Safe places to park money?

[q9]

Are deposits currently protected? I thought there was just talk about legislating for it.

I've only heard how it wont happen in Australia.

If you are not into investing, then I don't really understand the point of the question. Where is your money now? And why move it all?

Many who are into investing took the hint from Nov/Dec last year and started culling stocks not worth hanging on to - those that would fare badly from poor market sentiment.

My thoughts are that shares will probably be in the doldrums for some time, but they are likely to recover far more quickly than the property market - as has typically been the case. But then I wonder if falling interest rates and low clearance at auction may not point the way to good buying opportunities in property for those so inclined...?

Stocks in companies that produce gold could be worth investigating especially if the share prices have taken a bit of a tumble.

Of course, none of that is advice, just some thoughts...

[Toolin Around]

Hear, hear.
The Big 4 aussie banks all have a AAA-rating. Only 18 of the worlds banks out of some 250,000 carry this rating.

Mike

I've heard the same thing parroted by many people but I have yet to find any organization posting this list for 2008. I've seen every other years but no this years.

[The Bleeder]

TA,

I don't know your circumstances so this is my opinion only.

I worked for that institution on Bridge St for 25 years.

A term deposit is the second safest place for your money at the moment. (It is generaly recognised that it will take about 3 years for the stock market to recover).

Shop around all the institutions that offer term deposits to find which one suits you.

I'm with BobR on Financial Advisors (bottom feeders that are only interested in their commissions) that they are product sales people (there are good ones and bad ones but I can't pick 'em).

Property is a good investment but then again you have to pick the right one like Ashore said.

Gold stocks are preferably left alone unless you have a good stock broker who will give you advice that will help you make a decision.

If you run your own super fund then there are other options that are available.

As I said before 'I don't know your circumstances and this is my opinion only'.

Steve

[Ron Dunn]

I'm wrong. Well, rather, I'm a couple of decades out of date.

Bank deposits in Australia are NOT guaranteed.

[Toolin Around]

Are deposits currently protected? I thought there was just talk about legislating for it.

Mike

No aussie bank has insurance on any accounts. They did uptil the 80's when the market was opened up and the big four complained that the insurance gave them a competitive disadvantage so it was scrapped. In the US you can choose to be in an insured institution or not. Canada, England, Ireland, Scotland (and I would suspect many other European banks also) all have insurance underwritten by the government on every account.

It may be a bit of paranoia but it wouldn't surprise me that if things were to get much worse a bank here could tip over. It's happened before in less sever circumstances hasn't it.

[Clinton1]

I believe any of the Mints will sell gold to you, either cash and carry, deliver to your bank for safe deposit box storage, or you can store for a fee. Perth Mint and Australian Mint spring to mind.
Private vendors are available.

Silver is also a safe haven.

Might pay to take a look at the graph for the price of gold over the last 5 years as well, it has gone up and up and up as the more cautious got into it heavily over the past 3 years.

I note the comment someone else made with regards to Financial Planners, yes there are plenty of bottom feeders, and also others that make their living chasing the best return for their clients on a year on, year out basis...you do have to pick the good ones though.
Just like tradesmen really!

I've been given bad advice by stockbrokers working for multinational companies, financial planners, accountants and others... its down to the individuals and how you control them.

http://www.ainsliebullion.com.au no affiliation, blah, blah, blah...

[damian]

Goodness me, all this panic and fuss.

In the early 90's the USA had the savings and loan stuffup. Similar thing to this. 500 US banks went under. None of ours did. This time about 300 US banks are tipped to fail. Unlikely any of ours will. I did say banks, not mortgage shops who get all their capital on the money market like rams.

Some of you might have noticed John Simons repositioning Aussie about 18 months ago, from being a rams to being a reseller, reducing exposure, moving into credit cards. Smart man.

Real estate has dropped about 10% across Australia, and the people I listen to are predicting a further 20-50% fall. I am looking to trade up to a bigger house but I'm not moving in any hurry. I sure wouldn't be buying investment properties right now.

I don't think we are at the bottom yet, but we are approaching a buying opportunity. Everyone loves to hate the banks but given you can't stop them putting share holders first might as well become a share holder and roll in those dividends. Rio looked good at $95, at $85 or whatever it is it's beautiful, but I'd still be buying BHP first, more diverse, safer. Big 4 banks and big miners, just pick carefully.

But then what would I know ?

[Toolin Around]

I believe any of the Mints will sell gold to you, either cash and carry, deliver to your bank for safe deposit box storage, or you can store for a fee. Perth Mint and Australian Mint spring to mind.
Private vendors are available.

Silver is also a safe haven.

Might pay to take a look at the graph for the price of gold over the last 5 years as well, it has gone up and up and up as the more cautious got into it heavily over the past 3 years.

I note the comment someone else made with regards to Financial Planners, yes there are plenty of bottom feeders, and also others that make their living chasing the best return for their clients on a year on, year out basis...you do have to pick the good ones though.
Just like tradesmen really!

