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wayneL
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@waynel
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June 3, 2004 - 4:38 pm
Median property price vs All Ordinaries Index…why they cannot be compared.
It’s apples and oranges folks.
With property, only raw selling price is taken into consideration. There are a myriad of expenses and capital expenditures which are not accounted for in this raw data.
Lets take the example of a hypothetical single property which by an extraordinary stroke of luck, qualifies as “THE” medain priced property in Australia.
Lets say it was purchased in 1999 for $200k and just sold yesterday for $400k. A compound return of between 18% and 19% per annum…and a 100% return all up.
Ummmm…but we must deduct a few things….maintenance, repairs, rates, renovations, improvements, transaction costs (we will ignore interest charges as we can gear shares and this will be payable on shares also) etc.
So this property may have had tens of thousands spent on it over that four year period…certainly several thousand…and perhaps even six figures. But this is something we cannot know as is is not revealed by the raw sales figures.
So true return could be *substantially lower.
Now to shares and the All Ordinary Index.
The Allords is an average of stock prices for the largest 500 publicly listed companies. But a proportional weighting is given according to the capitalisation of the company.
In other words the biggest 10-20 companies will completly dominate the Allords. The 400th largest company could go up %300 in one day and the Allords would hardly budge.
Now the largest companies are also, by definition the most mature companies, and widely regarded as having the most limited growth prospects.
In other words the diligent share investor who is looking for capital gain, will avoid these large companies and concentrate on small to medium sized companies with growth prospects.
As an example, I have a contact who has a documented and verifyable capital gain of just under 30% per annum *compounded over the last 21 years. The silly duffer doesn’t believe in leverage…but thats his problem.
So don’t get too smug about the figures released above. They do not represent reality.
Another factor to consider is that the Allords is not adjusted for the payment of dividends. So a certain percentage of value is stripped out of the average by the payment of these dividends. If all companies were able to retain dividends the current value of the All Ordinaries Index would be quite a bit higher by a few percent per year compounded.
I am not saying shares are a better investment, just presenting an alternative reality. Some truely amazing returns are available from both property and shares. It is up to the individual to operate his investment business as they see fit.
As pointed out above there are other factors to consider…the amount of leverage available etc.
but bear in mind that you CAN leverage shares also.
Cheers
http://www.tradingforaliving.info
wayneL
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@waynel
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June 3, 2004 - 3:10 pm
Originally posted by Derek:
This gives you a 20 year snapshot – Steve Navra argues that any further back than this and your statistics are unreliable because of the significantly changed economic and social conditions as compared to today. He argues 10 years (?from memory)is a little too long ago too.
So it’s different this time?
This is what the proponents of the “New Economy” were espousing ’round about the year 2000[whip]…and oftentimes before that.
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wayneL
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June 3, 2004 - 2:31 pm
Anyone woulda thought Monopoly just won a medal at the olympics…sheez! What’s the big deal?
Rob! Why does this bother you so much? She has not been appointed Governor General for Chrissake!!!!
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wayneL
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June 3, 2004 - 6:27 am
This is a really futile argument. One never invests in the sharemarket (apart from the lazy buggers who invest in index funds), they invest in individual companies…likewise with property.
FWIW…
It all depends on the skills and attributes of the individual investor as to which is better for him/her. People done extrordinarily well in both…
Though for the average slob who refuses to put the required effort in, property is probably an easier and safer bet.
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wayneL
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@waynel
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June 2, 2004 - 3:34 pm
>>We always made sure that even if we did get called in, we would make money on the deal….<<
??I can not think of an instance where you would lose money if excersized…unless you are already carrying a substantial loss on the underlying.
>>experience tells us that you can’t expect income every single month you write an option, if it’s worth writing at all, at times….<<
AMEN!!!!!!! The “gurus” (and I use that term very loosely) who claim a 3-10% income PER MONTH are lying through their teeth.
As Scott points out, when volatility is low, OTM calls won’t be worth a pinch of goat s**t. They’ll be so cheap it won’t be worth writing them.
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wayneL
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June 2, 2004 - 3:03 pm
FYI
US definitions according to the corporations act:
Sophsticated Investor:
An investor who has sufficient knowledge and experience with investing that he/she is able to evaluate the merits of an investment. A requirement of certain exempt offerings.
