Capital Gains Tax? Keep related posts in this thread, please.

[Gatekeeper]

You could always PM me EXNZPat confused:

[exnzpat]

You could always PM me EXNZPat confused:

No need to be confused.

It was not about you. I was just pointing out how conveniently Orion ignored mine and Badger’s last posts and I suggested some very rude names for Orion’s forth coming book. Muppet, being omnipresent and a good guy, removed that portion of my post.

But, secretly, I’m pretty sure Muppet is having a good laugh.

[Gatekeeper]

I'd still like you to PM me

Have you read this piece, it is being discussed intensely on the net. http://seekingalpha.com/article/6776...on?source=cnbc

Repurchase Agreements and Covert Nationalization
posted on: March 09, 2008 Font Size: PrintEmail The Fed announced that it would auction off $100B in loans this month rather than the previously announced $60B via its TAF facility. In the same press release, the FRB announced plans to offer $100B worth of 28 day loans via repurchase agreements against "any of the types of securities — Treasury, agency debt, or agency mortgage-backed securities — that are eligible as collateral in conventional open market operations".

The second announcement puzzled me. After all, the Fed conducts uses repos routinely in the open market operations by which they try to hold the interbank lending rate to the Federal Funds target. In aggregate, the quantity of funds that the Fed makes available is constrained by the Fed Funds target. So, what do we learn from this? Fortunately, the New York Fed provides more details:

The Federal Reserve has announced that the Open Market Trading Desk will conduct a series of term repurchase (RP) transactions that are expected to cumulate to $100 billion outstanding... These transactions will be conducted as 28-day term RP agreements.. When the Desk arranges its conventional RPs, it accepts propositions from dealers in three collateral “tranches.” In the first tranche, dealers may pledge only Treasury securities. In the second tranche, dealers have the option to pledge federal agency debt in addition to Treasury securities. In the third tranche, dealers have the option to pledge mortgage-backed securities issued or fully guaranteed by federal agencies in addition to federal agency debt or Treasury securities. With the special “single-tranche” RPs announced today, dealers have the option to pledge either mortgage-backed securities issued or fully guaranteed by federal agencies, federal agency debt, or Treasury securities. The Desk has arranged single-tranche transactions from time to time in the past.

I actually only found this today. I'd say better to be open about it, as the Uk have been. It's happening all the same, for a better name.

[Badger]

I would be happy with a $30000 property bought 20 years ago with $1000 and now is worth $240,000 that paid itself off. If I put $30,000 in the bank I would be lucky to get $240,000 today plus I would have to come up with the full $30,000 20 years ago. I could have bought gold but again I would have had to come up with $30,000.

Tucker...


"The most important thing to remember about inflation is that it is both a liar and a thief. A thief because it quietly takes from your net worth through reducing the value each year of what your dollars will buy. What makes inflation a particularly clever thief is that it is a liar that hides genuine losses, even as it presents false profits. For example, let’s say you have an asset worth $100,000, and there is a 5% inflation rate. The asset keeps up with inflation, and is therefore worth $105,000 at the end of the year. Now, that sure looks like a $5,000 profit – and it is taxed as a $5,000 profit. But it isn’t, because inflation took $5,000 of your purchasing power, and all you did was break even. Your $105,000 at the end of the year will buy you no more reality (goods and services) than your $100,000 would have at the beginning of the year, and your “profit” was a (fully taxable) lie." By 2008 Daniel R. Amerman, CFA

Full article here

http://www.financialsense.com/fsu/editorials/amerman/2008/0306.html

[exnzpat]

I'd still like you to PM me

Have you read this piece, it is being discussed intensely on the net. http://seekingalpha.com/article/6776...on?source=cnbc




I actually only found this today. I'd say better to be open about it, as the Uk have been. It's happening all the same, for a better name.

I just PM ed you.