I've been given bad advice by stockbrokers working for multinational companies, financial planners, accountants and others... its down to the individuals and how you control them.

http://www.ainsliebullion.com.au no affiliation, blah, blah, blah...

I'm not overly trusting of the advice given by the "professionals" when I'm ignorant of what they're talking about. To be honest I've not found much of the paid advice I've gotten to be all that good - most of the time it's biased. For the most part now I prefer to get direction from casual opinions that I can then go and investigate myself. Then seek out professionals when I know as much as them (but I don't let on I do) to get another point of view and or see if they have anything of value to add.

[Greg Q]

I heard that the Bank of Scotland is one of the other AAA rated banks, and they are being thrown a multi-billion lifeline by the B o E. You can only really go by the assurances that ANZ aside, no one here has any exposure to those toxic sub-prime property CDO's and CDS's*

Although there are as many if not more CDO's backing up the equally risky credit card and student loan debt loads. No local bank has even addressed them in their statements. I read last month that there is some leveraged exposure in our banks, and that the worst case would wipe out their capital base.

I am of the "Krugerands in the jar under the house" school of thought*

*note to thieves: Under the house in theory. In practice they are buried under the septic tank. Fill your boots.

[ian]

do you have a mortage with a major bank?

if yes, you can park spare cash (up to the value of the mortage) in an interest offset account linked to the mortage.
effectively you'll be earning about 8% after tax on your savings


ian

Note that I'm not a financial advisor

[q9]

Real estate has dropped about 10% across Australia, and the people I listen to are predicting a further 20-50% fall.

Care to explain the fundamentals behind that prediction? Just that I've not heard that anywhere else...

[damian]

The long term average ratio of median wages to median house prices is 3 times. Over the last 10 years the US rose to about 3.5 times. We currently sit at 7 times.

About 1 in 3 housholds in Australia are mortgaged and many of those are small, however it only takes about 5% or even 3% of the market departing to cause a collpase. While people like me are unaffected by this current situation there are a small but highly leveraged ( lots of debt ) group of people out there. Over the next few years they will struggle to meet their credit card repayments and keep their jobs. As hose prices start to fall they will find the house worth less than their 100% mortgages and as payments are missed banks will forclose and sell at whatever price they can get. Then the whole house of cards comes crashing down.

I've been telling people this was comming for 5 years, and get quite annoyed when people look at me stupid and say thigns like "house prices never fall". I begged screamed and cried to friends in 89 not to buy homes, and got abused for my trouble, only to watch them go broke and lose everything they had in the early 90's. Being right didn't make it less painful.

Note that I am not makeing the above prediction. I think 20% is a good possibility, 50-60% less likely, but I really don't know. The outcome of this retraction is less easy to predict than previous ones becauseof the changed demographics of home owners in Australia. We have become a truely divided society, with people like me carrying no debt and being cash and asset rich contrasting people struggling manage thier money. The outcome is unclear.

If you can be bothered watch tuesdays 7:30 report on podcast (might have been wednesday) and Alan Kohla's Inside Business on sunday mornings, again should be on podcast. Don't believe everything they say, especially when it is a reporter or a special interest saying it. Some of the commentators are amusing, some are worth listening to.

Finally, as an aside, I'll repeat what I have typed elsewhere.

1. The market doesn't matter. Billions haven't been wiped off anything. Short term movements are driven by day traders and other's of thier type who deserve whatever they get. Your super/shares has only fallen if your selling this week.

2. The media are in the business of selling advertising space, and to that end attracting viewers. They are not there to educate you, nor are they your friends. They will say and do anything to spread fear and panic so you keep watching.

3. Tight credit will affect the real economy. Businesses will fail, jobs will be lost, lives damaged. It's a terrible pity, along with the fact that government and society more widely is driven by headlines rather than substance.

2c.

[Toolin Around]

Care to explain the fundamentals behind that prediction? Just that I've not heard that anywhere else...

Have a look at the 50 year graph of realestate prices across Australia at ASB. The increase in price compared to the last two increases is massive in scale. The graph almost goes vertical. There is no way that such rediculous spending by home buyers can be sustained or the prices maintained. Mathmatically speaking the prices have to come down. When you look at the graph of the last 50 years one thing is also noticeable. The drop in price on the back side of the wave is relative to it's increase on the front side so this drop will be a big one relatively speaking.

[damian]

Have you got a link to that ? it'd save me some typing next time I answer this question...

Just found this:

http://www.aph.gov.au/library/pubs/r...-07/07rn07.htm

[clare]

Thanks for that clear and succinct overview Damian. It comes as a timely reminder to really do the homework and to dismantle such cliches as 'safe as houses' and 'can't go wrong with bricks and mortar' etc I remember all too well the crash in '89 that left so many people with negative equity on their homes in the UK and and huge, lasting debts that for many, were insurmountable. I'm pretty sure the housing market would recover and continue it's northward climb on the graph, but as you say, it's what happens inbetween times that does the damage.