A Debt Of Thanks by Bryan DukeHogan and Partners Stockbrokers (08) 9327 9344
A quick scan of any newspaper at the moment will reveal a preaching invective against the use of debt in the market. Now that the world is engulfed in this {hopefully} once in a lifetime chaos, the editorial advice is uniform, angry and scared. Oh the terror. The wallet numbing terror!
The use of debt and indebted instruments has clearly been abused for far too long and there were plenty of people arguing against these strategies before the markets one collective leveraged penny dropped. Now every journalist has taken hold of his courageous hindsight and spouted the sort of sanguine financial advice I can get from any nursing home activities room.
Every day we are reminded of our foolishness in accepting debt as strategy. Never mind that we used to think a lowly geared company had a lazy book, full of slovenly immoral cash. Never mind that our margined money provided spectacular, tax efficient returns both in the market and in property when it went our way. Never mind that all of our managed super funds profited from loaning stock to those evil risk takers either. No, those heady days and fine ambitions were nothing but greed my friends and we should all hang our head in shame for ever contemplating something beyond warm porridge and Scrabble in our golden years. I don't know what a man who poops a party pooper is but I'm declaring myself him. I love having the choice of taking one dollar, assess the risk, and accept the return or otherwise from an extra nine on top. That is an empowering option for someone who finds the “miracle” of compound interest over forty years a little less than life affirming.
Australia has fully embraced the idea of placing a higher risk on cash in low risk stocks via margin lending so it was inevitable the idea would expand to high risk cash playing high risk stocks, but that still does not make it wrong. It’s a very good idea to use this life to “know thyself” as some Greek scribe so succinctly etched, and so it falls that every investors should Know Thy Product. This has been dutifully formulated and handed up to us by our regulators in the form of Product Disclosure Statements. These are not as baffling as many have stated following the Opes [sub}Prime tragedy. Use them!
In the clamor to finger point villains, irrational thought has entered some newspapers and slandered the product along with the promoters. No doubt there have been shenanigans, but ultimately these clients accepted a benefit in lieu of risk and that risk was, according to the PDS and the courts, their entire collateral! The last fifteen years have seen the slow development and regulation of a raft of products designed for every class of investor. We all fall into one of several personality types, and therefore investment needs, so this is merely the evolution of efficiency.
Before these choices became available, the only way a layman could take higher risk over his cash was to either start a business or gamble. Eventually though, all of us who were in between were noticed by that large invisible sentient being we call the market and like another large invisible sentient being once said; “Ask and you shall receive”. Well we did, and we have much to give thanks for. Warrants, options, CFDs, futures, swaps, instalments....the list goes on, and after watching banks make money hand over fist by loaning nine dollars over every one deposited and then charging interest over that “ether”, I am more than happy to have the choice to take my chances.
Feedback welcome at http://www.markettalk.com.au/
News Headlines:
Thu, 28 Aug 2008 05:50:53 -0400
TOKYO (Reuters) - Toyota Motor Corp cut its 2009 vehicle sales forecast by nearly 7 percent as high fuel prices hammer demand for large cars and pickup trucks, and said it will speed up the rollout of hybrid and electric cars as their popularity grows.
Thu, 28 Aug 2008 01:24:06 -0400
NEW YORK (Reuters) - Top executives at Starbucks Corp including Chairman and Chief Executive Howard Schultz will not be getting raises anytime soon, after the coffee chain's first-ever quarterly loss as a public company.
Thu, 28 Aug 2008 06:14:12 -0400
(Reuters) - Amgen Inc is halting some pricing practices that critics say were contributing to overuse of its flagship anemia drug Aranesp at a time of mounting concerns about the product's safety, the New York Times said.
Thu, 28 Aug 2008 06:13:18 -0400
LONDON (Reuters) - Futures for the Dow Jones industrial average, the S&P 500 and the Nasdaq 100 traded down about 0.1 percent on Thursday, pointing to a slightly weaker start on Wall Street after a positive close on Wednesday.
Thu, 28 Aug 2008 05:18:00 -0400
PARIS (Reuters) - French banks showed the scars of the financial crisis on Thursday, with heavy asset writedowns stripping Credit Agricole of all but a sliver of profit and plunging Natixis to a billion euro loss.
Regular Columnists:
A Debt of Thanks
Friday, May 09, 2008:
A quick scan of any newspaper at the moment will reveal a preaching invective against the use of debt in the market. Now that the world is engulfed in this {hopefully} once in a lifetime chaos, the editorial advice is uniform, angry and scared.
Technical vs Fundamentals
Thursday, April 17, 2008:
Technical analysts and fundamental analysts are often defensive of their own analyst style and it is often difficult to find people who are proponents of both styles of analysis.
RIO Tinto worth $210 Billion? It would seem so…
Thursday, April 17, 2008:
Mining Giant Rio Tinto’s shares are soaring once again off renewed speculation regarding it’s much publicized BHP Billiton takeover.