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Thread: Europe and the Lost Decade

  1. #11
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    Question

    Why do the politicians of such countries such as Italy and Spain and Greece resort to such state welfare tactics? It's to satisfy their populations and try to keep them from once again turning to fascism as they have so many times in the past.

    The begs the question that, if these countries have to now start to cut back on social programs, will it result in the growth of fascism again as their populations start to look for other alternatives?

    In other words, everything old could be new again!!??


  2. #12
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    Doctrine , I believe , has the right take on how to approach the market. It is always a mistake ,in my view, to ignore the way the market behaves over time. For example if you bought a diversified portfolio in 1906 and cashed it in in 1942 your yield was 0%. From 1942 to 1965 the compounded market return was 11% and from that point with the Dow at 1000 it never went over that for 18 years. Then in 17 years it went to 11000 ! So the market gets hugely overpriced and then flattens out or collapses. Individual investors need to keep in mind that 80% of money in the market is invested by fund managers , insurance companies, pensions , etc. so an individual trying to read the market and make a buck by timing is a mugg's game , I think . As Doctrine advises ,better to depend on good corporate stocks . I'm not sure about ETFs but with mutual funds only about 4% ever beat the S&P index and then only by a small amount. Cheers.

  3. #13
    Senior Member m3s's Avatar
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    Quote Originally Posted by dogcom View Post
    People keep mentioning Europe as a big problem but the US isn't much better. Wasn't very long ago and we were only talking about how horrible the situation in the US was and the US dollar was going to zero and so on. Solve the problems in Europe and then the US will be the target again.
    This is what I was thinking everytime someone mentions Europe, or Italy etc. It's like the media and everyone else have a 1 track mind. Is Italy is the worst, it's not like the rest of us are that much better. Canadians have more consumer debt than Americans, and if any country causes this economic slowdown and loss of more Canadian jobs and the death of companies like RIM, that debt doesn't just vanish
    When everyone thinks the same they don't think at all

  4. #14
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    Mode ....: I don't know about the figures for 'consumer' debt but our per capita debt evidently is much less than the US, ie about $48k to our $28k . I can't find exact figures for per capita 'consumer' debt which I assume is for items like credit cards, car loans, etc. Do you have this data ? Cheers.

  5. #15
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    Lets hope we don't have a major housing price crash anytime soon. That would really slow us down. Or make us go backwards.

  6. #16
    Senior Member zylon's Avatar
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    one up on wall street

    Quote Originally Posted by doctrine View Post
    This is why its important to invest in dividend paying companies, which despite all the hype about being the "latest and greatest craze", still offer fantastic yields in many industries. ...
    Good post

    I've been reading Peter Lynch's “One Up On Wall Street” where he makes the case that the individual investor should be able to handily beat any broad index; and he also explains why it is deucedly difficult for large mutual funds to do the same.

    I found it quite revealing that P Lynch chose individual stocks for both his mother's portfolio and also his mother-in-law; and apparently they did not invest in the fund which he was managing.

    So far, I've read four chapters, and I don't have any bone to pick with the author. Unfortunately, the book was written 20 years ago, so his enthusiastic endorsement of owning a home before investing in the stock market rings a bit hollow during this dark hour in USA real estate.
    Before you buy a share of anything; there are three personal issues that ought to be addressed: (1) Do I own a house? (2) Do I need the money? and (3) Do I have the personal qualities that will bring me success in stocks? ~One Up On Wall Street
    I wonder if the author has had a change of opinion, concerning point number one, considering the events of the past decade.

    I highly recommend that everyone, regardless of investing experience, get this book from the library. It's possible that I wouldn't have paid much attention to what P Lynch has to say, had I read the book before venturing into the markets; but now that I've made pretty well every mistake that he writes about, I find that I'm hanging onto every word.


  7. #17
    Senior Member Jon_Snow's Avatar
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    As a property owner, is it wrong that I am kinda hoping for a real estate crash?

  8. #18
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    Quote Originally Posted by zylon View Post
    ... so his enthusiastic endorsement of owning a home before investing in the stock market rings a bit hollow during this dark hour in USA real estate.
    I haven't read the book, but is it possible that he's referring to idea that you should be out of debt (i.e. the home should be paid off), before investing in the stock market.

    For example, here in Canada, imho I believe that investors shouldn't even open a non-registered trading account, until they've paid off their home and debt.

  9. #19
    Senior Member m3s's Avatar
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    Quote Originally Posted by dogleg View Post
    Mode ....: I don't know about the figures for 'consumer' debt but our per capita debt evidently is much less than the US, ie about $48k to our $28k . I can't find exact figures for per capita 'consumer' debt which I assume is for items like credit cards, car loans, etc. Do you have this data ? Cheers.
    I can't find consumer debt stats either, but our per capita debt is certainly higher (half of which is consumer debt). While holding ourselves high and mighty, we have complacently surpassed Americans in just about every kind of debt, and yet we somehow think we are immune to the debt crisis? I would't be surprised if our average consumer debt surpasses Americans very soon as well:

    Canadian Debt (USA in brackets)
    Average household debt per family $177k (USA $148k)
    Government debt Canada 65% GDP (USA 59% GDP) Canada is +80% according the IMF!
    Credit card debt per consumer $3500 (USA $4000)
    Student debt per student (hard to compare as I can't find data of personal student loans)
    LOC per Cdn consumer $35k!! (not sure about USA)
    Car loans per consumer $16k
    28 personal bankruptcies per 10,000 people (48 in the USA) thanks to our RE market no doubt

    Median cost of a home $372k ($202k in the USA) and UK $371k CAD

    Have Canadian Consumers Reached Their Limits?

    Sure we're slightly "better off" but in this global market we rely heavily on everyone else. It's not like we don't have a debt problem, ours just isn't "as bad" Our debt is still growing faster than our income
    When everyone thinks the same they don't think at all

  10. #20
    Senior Member zylon's Avatar
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    Quote Originally Posted by avrex View Post
    I haven't read the book, but is it possible that he's referring to idea that you should be out of debt (i.e. the home should be paid off), before investing in the stock market. ...
    No, the way I interpret his ideas on owning a home before investing in the stock markets, is that he thinks home ownership is an excellent investment; keeping in mind that he's talking from the USA perspective.

    Some points he makes:
    • you buy a house on margin; say, 20% down
    • even if the house drops in value, you won't get a margin call (unlike stocks bought on margin)
    • interest on the loan is tax deductible (USA)
    • federal tax deduction on property tax (I didn't know that)
    • house is a hedge against inflation
    • you can roll proceeds of sale into another purchase tax free (again, unlike stocks)
    • after the children have moved away, you can revert to a smaller house, making a decent profit in the transition. He writes, “This windfall isn't taxed, because the government in its compassion gives you a once-in-a-lifetime house windfall exemption. That never happens in stocks, which are taxed as frequently and as heavily as possible”.
    • you likely won't be scared out of your house by reading alarming headlines, as you might be inclined to do with falling stock markets (ie: nesting with the dust bunnies under the bed)
    • houses are owned on average 7 years; whereas 87% of stocks change hands every year


    Remember, this was written 20 years ago.


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