So is that it?????
Your big investment idea is putting money in the bank at 6% per annum????
This equates to about 1% per annum net after tax and inflation if you are in the highest tax bracket. All this does is compound the baby boomers problem further.
I noticed that was also your shortest post seeing it had to come from your mind. Impress me more and tell us an investment that can return at least 6% NET per annum after tax and inflation.
Robert Bou-Hamdan
Mortgage AdviserIt seems the RBA may have jumped too soon to raise interest ratesRemember, the RBA’s role is to control inflation (between 2-3%) not manage economic growth, that’s the government’s role. Its quite possible to have slow growth and high inflation (stagflation) and the RBA may be forced to raise rates despite a slowing economy.
A lot of people think inflation in Australia is inevitable through a lower AUD to restore our export competitiveness, and to reduce our massive debt burden (inflation reduces the real value of debt over time)
If inflation rears its ugly head the RBA will be compelled to act, even if it results in a recession.
I don’t see over investment in property as the source of all woes in this country. Contributing factors include: lack of access to capital, small population hence insignificant on the world scene, no entrepreneurial culture, shocking tax rates, obsession with giving farmers a fair go, tall poppy syndrome, lack of respect for white collar achievements, too much focus on sport… could go on all day actuallyAUSPROP, excellent article, and I couldn’t agree more. Over investment in property is not the only source of all our woes, but imagine if all that money that was poured into real estate had gone into more productive enterprises?
Your big investment idea is putting money in the bank at 6% per annum?????Its not a big idea, its a defensive strategy for troubled times that’s all. Preserving your capital is better than losing it.
Longer term, I guess you could look at investing in Australian exporters. These companies have suffering with the high $AUD and their stocks have been battered recently. When the correction in the AUD comes, they will do well.
Investing in Australian exporters is a nice low-risk investment that will return certain profits – NOT!!!
Why protect capital when you can increase it if you know how?
Robert Bou-Hamdan
Mortgage AdviserWhy protect capital when you can increase it if you know how?Sorry, I’m really not interested in your sales pitch. I’m perfectly happy where my money is now.
I am not selling anything. Have fun protecting your capital.
Robert Bou-Hamdan
Mortgage AdviserOriginally posted by The Mortgage Adviser:The ‘jealous’ comment refers to property investors who actually make good money in all economic climates. Instead of preaching doom and gloom and sitting there with money in the bank earning nothing, they get on with it and have an educated go.Instead of regurgitating other people’s negative economic commentary, why don’t you tell us what you consider to be a good investment and show some positivity and originality for a change?
It can be difficult to do so without appearing to ‘blow one’s own trumpet’. I also object to the view that the ‘reversion to mean’ ascribers are all doom mongers. By having a little foresight, one can capitalise on any market correction. Here are a few from my personal file:
2003 – Sold 2 (of 3) properties to pay off my PPOR, bought a small vacant block of land in a tiny coastal town on which I have almost completed building a small holiday home also fully paid for from previous capital gains. At this point many of my friends and workmates were trying to maximise their exposure to property and thought my ‘doom and gloom’ outlook was laughable.
2003 – Made my first foray into the sharemarket (and a couple of other asset classes) through managed funds. Those same colleagues were openly of the view that shares were a way to lose money. “It’s just like gambling” I was told. Over the next 18 months I gained confidence and understanding which enabled me to confidently leverage into some direct share investments mostly in resources & oil.
2005 – Expecting a broad correction in the sharemarket, I switched my superannuation investment option to 80% cash, 20% shares. Reduced my direct share investments, payed out my loans and exited my then managed funds. As a hedge I bought into an internally geared fund which would give great returns should the market continue its bull run. It was generally accepted at this stage (Feb/March) that the shares would be the best performing asset this year.
Now I’m not saying that every investment decision I’ve made has been perfect, and I’ll admit that I’ve lost money on more than one occasion, but overall, I’m quids ahead of the majority of investors I know who seem always to be making the opposite choices.
So my point is this – I don’t look around and see doom and gloom. I see booms and busts, bull markets and bear markets. It’s not important to me that I pick the absolute peaks and troughs, but it is important to me that I’m only holding appreciating assets. In falling markets I support dmichie’s idea that preservation of capital is better than holding assets in the hope of long-term growth.So where are the current opportunities? I still think oil’s a sure bet, gold should do well as inflation rises, high interest cash accounts…* however, the best investment for overstretched property investors at this point in the game is reduction of debt IMHO.
