Saturday, February 16, 2013

First Time Landlords Beware! Three Common Mistakes Made

Rental Properties are a future investment as well as a money maker. Making sure you have the right property to suit your individual needs is critical. You want to be 100% satisfied with your rental property when all things are said and done. You want to avoid being stuck with a property that you can't rent or has no investment future. In the following info I'll share 3 common mistakes made by first time landlords.

1. OVER PAYING FOR PROPERTY - The price alone is not your only concern, you need to research the area as well and ask the pertinent questions involved in your final decision. SALE PRICE of the houses around your prospective property (higher/lower). Is there a over abundance of houses for sale in area? Why? Is it a high crime area? (Check with local police or local library for crime stats). What are the schools in area like (reputation). You may have tenants with small children or planning a family. What is the job market like in the area? Is it a rising job market or declining, this will determine your turn over rate. Another turnover rate to be aware of is if there is a college or university in the area. Do you want a student rental? There are MORE questions to ask, these are just a few.

2. BEING UNDERCAPITALIZED -By this I mean going into your investment being financially unprepared. If you go into this with a no money down or minimum down payment, make sure you have capital in reserve. What happens if you can't find a suitable tenant immediately and your mortgage payment is due? Do you have the income to cover payments? Unexpected maintenance bills before your rental property can be rented. Unforeseen repairs in the first few months and as new tenants request repairs. Ignoring small repairs can lead to major repairs and expenses, but this is another topic for another time.

3. In relation to the above topic, not understanding FINANCIAL MANAGEMENT is another common problem area to avoid. Once the rental income starts to roll in it is easy to forget you have financial responsibilities. Being prepared is one of the first things to be forgotten once you have extra cash in hand. You must keep in mind this is a business as well as an investment. Besides the obvious maintenance bills and general up keep its the unobvious that will catch you off guard, now or in the distant future. One example is Court costs that people tend to forget. Small claims to recover unpaid rent (it will happen). You may recover these costs, but the initial costs will be out of pocket. Plus law suits must be fought diligently. It's prudent to be prepared. Also taxes, utilities (your choice), advertising for rental etc. Just some of the surprises that could be forgotten.

These 3 common mistakes only touch on the many issues you have to consider before purchasing that first rental property. Success is very attainable in the rental income market and the return on your dollar can be excellent, especially if you are prepared for any surprises or setbacks.

Monday, February 4, 2013

Binary Options - The New And Exciting Way To Bet

Some of you may have heard of Binary Option Brokers, some of you may not. It's a relatively new form of betting where you can place wagers on the market. To put it simply, it's being a stock-broker without the stocks.

Now, you're probably thinking the same as I did when I first started using Binary Options; 'This sounds like it's going to be complicated'. Granted, when you hear 'stock-broking', you immediately think of mentally exhausting and challenging work, but you couldn't be further from the truth when it comes to Binary Options.

For those of you who are computer savvy, you'll known that binary means 'a set of two', which is all you get from Binary Options. At Binary Option Brokers, you'll get two choices, rise or fall. Whilst these bets can be made in several ways, the basics lay in whether a company's, materials' or currency's worth will rise or fall. Like I said earlier, it's stock-broking without the stocks (and a lot less pressure too).

The only bets you can make are 'rise' or 'fall', so whether a stock will go up in price, or down in value. There are a variety of ways in which you can make these bets which I will explain later, but that's the basics of it. Most brokers will offer a demo version, so you can give the market a try before you play any of your own money. You can also view trends and previous market results to get a feel where your bet should be placed.

There are five different types of rise and fall bets to make, each follow the basic principle of stock either rising or falling, but differ on how you make your money.

Up Or Down

This is the basic option; all you have to do is decide whether the market will settle above or below its opening level. At the end of the day, the stock will have a finishing price which will be above or below its opening price, and that will be the final result.

Call Options

A call option is when you want the market to rise above a certain point. You set the point yourself, and if the market ends above your prediction then you will make a profit, if it settles below your expectations then you'll use your premium.