Every time the Federal Government dumps dollars on some poorly run company (in the interest of national security) those dollars come with oversight only. The idea is protect those industries, which through the excesses of their management, have failed or are failing. The US Government does not want to control or own. To do so would undermine the foundation on which the US was founded i.e. freedom.

[orion]

What makes inflation a particularly clever thief is that it is a liar that hides genuine losses, even as it presents false profits. For example, let’s say you have an asset worth $100,000, and there is a 5% inflation rate. The asset keeps up with inflation, and is therefore worth $105,000 at the end of the year. Now, that sure looks like a $5,000 profit – and it is taxed as a $5,000 profit. But it isn’t, because inflation took $5,000 of your purchasing power, and all you did was break even. Your $105,000 at the end of the year will buy you no more reality (goods and services) than your $100,000 would have at the beginning of the year,

Yes, absolutely true Badger, I don't think anyone is disputing that at all.

With property however, if you put down a deposit of say $30,000 with a mortgage of $220,000, so the property price to purchase is $250,000; - over the term of the loan the tenants are paying off your loan to the bank, say over 20 or 25 years as well as you benefitting from any increase in value. So, for the $30,000 invested, this turns into $250,000 once the mortgage has been paid off in today's dollars. If you do this with say 10 properties the same way, you have invested $300,000 and at the end of the loan, in today's prices you would have $2.5 million worth of property and still have an income from it.

Regards
Graeme Fowler

[Badger]

Yes, absolutely true Badger, I don't think anyone is disputing that at all.

With property however, if you put down a deposit of say $30,000 with a mortgage of $220,000, so the property price to purchase is $250,000; - over the term of the loan the tenants are paying off your loan to the bank, say over 20 or 25 years as well as you benefitting from any increase in value. So, for the $30,000 invested, this turns into $250,000 once the mortgage has been paid off in today's dollars. If you do this with say 10 properties the same way, you have invested $300,000 and at the end of the loan, in today's prices you would have $2.5 million worth of property and still have an income from it.

Regards
Graeme Fowler

Well Graeme

Thats how it should be!

But thats perhaps not whats been happening! Thats what your been lead to believe very cunning tactics from those in the know.

Your set up or goal then is to be an old school landlord?

which is far different then 10-20% yoy gains based on easy credit.

However Old School Landlords most that I have met have been Freehold no morgage or negligable or the income is more than enough to live off and service any debt comfortably regardless of macro economic conditions.

Passive income.

Not pyramid schemes based on paper from thin air + interest.

[Badger]

I just PM ed you.

Every time the Federal Government dumps dollars on some poorly run company (in the interest of national security) those dollars come with oversight only. The idea is protect those industries, which through the excesses of their management, have failed or are failing. The US Government does not want to control or own. To do so would undermine the foundation on which the US was founded i.e. freedom.

Corporate Welfare I think

[orion]

Thats how it should be!
But thats perhaps not whats been happening! Thats what your been lead to believe very cunning tactics from those in the know.
Your set up or goal then is to be an old school landlord?

Hi Badger, yes that is absolutely my goal, always has been and I am sure always will be. I still have about 15 years to be mortgage free with everything, a lot longer than it would have been had I not had some problems a couple of years ago.
There are many people that buy property with the hope of it forever going up in value, use interest only and never intend to pay the mortgage off. I have never understood this way of thinking and I believe most of these people will be wiped out over the long term, unless they change their thinking. The theory is to buy, wait for the properties to go up, borrow up to 80% again or even higher, and continue to do so as long as properties go up in price. The problem is when properties come down in value, they are over-leveraged and may be forced to sell and lose everything.

Regards
Graeme Fowler

[Badger]

Hi Badger, yes that is absolutely my goal, always has been and I am sure always will be. I still have about 15 years to be mortgage free with everything, a lot longer than it would have been had I not had some problems a couple of years ago.
There are many people that buy property with the hope of it forever going up in value, use interest only and never intend to pay the mortgage off. I have never understood this way of thinking and I believe most of these people will be wiped out over the long term, unless they change their thinking. The theory is to buy, wait for the properties to go up, borrow up to 80% again or even higher, and continue to do so as long as properties go up in price. The problem is when properties come down in value, they are over-leveraged and may be forced to sell and lose everything.

