just that little bit more.....

 it seems 90% of people quit when they are 90% of their way towards reaching a goal and why that last 10% of any goal is so hard to crack. The main reason we do this is actually not because the last 10% is too hard to crack, it is because we simply don't know when we are 90% of our way there. Let me explain.

Over the years I have observed that this phenomenom tends to take place when someone embarks on some serious undertaking, such as:

• Building a Property Portfolio;
• Growing a Business;
• Launching a Product into the Market;
• Maintaining a Personal or Business Relationship;
• Building a Working Career;

Whatever activity it is that we are undertaking, we often find at some point that we meet with stiff resistance towards what we are trying to achieve. This is usually when we start to doubt that we will ever achieve our goal, and quite interestingly it is usually around this time that we will find other "easier" and "better" ideas to start focusing our attention on and so gradually we start reducing the efforts we are expending towards our original goal. Using the above list as examples we can see how this would affect the following activities:

• Building a Property Portfolio: you may reach a point where you feel your portfolio is "stuck". About this time some "exotic" investment idea, that seems to be able to make a lot more money more quickly, will suddenly come to you and divert your attention and focus.
• Growing a Business: you may reach a point where you do not see much future in your business. Suddenly some other "easier" and "better" business opportunity will appear to make your original business seem even worse.
• Launching a Product into the Market: you may reach a point where it seems not many people want your product, then along will come some other "easier" and "better" products to convince you that you must have the wrong product.
• Maintaining a Personal or Business Relationship: you may reach a point where you don't think the relationship is working any more, then some other party or parties will appear who look much better than the ones you are in a relationship with.
• Building a Working Career: you may reach a point where you think you are in a dead end job, then a "better" job comes along to convince you to quit this one, then the cycle sets itself up to repeat not long after that.

All of this can occur because our mind is very powerful. It can bring to us what we really want to see. In the above examples, the way I interpret them all is that when a person is actually 90% "there", they usually meet with stiff resistance from the world around them as that last 10% tends to require a lot more focus than the previous 90% just to get the job done. In these situations, our mind starts looking for an easier way out instead of striving to crack that last 10%.

While you are in this "selective" looking mode, you will tend to only be able to see how easy it is for other people to achieve a better outcome by not doing what you're doing. You can end up completely ignoring the fact that there are people who have cracked that last 10% and are doing well in what you're doing.

People often spend a long time and a lot of effort to get to that 90% point. Then suddenly they quit and go for something else as it seems to be easier to start another thing and do the first 90% for that new activity. So they end up never confronting that last 10%. The irony is, that without them achieving that last 10%, they often end up achieving nothing.

The outcome is simply not there. This is evidenced by the fact we all know people who seem to have done a lot and know a lot, but have never achieved the desired outcome they originally intended to achieve in the first place. They just never got there, because they never did that final 10% that will breakthrough for them.

This is how you can crack the last 10% of whatever you're doing so that you can achieve the intended outcome:

• Do not give or allow yourself to consider any alternatives until you get this last 10% done, as we can all become extremely determined when there are no other alternatives ☺
• Face the issues and confront any past failures as if these were your best chance to make a breakthrough, because the odds are that most people in a similar position would be unwilling to do this. This provides you with a better chance to make it happen for you.

Finally, if do you find yourself starting to disperse your energy into other potentially "easier" activities, remind yourself that this is probably a strong sign that you may be at the 90% point of whatever it is you are currently doing. Try to remember that the other apparently "easier" activities will eventually reach the same 90% point when they become difficult, so you might as well just keep going and crack that last 10% of what you're doing right now, as it is probably quicker in the end, to get you to your desired goal.

This is the big picture.

If you look at the Westpac Consumer confidence survey, the 'now is a good time to buy a
dwelling' index has increased 19.6 percent over the past year. We're still a ways off boom-
time levels, but confidence is making a strong come-back.

And you can see it in the auction data too. In both Melbourne and Sydney we've seen a huge
number of auctions in the early part of the year. And auction clearance rates are moving
between 60 and 70 percent. Again, this isn't booming, but it certainly indicative of a healthy
market.

And across the board, all the signs are that we've only just entered the on-ramp.
Unemployment is still a very healthy (and on a global scale, phenomenal) 5.4 percent.
Consumer confidence is also up over 12 percent in the last six months, to the highest level
since 2010. And as this recovery gains more and more traction, it will see a cyclical drive return to house
prices.

At the same time, interest rates remain pinned to the floor. Markets are currently pricing in
little change in official interest rates through the rest of the year, leaving them anchored to a
record low of 3.0 percent. And a rebounding economy and surging house prices won't trouble the RBA much. They've made it pretty clear that their biggest concerns are the high Aussie dollar and uncertainties on the global stage.