Put Options

Put options are the opposite of call options, instead of predicting the market will rise above a certain point, you'll bet that they fall below a certain point. All you need to do is place your expectation, then wait and see.


A target result is when you bet on the parameters that a stock will fall between. For example, you can bet that a stock will gain between 40-50 points that day, or if a stock will lose 25-35 points. This is more detailed type of bet which will take a little extra skill to get used to.


Ladder bets are very similar to both call options and put options, except you can bet on both rise and fall rather than just one or the other. You still have to set a point you think the stock will land above/under.

Sunday, February 3, 2013

Silver Coin Clipping in the Digital Era

Price suppression, market controls and market manipulation have become the modern day equivalent to coin clipping in the silver market.

Monetary debasement is not a new phenomenon and has been practiced by various governments throughout the ages, either as a way for them to profit at the expense of their citizens or to pay off high levels of debt.

The inflationary result of money debasement is the same regardless of the underlying motivation. It also allows unsound money policies to proliferate as the can gets continually kicked down the road.

Monetary Debasement in Rome

A classic example of monetary debasement was seen when the Romans allowed the value of the denarius to fall over time as the government changed the coin's size and silver content.

The denarius was originally made of almost pure silver and weighed 4.5 grams, but this weight was reduced to 4 grams during the Julio-Claudia dynasty and then to 3.8 grams under Emperor Nero.

By the latter half of the third century, when it was replaced by the Argentous, the debased denarius only contained roughly two percent silver.

The rush to debase

Depressions and the Government Finance Bubble

Depressions are typically the result of deep structural mal adjustments in an economy. They are ultimately about credit failure, although another way to look at it would be money failure, since all of the paper "money" in use today is actually either debt or credit.

Since 2009, a bubble in government finance that is very close to source of the U.S. Dollar's creation has grown to an unprecedented size. Like the private credit bubble that preceded it by only a few years, this bubble is even more laden with risk misperception that has in turn resulted in severe mispricing.

Of course, there will ultimately be a rebalancing, and nowhere is that maladjustment likely to play out with more drama than in the remarkably under priced silver market.

Silver's Performance Shines

Since 2003,the price of silver has gained 1,012 percent. Although many will be quick to point out the corresponding 1,000 percent rise in prices over the last decade, when this silver rally is compared with the rate of monetary and credit expansion - and any semblance of non-academic reality in terms of inflation - this notable rise in silver seems muted at best.

The silver rally has certainly not been without its attendant media drama apparently intended to keep most investors who could benefit from even a semblance of wealth protection far, far, away from the demonized, but intrinsically valuable, metal.

Furthermore, silver looks attractive from just about every investment angle. Comparing real supply and demand, current trading structure, technical price patterns, inflation-adjusted pricing, ratios relative to gold, and excessively easy monetary policy - all point to silver's undervalued status.

Derivatives Allow Silver Market Manipulation

After the Hunts were shut down, it became easy for money printers to artificially control prices using the futures and derivatives markets that did not obligate sellers to deliver physical metal, just paper money. This manipulation led to an accelerated boom for silver's industrial users.

Yes, former U.S. President Johnson and other world central banks had long ago de-monetized silver, but the drawdown in its above-ground supply was substantial at a time when prices remained trapped by derivatives that became permanently detached from supply and demand fundamentals.

This phenomenon occurred in parallel with the credit expansion and the rise of shadow banking in finance, both of which had essentially the same structural maladjustment result.

As always seems to happen when the prospect of new credit creation ramps up paper markets, the warning signs of monetary debasement will be enthusiastically dismissed by the mainstream media. Nevertheless, the end result is much like clipping coins.

With rising premiums and growing awareness of the disconnected state of the paper and metal markets, silver's undervalued state will not last long. Time is running out for investors as the supply of real silver quickly vanishes.