Accredited Investor:
The SEC designation for an individual or entity meeting any of the criteria listed below. Certain restricted offerings, limited partnerships, and angel investor networks are open only to accredited investors. opposite of nonaccredited investor.SEC criteria:Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer or general partner of a general partner of that issuer.Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000.Any natural person who had individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.Any trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase of the securities is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment.Any organization that was not formed for the purpose of acquiring the securities being sold, with total assets in excess of $5,000,000.And, any entity in which all of the equity owners are Accredited Investors.
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wayneL
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June 2, 2004 - 6:53 am
Originally posted by DeClair:
I think people need to keep perspective in all of this… If people can keep paying their loans until the next property boom (IF), sure enough, the boom will ‘regather’ those poor neg equity lost souls, and behold, turn them into substantial positive equity ‘born agains’…happens in cycles, folks, and it’s why there are now a lot of people with equity in property. How many could have achieved it by saving, alone? .001%
Relax, and enjoy the prosperous cycles in life…
This is true.
But in some cycles, this has taken quite a long time to play out.
We don’t know how long this cycle will take, or how far down it will go. IMO the more prices hold up the longer it will take to play out.
Agree with your last comment but would add to pay heed to them when buying
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wayneL
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May 31, 2004 - 5:47 am
I understand exactly what you mean Kay, I’m sure most others do.[wink]
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wayneL
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May 30, 2004 - 3:21 pm
A wise friend (and mentor) once said to me:
If you are not happy when you are poor, then you will never be happy when you are rich.
I have to agree….
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wayneL
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@waynel
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May 27, 2004 - 5:08 pm
Never mind, Google found it!
FYI:
Purple title refers to ownership of an
undivided share in a property. The term
similarly refers to the colour of the
sketch on the title, which used to be
shaded purple.
Although not a common form of
title, some retirement villages or multi
storey flats (for example) offer residents
an undivided share in the complex. The
right to occupy certain areas in the
complex is determined by the contract
with each resident.
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wayneL
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May 27, 2004 - 2:59 pm
Just to clear up a common misconception:
You can leverage shares and commodities to the hilt.
For instance, via index futures I can attain an effective LVR of about 97% on a theoretical basket of shares.(NB: futures don’t *really* work that way but same general idea)
Other derivitives (CFD’s) have an LVR of 90%.
Via margin lending, LVR’s are between 40-75%.
I would like to go to great pains to point out here that we are talking about a trading strategy. This is a business proposition as opposed to an investment.
For standard buy and hold investing, we all agree property is king….providing the world economy escapes a very severe shellacking as proposed by Prochter, Dent, et al.
But for buying and selling short/medium term…give me shares/commodities any day…and/or derivatives thereof.
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wayneL
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May 26, 2004 - 7:56 pm
Chan,
I know lots of professional traders and none use this strategy.
I do know “investors” who have long term holdings, who write calls for additional returns when the stock is downtrending/sidways.
As a trading vehicle….hmmmmmmmmmm….Brokers like it cause it generates additional brokerage. Wealth seminar speakers like it because it sounds all so feasible and clever. As a trader, I don’t like it one iota.
When you think about it, why would you buy shares so you can write a call. If you think it is going to go up, why limit your upside, why not just buy the share? If you think it’s going to go down…well, you’ll collect the premium but take a hit on the shares.
Again, for long term share holders, covered calls can be quite good…in certain circumstances.
Well I’m outa here, before I get busted by Steve for talking shares! :-x
http://www.tradingforaliving.info
wayneL
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@waynel
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May 26, 2004 - 1:55 pm
[bomb]*wayneL spits the dummie* [baaa]
I give up!!!
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wayneL
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@waynel
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May 26, 2004 - 1:02 pm
Originally posted by AusProp:
Perth is still rising strongly and is expected to continue for some time.
LOL, not in the places where I am looking.
Perth does lag by a few months. I see Perth as stagnant price wise, but volume still ticking over. Wait till next year for real declines!!![evil4]
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wayneL
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@waynel
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May 26, 2004 - 5:31 am
Originally posted by Salubrious:
Its good to see there is a majority of agreeance on this issue. I remember bringing this topic up a month or two ago and was sliced and diced!