We've got a property market with solid fundamentals, backed by a rebounding economy, all while the RBA keeps the pedal to the metal. But watch out! The establishment phase is coming to an end. Soon the bargains will have run dry, and we'll be back in the boom phase.

I think the market as a whole is under-priced, and there are some spectacular opportunities
out there if you know where to look.

Housing boom leveling

The Reserve Bank says home prices are likely to grow slowly, if at all, now that the low-inflation driven boom of the late 1990s and early 2000s has ended.

The RBA says the move to inflation targeting in the early 1990s , and resulting lower consumer price rises, meant home buyers could borrow roughly twice as much as before.

This bank's head of financial stability, Luci Ellis, says this ability to borrow more explains a lot of the massive rise in home prices, both in absolute terms and relative to income, over the late 1990s to early 2000s.However, she says this transition to a low inflation environment now appears to have run its course."It also takes time for this additional borrowing capacity to bid up housing prices.

But the transition does end after a while, and it is our assessment that it has now ended," she said in a speech to the Citibank Property Conference yesterday.Dr Ellis says the household debt to income ratio has been fairly steady since 2005 and the ratio of average home prices to incomes levelled off around a year before that.She also notes that household saving has been around 10 per cent of income since the global financial crisis."But given it has actually been quite stable for the past five years, it seems reasonable to suppose that where we are is at, or close to, a 'new normal'," Dr Ellis said.

The Reserve Bank's chief watcher of Australia's financial system's health says that means households, banks and businesses in the property sector should brace for much slower and patchier house price growth than they were used to in the period before the GFC.

"Trend housing price growth will be slower in future than in the previous 30 years," Dr Ellis forecast."We don't have a strong view about whether the ratio of prices to income should be mildly rising, falling or constant from here. We do not have a target for this variable.But we think it is very unlikely to return to its 1970s levels, or to rise rapidly once again.

"Nor would we want to see another boom like the one a decade ago." The Reserve Bank warns that this slower housing market will lead to more periods when house prices are falling, meaning purchasers and financial institutions need to be wary of respectively borrowing and loaning too much of the purchase price, as they might find the outstanding loan becomes bigger than the value of the home - a situation known as negative equity.

This slower property market is also likely to have implications for bank profits.

"If trend growth in housing prices will be slower in the future than in the past, trend housing credit growth will necessarily be slower too. This has obvious implications for the rate of growth of bank balance sheets and profits," Dr Ellis observed. However, she warns banks against lowering lending standards to try and boost loan growth and profits, particularly in light of the risk of periods where home prices fall.

Instead Dr Ellis concludes that bank shareholders need to get used to lower returns.

Empty cities In the second major theme of her speech, Dr Ellis observed that demographic forces combined with the financial forces she described earlier would probably drive more Australians into medium and high density housing.The trend towards higher density housing was partly being driven by the high cost of homes, which Dr Ellis said cannot be blamed on a lack of land release on the urban fringes.

"If constraints on land supply were the most important factor explaining high housing prices, we would see prices rising fastest where those constraints were most binding - the greenfield sites on city fringes.But that is not what we see," she argued.Neither state government levies on developers or the cost of vacant land on urban fringes are the major culprits for high home prices either according to Luci Ellis.

"Rather, it turns out that construction costs are the largest contributor to the total costs of production, and they seem quite high compared with the total cost of a newly built home in some other developed countries," she added.

Dr Ellis also argues that a lack of medium and higher density housing closer to city centres is a much more significant reason for Australia's relatively high home prices."Part of the reason why land seems in such short supply is that we each consume so much of it.Australian cities are the least dense, in terms of population per square kilometre, than the cities of any other sizeable country, developed or emerging," she concluded.

"Even with slower population growth, the price of our low-density life has become unaffordable for some.

It therefore seems likely that our cities will become denser over time." However, Dr Ellis says there are impediments to an adequate supply of apartments and medium-density dwellings which may cause problems as developers continue adapting to the trend for higher density housing."It takes longer to build a block of apartments on a brownfield site than the same number of dwellings as detached houses at the fringe," she observed."Dwelling investment has already become less cyclical in the past 10 years than it was in the previous 20 years.

It might well be that construction lags - and concerns about supply - will become even more acute." However, despite the many challenges and slower growth for Australian housing, Dr Ellis is not too worried about the possibility of a property price crash."We are pretty sure that the boom we saw in the early 2000s managed to end with a fizzle, not a bust.So we don't expect a sharp reversal from a starting point described by the situation we face now," she predicted."But we certainly can't rule out the possibility of a major housing downturn in the longer-term future."

property silver lining

Well, let me put to you a counter argument to the normal rhetoric for property growth.