Regards
Graeme Fowler

Yep passive income to see you right through any inflations and deflations now thats another thing many here are not factoring in there investing practices DEFLATION

Interesting times and also very dangerous for the herd!

Nice one good luck with the Old School approach.

[OllyN]

More Confusing Signals

Treasury warns of housing gloom hitting people's pockets
Tuesday, 11 March 2008

Treasury has become more pessimistic about the economic outlook for householders, predicting that a slowing housing market will have many people feeling the pinch.

Last week, the Reserve Bank foreshadowed a gloomy time for households, indicating interest rates were unlikely to fall until late next year and forecasting house prices would fall on average by 5 per cent this year.

Treasury's monthly economic indicator bulletin said the housing market had weakened considerably since late last year as borrowing costs increased and the increase in net migration declined.

Pressure on households was increasing as the number of lower fixed term mortgages expired and had to be reset at higher rates.

Fewer migrants reduced demand and the strong local employment market was unlikely to be able to support current house prices, Treasury said.

Many households had been borrowing on the increased equity in their homes and this would be much for difficult in the future.

Treasury had been predicting a downturn in household spending and a "moderation" in the housing market.

"It is now apparent that both annual growth in residential investment and houses prices will be declining sooner than previously thought."

Treasury said this should slow both the labour market and inflation.

Drought and slowing economic growth in the United States and Europe would subdue New Zealand's growth, Treasury said.

The Reserve Bank estimated nearly a third of mortgagees on fixed rates will have to refinance in the next 12 months and, on average, they will have to pay between 0.7 and 1.5 percentage point higher rates.

Inflation was expected to peak at 3.6 per cent in September before coming back within the bank's target band of 1 per cent to 3 per cent next year.

- NZPA

[exnzpat]

...The theory is to buy, wait for the properties to go up, borrow up to 80% again or even higher, and continue to do so as long as properties go up in price....

I'm confused. Is this the theory you have been promoting here?

[exnzpat]

Corporate Welfare I think

Yep! That’s what we call it. However, in the case of the financial industry if someone does not step in provide some security we could be looking at a depression on a global scale.

Regardless of how the problem is fixed, at the end of the day, interest rates will rise and property values will fall – nothing will change that – only time. But, then I’ve been saying this since the first day I got on this board. Have I not?

[orion]

Originally Posted by orion
...The theory is to buy, wait for the properties to go up, borrow up to 80% again or even higher, and continue to do so as long as properties go up in price....

I'm confused. Is this the theory you have been promoting here?

This is the theory I have been warning people against for at least the last 15 years. It is very risky, but people just don't seem to get it. Their assumption is that prices of property will always go up. NZers aren't quite as bad as the Australians though that I've spoken to over the years. They look at me sideways and think I'm nuts when I talk to them about paying their mortgage(s) off. Some people will just end up learning the hard way I think.

Regards
Graeme Fowler

[exnzpat]

This is the theory I have been warning people against for at least the last 15 years. It is very risky, but people just don't seem to get it. Their assumption is that prices of property will always go up. NZers aren't quite as bad as the Australians though that I've spoken to over the years. They look at me sideways and think I'm nuts when I talk to them about paying their mortgage(s) off. Some people will just end up learning the hard way I think.

Regards
Graeme Fowler

OK. That makes more sense. I agree with you on that point. I never touch equity if I can help it.

However, you’ve put forth an awful lot of effort to make a fairly simple point. I hope you have found a good editor for your book because you are going to need one if you want to sell more than a few copies.

Go back and read the post I responded to again. Surely, you can see how someone reading this could get confused.