So the 'crash' is over, how was it for you?

skap7309

nembot wrote: »

I'll let you know in a few years, when it is really over.

Yes i will certainly second that.

Over indeed......hahaha!

julieq

Thrugelmir wrote: »

If you're preparing long term business plans and forecasts. Planning investment projects and the like. Bearing potential future events in mind is essential. No you can't control them. But at least minimising the downside is essential. I remember once spending ages on a business plan to raise venture capital. The first question asked of us was can you absorb a 30% change in the exchange rate? ( Our sales were primarily in US$, we'd factored in a 15% fluctuation).

Life isn't just luck. Its absorbing information and making decisions. Rightly or wrongly.

There's no such thing as luck anyway, risk management is about probability and contingency. You can't guarantee success via a business plan, all you can really do is to show that you've thought about those downside risks which can be anticipated.

I see a bit of an absolutist attitude to risk here (in general, not from Thrugelmir, I largely agree with him). You see that in statements bears are apt to take, such as "well we saw a rapid downward movement in BOE rates, so obviously it's possible they may go upwards just as fast". That's a true statement in absolute terms, the question you have to ask yourself is how likely that the downside will materialise in that form, what circumstances would lead to that and what the implications on the underlying circumstances are generally.

And in fact fast quick rises would imply a massively overheating economy needing rapid application of the brakes. Looking at what is happening elsewhere, you have to say that there is a vanishingly small probability of that, so it can be discounted effectively. The contingency would be to use the low rates to minimise debt to reduce the effect of a large interest rate hike against hyperinflation, though in this case I wouldn't be paying off debt, I'd just ensure I was in a position where I could.

Proper risk management is about evaluating downside risks as a function of probability against upside returns as a function of probability. And it is about conserving resources that you don't run out of them while waiting for an upside to materialise.

Imagine a roulette wheel with 37 numbers, 0-37. The odds you get are 35/1 on any number, so given the true probability of any number coming up are 36/1, you would lose on average if you played one number for an infinite number of goes. If the casino offered you 40/1 you would win over time, but you'd have to ensure you won before you ran out of money, so you would bet in quantities probably 1/320 of your entire bankroll to allow headroom for the probabilities to work.

This is where the bears often get things wrong, because to them risks are subjective: if there is a risk at all, any risk, it becomes an overriding decision factor. Actually this is prevalent everywhere on MSE, this is why it's a "penny wise pound foolish" site in a lot of ways. Risk is central to return, and the one way of ensuring you get no returns at all is to defer taking the risk forever.

There are unquantified risks of house price deflation over a given period (in fact the risk is high over short period and vanishingly low over longer periods). There are unquantified risks of "mass" unemployment (in fact it isn't all that high in absolute terms). There are unquantified risks of soaring interest rates (in fact it would take a long time for them to get back to the rates before the correction). There are unquantified risks of all manner of things, and they all get mixed up in a cauldron of worry into really quite unsustainable sets of beliefs. This is why I bang on about bounding numbers against absolute limits, the mass media hates doing this because it makes often very exciting apocalyptic headlines quite dull.

I've personally become somewhat more bearish over the last week or so, but this isn't based on the housing market which I think will tick along fine and show some modest gains this time next year, it's about the rapidly forming stock market bubble. There is a recovery in business, but nowhere near enough to sustain the level of increases in the indices. The rises are now on the radar of the general public, and it's starting to feel overexuberant. But then again I'm contrarian by nature.

IveSeenTheLight

Cannon_Fodder wrote: »

A totally sensible parenting choice.

Pretty much the opposite of the over-protective measures holding up the economy at the moment...

If only the Govt had taken your approach, recognising that a little pain helps a lesson to be learnt...

Instead of which, they have coddled sections of society, who will get the worst shock of their lives when the second-wave recession, or double-dip, does hit and they find the Govt is no longer there to protect them.

However, there is a little pain is there not: -

• Unemployment rising
• Pensioners savings hit with low interest rates
• Tax burdens created for the future.

You have to protect to some extent.
I let my son fall, but I wouldn't let him jump off a cliff

Thrugelmir

chucky wrote: »

good idea - everyone bail out of property now!!!!! :rolleyes:

hold on - where are these people going to live??

I was referring to BTL.

Not home ownership.

Thrugelmir

julieq wrote: »

There's no such thing as luck anyway, risk management is about probability and contingency. You can't guarantee success via a business plan, all you can really do is to show that you've thought about those downside risks which can be anticipated.

I see a bit of an absolutist attitude to risk here (in general, not from Thrugelmir, I largely agree with him). You see that in statements bears are apt to take, such as "well we saw a rapid downward movement in BOE rates, so obviously it's possible they may go upwards just as fast". That's a true statement in absolute terms, the question you have to ask yourself is how likely that the downside will materialise in that form, what circumstances would lead to that and what the implications on the underlying circumstances are generally.

And in fact fast quick rises would imply a massively overheating economy needing rapid application of the brakes. Looking at what is happening elsewhere, you have to say that there is a vanishingly small probability of that, so it can be discounted effectively. The contingency would be to use the low rates to minimise debt to reduce the effect of a large interest rate hike against hyperinflation, though in this case I wouldn't be paying off debt, I'd just ensure I was in a position where I could.

