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actually I quite like the links. I have even used a few times. At worst, I find them funny when they are out of context.
everyone knows that property will appreciate in the long run. But for every seller there is a buyer. Why did they sell in 94 ? 20-20 is great in retrospect. At the time they were probably seeing no capital gain in sight and the majority view was that property was going nowhere.
Simple human nature : people follow the herd. An interesting question is why did the people who bought in 1994 elect to buy a dog ?
ausprop, yes i guess you can argue anything. However it is actually very difficult to act against the majority. To do this you have to concieve of how it could be different to the majority view which can be extremely compelling. Social proof is an amazingly concrete feeling reality. Arguments here can be useful and provide you with the mental leverage to act against the herd.
I elected to follow the herd wrt CGT. I sold in 2001 and when things did not move down I jumped back in again in late 2002. I think it is highly important when the market does not move in the majority expected direction. In this case despite the negative consensus things moved up, this is a strong indicator that the maket is robust and set for more appreciation. I realised I was wrong and switched. When the market indicates a clear bottom in what seems to be a declining market, I will be jumping in again. Heck I could be wrong but the fact that it is very tempting to reinvest now, to me indicates we have not reached a bottom.
with the uk market, our market certainly feels more steady at the moment, maybe the UK will get to a bottom earlier.
check what the market rent is. It is often inflated, particularly if there is a rental guarantee.
ausprop the article you quote refers to the US, I was referring to the UK property market in mine.
The UK seems to be 6-12 mos behind us and the US is still in a property boom (2 years behind UK)
Not sure what average rental yields are in US. I suspect they are better than here as prop prices have gone up by only 60% last 5 yrs there compared to 120% here.
what’s the interest rate charged funds geared with Fusion ?
I am more thinking 40% aust, 60% overseas next year, as I expect US equities to outperform from q2 2005.
Mortgage securities worry me, the banks have shifted the risk so when there is period of high defaults, they maybe more insulated than in the past. I wonder who is insane enough to be holding the massive amount of MBS, probably super funds.
Robert, I am interested in your investment club. Unfortunately I will not be living in Sydney again until oct 2005, but would be interested in meeting other individuals in the sydney region late 2005, cheers.
Also : 1994 was a slow year, low liquidity, hard to move stuff. Fast forward to boom times and the opposite is true.
todays dog is tomorrow’s poodle…
I voted for bob car, only because he jogs and I like joggers, but with what he’s done to the sydney city structure/ infrastructure/ planning/ investment/ economy, I am voting for someone else. Greens maybe.
With the accom in NZ Sth island, I was in Dunedin this year and there are heaps and heaps of cheap and wonderfully comfy B&B’s. Don’t worry about accom, sort it out when you get there (ie on the fly). Also don’t worry about hiring a car, just sort it out when you get there (near the airport). If by chance you go in the middle of some mega tourist event (not aware of any in dunedin) then bring along a fisher and paykel colourful tent and camp next to the uni.
What you have to really worry about is the driving though those picturesque windy roads. I kept on thinking I was ayrton senna and had some very near death experiences on hairpin corners up windy hills.
so is there a fee if you want to get out early ? How much of a floor does the capital protection provide ? Staggering the maturity dates is good, but one year does not give you a large timeframe to dollar cost average.
Be careful of leverage if you are new to sharemarket. It is usually the main reason for big losses, along with being underdiversified/taking too much firm specific risk. Things are not fantastic value currently and I would tend to leave my powder dry for when things are bargain level. That being said we are coming off a base from 2001-3 where things moved nowhere. But the move in the last year of 40% means there is little support if things head south again.
fusion product is interesting, make sure you get a good margin rate and no front end fees on the funds. In 2000 I bought into colonial geared fund, as margin lending on a mutual fund was not as available. Margin loan is better as you can select the funds yourself rather then be limited to a fund that has a levered structure inbuilt. If you are going to get a margin loan then volatility will be less on a fund that individual stocks presumably and you are more diversified.
Don’t know much about the Macquarie ALPS investment. Sounds like a geared portfolio with some put options. You could achieve the same thing more cheaply by structuring the portfolio yourself but you might need a lot more capital to do this cheaply. In this sense it may add value. It depends on 1) the amount of leverage 2) the riskiness of the investments (companies, are they shares, bonds, prefs etc). The problem with the structured products is that usually a lot of margin is included to the issuer if they are still a niche product. I remember when installment warrants and other warrants came out these were supposed to be a good deal but it was cheaper to get a margin loan yourself. The secondary market for these was illiquid and you couldn’t offload if you needed the cash except to the issuer at a hefty discount (HUGE buy-sell spreads).
I think I will try to stick to low cost margin loans, low cost mutual funds (eg index/vanguard) and products that are in the mainstream as they are tend to be cheaper. I looked at comsec again today and can’t believe they offer stop losses, this was unheard of for a discount broker previously.
