Foreseeing and preparing for the next fiscal meltdown.

[BIRMANBOY]

W69,Since you have renamed as "insolvency specialist", you should be guaranteed future income....oh wait...they are insolvent so lets rethink that. Doomed eh? the more you read articles and listen to experts, the bigger the fear. Forget the fear and get on with your life. Fear, strife and disorder sell newspapers and pay for experts BMW's. I have a Yaris so am not worried at all.

We are doomed

http://www.radionz.co.nz/audio/player/20174756


ECB mistakes will cause another financial crisis - economist

[winner69]

Birman, I got pissed with somebody saying I didn't deserve to be a Legend so changed it. Fair enough but the new one was stupid.

its BaaBaa who thinks the world is going to end. Thought he needed that man to reaffirm his fears.

you and I have seen it all before eh. Plenty of bargains in the wash u for the survivors like us.

lovely sunny morning here. Done my 5k around the coast and feed the cats so will enjoy the rest of the day. Might wander up to the coffee shop to see whose there, might even catch up with my mate Des


you enjoy your day as well mate

[winner69]

I have a Yaris so am not worried at all.

Nice. What colour?

Wife has a fluoro green Swift for whizzing around town

Big flash cars are the scourge of the world, a symbol of what's wrong with the world today. OMG what have I said.

[Baa_Baa]

Thanks Winner69, good to have you join the discussion.

Although the world is unlikely to end because of a financial crisis, and few would believe it will, you have generously shared by inference that global fiscal uncertainty is not something be fearful of when one is skilled enough to identify the bargains, and fortunate enough to have the experience that ensures [fiscal] survival.

It would be great to hear more from you on those things; managing fear, fiscal survival (say capital preservation), identifying bargains.

BAA

...snip
its BaaBaa who thinks the world is going to end. Thought he needed that man to reaffirm his fears.

you and I have seen it all before eh. Plenty of bargains in the wash u for the survivors like us.
.. end snip

[BlackPeter]

Thanks Baa_Baa for setting up this thread ... and no, winner & co - I don't think this is about the end of the financial world as we know it. I agree that humans are as a kind quite able to survive catastrophes, it is only individuals who tend to go down.

Just taking some examples: World didn't end after the Dutch 1637 tulip mania, world didn't end after the 1929 stock market crash, and (as we all know) world didn't end after the 2008 GFC either. However - in each of these financial crashes did lots of people lose their last penny (or whatever the currency of the day) and some even ended their life just due to losing their money. For these individuals (and for their families) actually the world did end / or break down.

So - I would see this thread as an opportunity to discuss financial safe guards to reduce the impact of such events. If you look for examples in other areas: The use of cars is dangerous and tends to kill some hundred people a year only in NZ. This doesn't mean that people stop driving (and nor should they stop investing), but they do take some precautions. Most got to use a safety belt while driving, modern cars feature air bags and other safety features. Ridiculous - isn't it, given that most people have most days no accident at all ... or maybe just sensible?

I think this thread could be a good opportunity to talk about "financial safety belts and airbags". A discussion about that seems to make sense, even if most of us don't expect to be involved in a serious accident anytime soon (but hey - it can happen).

I think as well that this thread is a great opportunity to talk about indications for financial crashes in the wings. And if you allow me to go back to the car example. Even if it is nearly impossible to predict with certainty the next car accident (same with financial crashes), you can predict that a group of 18 to 20 year old heavily intoxicated males behind the steering wheels of their boy racer cars on a Saturday night are much more likely to cause an accident over the next year or so than a group of 35 year old non drinking females. So - why wouldn't it make sense to identify these risk prone drivers ... as well as risk prone financial situations (in order to avoid them)?

[BlackPeter]

Now - lets look into one IMHO quite significant risk areas for another financial crash (whenever it might happen):

Many countries these days are piling up debts without any intentions (and / or realistic ability) to ever pay this money back. Question is - how will this trend develop? We do see at current the odd country going bankrupt (they have other names for it ... haircut on debts): from the more recent history names like Russia, Argentina and Greece spring to mind (and Iceland closely avoiding bankruptcy in 2008) - and actually some of them might be in the starting blocks to give their creditors the next "hair cut". Not sure either regarding a number of developing countries (it sounds China has problems to get the money back they did lend to various Pacific and African countries) and not sure about many other African countries either (Zimbabwe bonds, anybody?).

What we didn't discuss so far are the elephants in the room. Neither the United States nor Europe are likely to ever repay their current fiscal debts - and, while most of these countries are currently able to serve the interest they owe, this will change as soon as interest rates rise. Might be an interesting discussion how markets will react when the first hair cuts for US bonds are announced.