Saturday, February 2, 2013

Ten Market Estimates and Predictions From 2012 - An Evaluation

Market estimates and predictions are always viewed with a degree of caution. Attempting to forecast the direction of shares, currencies and interest rates is very difficult to do, especially with any accuracy or consistency. However, some crystal ball gazing can be a necessary exercise for investment advisers and strategists, and it does at least allow us to focus our thoughts, consider various scenarios and evaluate risks and opportunities. Rather than rely too heavily on market predictions, we prefer to consider them as talking points that might encourage some insightful debate and thought.

On that note, let's recap and evaluate what we wrote a year ago regarding 2012.

1. Recession in Europe, while the US economy surprises us

Correct. Europe did fall back into recession despite most forecasters expecting at least some growth, while the US economy was much more resilient than many predicted as house prices stabilised and consumers began to spend again. Many of the worst problems in the United States over 2012 were political, rather than economic.

2. No break-up of the Eurozone in 2012

Correct. The Greek election was a bit of a debacle, but in the end the Eurozone stuck together and the European Central Bank resolved to do "whatever it takes" to keep things stable. For now, it's working.

3. No "hard landing" for China

Correct, but only half a point. China did avoid a hard landing (which would have had severe consequences for Australia and to a lesser extent, New Zealand) but we also said it would hit 8% growth. It looks to have just missed this hurdle, with actual growth for the year likely to be in the high sevens.

4. Shares have a positive year

Correct, but only half a point, because we weren't nearly optimistic enough. We picked the local market to deliver "at least 5%" and the US to rise 10%, but share investors have had an outstanding year with the NZX50 up 24.2% and the US rising 15.9%.

5. NZ Interest rates remain very low

Correct. A year ago the bank economists were, on average, expecting the Official Cash Rate (OCR) to hit 3.0% by the end of 2012, but it was unmoved all year at its current 2.5% as the recovery remained very sluggish.

6. The NZ dollar rises against our major trading partners

Correct. The NZ dollar rose 6.6% against the US dollar as the Americans continued to undermine their currency with their money printing policies. It also rose against the British Pound, the Euro and the Australian dollar.

7. Fixed interest doesn't repeat its 2011 performance

Correct. Fixed interest was the star asset class of 2011, delivering a stunning 13.3% compared with NZ shares, which fell 1.0%. But in 2012, shares had their best year since 2004 rising almost 25%, while fixed interest delivered a reliable yet much less inspiring 6.2%.

8. Obama is re-elected US president

Correct. It was a tight race and Mitt Romney put up a good fight, but the eventual election result meant an unchanged US political landscape. Ironically, rather than the usual post-election optimism, markets saw the status quo outcome as a major negative. The expectation of further political gridlock and further decision-making stalemates drove the S&P500 down 5% in the days immediately following the election.

9. Mighty River Power might not be the only game in town, as legislative changes might enable Fonterra to introduce share trading allowing the public to invest

Correct. A final decision on Mighty River was deferred into 2013 and Fonterra did indeed come to market (in the form of the Fonterra Shareholders Fund), and what a stunning debut it was.

10. Inflation falls back to low levels

Correct. Official inflation was just 0.8% - below the Reserve Bank's target band of 1-3% and unlikely to spark any interest rate rises in a hurry.

Friday, February 1, 2013

It's Important to Be Aware of Different Kinds of Tax Saving Investments

It goes without saying that proper tax planning is an essential constituent of personal finance. However, before you invest somewhere and see if you can avail tax benefits or not, it's important that you are aware of different forms of tax saving investments. Though they come under various categories, but the ones under Sec 80C are one of the most prominent ones; thus, it's important that you are aware of them so that you can plan and invest wisely.

To start with, life insurance policies are one of the largely chosen ways for savings. These policies for a very long time have been measured as a tax discount means. However, many times because of ignorance and lack of knowledge, the buyers buy the wrong coverage and policy and stay unsatisfied. Remember, a life insurance policy is gainful when you are on a lookout for ways to offer a monetary shield to your family in case of any mishap or unfortunate incident. What sum of insurance, you should have will depend on various factors; like your takings, expenditure, responsibilities and more. Remember that the tax benefit is the inbuilt benefit that will come with this product. So, think about this only after thoroughly knowing your needs and requirements.

