9 March 2008

Aussie doze into disaster

Im even having problems with my own family trying to reign in a 15 year term family trust investment adviser (and family friend) with a stellar track history, while trying to convince my siblings that this is different and that funds that name themselves "conservative" are in fact prone to up to 50% losses in the next 12 months, the sentiment is Australia is still very adamant that this is just a correction and we will be back to growth in a few months

Its like running an election campaign :), but when you dissect the various funds make up, the reality I am finding is horrendously risky . There are funds actually called "conservative funds" lol, when you look below the covers you find that that some of the gearing approaches 50%, there are many folks in Australia that are going to lose a large portion of the superannuation (401k in US terms) and they charge fees between 2-4% annually even if they do lose most your money. Some of the strictly conservative funds hold stock like Macquarie Bank (one of the most highly leveraged investment banks in the world). Because its been such a performer over the last 15 years they perceive this as conservative !

All the research is teaching me how exposed most Australians are to the kind of "shock and awe" event that we have been discussing for the last few years. it almost impossible to get the investment profiles of these funds, so I have been doing it via forensically tracing the share registrars and sub notices etc folks like Colonial who say market a fund as so called "conservative" in order to chase returns have warped are basically overweight financial s, their investors are consoling are still consoling themselves by the so called "conservative" tags are showing 3 months losses of 13-25% and if our "good time" investment adviser is anything to go by they haven't gone much below the branding themselves.

Even the Aussie golds producers are exposed to massive leverage from these funds , we both know the history and volatility of the gold market, so many folk are leveraging themselves into gold stocks like Lihir and Newcrest and track gold via USD gold not realizing that AUD gold is showing half the USD return on gold than AUD over 10, 5 , 2, 1, 3mth periods . Folks are reading Sinclair, Puplava etc and not realisng that AUD currency strength is discounting returns by 50% and $1500 gold could be matched by 1.50 AUD by 2011.

The invest in the metal not the stock or at least diversify is totally lost on them.

Its going to be allot uglier than even I think we realized most Aussie investor have no idea how much they are about to lose.

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