Hehehehehe……….A couple of us were talking about this sort of stuff late last year…you should have seen the reaction then!!!!!!!!![fear]
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wayneL
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@waynel
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May 24, 2004 - 3:11 pm
The program was nuttin’ new to us bears.
Fasten your seatbelts folks, the ride will be “interesting”.
http://www.321gold.com/editorials/hultberg/hultberg090303.html#4
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wayneL
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@waynel
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May 21, 2004 - 5:03 pm
Originally posted by Chan$:
Originally posted by HousesOnly:
this is a serious investors forum and not English classes.
So are you saying only people with perfect English allow to posts in this forum?
If it is so then 99% of people here will either got some grammar problems or mispell.
Common mate, you can’t criticise this kind of things.
Kind regards
Chan Dollars
[Retire Young, Retire Rich] [strum]
I can only echo those peoples admiration for the multilingual.
Have you ever wondered why english has become the international language? It is more than just the export of english via Entertainment and IT. I believe it is because it is such a forgiving language.
I’m sure most of us find people like Chan’s arm wrestle with English grammer both admirable and charming….and we are mostly gracious enough to fill in the gaps.
Go at it Chan, you’re doing just fine mate.
http://www.tradingforaliving.info
wayneL
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@waynel
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May 21, 2004 - 4:49 pm
Hi guy’s and gals,
Many years ago I listened to one of those psych’ type people who had an interesting point of view.(can’t remember the name)
He said it was impossible for human beings to make decisions based on logic alone. Rather, we make emotional decisions, and then dredge up whatever logic we can find to back that decision up.
As tough as that was for my youthful male ego to accept at the time. I now believe that to be the absolute truth.
For instance, the decision to invest $+ve or $-ve is probably more to do with psychological factors than logic. The debates on these forums will attest to that….:x
Those who claim pure logic as their only guide….well, those of us who are aware of our emotional side can only smile, and note the evidence of the opposite….
Cheers
http://www.tradingforaliving.info
wayneL
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@waynel
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May 20, 2004 - 6:52 am
Originally posted by Rugbyfan:
Acey, have you been to Fremantle since the cup in ’87. Apart from the fact that prices have skyrocketed (along with all of Australia), there was so much cash invested into the area in the form of infastructure. Along with that, houses, apartments and townhouses have been popping up on a regular basis. I do not know what the population growth has been since then, but I hazard a guess it is one of the best in WA.
I have spent many long lunches along South Terrace and the place is chockablock every day in Summer.
To those who got into Freo before ’87, would have made enough to retire on IMHO.
‘Eat rich food, barbeque a yuppie’ [greedy]
…and it was virtually a no go zone previously.
Agree, it’s a top spot now.
Re: Spain…watch those Spaniards!!!! I’ve heard many horror stories from Brits who have bought there. There’s a very different set of ethics there!
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wayneL
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@waynel
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May 19, 2004 - 6:00 pm
Originally posted by Michael R:
Secured an option within the past 3-4 months [no money down] on land in Queenstown, New Zealand subject to the vendor receiving re-zoning approval.
The offer was slightly higher than the asking price.
Approval was granted.
The land was flipped for more than twice the agreed price on the date the deposit was due – closing + 30 days.
Total time committed ~8-10 hours.
There are a number of locations in New Zealand where the same strategy can be applied with a guaranteed [as close as you will find] return on investment.
Moral of the story, you do not require an abundance of cash or equity to make money in real estate.
The key is due diligence [doing your homework] and presenting an offer which is risk adverse and a “win-win” for both parties – this type of transaction does not require disclosing your intent in terms of resale or otherwise.
— Michael
There is another moral to this story…
I knew a chap in QLD who used to do this ( Sunnybank Hills/Browns Plains/Calamvale area). But when I knew him, he was doing this in a bear market…made millions!
The moral; you “can” make pots of money even in a crappy market. (giving myself an uppercut here…I have been armed with this knowledge for years…hmmmm)
http://www.tradingforaliving.info