Proper risk management is about evaluating downside risks as a function of probability against upside returns as a function of probability. And it is about conserving resources that you don't run out of them while waiting for an upside to materialise.

Imagine a roulette wheel with 37 numbers, 0-37. The odds you get are 35/1 on any number, so given the true probability of any number coming up are 36/1, you would lose on average if you played one number for an infinite number of goes. If the casino offered you 40/1 you would win over time, but you'd have to ensure you won before you ran out of money, so you would bet in quantities probably 1/320 of your entire bankroll to allow headroom for the probabilities to work.

This is where the bears often get things wrong, because to them risks are subjective: if there is a risk at all, any risk, it becomes an overriding decision factor. Actually this is prevalent everywhere on MSE, this is why it's a "penny wise pound foolish" site in a lot of ways. Risk is central to return, and the one way of ensuring you get no returns at all is to defer taking the risk forever.

There are unquantified risks of house price deflation over a given period (in fact the risk is high over short period and vanishingly low over longer periods). There are unquantified risks of "mass" unemployment (in fact it isn't all that high in absolute terms). There are unquantified risks of soaring interest rates (in fact it would take a long time for them to get back to the rates before the correction). There are unquantified risks of all manner of things, and they all get mixed up in a cauldron of worry into really quite unsustainable sets of beliefs. This is why I bang on about bounding numbers against absolute limits, the mass media hates doing this because it makes often very exciting apocalyptic headlines quite dull.

I've personally become somewhat more bearish over the last week or so, but this isn't based on the housing market which I think will tick along fine and show some modest gains this time next year, it's about the rapidly forming stock market bubble. There is a recovery in business, but nowhere near enough to sustain the level of increases in the indices. The rises are now on the radar of the general public, and it's starting to feel overexuberant. But then again I'm contrarian by nature.

Whilst the stock market may be bubbling. In the same way share prices crashed over night , they have risen back indiscriminately. Ignoring the indices, which as their is a change every quarter in the consituents of the index, has little resemblence to ones investments unless holding a tracker fund. Their is good value to be found. And I'm not refering to the casino stocks such as the part nationalised banks.

The herd is chasing the market at the moment. Personally I've pocketed some gains and will reinvest when the market falls back 15%.

The extent of the problems in the economy are well known now. I'm starting to feel bullish on a broad level in investment terms. As by forecasting with a suitable worst way contingency you can see past the worst.

carolt

IveSeenTheLight wrote: »

I do have a kid and I do have the same mantra as Dan and Cleaver.
I definately wouldn't agree with your insinuation that this leads me to being an irresponsible parent.

You can only do so much to protect your kids, sometimes hard lessons need to be learnt.

My son fell over the other day, I could have held him up and protected him from falling.
The thing is, he got back up and on with his life, probably having learned a little more about balance

[edit] Actually, the wife is far more protective of him than I am, maybe its a male / female / maternal instinct thing [/edit]

That's a silly post, ISTL.

No-one's acusing you of irresponsible parenting.

You are comparing letting a child fall over to taking sensible precautionary plans re matters such as unemployment, schools and pensions, as cited by Dan.

Clearly, falling over is (a) not serious and (b) not something you can plan to prevent/mitigate.

Whereas taking sensible steps to save for a pension, plan in case of unemployment/reduced income, or plan schooling is just called Being a Grown Up.

As a non-parent, maybe Dan can always hope something will 'come along' if he faces problems such as unemploment for example. As a parent, I make sure I have insurance or fall-back plans in place.

I hadly think that's a terribly controversial statement.

It has nothing whatsover to do with wrapping my kids in cotton wool. It's just commonsense financial planning. Much as you hope to provide for your family's future through your BTLs.

Don't really get where you were coming from on your post.

IveSeenTheLight

carolt wrote: »

That's a silly post, ISTL.
No-one's acusing you of irresponsible parenting.

You are comparing letting a child fall over to taking sensible precautionary plans re matters such as unemployment, schools and pensions, as cited by Dan.

Whereas taking sensible steps to save for a pension, plan in case of unemployment/reduced income, or plan schooling is just called Being a Grown Up.

As a non-parent, maybe Dan can always hope something will 'come along' if he faces problems such as unemploment for example. As a parent, I make sure I have insurance or fall-back plans in place.

I hadly think that's a terribly controversial statement.

It has nothing whatsover to do with wrapping my kids in cotton wool. It's just commonsense financial planning. Much as you hope to provide for your family's future through your BTLs.

Don't really get where you were coming from on your post.

Dan's statement was simple

"Im not. Im just a regular family guy. Great family, nice home, good job, bit of money, and enjoys life without breaking into a sweat in case the Torys stick up tax by a few quid, or the mortgage will cost a bit more next year."

your reply was equally simple

"But you don't have kids.

Dan's never mentioned them either.

I think once you do, it's not pointless 'worrying'; it's responsible parenting. "

I didn't see anything in either Dan's or your posts about save for a pension, plan in case of unemployment/reduced income, or plan schooling.

Your right, I have looked at my future and invested in BTL's,primarily because I have no confiedence in pensions. I do not however "break into a sweat" either in case the BTL mortgage rates go up, I don't get a tenant, the boiler breaks down etc etc etc.

If and when these occur I'll deal with it, until then, I'll enjoy the life I have.

Maybe it goes to show how a very short post can be incorrectly interpretted (in my opinion) as being irresponsible if they were a parent