(03) 9020 2905Debt Man column – The West Australian (Business)
December 23, 2011.
Bruce Brammall
Debt Man
Okay, I’m stuffed. Like a turkey with a heartbeat at this time of year, I’ve just been praying to make it through to Christmas.
If a turkey is still gobbling on December 25, it can relax. The next major threat to its existence is when the Americans celebrate Thanksgiving in November.
To have won on your finances this year, you’d have needed to dodge bullets like Keanu Reaves in The Matrix. Or to have been invested via the Volvo-engineer motto of safety first, second and third (performance comes a distant last at Volvo) – all in cash and bonds.
At this time of this year, me, the less-fortunate turkeys and the stockings aren’t the only things that are stuffed.
The bank account is stuffed from the purchase of roughly 1578 presents, my liver is stuffed from 67 pre-Christmas Christmas parties and my kids are stuffed from a month’s worth of advent calendar chocolates.
But that’s the fun stuff.
Unfortunately, everything else is stuffed too. The Australian economy is stuffed, or on the precipice. The Reserve Bank wouldn’t be slashing interest rates like a Myer Boxing Day sale if it wasn’t concerned that it was full of breadcrumbs and goo.
The Australian stock market is clearly stuffed.
Property’s 2011 slide says only one thing – it’s stuffed, at least temporarily. Debt markets are stuffed. Most of Europe is more stuffed than a thousand nine-month expectant mums. The US property market, which caused the GFC that we’re still working through now, is still, most definitely, stuffed.
Retailers are stuffed. Billabong has faced a wipeout – to non-surfers, that’s also known as stuffed. Australia’s building industry is stuffed.
South Korea’s Kim Jong-Il has snuffed it and might, in following the traditions of some other dead tyrant communist leaders, also be stuffed for display.
But those who’ve felt the rough end of the investment pineapple this year shouldn’t say “stuff this!” and chill for the next 10 months. You might have considered giving it all away in the last few months. Selling up. Moving on.
Not so fast.
Flip your thinking. Every generation gets an opportunity to say “I remember when everything was a steal”. For the Boomers, it was buying property in the 60s and 70s before two-income households became the norm and prices entered a step change.
If you’ve got time on your hands (that is, you’re under 55) and you believe in shares and property as long-term stuff to own, then early 2012 could be shaping up as your time to be able to have your chance to make the “remember when” claim in a decade or two.
Any Warren Buffett fans out there?
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
That’s probably my favourite Buffett-ism. It’s the “buy straw hats in winter” philosophy. Buy good stuff that is currently out-of-fashion that nobody wants, so you can sell it back to them when they’ve recovered their senses.
Could 2012 be your opportunity to be greedy when others are fearful?
Hey, I can’t be sure. But there are a few things that I will point out.
In one of the most memorable movie quotes ever, Robert Duvall, in Apocalypse Now, said “I love the smell of napalm in the morning”.
For those of you disturbed by that awful smell sifting through the air, wafting out of the newspapers and permeating through the nightly news, I can confirm that it’s fear.
Fear that really bad stuff is going to happen. That Europe will collapse in on itself and, like a rock thrown into a pond, that the waves will spread across the globe.
The problem with Buffett’s “greedy when others are fearful” quote is … it’s so hard to do! Buying stuff when everyone around you is selling because they’re panicked, losing money and calling out for their mummies, is a very hard time, psychologically, to wade in and buy. But history shows Buffett is right.
So, how do you prepare for that? Be ready for that sign that tells you “Yep, it can’t get much worse than this. I choose to buy … now!”
Start squirreling away some acorns. Speak to your bank manager. Be prepared. If you do, but the moment to buy never strikes you, then fine. Having a surplus of the folding stuff is never out of fashion.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser. bruce@debtman.com.au .