Leverage x Depreciating Assets x Rising Interest Rates = Oh Sh!t [blink]
Cheers, F.[cowboy2]
*<edit> I just thought I’d add that one of the most important money making vehicles over the next few years will be having a (excuse the dirty word) J – O – B. You know, the type where you work 40 odd hours per week providing a service or product that somebody else is prepared to pay for. I know, it’s contrary to the many posts here from those wishing to leave the 9 to 5 world, but it really is a good way to make money!
It can be difficult to do so without appearing to ‘blow one’s own trumpet’Exactly. Robert seems to think anyone who has a negative outlook on property is some poor disgruntled student frustrated that they can’t get on the property ladder, or “missed out” on the big boom. (Robert said: “Are you jealous because you cannot afford to buy any property or do not have the knowledge to find a way?”). That’s not my position at all, but I’m not going blow my own trumpet here.
I still think oil’s a sure bet, gold should do well as inflation risesHave you read wulfgar’s gold posts over at the cracker housing forum? I’m a super bull compared with this guy. He reckons we should all be burying gold ingots in the backyard!
http://cracker.com.au/viewthread.aspx?threadid=52250&categoryid=11061I just thought I’d add that one of the most important money making vehicles over the next few years will be having a (excuse the dirty word) J – O – B. You know, the type where you work 40 odd hours per week providing a service or product that somebody else is prepared to pay for.Radical stuff foundation! It would be nice if the economic geniuses running this country taxed honest labour at the same rate as capital gains.
Another suggestion for a money making vehicle would be a business that exports its goods and services to the world. Believe me, its been a hard slog being an exporter since the AUD shot up to 80c in late 2003.
http://finance.yahoo.com/q/bc?s=AUDUSD=X&t=2y&l=on&z=m&q=l&c=I didn’t think you could suggest any real ideas to making money in the current economic climate. It seems you guys are more than happy hiding your cash.
As for doing things differently, it sounds to me like both of you are following the flock as the majority is preaching doom and gloom. I am content doing the opposite or implementing strategies that profit from downward trends.
Regarding my jealusy comment, that refers to not being able to find properties that are doing the opposite of the general trend assuming you want property. I am personally getting out of all property investments to enter into other more profitable and certain investments which are property related but do not require holding property.
Each to their own.
Robert Bou-Hamdan
Mortgage AdviserI am personally getting out of all property investments to enter into other more profitable and certain investments which are property related but do not require holding property.Well, I think its time for you to ‘fess up then! Please do tell where this wonderful investment opportunity is. I have some property-related investments that are yielding 9% but they’re certainly not 100% risk free and I’m thinking of moving all my money into cash before things get any worse.
dmichie, when the ‘bubble’ bursts as you keep advocating, I may consider letting you know of my intended investments. Otherwise, unless you can come up with some real investment options ON YOUR OWN instead of regurgitating other people’s economic commentary and posting numerous links to the same rubbish over and over, your are all on your own mate.
Here is an idea… try putting as much time into researching property, shares and alternative investments as you do into learning about a negative economic outlook and you will have no problems.
Robert Bou-Hamdan
Mortgage AdviserHmmm … well I find it fascinating that a mortgage adviser is “getting out of all property investments”. Have you told your clients this, especially the ones borrowing 100% for a 50sqm apartment?
Most of the “rubbish” I have quoted has come from the most respected economic commentators in the land; Gittins, Colebatch, Kohler, Garnaut … not to metion The Reserve Bank of Australia, and of course, the piece by the chairmain of GMO.
I spend plenty of time researching property, both reading reports (thanks for the PMI report BTW, which confirms my views) and getting out into the real world. I went to three auctions today. They all passed in without a bid. I haven’t seen anyone bid at an auction for 6 months.
Originally posted by dmichie:Hmmm … well I find it fascinating that a mortgage adviser is “getting out of all property investments”. Have you told your clients this, especially the ones borrowing 100% for a 50sqm apartment?
I am also getting out of mortgage broking and my clients know this. I believe you miss the point of mortgage advising / broking altogether. We are not allowed to nor should we provide property related advice. All we do is advise regarding structuring of finance and various products available in the market. People go to a mortgage adviser / broker to determine how much they can borrow or obtain the funds they need to go through with a purchase. Their decision to buy property is based on other factors or other professionals.