I drive a late 90’s model car that I bought second hand and live in a modest home. I have a lot of fun, just not involving wasting money. I enjoy my job as I have the opportunity to help people there, but I also enjoy investing and markets.
Why ? I actually enjoy the process very much.
my gotten, you are right I do need to get a broker ! This is ridiculous. I have an account with comsec but since I haven’t used them since 1999 I’ve forgotten my password and account number and have this fear that they will make me physically come into a bank branch and wait at customer relations for hours and then the branch will close and the A/C’s will turn off and then the air will run out…
So I’m more in cash out of laziness and disorganisation. I think if you have an IP this is implicitly bullish about property. Next step down is exchange traded property assets. Further down bearish track is no property and equities, then cash, then gold and resources. As I have no major directional view at the moment I should maybe park some in equities with more of a splattering of resources as I am leaning towards the bearish side.
Anyhow your tactical asset allocation between property/bonds/stocks/ cash has a significant effect on your returns. Some people say as much of an effect as the particular property/ share/ bonds you choose. Currently I am 40% property (PPR, 2 industrial), 40% cash, 20% equities. This is a ridiculous amount of cash if nothing calamitous is happening soon. So I think I need to get more exposure to equities. Unfortunately lots of other people have done the same and I am worried by the near verticle move in our sharemarket in the past few months.
I guess the problem is where to park this capital until things trough in property and when everything else looks to be overvalued.
yeh, or I could be wrong holding a cash, comercial property tust, oil, gold and underperforming badly. In which case I would have to quickly change the plan to cunning plan mark 438.
I have a cunning plan, it is to time markets where I have a likely directional view and to remain diversified the rest of the time. Another part of the plan is not to get wiped out by earthquakes, tidal waves, interest rate hikes, recessions and other events that although uncommon are likely to occur every couple of decades. An add on of the plan is to use likely fundamental changes based on demographics or anything else I can think of or find in the yard.
Thanks for the link. I gave my boker the ding a long time ago. Fin does not list LIC’s in any section I can find (maybe they’re all in general industrial). These are all property vehicles in a diversified portfolio so why not mention it here ?
Not many people seem to have an interest in anything other then westfield and lend lease.
I sold my IP’s recently and was thinking of a small amout in something more liquid in the short term but think I will give the whole property field a pass and stay in cash. It’s very hard to stay in cash very long as it really burns a hole in your pocket.
I think they will go down or nowhere in the next 12 months but when Chinese inflation rockets and they revalue the yuan in the next 2-5 years rates will probably increase significantly.
Consumers are very levered and account for 2/3rds of economic growth. The RBA is aware that the economy is very sensitive to rate hikes and presumably would not shift the short end up any further unless forced to (by an external shock). They may even reduce rates if growth has tanked due to the small hikes we have seen.
This is just my opinion. A stagnant rate environment or small cut would also suck out all the residual buyers in the property market and set the scene for a correction.
the bond market indicates that rates will stay flat or go down next year. They are usually right. This indicates the expectation of a slowdown. The yield curve is very flat at the moment but not inverted so I don’t think anyone is expecting a recession (yet).
The big unknown is where US rates will go as it is hard to see how we can attract capital to pay fo a CAD with lower rates that them. The price of US treasuries seems to have topped out and is possibly going down (ie yield going up). The cash rate is set by the RBA/fed reserve, but they only control the short end. Look at the 10 year notes to figure out what the market expects.
If the chinese revalue the yuan due to inflationary pressures, it is likely interest rates will rise globally. It is more a case of not if but when. They will keep the yuan pegged until it burns out their economy. The mercantilist model is to have low interest rates and accumulate foreign currency/ assets. To this extent the chinese have been successful in lending the US debt, selling consumer goods to them and buying the farm. Unfortunately in every case in the past of this – result has been inflation in the foreign country followed by asset bubble and crash. Same happened with Japan, emerging asian countries. If it happens in China we will see 1) inflation in China 2) USD collapse 3) higher rates in US and globally 4) recession in non asian countries initally then elsewhere : the US is currently only allowed to devalue against every other country except the one it needs to (china). Hence the european and floated asian economies will really bleed until the chinese revalue the yuan. Higher growth in US than elsewhere, eventual collapse in China.
The situation we currently have of a develloping country having a current account mega surplus (china) and a developed country with developing country CAD (US) is unusual. It is also inefficient, capital should be going to china to fund investment rather than to the US to fund housing and consumption (also applies to australia). I think it is an unstable situation. It would not surprise me if this was the turning point of the interest rate cycle.
We either go to inflation from here or deflation. Neither is very positive for asset markets. But then people have been thinking this for ages so who knows how long it will take to pan out.
stuff it LIC’s too hard to understand. Checked out LPT’s. Only a couple are trading at discount to NTA. THis was not the case when I last had a good look (2000), the majority were trading at discount to NTA. Also yields are lower, most around 6%
Maybe people have shifted some from direct property to here ? Share property index has done quite well this year (up 5% just in the last month). Maybe not a good time to get in. But still more attractive than most direct property atm.
