For those interested, here’s an interview I recorded yesterday with one of my authors, Olly Newland, on the global market turmoil. – P
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Long time investor and best-selling author Olly Newland is interviewed by Empower Education’s Peter Aranyi about the latest events in global markets — and gives his views on how local investors should respond.
AUGUST 2011: World financial markets react with turmoil due to the US credit rating downgrade and sovereign debt crisis — shedding value and displaying a nerve-wracking volatility that makes many question their investment strategies. What is the way forward? How will these world events affect our local property market? How should investors react — and how should YOU react?
Olly Newland has lived through many such troubled times. While Olly would never say he ‘knows it all’, in this 13 minute audio interview he outlines his view of the current financial crisis, he discusses the ‘change in the times’ brought on by this increased market volatility, what it heralds, and suggests what steps you could take to protect yourself.
Listen here:
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or download an MP3 file here (13 minutes 6.7MB): Olly Newland – How to respond to the global crisis
© 2011 Empower Leaders Publishing Ltd. All rights reserved.
Related: Olly’s book Lost Property relates his experience in previous financial market convulsions and important lessons he drew from those times.
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[Cross-posted from www.EmpowerEducation.com]
Good stuff.
I like what Olly has to say about property.
A little misunderstanding over US Treasury Bonds, though. US Treasuries are very safe, with a guaranteed rate of return — over the rate of inflation. With inflation low, and interest rates low, the last ten years has seen a very low rate of return from US Treasuries – far lower than Wall Street can return. Money markets and bond markets with low rates of return also mean less risk. And that’s why we are seeing this rush to US Treasuries. Americans are fed up with Wall Street and their political arm of loony Republicans.
During the 2008 dive I remained in the stock market with a fairly low risk portfolio (because those in the know said “stay.”). One week into it I lost about 30,000USD. This time, two weeks ago, I dumped all my stock (especially international stock, i.e. non USA) and headed straight for US Treasuries. So far, and I must say, and I’m enjoying this, I’ve lost about 100USD, HA! Up yours Wall Street!
By the way, on gold (something I’m very careful to stay away from). The European Union holds the largest gold reserve on the planet; the USA holds the second largest. The rapid increase in gold value this year puts this commodity on dire footing. One way to buy your way out of debt is to sell gold – and lots of it.
Now, if I was in debt to the scale of the Europeans (more so than the Americans), what would I sell first?
Having said all this, the stock market was UP at “close” this afternoon. So who knows what will happen tomorrow? Probably much of the same – UP/DOWN/UP/DOWN/ETC/ETC
Yup, hello Volatility. It seems clear the US image of constant econimuc growth has been dented.
Have you seen this?:
Interesting to hear of your aversion to gold — I’m not an expert, but isn’t it regarded as a ‘store’ of value, rather than a pure investment? Human beings would find a way to bet on anything, of course, so there’s a trading gold bullion market, but I have always regarded it as a ‘hedge’ — just as you have used T-bills.
regards, Peter
I avoid Time magazine as much as I do gold. Time magazine is biased – to the right. I’m no liberal by any means, but I avoid right-wing media whenever I can, not because I find it offensive, but more because it is the same stuff over and over again. It becomes tedious after a while.
But here’s the truth about the Tea Party.
The Tea Party is simply the latest iteration of the “Know Nothing’s” and the “Ku Klux Klan.” Bigotry, racism, and religious intolerance are their mantra. Beneath it all is their confused Protestantism that assumes the New Testament was written for them and them alone.
The kicker is this: their belief that the world is actually coming to an end. An astonishing idea that has helped soften borrowing adverse American’s into accept greater personal debt.
Naturally, this sounds like nonsense – but when you meet some of these people, talk with them, and then do a little research, you find that the idea is not so crazy after all.
The Tea Party is still quite disorganized. A ramble of old fools, religious weirdoes, and uneducated buffoons. They are not dangerous, — yet. But as soon as they find a “respectable” leader who is appealing as a candidate, they will attract militia fringe groups into their fold.
I don’t worry about them so much, though. American’s are inventive and passionate when it comes to politics, but at their core they are genuinely nice people. The Tea Party and their affiliates are their own worst enemy. Check out this clown: http://news.yahoo.com/prayer-day-texas-governor-preps-presidential-bid-173029850.html
The irony here is deep. The US Constitution – the law of the land – makes it illegal to use public office and public funds for any religious purposes. The event here was of course, private, and Perry is there not representing the State of Texas, but himself. But, and this is where on-the-ground research is key, another part of the disjointed Tea Party agenda is “prayer in schools.” But, like everything associated with fringe groups there is always more to the story. Unfortunately, space and time prohibit me from telling it. So here’s America’s sweetheart, Sarah Palin who is more than happy to tell you all about it: http://www.thelangreport.com/religion-or-lack-of/sarah-palin-wants-creationism-taught-in-school/
What’s creationism you ask? Oh, that’s where mankind and dinosaurs lived together. Apparently, our first ancestors (of 6,000 years ago) used to saddle these puppies up and ride about on them.
Yes, I share your view of the nutty Tea Party as pandering to the anti-intellectual ‘extreme’ fringe of Right wing politics white Southern extremists that appear to want to return to a simpler age … or say they do.
As this article highlights, some of them talk a good game publicly, slamming Obama govt stimulus as corrupt, while also putting their hands out:
http://www.huffingtonpost.com/2011/08/10/michele-bachmann-stimulus_n_922851.html
As for TIME magazine, you’re probably right. I don’t subscribe, but my parents did and I read it a lot as a teenager … and couldn’t help but be struck by how they seemed to be then President Richard Nixon’s last fans … but I seem to recall how even they, eventually, with heavy heart, had to admit the Watergate break in, the WH plumbers, the ‘lost’ tapes/coverup etc made him look like a crook who needed impeaching. That’s how I recall it.