And again - it will not be the end of the financial world (no money devaluation so far has been), but it will mean a lot of problems for a lot of people. And the risk for the next financial crash being close (months or small number of years) is in my view similar to the risk of a group of drink driving boy racers to cause a serious accident over the same period of time.

Historically it was normally good and productive companies which recovered first, while money in the bank and bonds often have been lost for ever after a financial crash. Though, this is not always true. If you look at the recent GFC, than people with (good quality) bonds had after 5 years (2007 to 2012) more money in the kitty (average gain of some 4 to 5% annually during this phase), while people fully invested in stocks ended in average just back where they started in 2007. Obviously - the people who put their trust into Bridgecorp, Money managers & Co ended often up with a nice round number - ZERO.

My strategy so far is to keep most of our money (but the supply for a couple of years) in (still reasonably priced) stocks, to diversify not just across industries but as well geographically, and I bought into some gold stocks (well, miners - not that fond off holding the yellow metal myself). Ah yes - and I never trust people asking for my money and promising huge returns ...

[percy]

I am pleased we have this thread.
Like BlackPeter I am well aware that stocks with a strong balance sheet, and a capacity to pay increasing dividends,quickly recovered from GFC.
I also have very diverse holdings.Maybe I have got it a little wrong selling down my Aussie stocks and reinvesting in NZ stocks,but I am more comfortable with NZ Ltd's prospects, than overseas,and I am enjoying the imputated dividends. I have also added agriculture stocks to my portfolio.
I like a lot of NZ sectors;medical,retirement,agriculture,banking and finance, tourism,utilities and service.

[BlackPeter]

sort of relevant article in today's financial times:
http://www.ft.com/intl/cms/s/0/24769...#axzz3XPbv82Ri

This time it is not some funny internet celebrity rising concerns, it is the IMF!

Article points to
- risk of ongoing low interest rate environment (in case Fed does not move) to a number of European life insurance companies, who used to guarantee minimum returns which are now not sustainable. Any yes, if companies like e.g. the German Allianz would crash - this would make the 2008 GFC look quite pale in comparison ...
- risk of rate rises to emerging countries (with high US$ debts) - in case the Fed does move ... just imagine not one Greece, but dozens of them at the same time ...

Sounds like they (the Fed) are (at least in the short term) doomed if they move and doomed if they don't. We live in interesting times!

However - the article ends with an sort of optimistic outlook:

"While the stability report flagged risks looming in the financial sector, the IMF’s economic forecasting wing had a more optimistic take on the outlook. Releasing growth forecasts on Tuesday, Olivier Blanchard, the IMF chief economist, said: “I sense the macro risks are smaller than in October — there is no reason for doom and gloom.”

[Baa_Baa]

The Federal Reserve Economic Data (FRED) is an informative source of all sorts of global economic data, including NZ. Take a look around, you may be surprised at the wealth of information available. http://research.stlouisfed.org/fred2/categories

Here's the FRED chart for M3 for NZ. http://research.stlouisfed.org/fred2/categories/32338 "The M3 classification is the broadest measure of an economy's money supply" (Investopedia). As you can see there's a lot of money sloshing around and it's increasing every year. Have a look at the big global economies though, there's some eye watering numbers.
Attachment 7276

Where's the money coming from? Certainly not entirely from surplus domestic productivity or exports, so NZ is a net borrower year on year. Another very useful data source is our own RBNZ. http://www.rbnz.govt.nz/statistics/k...rrent_account/
Attachment 7277

But by contrast, if the US money supply is increasing, which is is similar to the NZ M3 as the top chart shows, but of course in USD Trillions not NZ billions take a look at the US Debt! http://research.stlouisfed.org/fred2/series/GFDEBTN You can see why people might wonder how and who can possibly ever repay it? Especially when the US has been running in deficit for about 40 years, so it is a net borrower, but also has a special role as the USD is the Global Reserve Currency.
Attachment 7278
Attachment 7279

So where's it all heading? Who knows, should we care, does it matter?

BAA

[percy]

[QUOTE=Baa_Baa;568004

So where's it all heading? Who knows, should we care, does it matter?

BAA[/QUOTE]
I guess we should,it does matter,but nobody knows..
I believe the futures market trades about 10 times the actual world trade figure.Puts,calls,margin lending,off balance borrowings means to me no one would know total liabilities.
To try and figure all of the world economy is well beyond my brain power.
I therefore try to look for simple indicators;
Ageing population means medical and retirement sectors will do well.
Growing Asian wealth will drive up demand for NZ agriculture products.
NZ economy doing well will drive demand for Bank and Finance company products.
Internet spending will grow web page designers,fast transport [courier] services.
Larger ships will demand fast turnaround and hubs.ie Port of Tauranga.