Most of the “rubbish” I have quoted has come from the most respected economic commentators in the land; Gittins, Colebatch, Kohler, Garnaut … not to metion The Reserve Bank of Australia, and of course, the piece by the chairmain of GMO.Economics is a field where no-one is ever wrong. The problem with most economists (and yourself) is that they tend to follow the flock. They do not want to go out on a limb. If their commentary is incorrect, then there credibility remains in tact because everyone else was saying the same thing. I for one like to do the opposite of everyone else.
I spend plenty of time researching property, both reading reports (thanks for the PMI report BTW, which confirms my views) and getting out into the real world. I went to three auctions today. They all passed in without a bid. I haven’t seen anyone bid at an auction for 6 months.I think you missed the point of why I provided the PMI report. I hope you looked at Table 4 closely. As for your comments regarding auctions, I guess you believe that the exit tax in NSW has nothing to do with it either.
In my opinion, most of the property slump problems stemmed from the fall in NSW property prices. This is off the back of taxes on holding property and taxes on selling them. A lot of investors wanted out because they felt the impact of holding property or selling after the exit tax was introduced made holding property less attractive. I tend to agree.
Unfortunately, everyone tried to act at the same time and it resulted in a huge over-supply of properties coming onto the market. With the interest rate increases, this made the problem a little worse but I have found that most people do not consider current interest rates as expensive when they consider the rates of the early 90s.
Assuming interest rates do not increase dramatically over the coming two years (which is what I firmly believe), I do not see the doom and gloom that you guys are preaching coming any time soon.
I am also of the opinion that when the Liberal Government takes over the Senate in July, things will change very quickly for the better from an overall economic perspective. Economic results will be reflected in the months following this and consumer and investor confidence should respond accordingly.
Please note that these opinions are my own and I don’t think you will find them written anywhere!!!
Robert Bou-Hamdan
Mortgage AdviserEconomics is a field where no-one is ever wrong. The problem with most economists (and yourself) is that they tend to follow the flockThe economic consensus at the moment is the economy is slowing and the most likely outcome is a so-called “soft landing”. As you know, my view is considerably more bearish, and would probably be considered extreme by most people (including yourself). I don’t think that is following the flock is it?
guess you believe that the exit tax in NSW has nothing to do with it either.Its certainly affected the investor market, but all of the places I saw today were owner-occupied houses.
I am also of the opinion that when the Liberal Government takes over the Senate in July, things will change very quickly for the better from an overall economic perspective.The Coalition certainly has a historic opportunity to introduce real economic reform. Unfortunately Howard is a populist (with no interest in reform) and he has to honour at least some of the crazy promises he made before the election. I believe Costello is a frustrated reformer and would like to make big changes but can’t until Howard goes. Beazley is a dinosaur with very little to contribute. Honestly, the only politician who gives me any hope at the moment is Malcolm Turnbull. Lets hope Malcolm and the “ginger group” can get some of their ideas through Howard’s thick head before its too late.
Originally posted by dmichie:Quote:Its certainly affected the investor market, but all of the places I saw today were owner-occupied houses.So lets base our medium to long-term investment decisions based on 3 failed auctions in an area that has not been identified.
I bet there are other reasons why demand has dropped off at the auctions you attended this morning. One may be that everyone went out last night and did not get up in time. Why would you run an auction on a Saturday morning anyway? It is a receipe for disaster and the sellers were provided with poor advice in my opinion.
Robert Bou-Hamdan
Mortgage AdviserSo lets base our medium to long-term investment decisions based on 3 failed auctions in an area that has not been identified.Not at all. I’ve been to dozens of auctions over the past 6 months. No-one ever bids. Dunno why the agents persist with the whole charade, but its helpful for someone like me who is trying to figure out what’s going on in the market.
Why would you run an auction on a Saturday morning anyway?Auctions (and inspections) have always been held on a Saturday in my area, as they are in across Sydney AFAIK. Don’t ask me why.
Have you ever thought that Saturday morning auctions may be a huge contributor to the problem? In the Eastern Suburbs of Sydney, most auctions are held during the week in the evening.
Are you going to tell us the area where properties are not being bid on at auction?
Robert Bou-Hamdan
Mortgage AdviserMatt,
Why source properties for them when you should be sourceing properties for Yourself. Take the plunge.
Having no money may be an excuse. Are you a speculator or Investor. If you have a car sell it and start investing. Good luck and happy investing.
David
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