has large retail deposits. After the banks bottomed out at these prices we will see an Asia Pacific recovery as they will be the new consumers.
Forget the USA it is a relic of the past now , we need to look to China , Japan, Singapore and other Asian tigers to show us the economic indicators now. These are the forces we are tied to and recovery will only come from their leadership. I feel Australia is well placed to take a leading role in this new world order as we are not only geographically well located in the center of the region but well placed as a broker between Asia and Europe, USA or other western nations because of our cultural diversity. Many Australians have the skill sets and connections in the Asia Pacific to rapidly deploy our business interests globally.

The incompetent economists say no one could have seen the financial crisis coming. What sort of RUBBISH is that ?

I constantly see so called economists on the news saying no one could have predicted the financial melt down . Well what rubbish ,a fifth grader with a pocket calculator would have seen this coming . I am just glad none of these numskulls are in charge of my finances. Warren Buffet the worlds best investor knows the minimum required return on investment as he just lent 3 billion dollars to General Electric which were having trouble attaining funds due to the credit squeeze at 10% per year. Now take ten percent as the base line for return. Why did anyone think price to earnings ratios of 30 to 40 equal to 2.5% for bank shares or any others which is riskier than cash deposits to be considered acceptable ? The more volatile an investment is the higher the guaranteed return should be. Also take into account inflation between 3 and 5% then you would be losing money.
This whole problem has been created by huge super funds and other large groups that have not been investing in new production but just inflating the prices of existing assets until these assets can no longer return a reasonable dividend. There is just to much of this lazy money in our economies looking for an easy reliable home even with minimal returns.
Australia has initiated many tax effective investment programs to establish new industries like wine,olive oil, tree plantations . Many will fail and this is why it is imperative they do get the support of large investors . The playing it safe mentality of super funds and investors in general has not worked out for them in the long run with the bubble bursting on property,share markets, credit markets and commodity prices. So they may as well invest in new industries like renewable energy,carbon tree sinks, fresh water recover systems and other real economy products such as food . Instead of hiding behind traditional asset based investments that inevitably become overinflated which should never have had PE's above 10 times earnings.
To those large investors i say "get off your bums and get your hands dirty creating new business's " and if you don't have the skills to start a new business what the hell are you doing handing investment money. I mean if you have enough skill to value an investment properly surely you have the basic skills to start up enterprises.

You can't have it both ways Kevin

We are told by his imperial highness that the banking institutions that Australia has are strong ,well funded and well regulated. These are the same banks that have written down billions in sub-prime losses . Firstly if they have to pass on increases in borrowings from overseas ,what were they doing lending overseas in the first place? I feel it is about time the CEO's and the shareholders bore the brunt of the decisions they allowed them to take out of greed. If these banks are so strong let them pass on the full amount the reserve bank drops interest rates by. The banks that have strong retail deposits with little reliance on overseas funding will reap the benefits of not engaging in speculative gambling in foreign shores where they have no on the ground experience of valuations of these securities . We regulate and grant licenses for banks to operate so the are not a completely free enterprise to do as they will. It is obvious the CEO's of these banks require a little more regulation ,i mean they are not like US banks but they are not Jedi knights working the force in favor of its depositors , clients or Kevin's Working Families struggling with high mortgages.
I feel we are near the end of this mess because as with a boom the experts say "we can see it going much higher" then it implodes. Well at the moment they are saying "the times could get much worst". Well an x-spert in economics is just an unknown drip under pressure. We in Australia have been working so hard and long hours , with the resource boom that has flowed on everywhere.This will give us an opportunity to holiday ,take a break and refresh which in turn should give tourism a boost. The ones in our society with eyes bigger than their stomachs will have to keep on peddling a little longer to pay off the debt but interest rates should fall to help them out. The credit crunch will end up being a very good thing as it will stop reckless lending on dubious assets and business. Like the banks that have lent to newbies in my industry of limousine services.

What will happen when Asia wants its money back from the USA ?

China and Japan account for 47% of money lent to the United States of America mainly in the form of treasury notes or bonds. They do this for a number of reasons ,firstly so the USA has the money to spend on consumer goods they produce. Secondly to keep the US dollar strong compared to their currencies so their products are very competitive when compared to any thing made in America.
It is my belief they have done it to such an extent to put their competitors out of business in the US and other developed countries in the view that once these industries have been crippled they can allow the dollar to fall as the USA will no longer have the infrastructure to compete. It is like a casino lending addicted players half of what they gamble and then letting the debt ride.
Now i have worked for the Burswood casino in Perth as a driver in the past and from what i could tell from talking to these high rollers the casino's like the Asian nations are quite obliging until the new money runs out. The Asian nations have been much more hospitable than a casino would be but they have much more to gain which is a subservient society addicted to consumer goods. I was wondering what the Asia society was going to do with all these US securities until a major Japanese corporation bought a 20% stake in one of Americas largest banks. Then i realised they intend on buying up their Western competitors at a discount prices as the stock markets fall.
The thing is if Americans are dumb enough to elect George Bush as president they are well and truly dumb enough not to see this coming.
Wait there is more the USA is also subjugated by the cheap Arab oil and Iran now knowing it is only a matter of time before the US dollar is worthless has demanded that their oil be paid for in Euros . It is only when not if that the US dollar is no longer the international reserve currency .
Even though The USA consumes one third of world production and is 25% of the world economy ,who says it has to stay that way . There is a huge middle class in Asia that have been saving rather than spending via personnel and imposed superannuation schemes that have shown a more sophisticated consumer consumption increase . Real wealth is in the countries that produce new goods and services not inflate existing assets by printing money. I mean what would you personally prefer to take home a big screen tv ,car,etc or a pile of monopoly money.
Even with an 800 billion dollar bailout of the bad bank debts carried by poor bank lenders world wide will not redeem the underlying problem of US gluttony . The only real answer is to stop importing expensive energy and pay the real price of renewable local energy.

The amount invested in the US commercial paper market fell by $95bn during the past week, increasing concerns about the availability of money for banks and companies from this vital source of short-term funding.Data released by the US Federal Reserve showed the amount invested had its biggest weekly drop since the central bank began tracking the sector in 2001.In the past three weeks, the Fed data have shown that more than $200bn has been taken out of CP, a type of short-term debt that was widely bought by money market funds.Of the $95bn weekly drop to $1,600bn, financial paper accounted for most of the decline, falling $65bn.

If you had purchased $1,000.00 of Delta Air Lines stock one year ago you would have $49.00 left.With Enron stock, you would have had $16.50 left of the original $1,000.00.With WorldCom stock, you would have had less than $5.00 left.But, if you had purchased $1,000.00 worth of beer, one year ago, drank all of the beer, then turned in the cans for the aluminium recycling REFUND, you would have had $214.00.

Based on the above, the best current investment advice is to drink heavily and recycle. And I'm trying hard to be good citizen and recycle ....