Dunno if they’re soooo right wing now … a little bit of a ‘and now in news from the government’ though.
- P
Insane American politics aside… for now.
The “Share market” will be the next trend in New Zealand investment. Olly is getting in on the ground floor; I suggest others do as well. “Kiwi Saver,” going forward, will be the primary investment vehicle remaining for New Zealanders to retire on. There will be no more government pension.
Yes. That is what I said. The guarantee of the government pension will evaporate sometime in the next fifty years (I guess I should qualify this statement, but it’s a whole subject unto itself and can wait for another time).
I’ve always considered the New Zealand share market to be a bit of a joke because values run below $5 per share. These would be called Penny Stocks in the USA (of which there is a robust market). However, “Kiwi Saver,” is a game changer because it creates a government mandate to invest in shares and values will go up.
Is this a good thing? Yes. As long as a large percentage of your portfolio buys New Zealand companies — safe New Zealand companies (quasi-government types) — it will actually help New Zealand grow.
The biggest roadblock I see going forward with “Kiwi Saver” is that future governments will be tempted to stick their noses into this plan and alter it to appease their constituents of the time.
Plans like “Kiwi Saver” must have credibility and remain predictable to work. Government interference, even with the best of intentions in the worst of times, can and will upset the apple-cart.
Hi exnzpat, thanks for your comments. I’m pretty sure Olly himself is ‘done’ with the sharemarket … and what I got from his remarks was that he was saying stay away from paper assets, such as shares, bonds etc.
Talking with him about the pathway he undertook to ‘qualify’ as an Authorised Financial Advisor, I was struck by the emphasis on sales machines peddling ‘investment products’ … which he doesn’t do unlike some self-claimed gurus.
As for KiwiSaver, well, interesting to hear the ‘free enterprise’ National Party government considering making contributions to KiwiSaver compulsory to build NZ’s investor base — a generation after Robert Muldoon dismantled Nornman Kirk’s Superannuation scheme after demonizing it as communism with its ‘Dancing Cossacks’ ads.
Winston Peters’ proposed compulsory super savings scheme, based on the successful Singapore model were likewise dismissed.
Now that the GFC has revealed the Emperor has no clothes, these ideas are getting an airing again.
Surprise me.
I took it that Olly would consider advising on all investment types. But you are right. I listened to the interview again and realized that he was leaning more heavily towards real estate.
Olly was saying paper investments don’t look so good right now, which is true. But I’m saying, — neither does real estate!
So what are we to do? What are we to think?
First, there is a huge difference between Shares and Bonds. Shares are sold with zero guarantee of return. I’ve actually never heard of any bank manager authorizing a loan to purchase Shares – that would be financial suicide. Such a bank manager should be sacked. But of course, people do it – normally borrowing from credit cards.
As for real estate, the only reason a bank lends you money to buy a home or an investment property is because it is a hard asset that they will physical take from you if you can’t pay the mortgage. If I’m right, and property in New Zealand is still overvalued, Banks are going to be less likely to lend money for real estate because that hard asset may be worth less over the short-run than what it is today.
Bonds, on the other hand, do offer a guarantee. They are normally offered up by municipalities to raise short term cash for government projects. Some bigger companies do this too, so as not to dilute the number of shares in circulation. Normally, the interest on a Bond will always be above projected inflation figures.
If you have a Term Deposit at a bank then you are probably a Bond holder – you are just not aware of it.
Bonds, I think, are the best bet. Better than either shares or real estate right. Keep in mind Bonds are not Shares. Gold, oil, and other precious metals I would steer clear of because of the reason I alluded to earlier. They are too fickle and when they fall, they fall dramatically.
Olly spoke about antiquities and art. I don’t imagine the people who buy such things do so for investment purposes. They buy them because they want them and because they can. I know someone who owns a Norman Rockwell original, and it’s just another painting on her wall. Its value to her is intrinsic. It has no other value than its beauty.
The idea that countries are “going broke,” is wrong. Countries don’t go broke. All it takes is for a government to raise its taxes and its problems are solved. It is that simple. Don’t be fooled by the American debt ceiling debacle. It was nothing more than brinkmanship by the old guard of the Republican Party, trying to push the debt ceiling debate (a manufactured crisis) into 2012 (the Presidential Election year). Thankfully, the sheer obstinacy and stupidity of the Tea Party thwarted their plan. Obama got what he wanted. They won’t say that, but he did.
As for the S&P downgrade of the USA. It’s a joke. These are the same people who gave triple A ratings to worthless mortgage backed securities. Again, nothing more than brinkmanship on the part of Wall Street – government regulations are coming – and they don’t like it. The downgrade was gamble that appears to have backfired. In truth, I think most drama on Wall Street is manufactured.
The USA is not “printing” money — anymore. The 2 Trillion TARP, plus the earlier 1.7 Trillion in 2008, was it. It is crunch time now for planet Earth. Most people, and most Americans, don’t realize it, but most of that 3.7 Trillion dollars went overseas (away from the USA) to shore-up American interests (government and commercial). This money has been filtering through the world monetary system; it gave the rest of the world the allusion that the credit problem was only an American problem. It was not. Now, without new money in the system – the strain across the rest of the world is being felt.
Perhaps, at least in New Zealand, someone will actually admit that there was and is a housing bubble. I hope so, because this industry cannot move forward unless it steps back. That is how investment works – like it or not.
I do agree with Olly, interest rates in New Zealand will go down. But I don’t think it will help the real estate industry any.