In a down market,  inflation is low and GDP is low.

When inflation and GDP is low, interest rates are kept low in an attempt to stimulate the economy.When interest rates are low, one has more cash left over to pay down ones principle on their loans. Whilst  same payments are maintained on your mortgage, a larger portion of the payment comes off the principlebecause the interest portion is less. When one is able to accelerate the payment of principle,  they are one step closer to creating a positive cash flow position, where rents collected is sufficient to cover all costs and interest so the property becomes self funding.

Once the property becomes self funding it is now working for you instead of you working for it.

When there's a turn in the market and we start experiencing capital growth again,  you are now making money whilst you are sleeping.If you are a  long long term investor then a down market is welcoming from time to time. It's probably the only time you get a chance to do this.

The longer the down turn, the longer the interest rates remain low, the longer the opportunity to pay down principle without changing the amount you have been paying towards the loan.

If you are a long term investor than it does not matter when capital growth begins again unless you were planning to sell your properties and retire on the proceeds or you were planning to leverage on the increased equity to purchase more properties. It's more important to get the properties to become self funding as soon as possible. 
Let's look at the position when the property market is booming and property prices are growing.When property values are booming it leads to higher inflation and higher GDP which leads to higher interest rates by the RBA in an attempt to reduce inflation and slow the economy.

When interest rates go up it means there is less money left over to pay down principle which means we can only rely on increasing rents for it to become self funding.Relying on Rental growth to achieve positive gearing is much slower.

In summary:  there's always a silver lining in any economic condition, all it takes is to have a different mindset and to think outside the square.

but wait , there's more

Do you think what happened in Cyprus can’t happen in America or Australia? The fundamental issues are the same: governments borrow and spend, taking ‘revenues’ for granted. When ‘revenues’ fall due to lower economic growth (which is not responsive to lower interest rates), the spending remains. You have a deficit.

Australia has a budget deficit now. One way the current government wants to reduce that deficit is to change the tax rules on what it calls high-income savers. This amounts to a ‘budget bailout’ by raiding the retirement accounts of self-funded retirees. That’s not much different than what happened in Cyprus, where lifetime savings were shaved by 40% in the cause of ‘saving’ the financial system. 

Here in Australia, last year’s budget stipulated that if you earn over $300,000 and plan on funding your own retirement, your contributions to your own retirement will be taxed at 30% now instead of 15%. The government is also considering taxing the earnings on your retirement savings at twice the current rate, from 15% to 30%.

This is done in the name of ‘sustainability.’ But that word is a polite mask for theft. That is, for the government to keep spending your money on the people and things it prefers, it must either take more of your money or cut spending. Guess what it’s going to do? 

The government will eliminate ‘concessions,’ or the amount of your own money it allows you to keep. Using the word ‘concessions’ to describe the tax rate on self-funded retirees is also a transparent attempt to turn the tables on savers. A ‘concession’ is something that someone gives to you. As such, it can be taken away. Using the word ‘concession’ implies both generosity to begin with and the moral authority to change the rules for ‘the greater good’.


This isn’t just class warfare. It’s war on common sense and economic liberty

Cyprus continues

The Cyprus drama continues behind the scenes. Today’s the big day depositors find out what will happen to their money.

Here’s the breakdown: Deposits greater than €100,000 will lose 37.5%, with another 22.5% frozen in case more is needed later. The remaining 40% of the cash will be released today.

A little-reported fact is the linchpin of the deal. The government isn’t taking the deposits. They’re being converted into bank shares to re-establish the amount of equity needed under international bank law.

Nobody seems to know whether you can sell the shares, or what they’ll be worth. But here’s what we do know: Cyprus just sold a huge proportion of its banks to a bunch of Russian oligarchs who had deposited cash in Cyprus to evade taxes. Russian oligarchs owning your banking system...that doesn’t seem like a great idea.

The cash for shares deal also doesn’t actually fix the Cypriot government’s  financial status.

Cyprus’ economy is in deep trouble, so the temporary bank fix is likely to be...temporary.

Thoughts to ponder:

*banks only keep a small proportion of the cash you ‘deposit’. They lend out the rest

*When a bank goes bankrupt, depositors stand alongside creditors to get some fraction of their deposits back. 

*Depositors are in reality lenders to the bank, not depositors of money.

Of course, it’s not supposed to happen like this. Governments guarantee deposits in most countries, explicitly or implicitly. But what happens when the government itself is the source of the financial instability? Who will bail out your deposits then?

Its time to wake up and realise that depositing money into your bank account is lending, not safekeeping