Alternatively, you can also go for the Public Provident Benefit (PPF) or a Fixed Deposit (FD). The former is extremely favourable small savings scheme available to investors. The flexibility in contributions according to ones needs and requirement makes it a perfect choice for lasting funds and gaining excise benefit year on year. FD, on the other hand, for five years falls under Sec 80C tax benefit. Though generally, it is a feasible option for investors when last minute decisions have to be taken, yet the taxability of interest lowers the net yield. However, it is a good choice in current scenario especially for individuals in lower tax group.

This is not all; you can also make a tax saving investment, under Sec 80D. Under this section, one can benefit up to Rs 15000 for self and family, at the same time as added Rs 20000 is accessible for parents in senior citizen group on premium paid for a health insurance scheme. However, just like life insurance policy, remember that it should not be measured only for fiscal advantages. A health insurance is there to offer you the benefits in case of emergencies. Do a proper research and then, buy the right plan, which matches your requirement.

Thursday, January 31, 2013

The Spending Sequester Will Grow the Private Economy

Today’s report of a 0.1 percent GDP decline for the fourth quarter came as a surprise to most forecasters. But it actually masks considerable strength in the private economy. Namely, housing investment in the fourth quarter jumped 15.3 percent annually, business equipment and software spiked 12.4 percent, and real private final sales rose 2.6 percent. All in, the domestic private sector of the economy increased 3.4 percent annually -- a very respectable gain.

And here’s one for the record books: Working ahead of year-end tax hikes, individuals shifted so much money to the fourth quarter at the 35 percent top rate that personal income grew by 7.9 percent annually -- a huge number. And there’s more: In order to beat the tax man, dividend income rose 85.2 percent annually. You think tax incentives don’t matter? Guess again.

Now, all this private-sector strength occurred despite the fact that government spending -- namely military spending -- dropped 6.6 percent. Inventories also lost ground and the trade deficit widened.

But here’s a key point: Military spending has now fallen virtually to its lower sequester-spending-cut baseline. It did so in one quarter by about $40 billion. So the brunt of the impact over the coming years has already been felt. (Normally, as of recent years, military spending has been virtually flat.)

Which leads me to another key point: Even with the fourth-quarter contraction, the latest GDP report shows that falling government spending can coexist with rising private economic activity. This is an important point in terms of the upcoming spending sequester. Lower federal spending, limited government, and a smaller spending-to-GDP ratio will be good for growth. The military spending plunge will not likely be repeated. But by keeping resources in private hands, rather than transferring them to the inefficient government sector, the spending sequester is actually pro-growth.

Big-government Keynesians think big spending provides big growth. They are wrong. This has been a 2 percent recovery -- the worst in modern times -- dating back to 1947. So let’s try something different. Let’s shrink government. Let’s let the private sector breathe and generate entrepreneurship and risk-taking.

Spending is the true tax measure of the economy, according to Milton Friedman, Friedrich Hayek, and others. Even a modest sequester spending cut of maybe $60 billion in 2013, and perhaps more than $1 trillion over ten years (most of which will come from a slower spending growth rate, not real reductions), will be the best thing to inspire business and market confidence as well as international credibility. And it maybe even shave a point or two off the spending share of GDP.

On March 1 the spending sequester is supposed to kick in by law. If Congress wants to help the U.S. economy, the best thing it can do right now is implement this sequester. Then it can round out an even larger growth package, including large- and small-business tax reform and adjustments to stop entitlements from going bankrupt.

Monday, January 7, 2013

One-on-One with Senator Ted Cruz

Last week on "The Kudlow Report", I asked Republican Senator Ted Cruz if he'd go with a government shutdown if it came to it on the debt-ceiling debate.  His answer: "I think we have to be prepared to go so far as to shut the government down -- if we don't get some serious policies to stop the out-of-control spending, to tackle the debt, and to get economic growth."

It was a bold statement.  Watch the full video here: