mrd

A well know finance industry figure recently launched a series of seminars. After reading the professionally crafted sales email, designed to invoke fear and panic and have me rushing to attend his paid event, I decided to address what appears to be a case of insincere opportunism.

Studying the world of global finance since last year is his authority for making such predictions. He proposed failure within our financial system is so systemic it is irreversible;  concluding our property market would soon crash.

A man (or a woman) with an experience is never at the mercy of a man with an opinion.

I lose respect for those who prey on the unsuspecting; profiting from their fear. My criticism is not isolated to this example; there are numerous other ’self appointed experts’ seducing the vulnerable. Fear of the possible fallout from the global credit crisis has provided a perfect vehicle for some to sell seminars, newsletter subscriptions and various services… such as finance broking in this instance.

Let me quote a line from the robot on the TV show Lost In Space:

“Warning, Warning; Danger Approaching”

Step 1 of this sales process: You’re at work when an email arrives. Negative from start to finish, it leaves you feeling “sick” with fear and despair. Having watched 60 Minutes last week… and listening to the guy who works next to you, your emotions were already frail. Now confusion reigns, you wonder if your security might collapse about you. “Why not”, you say to yourself; and in a scared moment you whip out your credit card and register for this event. After all, times are tough and you don’t want to live a life of regret.

Step 2 of this sales process: You take your seat after having spoken with no less than 8 other concerned investors. You’re glad you made the effort to attend; those who didn’t must be in denial, you think to yourself. The meeting starts and soon come the charts, the graphs and lots of complicated information. You don’t really understand all this stuff about Australia’s debt to savings level and income and productivity, etc; but the guy speaking seems to know what he’s talking about!

At work the next day you discuss everything best you can with the guy next to you. He’s happy that you are coming round to his way of thinking… after all misery loves company. You believe that you need to have your properties refinanced NOW before their values drop. The guy from the seminar will handle it for you.

Follow The Timeline:

• Fear and uncertainty has prevailed for some weeks now
• You receive an email, written by a paid professional, that left you feeling that you should to attend his paid seminar
• Once there you’re convinced your greatest chance of surviving the impending property crash is to refinance your properties now
• You are given new lines of credit against the increased value of your properties
• You are encouraged to draw down all you can from those new lines of credit and deposit the money safely into an offset account against your loans. Why? To protect you from a so called margin call from your lender; after property values drop. NB: A broker is not paid a commission until a loan is drawn down

When consumer sentiment is low and people are fearful, this will perhaps sound like wise rationale! Caution is recommended, however, whenever someone offers to rewrite existing loans. The benefits to you should always outweigh the costs you will incur.

NB: These seminars are in the future so I may be completely wrong; but if it smells like a duck, waddles like a duck and quacks like a duck… chances are… it’s a duck!

Don’t be unwise when it comes to the buying or selling of assets. Prudently managed, DEBT can be your best friend. Get on the wrong side of it and it’ll whip you.

If I am wrong and just being overly optimistic, why has the Reserve Bank, the Federal Government & the Treasury Department not made a huge “song and dance” and sounded the same warnings as I read in the seminar invitation? Are they avoiding a panic, asleep at the wheel… or is someone being opportunistic right now?

If we had not had a change of government almost 11 months ago you could be forgiven thinking it was in the government’s interest to hide any damage caused by years of financial mismanagement. The political hype over who are the better economic managers and an eternal desire for politicians to score political points puts that theory to rest, however.

If the dire predictions of this individual selling his seminar were accurate:

1. The new Government would be busy warning us of the “problem left to them by the previous government”. There is just 2 years until the next federal election
2. The treasury department would be warning the government. They are employed public servants, they don’t have to face the electorate… but would be blamed if they failed to sound a clear warning and things went really bad
3. The Reserve Bank would say so and adjust monetary policy to prepare the economy. Again, they do not have to face the electorate every 3 years. Putting up interest rates during last year’s federal election is pretty compelling evidence that the decisions they make are outside of politics

I don’t take financial counsel from someone with an opinion. To me these seminars are an opportunistic way of capitalising on genuine concern and fear in the marketplace.

If the merchants of doom we have heard in recent weeks are correct; then I am wrong; but so are:

• Michael Matusik: A long standing, respected, property industry analyst who is selling his reputation and his analysis, not a product or seminar.
• The numerous respected economic forecasters; such as at the ANZ bank. Our banks are sound, secure & profitable at a time when the global industry around them is not.
• Warren Buffett: One of the richest men in the world. He says “Be Fearful When Others Are Greedy  And Greedy When Others Are Fearful”.
• Glenn Stephens: Governor of the Reserve Bank
• Ken Henry: Secretary of the Treasury Department
• Wayne Swan: Treasurer
• Lindsay Tanner: Finance Minister
• Kevin Rudd: Prime Minister
• Malcolm Turnbull: Opposition Leader (and multi millionaire former businessman & merchant banker
• Julie Bishop: Shadow Treasurer
• Etc, etc

There will be many people with many opinions in times of uncertainty. Just remember that not all of them have your best interests at heart; so let the decisions you make be informed and considered.

Happy Investing,

Nick Lockhart

Related Posts

• October 17, 2008 -- Nick Lockhart’s DEBT Series – Part 2… “DON’T PANIC”
• November 21, 2008 -- The Property Investors Trifecta
• November 7, 2008 -- MRD announces November’s 0.75% Interest Rate cut 8 minutes AHEAD of the Reserve Bank of Australia
• October 24, 2008 -- Australian Property Values & The Global Credit Crisis
• October 3, 2008 -- The Safest Asset Class
• July 25, 2008 -- How The U.S. Sub-Prime Crisis May Affect You… Plus Who Are Fannie May & Freddie Mac?
• August 22, 2008 -- Where Is Opportunity In A World Of Doom & Gloom?
• August 22, 2008 -- Why I Only Invest In Residential Real Estate!
• May 2, 2008 -- WARNING: Exposing The Real Cost…
• January 18, 2008 -- Location: it isn’t an untold truism

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This entry was posted on Friday, October 24th, 2008 at 5:51 pm and is filed under friday afternoon @ mrd. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.